In this Guardian interview with the Nobel economic laureate and New York Times columnnst Paul Krugman, he points out that the Japanese economy has not grown at all since 1992.
[Will Hutton, interviwer, to Krugman] Japan’s GDP at the end of this year will be no higher than it was in 1992 – 17 lost years. You are saying that this is an ongoing risk, certainly for the North Atlantic economy – maybe the world economy.
Wow. No growth for 17 years? Surely the country should have collapsed?
But apparently not.
Previously on this blog, we’ve mentioned the notion, outlandish to many, that economic growth, or increases in Gross Domestic Product, might actually be a very bad measure of national success or failure for any particular country.
Yet it is precisely the measure most used by journalists, economist and politicians. Though in fact,
“…the welfare of a nation [can] scarcely be inferred from a measure of national income…” – Simon Kuznels, originator of the concept of GDP
So the guy who formulated the GDP concept didn’t recommend it for use as a measure of how we’re doing … yet we’ve somehow twisted it to that purpose.
Indeed, growth in GDP comes with significant costs, which are not measured in the reckoning of GDP: air, water and noise pollution, loss of farmlands and wetlands, mineral and biological resource depletion, increased crime (in some instances), damage to biodiversity,
So concentrating on large GDP as a measure of a nation’s well-being is a bit like judging a family’s prosperity on the basis of a large house and big screen TV … while ignoring its mountain of debt.
Which is why GDP can increase year after year after year – even as human well-being declines.
So what has happened to Japan in the last 17 years of non-growth? Though it has dropped several places in the UN’s Human Development Index, from topmost in 1990 to eight in 2006, and unemployment has increased, it arguably remains one of the world’s most developed and successful countries.
There are alternatives to GDP of course, such as the Genuine Progress Indicator. Real measures of national well-being need to take into account not just income, but also psychological well-being and the state of the environment, which will determine the well-being of future generations.