Economic Growth And Gdp example essay topic

GDP OPINION PAPER Once upon a time, in a land far, far away, a small island existed. This island was the best place in the world to live in, it was in the Caribbean Sea, great tropical weather, sandy beaches, but most importantly a GDP of two Trillion US dollars. Who can argue that this island is a bad place to live on, who can argue against statistics? Statistically each person was suppose to have two trillion dollars, but realistically there were only two people on the island, one being the richest man in the world, the other was his broke slave. Statistically it was by far the best place to live in but realistically there was 50% unemployment rate, 50% mortal disease rate, etc. Who can now say that GDP is an accurate indicator of a nation's well being, how can u compare an economically active country with its GDP to an island with one rich person and his slave?

The above example is an extreme case but it is an indicator of just one of the issues that GDP poses when it is used to measure a countries' well being. When the GDP system was invented it was made to measure just the domestic production and nothing more, today it is being used as a means for determining which country is better to live in and I think that this is ludicrous to say the least. There are many things to consider when setting a standard of living or ranking a country, money isn't the only one and even when it is GDP is not an accurate way of measuring economic growth, on the whole GDP lacks many essential elements, thus making it unfit to measure anything let alone the overall ranking of a country in the world and economic growth. On some level GDP does measure economic growth, but what else is associated with economic growth, is economic growth necessarily good or can it sometimes be bad, what does GDP keep a blind eye on? In today's society because of globalization and the development of international trade, countries tend to compare themselves on a global scale using GDP measurements. Ideally whoever has more economic growth and GDP is the better place to be a citizen of (World Bank Statistics, 2004), but where one country could be growing more financially, another one may have better standards of living and not to be focusing so much on production, but more on cultural improvement, lowering taxation, improving healthcare etc.

When there is economic growth in place there is also the issue of how many people will not keep up with the economy and become homeless, how many people will not be able to afford the bare necessities and when the country would go into a depression because of inflation and interest rates rising too much. All of these things are factors that are not accounted for by GDP and they are very likely to happen because of economic growth (Wikipedia Foundation Inc, 2007). Would unemployment, hunger, and depression make the country a better place to live in? Not really.

Apart from the fact that there are too many costs to economic growth and that it is not all good and sunny, there is also the issue of the inflation and its effects, and how it is not at all seen by the GDP calculations. The economy always moves in cycles, it is almost like an exact math equation. Most of the economic aspects are being viewed from a psychological perspective where there is economic growth up to a point where inflation is above the prices (Wikipedia Foundation Inc, 2007). What some people may not realize is that as soon as that happens there is not a recession starting because now people reached their limits and are not spending anymore as much as they did, bringing the whole economy into a downfall. The country with the highest GDP and economic growth could also be the one with the closest recession coming up because maybe inflation is so high that it will overcome prices soon. This is just another drawback of using GDP for everything because there are so many things like inflation that are not accounted for at all.

There is one more problem with GDP that is very big, even if people were to measure countries only based upon their GDPs there would still be the problem of inaccuracy and statistical bias. When setting a global standard that all countries should abide by, one must also make sure that every single country follows the exact same procedure, doesn't lie, doesn't conduct inappropriate research and isn't like the island brought up in the example earlier. What gives people the guarantee that these numbers that each country reports are accurate and realistic figures. Apart from that there are also other elements to consider like the history because if a country only now began developing it is going to have significant growth and GDP but the living conditions may still be horrible and the country may still be poor, simple growing to less poor. There are numerous other things that could be considered when basing a countries place in the world and its growth on a measurement like GDP, thus making it inaccurate, non reliable and overall a very bad way to measure economic growth. As one would already learn that there are problems with using GDP and there are certain things that make GDP loose its credibility, one can't help but wonder "what is there to do about it?" and what are the alternatives.

First of all GDP is a very useful tool to measure production and for a country to plan out its future financial dealings but when it comes to comparing with others or when it comes to measuring real growth and quality of life, GDP should not be used. Instead there are numerous other ways of measuring growth and quality of life; some of these include The Human Development Index which measures the life expectancy, literacy, education, and standard of living of a country (Wikipedia Foundation Inc, 2007), also there is the Subjective Life Satisfaction which measures peoples understanding of well being in that country (Wikipedia Foundation Inc, 2007), and many other forms of measuring that may be a little harder to tabulate but are a lot more accurate in terms of economic growth, life satisfaction and comparison with other countries. The GDP is overall a very smart system that is very hard to truly analyze, it is a way all counties could look at their own economies, but since there are other non-dollar factors associated with life that are not taken into consideration by GDP, it is completely useless in measuring which country it is better to be a citizen of and all conclusion found form GDP statistics should not be taken seriously as there are too many flaws in the GDP system.