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DURING a wellbeing economy session at our Festival of Economics in 2023, I was intrigued by a short story from Amanda Burgauer from Common Weal. Quoting Katherine Trebeck, the founder of the Wellbeing Economy Alliance, Amanda said: "Kathryn suggested that we should manage the wellbeing of a community by metrics such as what percentage of girls ride their bicycles to school? Not GDP."
Even though I was well aware of the difficulties with GDP as a measure of wellbeinscotong, I could not process the full impact of a suggestion like this. It seems too tangential and different from our GDP default of measuring the throughput of a nation that considers a rise in this number equal to a rise in wellbeing. Amanda’s story slipped to the back of my mind.
Fortunately, I watched the session recording as part of last night's episode of Scotonomics. Almost a year after first hearing this tale, I felt I was now ready to consider the true riches that a simple measurement like this offers.
Here is Amanda explaining its impact: “There's a lot of data in that one question about safety, equality of girls and boys, and physical activity. And so this is not what you get when you measure GDP. You wouldn't be looking at those qualities at all.
"And so that question of Kathryn's is one that's always stuck in my mind because it actually measures things differently. GDP would simply ask: How much did her bike cost."
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GDP has fallen in the UK, and we are now in a recession
As you are probably aware, the UK's GDP was negative for the last two quarters (Q3 and Q4 2023), which means that the UK is experiencing a recession. It is unlikely that the economy will grow this year. And as the "conventional wisdom" tells us, we must turn this around.
As the mainstream story goes, as GDP shrinks, so does our collective and individual wellbeing. The real implication of a change in GDP growth for a wealthy national like the UK is far, far more complicated than this.
An increase in GDP is caused by both an increase in material throughput and energy use, mostly from fossil fuels. I believe growth, measured by GDP, is unlikely and unwanted. GDP growth in the UK is now unsustainable, depleting and damaging our collective well-being despite adding to our material wealth. But GDP continues to be the measure that matters.
Reacting to the recession news, Keir Starmer posted: “Rishi Sunak has failed to turn the corner on 14 years of Tory economic decline. Britain is hit by a recession and it’s working people who will pay the price.”
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GDP growth will be Labour’s defining mission, said the Labour Leader back in 2023. Labour smell blood. And a drop in a well-known metric enables them to line up the firing squad.
It is irrelevant that GDP growth will prove as elusive for Labour when in power as it has for the last few Tory administrations. Since the financial crisis, GDP growth for the UK has averaged 2%. The structure of the UK economy, the unwillingness of governments to increase spending, the ecological crisis, plus the international economic conditions make GDP growth, even close to this level, an exceptionally unlikely trend.
GDP is a tired metric that is only useful for highlighting what we need to reduce
During the same panel at Scotonomics, Gary Gillespie, the Scottish Government's chief economist, said: "GDP isn't a measure of wellbeing." Gary highlighted the Scottish Government’s “wellbeing economy monitor, with its 15 indicators ranging from gender pay gap to carbon emissions". He said it offers a broader understanding of our economic health. A Well-being Economic Monitor is a welcome addition to Scottish Government metrics. The UK has no similar measures. But GDP still rules the roost.
Criticising the UK Government’s GDP decline will be the focus for all the opposition parties during the UK General Election. It's the same old tired discussions about a metric that was never designed to measure wellbeing. How refreshing would it be if we could take a very different approach?
Imagine the Scottish Government announced that it will continue to measure GDP in Scotland only for international comparison. Its focus will instead be on the wellbeing monitor launched in 2022, plus a series of other measures, including Kathryn’s girls on bikes metric.
Just picture a world where the GDP in Scotland declined, and we celebrated that. This is the forced trajectory for the UK and for Scotland, and we should stop fighting against an overpowering current.
Consider if, by 2030, we transformed fewer natural resources into human-made goods and used much less energy, especially from fossil fuels. During this time, we improved cycling infrastructure across the country, increased community ownership in towns and cities and the countryside, removed the gender pay gap, eradicated poverty and reduced inequality. Would it matter if some 70-year-old metric declined? If we want a wellbeing economy, we must realise that chasing GDP is the way to derail that economy.
Only the conventional wisdom demands that we hold on to these outdated methods. Frances Rayner, from the Wellbeing Economy Alliance, who also appeared on our panel, nicely summed up the inappropriateness of GDP: “The fact that GDP is simple to measure is not a good reason to have it as a yardstick. You need to look at the full picture of what's really going on."
You can watch the session from our Festival of Economics here, and learn more about this year's festival in Edinburgh and Dundee here.
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