This paper focuses on the discussion of the arguments about GDP and its use in measuring social wellbeing. It also aims at explaining the reason why it is important for policy makers to not just consider the use of traditional methods in measuring the social well-being of the people but the non-traditional methods as well.
For many years, people have used Gross Domestic Product in measuring a country’s health status. This has been done through the consideration of the overall services and goods output. Consequently, economists, analysts and policy makers have used GDP to a great extent in drawing conclusions. GDP measures the overall output while considering inflation. This has made it a useful tool for determining the growth and economic status of a country over a given period.
Nevertheless, GDP does not actually reflect a country’s health or the well-being of a society. It considers economic output of the people. This is not necessary an indicator of the level of satisfaction of the citizens of a country. Similarly, GDP does not differentiate injurious and useful economic activities. Additionally, there are underground activities whose output is injurious to the citizens’ health and the final figure of the GDP may include them as well. Accelerated utilization of natural resources can also influence a high growth in GDP. Thus, it might not reflect the future growth after depleting the resources (Hess, 2013).
GDP considers the values of services and goods in the market without considering other important activities which are not accounted for in a market. Among these activities are home care services which GDP measurement has always ignored yet they influence the wellbeing of the society. According to critics, GDP measurement fails to indicate the distribution of income. Income growth of some individuals can increase a country’s income. This is not necessary an implication of an improvement in the wellbeing of everyone (O’Connor, 2004).
Therefore, using this parameter alone is not a real indicator of the wellbeing of the society. In addition to these shortcomings, increases in income generation are considered as a positive improvement in the wellbeing of a society despite being unrelated. A decline in GDP can indicate the implementation of proper mechanisms in curbing pollution. Thus, exhaustion of resources is slowed and this indicates the wellbeing of a society. As such, traditional social wellbeing indicators should be supplemented with additional measures in order to give meaningful conclusions.
In relation to this GDP’s limitation, policy makers ought to use other means of indicating the wellbeing of the society. Such means include public security, economic development as reflected by economic, cultural and social activities as well as the entire environment. Social indicators reflect the relationships of the people as well as distrust levels and discrimination. They also include distribution and the number of social gatherings and facilities that include clubs and churches. All these indicate tolerance among the people.
For policy makers, one monetary figure might not indicate that individuals work together to realize a common wellbeing. Thus, they should use the indicators. On the same note, the culture of the people as well as passing the valued practices down the generation line adds to the wellbeing of the citizens because it binds them together towards the achievement of a common objective.
Fig.1 The relationship of the GDP of the U.S, Uruguay and the United Kingdom against the years 2007-2010
This graph shows a sharp increase in Uruguay’s GDP in the past years after which it declined. The GDP of the US has a steady fall after which is started to rise. This is also the case for the GDP of the UK. Examining the GDPs of these countries shows that the GDP of USA and UK fall until they reach negative levels. This can be attributed to resources’ depletion while the contrary happens to Uruguay.
Fig.2 Relationship of Social-economic development in US, Uruguay and the United Kingdom during the years 2007-2010
This graph shows higher wellbeing of the UK society than that of Uruguay despite the fact that its GDP growth is the best. This means that the society of Uruguay is the poorest. As such, GDP cannot be used as an indicator of social wellbeing alone.
Hess, N. P.(2013). Economic growth and sustainable development. London: Routledge
O’Connor, E.D. (2004). The basics of economics. Westport, Connecticut: Greenwood Publishing Group