Gross Domestic Product, Measuring Economic Progress and Sustainability - Essay Example

The paper “Gross Domestic Product, Measuring Economic Progress and Sustainability" is a worthy example of an essay on macro&microeconomics. John Kennedy said: GDP is not as important to measure the health of a country’s economy as it is only one of the many indicators.  GDP  can be defined as “the total value of all final production that occurs within a country during the course of a  year” (Mayer,  2010, p. 130).  It does not include production that is done by a country’s companies in other parts of the world since that would be counted as Gross National Product (GNP). In order to prevent double counting and inaccurate estimates, GDP  does not include the sale of intermediate products, or services that are done without the exchange of money, or activities which are illegal.

In some countries, these excluded categories are extremely large, as for example in some third world countries where illegal crops are cultivated on a large scale or where much business is conducted by barter and informal processes. This means that GDP is a very useful measurement in countries with good governance and well-developed systems for keeping track of financial transactions. It allows governments in these countries to track the country’s economic performance from one year to the next and to compare countries with each other. In the countries with weaker institutions, GDP measurement is likely to be a poor reflection of actual economic activity, and so Kennedy’s warning does make good sense.

Another problem with an over-emphasis on GDP is that it can distort the view of a particular country. Some countries, like China, for example, have a huge GDP, but it does not mean that the citizens enjoy a high quality of life. The per capita GDP is a better indicator of how much wealth the citizens have (Sowell, 2011, p. 382). Other measures collected by various international organizations give a clear picture of trends in a way a particular economy is working, for example, infant mortality, employment, literacy, and disease statistics show the effects of economic success and failure in terms of human experiences. If one assumes, as most people do, that a society aims to increase its GDP for the benefit of the people, and not just in order to fill the coffers of a few rich companies and individuals, then these non-financial indicators are an important additional source of information that should be collected and assessed alongside GDP. A country could theoretically have excellent GDP outcomes, but the wealth can be focused on a few industries, such as oil for example, and the citizens can be living in considerable poverty.

Recently some economists  have been reviewing the way that GDP has been used in the past and it is  becoming increasingly evident that it is useful to a point, but it is not the only measure available, and it certainly is not the best for evaluating economic performance over the longer term and underpinning decisions for the future. Sustainability, both in terms of natural resources and in terms of the effects of industries on the workforce, is a factor which needs to be considered, and there is also a need to understand economic cycles and intercultural matters which fall outside the purely financial domain (Landenfeld and Shaunda, 2009). Overall, therefore, there are strong grounds for supplementing GDP measurements with other kinds of data and with qualitative analysis in order to form a fuller picture of all the dimensions of a country’s economy over time.