By Ann Marie Newton for QHQ
Fig 1 World Bank Data GDP (US dollars) from 1960-2020
What is GDP?
If, like me you’ve heard the term GDP mentioned in the news but didn’t quite understand what it means here is a quick guide. GDP stands for Gross Domestic Product, and according to the Bank of England is: “a measure of the size and health of a country’s economy over a period of time (usually one quarter or one year). It is also used to compare the size of different economies at a different point in time.” Additionally, from advisors Investopedia “(GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.”
GDP is measured in the UK by the Office for National Statistics (ONS). Measurements can be taken three ways:
• Production
• Expenditure
• Income
All three are said to yield the same results and is usually reported with % increases or decreases from the previous time period, an example from the ONS: “GDP increased by an estimated 7.5% in 2021, following a 9.4% fall in 2020.” Essentially GDP is based on measuring money changing hands and is used as an indicator for economic growth.
Being widely adopted as a standardised tool by many countries including the UK after the 1944 United Nations Bretton Woods conference, which saw the creation of the World Bank, it is used as the main international economic indicator. Fig. 1 shows a line graph from the World Bank giving a total GDP for all contributing countries and is listed at $84.747 trillion for 2020. A trillion being a million million. That is a lot of money changing hands in 2020. Further data is available to show the size of each country, with the top 3 spots being held by the USA, China and Japan respectively, with UK being in 5th position.
What’s missing?
GDP does not account for goods or services that are provided without money being involved, for example family care activities, homemade gift giving and volunteering. This is troublesome especially given the rise in care activities being provided by family and friends.
Equity is not reflected in GDP reporting, where the increases or decreases come from is not immediately obvious. An increase could be the result of the rich getting richer, with no indication of the economic health of those less well off.
Externalities such as environmental damage are also not considered, an ancient forest could be cut down to make into products resulting in an increase for GDP in a country with no reflection of the long-term effect on the climate, eco systems and biodiversity loss.
The word domestic is important as it signifies money changing hands within a countries boundary and does not reflect all the overseas transactions, this is important when it comes to any negative impacts resulting from the production of goods or services. For example: clothing imports, any negative climate, biodiversity or ethical impact of making and transporting the goods are not reflected in GDP.
Bhutan’s Gross National Happiness (GNH)
"Gross National Happiness is more important than Gross Domestic Product."
In 1972 4th King of Bhutan, King Jigme Singye Wangchuck, declared that Gross National Happiness (GNH) is more important than Gross Domestic Product (GDP). Interesting that this is about 30 years after GDP was widely adopted but before countries such as USA & China had done the same. The happiness of GNH should first be understood, as former Bhutan Prime Minster Lyonchhen Jigmi Y. Thinley said:
“We have now clearly distinguished the ‘happiness’ … in GNH from the fleeting, pleasurable ‘feel good’ moods so often associated with that term. We know that true abiding happiness cannot exist while others suffer, and comes only from serving others, living in harmony with nature, and realizing our innate wisdom and the true and brilliant nature of our own minds.”
This holistic approach to happiness speaks more to what it means to be human and is interesting in that it takes a long term viewpoint, includes the relationship with our natural environment and each other. More than that it also speaks to each and every one of us realising our true potential.
What is GNH?
Now we have looked at the happiness aspect of GNH, it is good to understand more about GNH as a measure. It is based on 4 pillars:
1. sustainable and equitable socio-economic development
2. environmental conservation
3. preservation and promotion of culture
4. good governance.
This is a very different approach to GDP and as authors of a 2012 report from the Centre for Bhutan studies say: “(GNH) conveys more fully the colour and texture of people’s lives than does the standard welfare measure of GDP per capita”. Taking into account other aspects of a person’s life feels more appropriate to the times we are living in, although Bhutan is a different size and geography to say the UK, perhaps there is something to be learned from this approach.
Measurements
If as author James Clear claims “The things we measure are the things we improve” then by using GDP as an international measure means our focus is narrowed in on money which leads to what we as a nation look to improve. This focus ignores consequences and does not account for other factors that go into making life ‘better’.
More importantly, given the scale of the challenges we face in terms of the climate emergency, chronic inequality, and biodiversity loss, coupled with trends such as an ageing population, surely our focus must shift to a more holistic approach. For us in the fashion and textiles industries how does a focus on economic growth help us when there is no more cotton available due to soil degradation?
Thinking about the word economy which GDP is currently the main indicator for, when I was in high school, we took home economics as a subject which involved cooking, sewing and nutrition, subjects associated with managing a home. The root of the word economy lies in the Latin for household management and Greek for management and steward. What if our future economies were more linked to our countries and the world as our home? What could we use then as a measure of how our home is doing? What would we use to measure our stewardship? What factors would be most important?
In the situation our ‘home’ finds itself today, what would be in your top three? I would be interested to hear your thoughts
#gdp #gnp #sustainabletextiles #sustainablefashion #apparelindustry