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The gross domestic product (GDP) print is an eagerly awaited figure for businesses, industries and market participants. In short, GDP has become the number by which the world judges itself. South Africa is no exception. And the print often makes it onto the front pages of the country’s leading financial publications.The UN has now thrown a spanner in the works, questioning whether GDP is a true reflection of societal progress.It notes that for decades GDP and its growth have been treated as the closest thing the world has to a measure of progress.However, GDP growth has coexisted with persistent inequality, environmental degradation and declining trust in public institutions.The international body, which has existed for almost as long as GDP has been used as a metric to gauge economic growth and progress, acknowledges that GDP is an indispensable measure of economic activity but argues that it was never designed to capture the full range of outcomes that shape people’s lives. In essence, the UN’s view is that society has come to expect answers from GDP data that it was never designed to give.A high-level report commissioned by UN secretary-general António Guterres to develop recommendations for a limited set of country-owned, universally applicable indicators of sustainable development that complement and go beyond GDP has made some interesting findings.The report represents the first time the UN has developed a proposal of this nature explicitly in response to a request from its member states, which include South Africa.The panel assembled by the UN comprised some of the world’s leading economic minds, including Joseph Stiglitz from Columbia University and Haishan Fu, the chief statistician and director of the Development Data Group at the World Bank.The recommendations of the panel can be grouped into four components:Foundational principles — peace, human rights and respect for the planet — captured through a limited set of indicators, complemented by normative commitments and institutional safeguards;Current wellbeing, measured across domains that reflect people’s lived experiences, including material conditions and work, health, education, security, subjective wellbeing, social cohesion, the quality of institutions and environmental quality; Equity and inclusion, treated as a cross-cutting dimension and assessed through indicators of inequality, poverty and disparities across population groups, including overlapping deprivations, with space for country-specific dimensions where relevant; andSustainability and resilience, which connects present outcomes to future wellbeing through the measurement of key forms of capital: produced, human, social, institutional and natural.The panel concluded that, taken together, these four components map the conditions a society needs not only to function today, but to hold together over time.The recommendations would still see a country such as South Africa — whose economy has not grown beyond 2% over the past decade — fare worse. The country’s educational outcomes are among the worst in the world. South Africa is also regarded as one of the world’s most unequal societies and among the least safe, particularly for women and children.Prof Raymond Parsons of the North-West University Business School said that while GDP remains the standard tool for assessing the total value of goods and services produced in an economy, the UN and economists have long warned against using it as a measure of national welfare. “GDP measures economic size, not how wealth is distributed,” Parsons said. “We have needed more data. Various supplementary indices have therefore been developed to track progress beyond output, such as wellbeing, equity, sustainability and resilience.“The gains at the macroeconomic level need to be visibly translated into tangible outcomes on the ground, not only through effective delivery, but also by credible indices that confirm it.We have needed more data. Various supplementary indices have therefore been developed to track progress beyond output, such as wellbeing, equity, sustainability and resilience.— Prof Raymond Parsons“South Africa’s current challenge is a sluggish growth rate. GDP is not a developmental metric, but it remains an indispensable tracker of what an expanding economy makes possible, including enhanced tax revenues for other socioeconomic goals.”Accelerating growth-friendly policies and projects is widely seen as a priority for South Africa if the economy is to break out of its present narrow 1%-2% growth corridor and attain the government of national unity’s inclusive growth target of 3.5% by 2030.The South African Reserve Bank began standardising and computing expenditure on GDP in the 1940s, eventually establishing the widely cited continuous time series that tracks economic growth back to 1960.Primary responsibility for compiling and publishing quarterly and annual GDP estimates shifted to Statistics SA in 2012, enabling the integration of data from both the production and expenditure sides of the economy.The GDP metric came to dominate economic thinking in the 1940s following the work of economist Simon Kuznets. During World War 2, many academics put their ideas on hold in the national interest. Not Kuznets. He spent the war years developing a massive “input-output” survey that helped reshape munitions production by predicting demand. The adoption of his measure of gross national product further transformed wartime economic planning and later became the standard by which economic growth was measured.The UN’s work on looking beyond GDP has received support from some quarters. Megha Sud of the International Science Council, Calder Tsuyuki-Tomlinson of the UN University Centre for Policy Research and Anna Abraham of the International Science Council threw their weight behind the panel’s report.In a note penned for the London School of Economics, they argued that GDP, in reality, measures only money flows. “It tallies transactions but cannot capture how wealth is distributed, whose lives improve, or what environmental costs are left behind. In GDP’s logic, clearing a forest counts as progress as much as investing in public health,” they wrote.“Meanwhile, some of society’s most valuable contributions, like unpaid care work, remain invisible. GDP may track economic activity, but it falls short of measuring what shapes human wellbeing.“As GDP growth remains the gospel of progress, inequality has risen and trust in public institutions has collapsed. GDP-centrism has arguably worsened the crises of recent decades: the Covid-19 pandemic, the climate emergency, and the technological disruption of labour markets.” Business Times
