Welfare has become synonymous with GDP, yet GDP measures economic activity not welfare.
- Interest is growing internationally as to how a more complete picture of progress can be shown.
How can we measure the prosperity and success of a nation?
future[inc] was launched to stimulate public policy debate about how we plan for long term prosperity. Leveraging the skills of Chartered Accountants in the world of business to consider how national progress is measured.
Organisations are broadening their reporting beyond the traditional financial metrics to encompass social, environmental and governance factors. There is also recognition that these factors show longer terms trends and may vary in the short term.
However, as nations we remain closely tied to judging the performance of policy, and therefore our politicians, on quarterly GDP growth rates. GDP is not a measure of broad prosperity but rather a measure of current economic activity. It is measured and reported frequently, which also ties nations into short term focuses.
So why do we judge our nation’s performance on GDP. It is a simple single number and it’s easy to measure reliably and on a timely basis. But it doesn’t actually measure policy outcomes. . We value things like families, our health, a high calibre education system, safety and security, the environment and equality, which are outside the scope of GDP.
GDP is too well entrenched to simply stop reporting it, but we could report another broader measure alongside it. I is possible that this measure may not be trending in the ‘right’ direction from a policy makers perspective. But surely that’s the point. We need to start understanding how we are performing in a broader societal wellbeing perspective in order to create the policies for long term prosperity for all.