Beyond GDP: here’s a better way to measure people’s prosperity

Professor Henrietta L. Moore

14 October 2021

When Nobel prize-winner Simon Kuznets declared in 1934 that “the welfare of a nation can scarcely be inferred from a measurement of national income”, he likely did not imagine that gross domestic product (GDP) would still be in use as shorthand for wellbeing and prosperity in the third decade of the 21st century.

Kuznets developed GDP as a means of measuring the impact of the great depression. It enabled governments to track any increase or decrease in their nation’s wealth as represented by the value of goods and services produced, and became increasingly important as governments estimated the cost of waging the second world war.

Today, the inadequacy of GDP as a measure of prosperity is clear. Data from the Office for National Statistics (ONS) for the decade up to 2019 shows that the UK’s annual growth in GDP averaged just below 2%. By comparison, income inequality increased by 2.2% over that ten-year period and the ONS’ annual average ratings of life satisfaction, happiness and anxiety all deteriorated in the year ending March 2020. This trend of rising income inequality despite GDP growth reveals that not everyone is reaping the benefits of this growth, nor leading a prosperous life, demonstrating that GDP is a poor proxy for citizens’ wellbeing.

With “levelling up” and regional prosperity now central to the UK government’s thinking, the Institute for Global Prosperity (IGP) has been working with a team of citizen social-scientists and community organisations in east London to create a completely new definition of prosperity. Rather than the outmoded measures of growth, productivity and income, our research identified 15 headline indicators – a “Prosperity Index” – that reflect the actual experience of wellbeing and security for people in these places, and the things that constitute a good quality of life.

Read the full article on The Conversation

Professor Henrietta L. Moore is the Founder and Director of the Institute for Global Prosperity.

Image credit: Patricia Gabalova