GDP: The World’s Most Powerful Formula and Why it Must Now Change is an account of how Gross Domestic Product came to be, how it rose to dominate international politics, and how it fails us. It is told through the stories of the people who invented it, tweaked it or challenged it over the decades, bringing a human dimension to what could otherwise be a somewhat bloodless history of an idea.
However, let’s cut to the chase: there are many books that critique GDP (including mine), and several books specifically about GDP. Among the more notable are Diane Coyle’s GDP, a Brief but Affectionate History, and Lorenzo Fioramonti’s The World After GDP. There are a bunch more in French, as France has been a leader in thinking beyond GDP. So why should anyone pick up this one?
I’ll give you a handful of reasons. First of all, there’s that focus on the characters. Important economists, power brokers and diplomats are profiled. Masood uses their own words, often from personal interviews. We get a sense of the people behind the politics, of what motivated them, and how they were perceived by their peers. These are powerful men – and they are almost entirely men – who have influenced outcomes for entire countries, and set the ground rules for international relations. So it’s intriguing to see how GDP was shaped by war and depression, but also by professional pride and academic rivalry.
Some of these characters may be familiar, such as John Maynard Keynes or Simon Kuznets, who first calculated Gross National Income in 1932 and then spent much of his career fighting the misuse of it. Less familiar will be Jigme Singye Wangchuck, the king of Bhutan who recognised as a teenager that the Western model of economic development was not right for country. Or Maurice Strong, who founded the United Nations Environment Programme and in the process, invented the role of Environment Minister and put one in almost every cabinet in the world. Or Mahbub ul Haq, a Pakistani economist who spent ten years directing economic growth in the country, only to see first-hand how it had created inequality and distracted from more material priorities.
That leads me to a second reason to pick Masood’s book over similar titles. British born and educated in Pakistan and New York, Masood brings an international perspective that’s often missing. Critiques of GDP usually focus on how the metric is blind to inequality and environmental destruction, and those are covered here. Fewer commentators write about how it fails developing countries. GDP was “created to suit the needs of countries that had already developed” he writes. In countries with high levels of absolute poverty, informal employment or subsistence farming, it makes far less sense. It can lead to perverse incentives and there is now decades of evidence to support the call for more holistic definitions of progress.
What holds back those alternatives and keeps GDP in use is ultimately power. If you’re at the top of the GDP rankings, you’re not interested in other ways of measuring things that might demote you. Membership of exclusive clubs like the G7 or the G20 depends on GDP. So Masood takes a realistic view in his conclusions. Rather than fight for alternative metrics, or the dashboard approach that President Sarkozy developed in France and David Cameron briefly toyed with in Britain, why not adapt GDP?
This is another distinctive of Masood’s book. “If it is true that GDP remains the only number that influential politicians, the markets, the banks, the media, and the commentators pay attention to, then the solution cannot be more alternative indicators; nor can it be a dashboard. The solution has to be to value the things that matter and then incorporate this value into the GDP accounts.”
If that sounds unlikely, the book describes how GDP has been changed in the past, how international definitions and standards are updated, and what the chances might be of improving GDP rather than abandoning it. I can’t say I’m entirely convinced about this myself – in the long term we just have to be more sophisticated than trying to reduce human progress to a single figure that goes up or down. But I respect that pragmatic approach as an intermediate step.
In short, Masood’s book is an eloquent and nuanced history of GDP and the political wrangling that created it, sustains it, and that might ultimately reform it.