A measure remodelled--GDP Financial Times

A measure remodelled--GDP Financial Times - A Measure...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
“A Measure Remodeled” By John Thornhill Financial Times Published: January 28 2009 02:00 | Last updated: January 28 2009 02:00 Standard measures of economic performance are suddenly producing terrible results for most countries. The UK learnt last week that its economy had shrunk by a real 1.5 per cent in the fourth quarter, the fastest rate of decline since 1980. Germany reported an even sharper fall, while Singapore - an open economy seen as a bellwether for global trade - expects negative growth of as much as 5 per cent this year. Maybe it is time to rethink the metrics. Most experts agree that the most commonly used indicator, gross domestic product, is an imperfect yardstick of economic activity. The trouble is, no one has yet invented a better one. But wait: a 24-member commission of prominent economists led by Joseph Stiglitz and Amartya Sen, both Nobel prize winners, is due to report in April on ways of improving our economic bookkeeping. The aim is to render economic data more comprehensive, more intelligible to the public and more relevant for policymakers by taking into account such factors as environmental degradation and quality of life. In changing the way we calculate economic activity, some commission members hope, we might also be able to change our political priorities and build happier, greener societies. This ambitious initiative was launched last year by Nicolas Sarkozy, France's president, who had grown concerned about popular distrust of economic statistics. All too often, he argued, official data seemed to conflict with personal experience, creating a dissonance between politics and ordinary life. The threat of catastrophic climate change should also force policymakers to recalibrate the broader environmental impact of economic growth, he said. Mr Stiglitz, a professor at New York's Columbia University, says that as an indicator of the market value of all goods and services produced in an economy, GDP has always been a flawed measure of economic performance, let alone social progress. He argues that the current global economic turmoil has made its deficiencies even more glaring. "This crisis has shown that the GDP numbers for the US were totally erroneous. Growth was based on a mirage," he says. "Many people looked at US GDP growth in the 2000s and said: 'How fast you are growing - we must imitate you.' But it was not sustainable or equitable growth. Even before the crash, most people were worse off than they were in 2000. It was a decade of decline for most Americans." Over the past year, the Stiglitz-Sen commission has been reviewing a vast array of alternative economic indicators while debating three main issues: how to improve standard GDP; how to incorporate new measures of economic, social, and environmental sustainability into the data; and how to devise fresh indicators for assessing quality of life. The commission may not invent a single measure to replace GDP but it could suggest a "dashboard" of indicators aiming to stimulate broader debate about the use - and
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

A measure remodelled--GDP Financial Times - A Measure...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online