Should the economy be measured by wellbeing over GDP?
By Daniel J. McLaughlin
The UK economy shrank by four times as much as predicted in April. One of the terms you will hear used in reports about this is "GDP", a measurement of the size and health of a country's economy.
Some believe that we should stop obsessing over GDP, and we should measure a country's growth by wellbeing - like New Zealand.
However, critics warn that ignoring GDP and growth could be bad for the economy.
Dan Button, a senior researcher at the New Economics Foundation, says that Britain should follow New Zealand's lead and measure national growth in "a more nuanced way".
In an article for the Guardian, he argues that the UK should "stop obsessing over GDP" because wellbeing is more telling.
New Zealand will use wellbeing when setting budgets and assessing government policy. Decisions on spending will be measured through four dimensions: human capital, social capital, natural capital, and financial and physical capital.
He says that the focus on GDP "masks what's really going on" - and measuring wellbeing is "a step in the right direction".
Button explains: "The economy described by the growth figures released... does not reflect the reality for most people, who do not feel the effect of rising GDP fluctuations on their daily lives.
"GDP fell... but it can continue to grow while wages stagnate, housing remains unaffordable, life expectancy stalls and the planet heats up."
He adds: "In the past, an undue focus on GDP has allowed governments to claim economic victory, while ignoring what is going on under the hood."
However, the Telegraph's Oliver Wiseman argues that the "trendy wellbeing metrics" are no way to assess an economy.
While admitting that GDP "certainly isn't perfect", he says that ignoring growth altogether would set us back.
Wiseman notes that political decision already put other considerations ahead of growth. For instance, the establishment of the NHS was "a step to boost wellbeing".
He argues: "As we pursue other objectives, the risk is that we take for granted the very thing that allows us to do so.
"Growth doesn't just give us the resources needed for public services. it's what meant we escaped the grinding poverty that defined humanity's existence for thousands of years."
Wiseman adds that once you "strip back the trendy packaging" of New Zealand's approach, you are "left with little more than a heavy sprinkling of cash for public services".
He says that it can form the basis for "yet more state intervention, and a rationale for measures that slow economic growth further".
GDP stands for Gross Domestic Product. According to the Bank of England, it is "perhaps the most talked about economic concept".
They explain that it measures the size and the health of a country's economy. The Office for National Statistics collects data from thousands of companies, and they measure GDP in three different ways: the total value of goods and services (‘output’) produced; everyone’s income; or what everyone in the country has spent.
They are the country’s ‘output’, ‘expenditure’ or ‘income’. When the term 'GDP growth' - also called economic growth or simply “growth” - is used, it usually signifies the overall strength of the economy.
The UK economy shrank by four times as much as predicted in April. It shrank by 0.4 per cent, and it was the second consecutive month it fell (it was down by 0.1 per cent in March).
This means that growth for the three months to April slowed to 0.3 per cent.
GDP figures had been boosted in the run-up to March, when the UK was originally meant to leave the European Union. It saw a spurt of growth as "manufacturers stockpiled parts, raw materials and goods in the anticipation of holdups at the border", the BBC reports.
There was a "dramatic fall in car production", which was down by nearly a quarter (24 per cent). A number of car plants shut down in April in preparation for a no-deal Brexit.