Should we really worry about our GDP?

It seems that Gross Domestic Product (GDP) has the weight of the world on its shoulders. As the most referenced economic indicator, it attempts to tell the story of the state of the economy in one number. It can decide on government failure or success and now more than ever, it’s easy to see how a drop in the figures has caused a seismic international policy response. But what does GDP mean to you and me?

In its raw form, it’s just the value of all the goods and services of a country. Taken in its per capita form we get a measure of ‘income per head’ – for the UK, it’s $35,900 (about £23,000). Using this, we can rank countries; doing this puts the UK below the US, Australia and Germany, the only saving grace being that we do come in higher than France.

The figures on GDP per capita tell a story of the successful vs. the unsuccessful, and, taking a look at the extremes of the table, they seem to do a fairly good job. Choosing between the rest of your life as the average resident of the Cayman Islands seems like a much better idea than the $600 per year as the average Somalian. However, when you look at the bulk of countries in the middle of the distribution, the implications seem less justifiable. Do Americans and Germans really have a greater quality of life than us? Do we really have more reasons to smile than the French?

The problem is that our income only determines part of our wellbeing. America’s long hours and meagre holiday culture along with their huge fast food industry only contribute positively to GDP, ignoring the potential loss in quality of life when compared to the shorter hours and extra-long lunches enjoyed by French bureaucrats with healthy blood pressure over a nice glass of wine. Moreover, taking average income does not give any information on spread. Should we consider a nation where wealth is concentrated amongst the few and poverty is rife as successful as one where the majority have an adequate standard of living?

A solution to this problem has been examined through the creation of indexes of happiness. The New Economics Foundation are one of the pioneers in this field with the ‘Happy Planet Index’ taking life expectancy, life satisfaction and ecological footprint as the three main indicators of “long, sustainable, fulfilling lives” finding that America’s figure of 30.7 falls far short of the UK at 43.3 and France at 43.9.

Despite this, it seems that this work has not really been taken seriously thus far as a measure to influence policy making. That is, until November last year when Cameron announced the creation of a measure for UK ‘wellbeing’ to be used alongside other National Accounting measures. Last week, the ONS released its consultation documents on the questions asked to determine the country’s ‘wellbeing’ and figures should be in use this summer.

Measuring happiness to judge a government’s success is not perfect. Another awful British summer, the fact the England team just can’t shake off ‘headless chicken syndrome’ or maybe just that all men are pigs – there are times we can’t blame the government for our unhappiness (even when they are Tories). But on average it’s measures like life expectancy, equality and job security that matter to us all. These things should be affecting government decision making as much as they affect us.

The development of a measure of well-being has the potential to really improve evidence based policymaking for government. If used in a credible and unbiased way it could mean the priorities of the UK are better aligned with the policies of its citizens.

Judging politics’ current use of statistics this does seem hugely optimistic but nevertheless it’s a step in the right direction. As students we’re spending “the best three years of our lives” living on beans on toast and Tesco Value Vodka. It’s time to see the bigger picture. Money just isn’t everything.