The recurring debate about whether economic growth reflects a nation’s well-being has been reignited at the Davos Forum, where measuring a country’s progress requires looking beyond economic performance, taking into account standards of living. There has been talk of keeping it in. Or the happiness of citizens as a measure of success.
Ninety years after gross domestic product (GDP) was introduced as an indicator of national economic progress, the World Economic Forum has considered how to measure “good growth” and whether national accounts should have a monetary value. In addition, environmental or social elements should also be included. The goods and services it produces.
According to academic literature, the creator of GDP, Russian-American economist Simon Kuznets, recognized from the beginning that GDP per capita could not predict the well-being of a population without taking into account how a country’s income is distributed. Is. He later advocated the reformulation of indicators with a more qualitative approach.
The Swedish Finance Minister, Elisabeth Swantesson, who was present in Davos this week, believes that GDP is an essential indicator today and the best way to measure development, because “things cost”, although she admits that other indicators of development is also required. welfare.
However, Spain’s Economy Minister, Carlos Bodi, defends that the elements by which GDP is measured should be updated and reformed, adding an environmental and social perspective.
In Davos, the minister cited as an example the increase of the minimum wage in Spain by more than 50% over the past five years, which has boosted consumption but has also reduced the vulnerability of an economy in which it is now Families are involved. Be better prepared to face rising inflation or interest rate hikes.
Calculating the value of monetary transactions of a country allows us to know domestic consumption, private investment, public consumption expenditure, trade balance (exports minus imports), the distribution of income among companies’ salaries and operating surplus, as well as the growth Is available. Distribution of production by regions.
As Kuznets designed it in the 1930s, public expenditure in GDP does not include what is invested in pensions, unemployment, or education or health, because there is no economic exchange.
It also does not measure the value of unpaid domestic and care work or self-consumption and barter, which may be relevant to the real economy of developing countries.
On the other hand, GDP counts alcohol and tobacco consumption, or polluting industry activity as wealth creation, without taking into account negative externalities to health or the environment.
Options for evaluating progress
During this week’s debate in Davos it was recalled that in 2008 French President Nicolas Sarkozy appointed a group of experts led by Nobel laureate Joseph Stiglitz to identify alternative metrics of economic performance and social progress.
Among its findings, there is a need for an inter-generational approach to evaluate well-being in each moment, but also its sustainability over time, which depends on whether “the stocks of capital that matter to our lives are (natural, physical, human, social) are transmitted” to future generations.
In 2011, the Organization for Economic Co-operation and Development (OECD) launched its “Better Life Index”, which analyzes eleven specific elements of well-being: housing, income, employment, community, education, environment, civic engagement, health, life Satisfaction, security and balance between life and work.
In the Davos debate, the Swedish minister stressed the importance of returns on social investment for progress and made a personal reference acknowledging that without Swedish public education she probably would not have been able to attend that session.
In this sense, one of the participants in the debate, Ravi Kumar, CEO of the multinational technology consulting company Cognizant, stressed that the best measure of good growth is upward social mobility that allows individuals to improve their economic situation. Allows.
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