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GDP: Gross deceptive product

The current system of measuring economic success based on GDP growth is deceptive in that it falsely portrays a growing economy as healthy even though it is not sustainable for future generations. 

Economists need to develop a measure of net economic and ecological well-being, rather than depending on GDP.

By Russell England, The Ecologist


Adam Smith

The Scottish enlightenment philosopher Adam Smith (1723-1790) recognised that economic growth would eventually have limits, based on the nature of a nation’s soil and climate.  

In his day, Smith was considered a moral philosopher and his early thinking on economic matters dealt with political economy, a term used for studying issues of production, trade, laws, and customs of individual countries and how income and wealth was distributed.  The science of economics was closely related to politics from its beginnings.  

Smith predicted the world’s economy could grow for about two hundred more years (from 1776) before natural limits were reached.

Modern economics 

Smith believed that individuals and nations bettered themselves through industrious behavior, saving for the future, and leaving future generations better off than one’s own.  

Most modern economists seem to have no concept of limits with regard to growth.  Indeed, an economy that is not growing is considered unhealthy.  

Economic success is measured in gross terms (Gross Domestic Product) with little or no attempt made to determine net gain or loss to either the economy or the supporting ecosystems. In other words, there is no apparent way to tell whether economic growth is in fact economical.  

Economists and policy makers tend to ignore the free services, such as clean air and water that nature provides, and thus fail to fully assign costs to ecosystems when evaluating the impacts of industry.  

It has been common practice to allow private companies to pocket the profits from their businesses while ignoring the collateral costs that are eventually paid by the public.

Such things as air, soil and water pollution from toxic chemicals discharged by heavy industry degrade the quality of life for all and governments (citizens) are often stuck with the costs of cleanup – if cleanup is indeed possible.

Increased consumption

Today, economic growth is primarily driven by consumption. It seems that people are no longer human beings dependent upon the free ecological services that nature provides, but merely consumers bent on acquiring ever more commodities.  

Growth is driven by consumption of natural resources such as fossil fuels, which are in finite supply, and underground aquifers, many of which are being depleted faster than they can be recharged.  

Virgin forests are rapidly being replaced by plantations of monocultured crops and livestock farms, with serious implications for biodiversity across the globe.

In much of the developed world, the modern version of capitalism has abandoned the whole idea of building wealth for future generations in favor of requiring future generations to pay for today’s largess.  

While the economy is driven by consumption, much of today’s consumption is fueled by ever-increasing debt. In reality, debt is a major instrument that keeps the economy growing like a cancer.  

Increasing debt 

In less than half a lifetime the United States has gone from the world’s largest creditor nation to the world’s largest debtor. The US national debt is now over $22 trillion and state and local debt amount to an additional $3 trillion plus.  

Personal debt, primarily in the form of home mortgages, credit cards and student loans, amounts to over $17 trillion.  Total government and personal debt is well over $120,000 per citizen. 

And yet, it is still common to hear prominent citizens and politicians refer to the US as the world’s richest nation.          

Economic growth has become an obsession in much of the developed world and is worshiped as if it were a religion.  Politicians promise to create jobs and grow the economy and the majority of their constituents blindly accept growth as though it were a commandment in a holy book and therefore not to be questioned.  

Viable alternative 

A growth-dependent economic system that depends on the consumption of ever-increasing amounts of finite resources, is unsustainable and therefore demands a serious search for a viable alternative.

Most people have little knowledge of or interest in ecosystems, and go about their lives as if they believe ecosystems (or the environment) are part of the economy, and believe that if they make a reasonable effort to control pollution and clean up wastes, all will be well.  

In reality, precisely the opposite is true; the economy is just a system devised by a single species that is a part of a larger ecosystem.  If the economy grows beyond the ecosystem’s ability to support it, humankind must ultimately face the consequences.  

In the long run, the ecosystem is likely to prove far more resilient than the economy, but mankind may not like how nature resolves the inherent conflict between the two. 

A business that measures success based on gross sales but makes no effort to determine net profits is likely to fail.  By the same logic economists need a measure of net economic well-being as opposed to depending on gross value of goods and services to gauge success.  

Future generations 

Measures of success could include such things as whether debt is increasing or decreasing, the status of infrastructure maintenance, whether aquifers are being replenished as fast as they are being drained and whether other natural resources and life support systems are being used in a sustainable manner.  

The current system of measuring economic success based on GDP growth is deceptive in that it falsely portrays a growing economy as healthy even though it is not sustainable for future generations.  

From an ecological standpoint, GDP might just as logically stand for gross deceptive product.

This Author

Russell England is a retired fisheries biologist living in Gainesville, Georgia, USA.  He has written numerous articles and opinion columns in various magazines and newspapers and is the author of Gross Deceptive Product: An Ecological Perspective on the Economy published by Covenant Books in 2018.  

Source: The Ecologist

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