by JINOY JOSE P.
Dear reader,
“At present, we are stealing the future, selling it in the present, and calling it GDP.” When the American environmentalist Paul Hawken made this observation, he probably did not realise he was writing the tagline for humanity’s longest-running tragicomedy. Gross domestic product, or GDP, is the most trusted indicator of progress for governments, businesses, financial markets, policy forums, think tanks, and media outlets. The higher the number, the healthier the nation. Or so we are told. And this belief has remained mostly unchanged for nearly a century.
Ironically, it all began with a warning. In 1934, the Russian-born American economist, Simon Kuznets, presented the first set of national income estimates to the US Congress. These tables were designed to help understand the effects of the Great Depression and gave policymakers a new statistical tool: a way to quantify the total market value of goods and services produced within a country over a period.
Kuznets, who would later win the Nobel Memorial Prize in Economic Sciences, understood the power of this invention and also its danger. He cautioned that this should not be mistaken for an index of national welfare. Economic activity and human wellbeing, he insisted, were not interchangeable. The Congress listened politely, then adopted the measure, ignoring all his warnings with juvenile enthusiasm.
By the 1960s, Kuznets was writing with increasing urgency. Growth, he argued, needed to be understood not merely in terms of volume but of purpose. More of what? For whom? To what end? His queries were rhetorical by then. The political appetite for a single, unambiguous number—one that could suggest the success of policies, the country’s potential, national dynamics, etc.—had become irresistible. GDP was simple to understand, it was scalable, and it was global. It was the Disney or McDonald’s of economic metrics; almost everyone has heard about it. It made countries legible to investors and intelligible to diplomats. It became, without debate or consensus, the shorthand for progress.
Once the framework was in place, it started dictating how power operated. In the decades following the Second World War, Western economies, especially those in Europe and North America, experienced sustained growth in GDP. This was seen as validation for the idea. The “economic miracles” of Italy, Germany, and Japan were purely statistical: high growth rates, surging output, and expanding industrial capacity. Italy’s miracolo economico, for instance—the rapid development from the late 1940s to the early 1960s—was taken as proof that state-led reconstruction and capitalist expansion could coexist fruitfully.
The fact that this growth also brought chronic air pollution, collapsing rural economies, the fall of sectors like agriculture, the decline of social security, and widening inequalities was treated as unfortunate but irrelevant background noise.
The American case was similar. During the post-war boom, petroleum flowed at prices lower than milk. Factories hummed, suburbs expanded, more and more workers were brought in (often at cheaper wages), and GDP rates climbed. The idea that infinite economic expansion might be neither possible nor desirable did not gain serious attention. Then, in 1973, the Organisation of Arab Petroleum Exporting Countries initiated an oil embargo against nations that had supported Israel during the Yom Kippur War. Prices quadrupled, supply chains broke down, and inflation soared. Economists were “reportedly” shocked. They had been charting the economy’s rise with all the confidence of a physicist plotting a parabola. Suddenly, the curve stopped.
What followed was a redirection. If growth could not be guaranteed through production, it would be chased through finance. In the 1980s, under US President Ronald Reagan and British Prime Minister Margaret Thatcher, economic policy moved towards deregulation. The real economy—the production of goods and services—became subordinate to the financial economy: stocks, bonds, insurance, derivatives, etc. What mattered was not whether anything tangible was being made, but whether profits were being recorded. This shift was sold to the public as modernisation (reforms, to use a term we are familiar with), but it was better understood as abstraction. Capital moved faster. Transactions multiplied. GDP, ever adaptable, kept rising.
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