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Time for GDP to step back from the limelight

2014-03-12 16:15 People's Daily Online Web Editor: Gu Liping

In order to improve the quality and efficiency of economic growth, a succession of provinces and municipalities have lowered their GDP growth targets during the "two sessions". It is time for GDP, the index that has dominated the Chinese economy for decades, to return gradually to its due position.[Special coverage]

China is not the only country with a "GDP complex". Americans are also keen on comparing their GDP with other countries. They used to compare Russia with California, and Mexico with Texas. For an even more dramatic impact, some media even pieced together a map of the U.S. in which all the individual states were compared with countries that had a comparable GDP.

But the excitement of GDP competition is not in itself enough to repair the damage that is concealed by growing prosperity. Research conducted in the UK shows that there is a limit to the extent that life satisfaction rises along with GDP- when GDP reaches a certain level, any improvements in life satisfaction begin to tail off. Whether it be the middle classes of developed countries or the salariat of BRIC countries, all have the same experience: the correlation between happiness and GDP growth is not limitless.

In its 80 years of history, GDP has always been held under a degree of suspicion. In the eyes of economists, it is not an entirely effective index by which to measure the health of an economy. Whether you are producing cannons or butter makes no difference to GDP, but it matters a lot to ordinary people. An increasing crime rate will endanger the public's everyday sense of security, even if an investment in security spending to combat the crime rate provides an increase in GDP. Industrial accidents and natural disasters can also serve to increase GDP, but no one welcomes such events. GDP has so many defects that it is hardly surprising to see growing numbers of people appealing to replace GDP with "people's smiles".

However, GDP is still an important indicator of a country's development. GDP growth means an increase in economic activity, incomes, and employment - all factors which help eliminate poverty and reduce social conflict during economic downturns. The website of the Bureau of Economic Analysis of the U.S. Department of Commerce praises GDP as "the biggest accomplishment of the Department of Commerce in 20th century", and many observers include GDP among the greatest inventions of the 20th century.

The problem is that when GDP becomes the main priority of the state, negative effects triggered by GDP growth such as income gaps, resource depletion, and environmental pollution come into play, and there is no easy way of dealing with them. The unshakable grip of GDP is partly due to the inertia of dependence, and partly due to obstruction from vested interests. Many countries have made great efforts to find an index that can better measure and depict social and human development.

In all fairness, as an important management tool of macro-economy, we cannot dispose of GDP completely, but nor can we let GDP dominate our development perspective. Nowadays, people are beginning to re-interpret the meaning of "happiness" and countries all over the world are asking themselves: What is the purpose of development?

We should bid farewell to our emotional dependence on GDP, and place limits on our greed for material wealth. Then the road ahead of us will be bathed in sunshine.

2014 Two Sessions

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