Better measurement of the economy and of people’s well-being could have led governments to respond more strongly to mitigate the damage caused by the 2008 financial crisis and reduce people’s continuing loss of trust in public institutions, according to a new report released by the Organisation for Economic Cooperation and Development.
“Beyond GDP: Measuring What Counts for Economic and Social Performance” targets the widely-used gross domestic product indicator as a crude measure that does not present the full picture of a country’s economic situation.
It also criticizes the widespread use of GDP as a gauge for policy success, when it should not be used as a proxy for economic or general well-being.
The report argues that the 2008 crisis and its aftermath illustrate why a change in perspective is needed.
The GDP loss that followed the crisis was not the temporary one-off event predicted by conventional macro-economic models, the authors note. But its effects have lasted over time, suggesting that the crisis caused the permanent loss of significant amounts of capital; including “hidden capital” in the form of “lower on-the-job training, permanents scars on youths entering the labor market during a recession, and lower trust in an economic system “rigged” to benefit a few.”