By Caroline Poublan, member of the St. Gallen Symposium's global Leaders of Tomorrow community
When 1929 crisis happened, it hit it all hard for the first time in modern history, leaving the world economy with a decade-lasting headache. That was time when countries realized they didn't have a means to effectively measure their economic wealth. And this is somewhat how, within the painful Great Depression Period, gross domestic product (GDP) was born. This tool based on roughly four parameters was built to assess the production of a nation, reflecting on a sense its economy.
In the late 30s, whilst depression had been soaking in countries for years, Hitler decided to force his ethnic deathly delusion across Europe and burst the world to tears and flames. Churchill's British Empire then gave GDP its first practical utility, using it to assess the limits of resources that the UK could potentially bring on to the war.
Another loop in time and we are now in 1944. Olympics have been cancelled, and games of another kind are taking place in a small American town known by the name of Bretton Woods. During the summer, diplomacy is on the spot: 730 delegates coming from 44 allies countries sat together in an isolated 1900s stylished hotel over 6000km away from progressing Normandy front, to agree on the next financial order. On an immediate pre-postwar situation, goal is to create the common financial rules meant to avoid a new Great Depression or another World War. From a down-to-Earth perspective, most important point is to reach a sufficient agreement to prepare the world for reconstruction.
After 3 weeks of negotiations, the agreement eventually took place, defining a gold standard and deciding on creation of the IMF and World Bank. Doing so, it also officially instated newcomer GDP fellow within the global stage of economics as the growth assessment tool. Bretton Woods basically paved the economical foundations to a newcoming world awaiting to be rebuilt, for which production reflected by GDP was undoubtlessly central.
And so now, 70 years later, are we reaching up to a new headache?
Read the news, listen to the radio, watch TV, go into the internet - grossly growth is all around, still based on GDP. So here we are with this few parameters driven stick hanging over the head of any political or economic leader like a Damocles sword. As often pointed out, GDP is based on difficultly calculable financial data and does not take into account further parameters that would make sense such as birth rate, education, women empowerment, human rights, or more genuinely: happiness. Provided the economic and political identity crisis that we are currently experiencing in Western world, with short-term sighted economic policies and rounding elections, it is doubtless any leader would favor an alternative such as climate sustainability over GDP defined economic growth.
So, let us simply remember that GDP is one measure, which was created and instated as standards in times of great burdens, in destroyed worlds on the very edge of reconstruction. It is fair to say GDP has long been sufficient, but world and economic game have radically changed since its creation, and it is time to reinvent our rules. To end with Kennedy's words, GDP measures "everything except that which makes life worthwhile". So how are we growing now?
Growth - The good, the bad, and the ugly will be debated in the light of the 46th St. Gallen Symposium (11-13 May 2016).