Given its centrality in any discussion of what kind of economic model is preferable, it’s easy to presume that the idea of GDP is as old as capitalism itself – that it was perhaps contrived by the likes of Adam Smith or David Ricardo. Yet to the contrary, it is a relatively recent development, devised by the economist Simon Kuznets in the 1930s in response to the Great Depression. It turns out that the central imperative of modern societies – that economic growth should be pursued as an end in itself – only started to reign supreme a century and a half after the Second Disruption began.
Perhaps even more surprising is that scepticism of it is almost as old as the measure itself. In 1968 Robert Kennedy spoke of how GDP ‘measures everything, in short, except that which makes life worthwhile ’. While Kuznets himself cautioned that ‘the welfare of a nation can scarcely be inferred from a measure of national income ’. Even for its inventor, GDP was always limited in understanding the broader determinants of a truly successful society.
But besides those older judgements regarding the often zealous manner in which GDP was used, by the late 1980s another criticism began to emerge. Now, some said, it was no longer capable of even measuring economic growth properly. This was most famously expressed by the economist Robert Solow when he claimed in 1987 that ‘you can see the computer age everywhere but the productivity statistics.’ That conclusion was a response to the ‘productivity paradox’ which so troubled economists at the time – namely, how investment in information technology over the 1980s had a seemingly negligible impact on productivity measures, which actually slowed over the decade.
Reforging the Capitalist State
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