GDP PER CAPITA: From objective measurement tool to ideological construct

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Date:
30 Mar 2016

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GDP per capita has developed from being a useful measurement device for restricted purposes, time periods and circumstances to becoming a hegemonic and normatively forceful tool applied to address many questions across diverse time periods and cultures. As such, it has contributed to a biased view of the origins and trajectory of global economic and social betterment and hence of the conditions that might promote globally sustainable development in the future.

That is the argument made by Professor Pat Hudson in research to be presented at the Economic History Society’s 2016 annual conference in Cambridge.

Her study notes that national accounting techniques, developed in the United States, Europe and Australia in the inter-war period, and considerably sophisticated since, have become the cornerstone of much research and accepted wisdom both in contemporary global development debates and in economic history.

In particular, GDP per capita has become the tool or yardstick of choice in most work that considers comparative levels of economic growth across the world and that attempts to measure the relative economic success or failure of regions and nations.

GDP per capita has also come to dominate research geared to calibrating the changing pace (the timing of acceleration and deceleration) of growth in different countries over many centuries. Hence, it has come to be instrumental in attempts to identify the causal factors propelling economies forward or holding them back at particular points in time.

Although the difficulties of estimating GDP are much debated before figures are accepted or employed, and although it is widely acknowledged that historical estimates across time and space leave much to be desired in terms both of accuracy and comparability, the notion of GDP as an ideological construct, rather than as an objective measurement tool, is rarely countenanced.

The adjective ‘ideological’ refers to an orientation that characterises the thinking of a group or nation. Ideological constructs and ideological reasoning, if widely accepted and practised by majority or dominant groups in society (and academia), are rarely perceived as such but enter the mindset, the vocabulary, the ether, of popular understanding and discourse, becoming a form of little-questioned common sense.

Because national accounting techniques were developed in the mid-twentieth century to aid macroeconomic management in societies that had (generally) industrialised early along a high capital- and energy-intensive route and without suffering the penalties of colonisation and informal empire, measurement tools such as GDP per capita best suit such circumstances and reflect the relative success of pursuing that route rather than other paths that might, through necessity or choice, prove more appropriate for particular parts of the globe and for sustainability over millennia rather than a century or two.

GDP best captures the characteristics of economies that have efficient recording mechanisms for taxation and other purposes; that have centralised (often synonymous with capital- and energy-intensive) rather than highly dispersed (and manual) forms of (lower environmental-impact) economic activity; that have a relatively small subsistence or informal sector; and that have insignificant levels of foreign direct investment.

Professor Hudson concludes:

‘GDP per capita takes no account of the distribution of income or of other measures of social wellbeing. It omits time discounting and sustainability considerations.’

‘Its continued unquestioned and widespread use by economists and historians closes down debate about alternative measures, restricts our understanding of the timing and causes of change and, above all, limits our vision of what ‘economic development’ is and how it might be directed.’

ENDS

GDP per capita: an ideological construct

Pat Hudson, Emeritus Professor, Cardiff University

hudsonp@cf.ac.uk

Pat Hudson is an Honorary Vice President of the EHS. She retired from the university sector in 2009 but remains active in research and writing. Among other things, she is co-editor of the forthcoming Routledge Handbook of Global Economic History.

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