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Report on GDP and Sustainable Development Goals (SDGs)

Introduction

In 1972, the King of Bhutan declared that “gross national happiness is more important than gross domestic product (GDP),” highlighting an alternative approach to national progress. Bhutan, despite this philosophy, remains low in GDP per capita globally. Contrastingly, South Korea pursued rapid economic growth through GDP-focused development plans, achieving significant improvements in living standards. This report examines the role of GDP in measuring development, critiques of GDP, and its relationship with the Sustainable Development Goals (SDGs).

1. The Role of GDP in National Development

1.1 Definition and Measurement of GDP

GDP measures the total market value of all final goods and services produced within a country in a given time period. Key aspects include:

1. Market Value: Uses actual sale prices of goods and services.
2. Final Goods and Services: Avoids double-counting intermediate goods.
3. Domestic Production: Focuses on production within national borders.
4. Total Value: Aggregates all economic sectors including manufacturing, services, and net exports.

1.2 Historical Context

• Developed in the 1930s by economist Simon Kuznets to track economic recovery during the Great Depression.
• Serves as a comprehensive national account similar to a financial statement for a country.

1.3 GDP and Sustainable Development Goals

GDP is foundational for achieving multiple SDGs, including:

• SDG 1 (No Poverty): Economic growth reduces extreme poverty.
• SDG 3 (Good Health and Well-being): Higher GDP correlates with increased life expectancy and reduced infant mortality.
• SDG 4 (Quality Education): Economic resources enable investment in education.
• SDG 8 (Decent Work and Economic Growth): GDP growth reflects productive capacity and job creation.
• SDG 13 (Climate Action): Wealthier countries can invest in cleaner technologies, improving environmental quality.

2. Comparative Case Studies: Bhutan and South Korea

2.1 Bhutan’s Happiness-Centered Approach

• Prioritizes Gross National Happiness over GDP growth.
• Life expectancy increased from 51 years (1972) to 73 years (current), aligning with the world average.
• Faces challenges such as emigration for economic opportunities.
• Gross National Happiness surveys show rising happiness, but international surveys indicate a decline.

2.2 South Korea’s GDP-Focused Development

• Initiated five-year economic development plans targeting GDP growth.
• Life expectancy rose from 54 years (1960) to 83 years (current), surpassing Bhutan by a decade.
• Infant mortality decreased by approximately 97%.
• GDP per capita increased from around $93 to over $30,000.
• Achieved status as the world’s 14th largest economy.

2.3 Implications for SDGs

South Korea’s GDP growth enabled significant progress on SDGs related to health, education, and poverty reduction, demonstrating the importance of economic development as a foundation for sustainable development.

3. Critiques of GDP

3.1 Limitations of GDP

• Excludes unpaid work and informal economy.
• Does not account for income distribution or inequality.
• Ignores environmental degradation and sustainability costs.
• Does not differentiate between welfare-enhancing activities and those responding to social problems.

3.2 Critiques from Experts

• The Stiglitz Commission (2009) emphasized that flawed measurements can distort policy decisions.
• Concerns that GDP focus leads to neglect of health, education, equality, and environment.
• Journalists and economists argue for alternative metrics such as happiness indices and sustainability measures.

3.3 Response to Critiques

• GDP was never intended as a measure of human flourishing but of market production.
• No single metric can capture all dimensions of development.
• GDP remains a critical component within a broader dashboard of indicators supporting SDG monitoring.
• Governments consider multiple factors beyond GDP in policymaking.

4. GDP and Its Correlation with SDG Outcomes

4.1 Positive Correlations

• Higher GDP per capita is strongly associated with:
• Longer life expectancy (SDG 3)
• Lower infant mortality (SDG 3)
• Greater educational attainment (SDG 4)
• Reduced extreme poverty (SDG 1)
• Increased self-reported happiness and well-being (SDG 3, SDG 16)

4.2 Environmental Considerations

Environmental quality shows a U-shaped relationship with GDP, initially worsening during early growth stages but improving as countries become wealthier and invest in sustainable technologies (SDG 13, SDG 15).

4.3 Economic Capacity and SDGs

Economic production measured by GDP provides the resources necessary to fund health care, education, infrastructure, and environmental protection, all essential for achieving the SDGs.

5. Practical Advantages of GDP

5.1 Timeliness and Frequency

• GDP data is released quarterly with preliminary estimates available within one month after quarter-end.
• Enables early detection of economic recessions and timely policy responses.
• Alternative measures like Bhutan’s Gross National Happiness data are less frequent and less timely.

5.2 Data Improvements and Accuracy

• Modern data collection methods enhance accuracy and reduce revisions.
• Real-time GDP forecasting models, such as GDPNow by the Federal Reserve Bank of Atlanta, provide continuous updates.

