by Luke Smith, originally a blog post in November 2018, rewritten for this website.
The common way of looking at Gross Domestic Product (GDP) is that it's a metric of economic success: more GDP is more wealth. Wealth is good. "Poverty" (meaning low per capita GDP) is bad. Nowadays, pretty much everyone talks about "economics" like this as if this truism was scribbled on the back walls of the cosmos.
This is just looking at one side of the ledger in a kind of global double-entry accounting book. A logically equivalent way of looking at it is that GDP is a metric of economic exchange required for survival in society as it exists. You can say that some area "produced" $1 billion of output (sounds good), but you can just as easily say that $1 billion was required for that area to sustain itself (sounds bad). These two are simply logically equivalent.
Let's dive into the Gestalt: when you hear that a family of eight lives on less than a dollar per day (PPP adjusted), you might wonder how they manage! To actually do such a thing would require buying large bags of rice for the whole family, eat only that and live in free cardboard boxes.
The reality is that that often uttered phrase means that they use less than $1 a day in the general economy, while the rest of their livelihood is "off-the-grid" or self-sufficient. They may grow food in a family farm, hunt for food, and most of their daily needs from cooking oils, to plates, to pottery, to soap are often made at home as well.
There is still "an economy" but often one that is barter based or socialist in the real pre-socialist sense of the word: mediated by direct face-to-face social tit-for-tat between neighbors and friends, none of this mediated by currency being exchanged, thus it is not part of the GDP.
If you read about some Bangladeshi village where the only product is "textiles", that doesn't mean that everyone there makes textiles all day and, without a textile company, everyone would've starved to death. It means that the only on-paper, measurable global industry practiced there is textile manufacturing. Other villagers might farm, hunt, even do some kind of gathering in some places. They will produce the arts and crafts and live the way people live when you leave them alone. If your view of the world is mediated by GDP, you're only seeing the extremely small sliver that pops into existence when people exchange something involving legal tender.
This is extremely difficult for us modern bugpeople to understand because to be a bugman in a large city is to produce absolutely nothing on one's own and buy literally everything you need from the store. To us non-productive people, GDP means income which means survival. But the further out of Bugmanville you go, the clearer the vacuousness of GDP becomes. When you realize that most of human wealth is unmeasured by GDP, you realize that Whig History and Steven Pinkerism is based on shaky foundations.
A minor example. We had a large Thanksgiving feast near my uncle's house in very rural Florida. As it got cold in the night, we had a fire in a repurposed old sugar cane cooking vat artfully standing on used symmetrical cinderblock pieces. A bugman hipster might pay two hundred dollars or more for a similar looking "authentic" piece of equipment. Those $200 would be counted in the GDP. A bugman hipster might have also bought or rented chairs for the event, "contributing" more to the GDP, but my uncle, as part of the local wholesome church community, simply borrowed some from the church. Thus our event produced basically no GDP output in goods or services, despite being functionally equivalent to some similar but expensive and ergo "productive" "Friendsgiving" practiced by urbanites. In reality we are richer than the bugmen hipsters who blew hundreds of dollars on a faux-folksy party. In this case, we owned the firepit and had easy access and permission to the chairs, thus we are more economically flexible than they are. That GDP that they produced/expended is evidence of deeper reliance on the economic system. That GDP output is a marker of fragility, reliance on the conditions of the outside economy in the same way that a village of Bangladeshis who abandon their traditional way of lives to work on textiles are more fragile, despite being able to save up for iPhones.
Most of the increase in GDP across the world is simply the movement from local partially-social partially-under-the-table economies to economies mediated by taxable currency. An economically self-sufficient village with close social relationships and a barter economy has 0 GDP. A township of entrepreneurs and artisans you partially barter and partially use currency which they don't report has 0 GDP. All of these people are "in poverty" and "earn less than a dollar a day". And if you want to be truly self-sufficient, that means having a personal GDP of zero.
More than that, pretty much everywhere, GDP is a strong indicator of social upheaval. If you think that GDP is some eternal goodness, remember that everything "good" about industrialization shows up in the GDP, while at the same time, everything bad about it will not show up. Or, sometimes bad things are registered as positive economic growth: urbanization has caused mass-disease, and if that means a market for new medical services and pharmaceuticals, great! The GDP just went up! The Ganges is polluted due to the textile plant? That just means more opportunities for local entrepreneurs to sell bottled water! The GDP just went up! Are people being pushed out of fishing or other subsistence occupations because of it? Even better! Now they have no choice but to contribute to the GDP! With every passing year, in fact, more and more of the GDP is produced by dealing with the problems that our higher level of GDP have caused.
At the end of the day, GDP is only a measurement of how reliant a place or country is on the global economy. Self-sufficiency has a GDP of 0. Wasteful consooomerism has an extremely large GDP.
I have one of my great grandfather's early electric circular saws. It has a bunch of gunk in it, but it still works (although I recently took it apart to replace some old screws and springs and other little parts to be careful). They literally do not make circular saws like it; it's all metal, while even the fancy modern stuff is mostly plastic.
The "unfortunate" thing about it and other durable tools is that it's "bad for the economy," especially the GDP. Since that thing has been around since maybe the 50's or 60's, that's as long as 70 years the economy has gone without the "stimulation" of us having to buy another saw.
Viewers of my technology videos: Which would be better for the world, if everyone used the material equivalent of a classic American-made IBM ThinkPad, or some Apple Laptops that are unfixable computers made of mostly batteries designed to conk out right before the new version comes out? Regardless, the Apple Macs that cost thousands a piece are much better for the "economy."
That's what I mean. If you have quality tools and do not need to constantly throw money at the system to buy things, fix things and otherwise waste money, you are going to be having a lower GDP. That's just how it is.
When you don't think things through like this, GDP is supposed to appear as an objective measure of economic goodness. You're supposed to be looking at those GDP charts and saying, "Wow, my life might be terrible, I am not free, I am subject to forces out of my control, and I am told I have to participate in mass-consumerism to survive, but these charts are the facts[!], and the facts say that things are better now, so I believe them!"
It's legitimately surprising to me how big of a boon the idea of increasing GDP is for Whig history and NPCs of many different ideologies. People of the Left and Right will matter-of-factly tell me that a plastic based economy taking over the world is still good because the line is going up. I've heard it as a justification for everything:
Don't like globalization? You're wrong, the GDP is going up. Don't trust state-funded institutionalized science? You're wrong, the GDP is going up. Don't want child drag queens? You're wrong, the GDP is going up. Don't want everything to be made of plastics and other petrochemicals? You're wrong, the GDP is going up. Don't want mass pornography? You're wrong, the GDP is going up. Don't want free sugary drinks since infancy? You're wrong, the GDP is going up.
When you abandon the illusion of GDP, you are suddenly able to ask whether massive technological "progress" has actually been good for real human life and human pychology.