1980s Latin America was a region of contradictions. On the one hand, it was the producer of some of the world’s most valued commodities. On the other, it was also home to communities plagued by poverty and income inequality.
Enter neoliberalism. Competition and increased production, they said, that’s the real road to prosperity. We’ll scratch your back if you scratch ours. Let our ideology shape your economy and we’ll make you richer. And yes, GDP slowly but surely grew. But at what cost?
To answer that, we need only look at the hungry families crippled by the rising price of food. At the rural communities left without clean water thanks to industry privatisation. At the desperate parents, victims of stubbornly high unemployment. Growing GDP may have ‘saved’ the economy, but it has done so at the expense of those the economy is meant to serve. What went wrong?
GDP is a broken relic of a time past. Like so many of the frameworks and metrics underpinning modern capitalism, it is a child of the industrial age, concerned simply with how much we produce, not with how or why or who reaps its benefits. As our society moves further and further away from these traditional notions of capital, towards the more complex and nuanced service and technological sectors, why do we still cling to GDP as the best measure of our progress?
Indeed, GDP isn’t just outdated. It’s also inherently flawed at best, and dangerously neglectful at worst. When American economist Simon Kuznets first outlined the concept in a report to the US Congress in 1934, he explicitly warned against the use of GDP as a measure of national welfare, arguing that the method is “contingent upon oversimplification”. How could we ever expect one simple single figure to explain the complexities, inconsistencies, entanglements and intricacies of human wellbeing? And yet, we do. For decades, Prime Ministers from both parties have stood at the dispatch box and dismissed concerns of rising unemployment and increases in poverty by pointing to so-called successes in GDP. A growing economy will solve all our problems, one day the wealth we’re all creating will trickle down to you and your family. Bigger is always better, at least that’s what they told us to believe.
So, if GDP has failed us, what’s the alternative? Every society surely needs some sort of measure of progress, some base from which to work and grow, so what should ours be? Appropriately enough, one potential answer comes not from the lofty heights of the Western-dominated IMF or World Bank, but from the Global South’s Indian economist Amartya Sen. A child of the Bengali Famine of 1943, his approach sees poverty as being about more than simply a lack of money. Instead, it’s about the deprivation of opportunity and freedom, the ways in which poverty impacts all elements of a person’s life, not just those directly affected by income. For Sen, wellbeing is not about economic growth, but capability.
For example, his 1981 book ‘Poverty and Famines’ argues that famine should be understood as far more than a shortage of food alone. He points to systemic inequalities in food distribution, the wide-reaching impacts of income inequality, the dangers of an economy that may work for urban elites but leaves rural workers behind. Increasing the supply of food may win the battle, but only a far broader policy approach, one that enhances wellbeing and increases individual and collective capabilities, can win the war.
Decades after Sen’s formative work, developed nations are finally moving towards a more nuanced understanding of human welfare. Shadow Health Secretary Jonathan Ashworth recently announced Labour’s plan for a Future Generations Wellbeing Act, following a ‘health in all policies’ framework and focusing on measures of wellbeing. This follows a similar announcement in New Zealand, whereby national budgets will now be based on broader human measures, rather than purely economic ones. How these policy measures will progress and what insights they will uncover remains to be seen, but any move towards a more human-centred measure must be welcomed.
For too long, we’ve looked at policy through a simplistic, one-dimensional lens. Policy isn’t a set of separate boxes, each one representing a different area with its own specific solutions. Policy is a web. Everything we do, everything we suffer, everything we aim to change is fundamentally connected. How can GDP ever account for the baby girl born in Liverpool, whose life will be 13 years shorter than the baby girl born in Richmond? They live in the same economy, with the same levels of nationwide production. But the Richmond baby lives in a safer house, has access to better amenities, goes to a better school, is given more opportunities, eats healthier food… Her capabilities are stronger, and that’s the key.
Our policy-making will continue to let too many people down until it accounts for and addresses the complex and far-reaching variables which influence human lives. GDP has failed to live up to the hype, as well as to standards it was never intended to meet. It’s time for something new, something radical, but most importantly, something that places people, not arbitrary numbers, at its heart.