Exploring Holistic Development Beyond GDP

by Sylvester Stephen Mtenga

Graphic designed by Freepik

Gross Domestic Product (GDP) as defined by the International Monetary Fund (IMF) is a measure of the monetary value of final goods and services produced in a country in a given period of time. It counts all of the output generated within the borders of a country.

GDP is a popular metric used to represent the total value produced by a country and it is among the important indicators to measure a country’s economic value. Everything from goods like cars and clothes, services like healthcare, and the income of inhabitants encompass a country’s GDP.

However, despite being a popular metric, GDP does fall short of providing a suitable measure of capturing a country’s economic standing collectively, as it does not take into account factors such as the fairness with which goods and services are distributed, or the extent to which environmental damage is being incurred during the production and consumption of the goods and services.

With some countries (eg. South Africa, USA & Qatar) reporting higher levels of GDP per capita together with lower living standards, large wealth gaps, income inequality, and social unrest, it becomes imperative to question the authority and credibility of the GDP being the sole metric of measurement of a country’s economic standing and leaves room to ask the following question:

“If GDP as a metric comprises some inconsistencies, how can we fix that and what additional factors can we use in tandem with the GDP to provide more accurate outlines to represent economic growth and drive decision making?”

Given the multidimensional nature of development, having a greater pool of factors and values to consider, in outlining a definitive framework to influence decision-making, would provide for more inclusive depictions and is a more logical route of passage.

Among the factors and values to include would be a country’s policies and level of attention pertaining to environmental sustainability. It is worth noting, there cannot be progress whilst damage is being incurred to the environment. A country should not be judged solely on its ability to produce goods and services, but also on the condition of the environment in which those goods and services are produced, as well as its laws and policies erected to safeguard the environment. Prioritizing attention to the environment is no longer a luxury. With global phenomena such as severe climate change, being environmentally conscious should be at the forefront of decision-making. 

A great policy would be the introduction of fines based on industries’ emissions and boycotting harmful brands to limit the extent to which the environment is damaged. According to The United Nations: “We can pay the bill now, or pay dearly in the future”, therefore countries cannot afford to be economically progressive whilst being inconsiderate of their environment and the planet at large.

A widespread misconception is that a higher GDP equates to a wealthier country. Multiple reports outline 84 per cent of people surviving on under $30 per day despite their county’s significantly high GDP. The misinformation can be attributed to the challenge associated with data quality and reliability, especially in developing countries. The responsibility of developing reliable and quantifiable data metrics and analysis infrastructures to combat the misinformation should fall upon the stakeholders. Data is perhaps the most precious commodity and therefore suitable to complement GDP. In response to the jarring statistics, it would be suitable to focus on societal welfare by incorporating measurements of poverty rates, access to healthcare, and income inequality to be the benchmark for decision-making.

Beyond economic indicators alone, incorporating literacy rates and educational attainment levels into the framework would provide a comprehensive understanding of a country’s development. Literacy and education go hand in hand in influencing economic productivity, innovation, and overall human capital development. Including these factors acknowledges the intrinsic link between education and economic growth, highlighting the importance of investing in human capital for sustainable development in the long run.

Measuring literacy and education alongside other indicators such as life expectancy and income per capita, offers a more nuanced perspective on societal well-being, guiding policymakers toward holistic policies that prioritize both economic prosperity and human development.

As modern societies and economies are increasingly growing in complexity, relying on GDP solely, discourages and constrains success. The potential benefits of adopting alternative metrics for decision-making and resource allocation are endless. 

A final call to action to policymakers, government officials, investors, and stakeholders alike would be to focus on taking a considerate approach that extends beyond the boundaries of economic prosperity to incorporate an emphasis on human and environmental development. By recognizing the interconnectedness of economic, social, and environmental well-being, decision-makers can steer policies and investments toward sustainable practices that promote the welfare of both present and future generations. This entails prioritizing initiatives that enhance education, healthcare, and social equity while preserving the environment and mitigating climate change impacts.