The ongoing debate about whether economic growth reflects a nation's well-being was rekindled at the Davos Forum, where there was talk of measuring a country's progress beyond economic performance, measuring the quality of life or the happiness of its citizens. A measure of success.
Ninety years after the introduction of gross domestic product (GDP) as an indicator of national economic progress, this year the World Economic Forum raised the question of how to measure “good growth” and whether national accounts should incorporate environmental or social components. The monetary value of the goods and services it produces.
According to the academic literature, the creator of GDP, the Russian-American economist Simon Kuznets, recognized from the beginning that people's well-being cannot be deduced from GDP per capita without taking into account how a country's income is distributed. He then advocated reform of the indicator with a more qualitative approach.
Sweden's finance minister, Elisabeth Svandsson, who attended Davos this week, says GDP is a necessary indicator today and the best way to measure growth, as she recognizes that “prices of goods” require other indicators of health.
However, Spain's Economy Minister Carlos Badi argues that the components by which GDP is measured should be updated and improved, adding an environmental and social perspective.
In Davos, the minister gave the example of raising the minimum wage in Spain by more than 50% over the past five years, which has encouraged consumption but also reduced the impact of an economy where families are now better off. Willingness to withstand an increase in inflation or an increase in interest rates.
Calculating the value of a country's monetary transactions helps us understand household consumption, private investment, public consumption expenditure, the balance of trade (exports minus imports), the distribution of income between firms' salaries and operating surpluses, and the evolution of firms. Distribution of production by sectors.
As Kuznets designed it in the 1930s, GDP does not include public spending on pensions, unemployment, or investment in education or health because there is no economic exchange.
It does not measure unpaid domestic and care work or self-consumption and barter value, which may be related to the real economy of developing countries.
GDP, on the other hand, counts consumption of alcohol and tobacco or the operation of polluting industries as wealth creation, without taking into account negative externalities to health or the environment.
During this week's debate in Davos, it was recalled that in 2008 French President Nicolas Sarkozy commissioned a group of experts led by American Nobel Laureate Joseph Stiglitz to identify alternative measures of economic performance and social progress.
In its conclusions, there is a need for a generational approach to assess well-being at each moment, but also its sustainability over time, which “depends on whether the capital important to our lives (natural, material, human, social) is passed on to future generations.”
In 2011, the Organization for Economic Co-operation and Development (OECD) launched its “Good Life Index”, which analyzes eleven specific elements of well-being: housing, income, employment, community, education, environment, civic engagement, health, and life satisfaction. , security and balance between life and work.
In the Davos debate, the Swedish minister stressed the importance of social investment for progress and made a personal note acknowledging that without Swedish public education he would not be participating in the session.
In this sense, Ravikumar, CEO of multinational technology consultancy Cognizant, another of the panelists, emphasized that the best measure of good development is social mobility, which allows individuals to improve their economic situation first. EFE
Follow Forbes Mexico for information on business and current events
Want to stay informed with Google News? Follow our showcase for the best stories
