The measurement of an economy is something which is given much store in the modern world; with governments talking often about how much their economies have grown and using this to extrapolate the level of success of their policies.  The principal measure of an economy’s performance is its Gross Domestic Product (GDP).  There are various different forms of GDP measurement: Nominal; Real; Per Capita etc. However, globally they are all measured in US dollars, and they all boil down to a measurement of the amount of money that has been spent in an economy for the given period.

Yet, is this really an appropriate measurement of success?  When was the last time that this method of calculation was questioned?  Surely a better judge of success is how we live our lives and not how much money we have?  The question of how we live our lives is self-evidently a subjective matter – leading to a (perhaps unfair) comparison of values and which could result in a lack of consensus concerning any given result – thus rendering the comparison redundant.  But is the comparison of GDP (money) any better?  Is it even objective?   Because if it is not, then it too is useless as a comparison.

Global GDP data and comparisons are generally measured in US Dollars, which means that economies which operate in a currency other than US Dollars have to be converted.  Therefore, amongst the various measures of GDP is the measure of GDP according to Purchasing Power Parity (PPP) which attempts to balance the differences in the GDP figures by means of the currency exchange rate: which is to say that if £1 Sterling can be exchanged for 0.50€, then the GDP of France would be doubled before being compared to the GDP of the United Kingdom.

This all seems reasonable and many organisations and international bodies refer to the PPP method when analysing statistics.  Nevertheless, the PPP method of comparing GDP does not take into account the standard of living and wages in a country.  Failure to account for the difference in Average Wage seems (to me at least) a significant absence from the calculation.  The purchasing power of the individuals in any economy is directly linked to their wages: thus in a country with a low average wage, one would expect a low GDP – both due to the low costs of employment, but also then to the subsequently low purchasing power of the labour force.

Even when the exchange rate mechanism is taken into account, things are skewed: the average wage for India in 2016 was 1,147,995 Rupees and for the UK was £25,500.  At the exchange rate of 1 Rupee to 1 pence, that would mean that the adjusted average Indian Wage (in the UK) would be equivalent to £11,500 per year… less than half that of the average UK Wage.  The lack of inclusion of this in the calculations seems strange, especially considering the amount of money spent on employing people, which although varies, it is generally no less than 50% in many modern economies.

In addition to this basic oversight, the differences in the conditions of the respective domestic markets act to determine the perceived value of a specific good within a specific market – thus the balance of each market is also different: manufactured goods which have multiple steps of manufacture or components risk costing more to produce that goods which are less complex or have less steps/ components (because at each step additional labour is factored into the cost of production).

All in all then, the comparison of GDP is not a comparison of like for like.  In which case why is this system used?  Even were a measurement of GDP  a valid benchmark between countries, it still shows only one thing – how much money is spent in an economy.  Is this really the level to which we have sunk – things are only valuable if they engender the spending of money..?  Has the word value become synonymous with financial value to the extent that this is all that can be seen?  Are the lives of human beings only quantifiable in such terms?

It strikes me that for as long as we quantify things (anything) in terms of money, then nothing will have any value other than a financial value; and that the strongest currency will therefore dominate everything.  The knock-on effect of this is that our entire judgement system then becomes reduced to a comparison with money.  Is this safety feature worth X?  Is that social service worth Y?  Our education systems cease to be concerned with whether or not we are educating ourselves properly and are reduced to the question of whether or not we getting value for money.  Likewise our health services become dominated by financial values rather than medical or social values.

For as long as money is our only value judgement, then it is only money (and profit) which will determine how our species advances.  Every action that we take will be judged on its financial impact to our economy – the stupidity of this is that when it comes to discussing how to address climate change – something which arguably has the power to wipe out the entire species – all we worry about is how it will impact our abstract concept of money!!  (Note to everyone – if the species is wiped out then money; sadly, is wiped out along with it!!)

We continue to blind ourselves to what is important, by focusing on something which is not.  We need to find a way to agree a global value for the ‘how’ of living and not the ‘how much’ of living.  Until we do, everything will be subordinate to money – freedom, democracy, the environment… everything.