THE END OF THE «GDP EMPEROR»: Experts Call to Abandon «Economic Fetishism»

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An obsession with economic performance cannot serve as a measure of human development. It distorts the assessment of the actual state in which the countries and peoples of the world find themselves. Scientists are calling for the creation of more effective indicators than GDP — a metric that has remained traditional since the 1930s.

SIMON KUZNETS — THE CREATOR OF GDP

he term GDP (Gross Domestic Product) refers to the market value of all goods and services produced within a country over the course of a year. It was introduced in 1934 by the eminent economist and future Nobel laureate Simon Kuznets during his report to the U.S. Congress. At one time, in order to emigrate to the United States, Kuznets forged his documents, stating Kharkiv as his place of birth — and indeed, an important period of his life was closely connected to this Ukrainian city.

In addition to formulating the concept of GDP, Kuznets developed the theory of economic cycles. According to this theory, the current year, 2025, should mark the onset of a prolonged period of economic decline lasting approximately 15–20 years. Whether Simon was right in his forecasts or not, we will soon find out. However, the fact that the modern world and economic thought have reached a crucial milestone in 2025 is evidenced by one event directly related to the fate of Simon Kuznets’s scientific and economic legacy.

IS THERE DEVELOPMENT «BEYOND GDP»?

Simon Kuznets was one of the great minds who profoundly influenced the global economy. However, the relevance of the national income measurement system he introduced is now being seriously questioned.

Recently, UN Secretary-General António Guterres put forward an important political initiative. He proposed that GDP should no longer be regarded as the defining indicator of humanity’s and the planet’s well-being.

Instead, a broad range of new and alternative criteria has been proposed. Moreover, the UN has already established a group of 14 high-level experts tasked with developing these new indicators. This ambitious project is called «Beyond GDP». The group of scientists is expected to present its final recommendations next year — outlining how to achieve the Sustainable Development Goals without being fixated on Gross Domestic Product.

DOES FOCUSING ON GDP UNDERMINE SUSTAINABLE DEVELOPMENT?

Yet even now, some experts argue that abandoning GDP will have serious consequences for global economic theory and practice. Over the decades, GDP has become the standard measure of national economic competence. Government leaders and their financial teams have done everything possible to ensure that GDP figures show steady growth — that consumer spending, government and private investment, and the net value of exports and imports all continue to rise.

It was precisely by GDP that the success or failure of a country’s economic policy was judged. So why has this approach come to be seen as inadequate? At some point, economists began to notice that the pursuit of GDP growth creates perverse incentives for socioeconomic policy. While it helps to solve some problems, it simultaneously generates new ones. In many cases, GDP growth actually undermines efforts aimed at achieving the Sustainable Development Goals.

DOWN WITH THE «EMPEROR»!

Until recently, GDP was a kind of «sacred cow» among economists. One of the first to call for abandoning the «fetishism of GDP» was another Nobel Prize laureate in economics — the American Keynesian Joseph Stiglitz. He sharply criticized the situation in which GDP is treated as the «emperor of all indicators», with every other measure placed in its «subordination».

Paradoxically, today many governments are willing to sacrifice truly important values for the sake of GDP growth — such as responsible consumption and production. Researchers have calculated that between 2000 and 2022, global GDP more than doubled. However, this process was accompanied by serious destabilization of social and environmental systems. In other words, the rise in GDP has hardly improved the living conditions of humanity — quite the opposite.

THE IDEA OF «PLANETARY BOUNDARIES»

British scholar Kate Raworth of Oxford has proposed replacing the concept of GDP with the idea of «planetary boundaries». Her concept can be seen as a creative development of Stiglitz’s proposal to use a set of alternative parameters instead of a single GDP indicator.

The «planetary boundaries» framework includes 13 environmental and 25 social indicators — among them air pollution, loss of biodiversity, rates of hunger, levels of education and sanitation, access to clean water, and more.

The authors of this new concept introduce another term — «ecological justice», according to which people have the right to water, food, energy, health, and a clean environment. The idea is undoubtedly noble. However, conservative economists are dissatisfied with the absence of traditional GDP components in this list — such as spending and investment. This means that the fate of GDP is likely still undecided and will remain a subject of debate among economists for a long time to come.

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