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2 April 2015

Is GDP the best measure of growth?

By Richard Dobbs, James Manyika, Jaana Remes, and Jonathan Woetzel
January 2015

No matter how we measure economic growth, it needs to be pursued in a smart way.

The extraordinary economic expansion of the past 50 years was clearly a success in terms of GDP: the world economy is six times larger, and average per capita income has almost tripled. But what about the environmental impact of sustained high economic growth? Or growing concern in the developed world about stagnating median incomes and widening inequality?

There is almost universal agreement that GDP alone is an imperfect metric for growth and prosperity. So we did not take lightly our decision to define growth using GDP in our new report, Global Growth: Can productivity save the day in an aging world? But limitations on data across a large number of countries and a long historical time frame meant GDP was the metric that made sense. As the Financial Times put it, “GDP may be anachronistic and misleading. It may fail entirely to capture the complex trade-offs between present and future, work and leisure, ‘good’ growth and ‘bad’ growth. Its great virtue, however, remains that it is a single, concrete number. For the time being, we may be stuck with it.”

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