The Growth Delusion – Review
The Growth Delusion: The Wealth and Well-Being of Nations, by David Pilling, January 2018. Bloomsbury, ISBN: 9781408893708, 352 pages. £20.00 (hardback – now also available in paperback)
If you think that economics, and in particular GDP, is a dull and incomprehensible subject, this book may change your perception. Although there have been numerous books on the topic of growth, this one takes a slightly different angle, exploring economic history and monetary facts and interviewing economic luminaries worldwide. Pilling wrote the book because he had “reached the conclusion that our habit of seeing everything through the prism of economic growth is distorting our vision of what is important.”
He begins by outlining the history of measuring economic growth. We learn about Kuznet, the ‘father of GDP’, whose methodology excluded government expenditure, and Keynes, who included it, and is thus considered by many as its true inventor. Pilling gives examples of the many ambiguities of GDP, such as counting prostitution and drugs where they are legal. Because GDP measures goods and services, not well-being, it can skew our perception of what we deem a successful economy. Household production is not included, nor are activities which are outsourced and performed by customers themselves. Pilling believes that as things become cheaper and more convenient, the economy can appear to be in decline, which has happened to productivity as measured by GDP. He asks whether this is a true measure, or whether our lives are better than we think. He shows that measuring growth in the conventional way becomes even more difficult in developing countries where the economy can be more informal, such as that of pastoralists in Kenya.
However, Pilling does not demonise growth, as he believes that it can transform the lives of the poor, e.g. in India and China. He quotes Amartya Sen, that economic growth can bring “freedom from unfreedom”, and also Hans Rosling, who saw growth not as an end in itself but a means to improve people’s lives. Pilling devotes a chapter to China’s rapid growth and the consequential problems of environmental pollution, social dislocation and inequality. He uses the China model to demonstrate that the obsession with measuring growth can often discount the negatives, because only one aspect has been measured.
The final section of the book examines those aspects of life that cannot be measured by GDP. Certain assets such as skills may not be measured, and the depreciation of assets – clearing wetland, for example – are not included in our current models. Measuring wealth in a different way could help societies avoid eventual collapse through environmental degradation. The problem lies in the undervaluing of natural assets, which are often regarded as free. We are borrowing from the future, which could lead to catastrophic results. Pilling also explores alternative measures such as the Happiness Index and the Genuine Progress Index, both of which demonstrate that income alone is not the only factor determining well-being.
Pilling concludes that whilst GDP is a useful tool, it needs to be treated with a degree of scepticism. He argues that rather than replacing it, we should add to it. Statistics, he states, are not neutral but political, and can influence policy-making. He makes several suggestions as to how we might implement a new way of measuring wealth that takes into account other factors, such as CO2 emissions. He implies that we should feel free to change the system to better serve our needs and to calculate what is really important to us.
Linda Wickham
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