When the world gets closer.

We help you see farther.

Sign up to our expressly international daily newsletter.

Already a subscriber? Log in .

You've reached your limit of one free article.

Get unlimited access to Worldcrunch

You can cancel anytime .


Exclusive International news coverage

Ad-free experience NEW

Weekly digital Magazine NEW

9 daily & weekly Newsletters

Access to Worldcrunch archives

Free trial

30-days free access, then $2.90
per month.

Annual Access BEST VALUE

$19.90 per year, save $14.90 compared to monthly billing.save $14.90.

Subscribe to Worldcrunch

Economic Metrics: Time To Dump The GDP?

The roots of the Gross Domestic Product measurement of economic health are in World War II. Even in 1968, RFK had doubts, and now criticism is growing about GDP's real value.

How did we end up using a war index in times of peace?
How did we end up using a war index in times of peace?
Itai Lahat

The formula used for assessing countries' economic growth has now been around for 71 years, and has become "the mother of all indicators."

The calculation of a nation's or region's gross domestic product, or GDP, is known for having far-reaching implications for markets as well as monetary and fiscal policymakers the world over.

When the GDP drops, markets go berserk and investors start shaking; when the GDP rises, it reflects a beautiful world full of prosperous, happy citizens. Life is considered good when the GDP increases by 3% or more. When growth is lower — or, God forbid, when it's negative — it spells catastrophe.

Life today could hardly be more quantified.

Yet, does the mathematical theorem of private consumption plus investment plus government expenditure plus export, minus import, really offer an accurate accounting of economic prosperity?

Even critics of this indicator, whose voices have become increasingly louder over the past decade, often forget to mention its roots.

The GDP was born in the shadow of World War II. During the war it was used as strategic index, as important as the allies' battlefield conquests. It was developed in 1934 by the economist Simon Kuznets for the U.S. Department of Commerce.

Kuznets warned that his index was not meant to measure welfare: "The welfare of a nation can scarcely be inferred from a measure of national income," he stated at the time.

Former chief economist of the World Bank Professor Joseph Stiglitz, like others, argued that the GDP outlasted other indices because it was well-suited for war. It allowed decision makers to estimate the tax they can impose on the public and, accordingly, the state's potential military power. In other words, how much stuff can be produced — especially tanks, bullets, guns and bombs.

But how did we end up using a war index in times of peace? Mainly because in 1962 economist Arthur Okun stipulated the golden rule according to which, for every three points that rise in GDP, unemployment would drop by one. But it is hardly clear that this rule is still valid today.

The World Bank is one of the organizations that deal with the global addiction to GDP figures, and its president Jim Yong Kim wrote in one of his books that instead of leading to better life, "the quest for growth in GDP and corporate profits has in fact worsened the lives of millions of women and men."

Economists at the Organization for Economic Co-operation and Development (OECD) have also written that GDP growth is not synonymous with progress.

Interestingly, we can go all the way back to 1968 to hear a full airing of the doubts about the GDP, (then referred to as Gross National Product, or GNP), courtesy expand=1] of then U.S. presidential candidate Robert Kennedy:

"Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product — if we judge the United States of America by that — that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.

"It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.

"It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.

"Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials."

You've reached your limit of free articles.

To read the full story, start your free trial today.

Get unlimited access. Cancel anytime.

Exclusive coverage from the world's top sources, in English for the first time.

Insights from the widest range of perspectives, languages and countries.

FOCUS: Israel-Palestine War

What Are Iran's Real Intentions? Watch What The Houthis Do Next

Three commercial ships traveling through the Red Sea were attacked by missiles launched by Iran-backed Yemeni Houthi rebels, while the U.S. Navy shot down three drones. Tensions that are linked to the ongoing war in Gaza conflict and that may serve as an indication as to Iran's wider intentions.

photo of Raisi of iran speaking in parliament

Iranian President Ebrahim Raisi at the Iranian parliament in Tehran.

Icana News Agency via ZUMA
Pierre Haski


PARIS — It’s a parallel war that has so far claimed fewer victims and attracted less public attention than the one in Gaza. Yet it increasingly poses a serious threat of escalating at any time.

This conflict playing out in the international waters of the Red Sea, a strategic maritime route, features the U.S. Navy pitted against Yemen's Houthi rebels. But the stakes go beyond the Yemeni militants — with the latter being supported by Iran, which has a hand in virtually every hotspot in the region.

For the latest news & views from every corner of the world, Worldcrunch Today is the only truly international newsletter. Sign up here.

Since the Oct. 7 Hamas attack on Israel, the Houthis have been making headlines, despite Yemen’s distance from the Gaza front. Starting with missiles launched directed toward southern Israel, which were intercepted by U.S. forces. Then came attacks on ships belonging, or suspected of belonging, to Israeli interests.

On Sunday, no fewer than three commercial ships were targeted by ballistic missiles in the Red Sea. The missiles caused minor damage and no casualties. Meanwhile, three drones were intercepted and destroyed by the U.S. Navy, currently deployed in full force in the region.

The Houthis claimed responsibility for these attacks, stating their intention to block Israeli ships' passage for as long as there was war in Gaza. The ships targeted on Sunday were registered in Panama, but at least one of them was Israeli. In the days before, several other ships were attacked and an Israeli cargo ship carrying cars was seized, and is still being held in the Yemeni port of Hodeida.

Keep reading...Show less

The latest