5.3 Comparability Across Time and Countries

• GDP allows meaningful comparisons of economic performance across countries and historical periods.
• Supports long-term economic research and policy evaluation relevant to SDG progress.

5.4 Policy Relevance

GDP remains a vital indicator for building productive capacity, which underpins progress on multiple SDGs. While trade-offs may exist, for most countries, increasing GDP aligns with broader development objectives.

6. Conclusion

GDP, despite its limitations, is an indispensable metric for tracking economic development and enabling progress toward the Sustainable Development Goals. It provides timely, comparable, and comprehensive data essential for informed policymaking. Complementary indicators addressing social, environmental, and well-being dimensions should be used alongside GDP to ensure holistic and sustainable development.

Note: This report was supported by a grant from Arnold Ventures. The content reflects independent analysis.

1. Sustainable Development Goals (SDGs) Addressed or Connected to the Issues Highlighted in the Article

1. SDG 1: No Poverty
   • The article discusses economic development and poverty reduction, highlighting how higher GDP per capita correlates with reduced extreme poverty.
2. SDG 3: Good Health and Well-being
   • Life expectancy improvements and reductions in infant mortality in South Korea and Bhutan are discussed, linking economic growth to better health outcomes.
3. SDG 4: Quality Education
   • The article mentions higher educational attainment correlating with higher GDP per capita.
4. SDG 8: Decent Work and Economic Growth
   • Economic growth, GDP measurement, and industrialization efforts in South Korea are central themes.
5. SDG 10: Reduced Inequalities
   • The critique of GDP includes concerns about income distribution and inequality.
6. SDG 11: Sustainable Cities and Communities
   • Discussion on environmental quality and sustainable development indirectly relates to this goal.
7. SDG 13: Climate Action
   • The article touches on environmental costs and pollution related to economic growth.
8. SDG 16: Peace, Justice and Strong Institutions
   • References to governance, policy decisions, and data accuracy relate to this goal.

2. Specific Targets Under Those SDGs Identified Based on the Article’s Content

1. SDG 1: No Poverty
   • Target 1.2: Reduce at least by half the proportion of people living in poverty in all its dimensions.
2. SDG 3: Good Health and Well-being
   • Target 3.1: Reduce the global maternal mortality ratio.
   • Target 3.2: End preventable deaths of newborns and children under 5 years of age.
   • Target 3.4: Reduce premature mortality from non-communicable diseases and promote mental health and well-being.
3. SDG 4: Quality Education
   • Target 4.1: Ensure that all girls and boys complete free, equitable and quality primary and secondary education.
   • Target 4.3: Ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education.
4. SDG 8: Decent Work and Economic Growth
   • Target 8.1: Sustain per capita economic growth in accordance with national circumstances.
   • Target 8.5: Achieve full and productive employment and decent work for all women and men.
5. SDG 10: Reduced Inequalities
   • Target 10.1: Achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average.
6. SDG 11: Sustainable Cities and Communities
   • Target 11.6: Reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal waste management.
7. SDG 13: Climate Action
   • Target 13.2: Integrate climate change measures into national policies, strategies and planning.
8. SDG 16: Peace, Justice and Strong Institutions
   • Target 16.6: Develop effective, accountable and transparent institutions at all levels.
   • Target 16.7: Ensure responsive, inclusive, participatory and representative decision-making.

3. Indicators Mentioned or Implied in the Article to Measure Progress Towards the Identified Targets

1. GDP per capita
   • Used extensively in the article as a measure of economic growth and development (SDG 8, SDG 1).
2. Life Expectancy at Birth
   • Referenced for Bhutan and South Korea to indicate health improvements (SDG 3).
   • World Bank indicator SP.DYN.LE00.IN mentioned.
3. Infant Mortality Rate
   • Used to show health progress in South Korea (SDG 3).
   • World Bank indicator SP.DYN.IMRT.IN mentioned.
4. Self-reported Happiness / Life Satisfaction
   • Discussed as a measure of well-being and happiness, correlated with GDP (SDG 3, SDG 16).
5. Educational Attainment
   • Average years of schooling as an indicator of education quality (SDG 4).
6. Extreme Poverty Rate
   • Share of people living in extreme poverty used to measure poverty reduction (SDG 1).
7. Environmental Quality / Pollution Levels
   • Outdoor pollution rates mentioned to discuss environmental impact of economic growth (SDG 11, SDG 13).
8. Timeliness and Accuracy of Data
   • Frequent GDP reporting and real-time estimates (GDPNow) highlight importance of timely data for policy (SDG 16).

4. Table: SDGs, Targets and Indicators

Source: vox.com