GDP and the idolatry of growth

In the middle of the eighteenth century, the physician-turned-economist François Quesnay devised a quantitative model of the economy, among the first of its kind and a precursor to present-day GDP. Quesnay is famous today as among the leading lights of an economic theory known as Physiocracy. Like other Physiocrats, Quesnay placed land and agricultural output at the center of the economic system.

He wrote at a time of incredible advances in calculus and probability theory, and he applied mathematical rigor to his economic theories, becoming among the first economists to produce such a quantitative model of the economy. In his efforts to categorize and quantify economic output in this way, Quesnay anticipates the fundamental idea behind GDP (and GNP, etc.), that to understand the economy, we must measure and sort our productive output.

Quesnay’s Tableau Économique was not the first such attempt. Almost a century earlier, William Petty had presaged a sea change in economics (though formal economics as we know it did not yet exist) by applying mathematical and statistical methods to the quantification of economic life. By the twentieth century, the approach had been formalized and brought close to its contemporary state by the work of economist Simon Kuznets, who in 1971, won the Nobel Prize “for his earlier work with growth and the economy’s size.

He developed methods for calculating the size of a nation’s income and changes in it and standardized the concept of gross national product (GNP).” Kuznets was a brilliant person, and he recognized the limits of the idea and perhaps foresaw its misapplications. “The welfare of a nation,” he wrote, “can scarcely be inferred from a measure of national income.”

It is worthwhile to briefly review the history of this idea, revolutionary in terms of the depth of change it brought forth, of economic life as a thing apart from social and political life, a distinct thing that can be quantified and, more still, made to grow forever.

It may be that crude attempts to size the parts of life we call economic are as old as humanity. In the modern era, though, this idea of measuring the economy as a newly independent object of study was distilled and clarified, taking on the character, eventually, of a sociological mania. We adopted a notion of economic progress and limitless growth so extreme and precarious that it now threatens safety and stability within several social and ecological contexts. The anarchist Colin Ward summarizes the criticism with characteristic style:

The notion of progress is one of the most pernicious delusions of our time. It is a notion which has been foisted on us by the machine age, a notion which has been implanted in us by the servants of the capitalist system who lead us to believe that the speed with which things are produced and the amount of things produced are synonymous with human well-being. The relationship between GDP growth and progress is itself a subject of some debate. Progress has no fixed meaning and no platonic form; its many meanings are subjective, human-determined, and mutable. The version of progress we know today is part of a broader meta-ideological suite associated with modernity. We are governed by this modern ideology, a meta-ideology standing a level above smaller periods’ popular political ideologies—even standing beyond major ideological categories like humanism, liberalism, capitalism and nation-statism.

The modern ideology is their bedrock, defined by ideas of human perfectability, unlimited progress (scientific, technological, economic, and in every other sense), never-ending growth, the importance of institutional hierarchy and power, and the obsession with sorting and quantifying everything under the supervision of experts. Now everything was to be the domain of the specialist, whose position allowed him (and it was a him) to dictate, to tell you what to do and what is true.

We may consider that the notion of progress itself requires that objects of inquiry must be, in Ivan Illich’s words, “homogeneous and quantifiable” (he contrasts the “unique and incommensurable” products of nature). So the notion of progress, like GDP, reduces vernacular ways of life, losing the ability to see their complexity—and, with it, the binding social forces occupying the spaces between more readily quantifiable things.

The claim that GDP is not an accurate or useful proxy for the real economy is an interesting area of overlap between the socialist left and radical libertarians. Both groups apply theories of class-conflict to understand the outsized influence of the finance sector on the decisions of policymakers and regulators (whether regulators are themselves the real policymakers today is a question for another day). As a measure of overall economic health and performance, GDP is both overinclusive and underinclusive; in the way it calculates the value of goods and services in the U.S., it doesn’t draw a distinction between economic activity dedicated to war and needless death, for example, and economic activity that serves human well-being and flourishing.

Counterpunch