Gross domestic product (GDP) is a term getting thrown around a lot, with politicians around the world forecasting an increase in GDP as a sign that the worst is over.

GDP has also been used to indicate whether or not developed nations are actually developing. In many ways, this system of measurement has guided western nation’s policies towards developed nations and is also guiding economist’s treatment of this crisis. It has long been used as a lens through which we view the world and is the standard bearer for development and living standards.

As far as systems of measurement go, the system isn’t inaccurate. However, it fails to take many factors into account. It feeds into the gluttony inherent to the modern world, the very gluttony that has slipped world economies into disarray.

We need to clear up a few facts about GDP. In layman’s terms, it is a measure of the annual national income of the people, companies and governments of a nation. This system of measurement was the result of government efforts to gauge how truly awful the Great Depression was.

Up came progressive, forward minded economist Simon Kuznets to the rescue. He developed an elaborate system in which he was able to establish national output figures all the way back from 1932 to 1919. By 1942, the modern day system of GDP was in place as the system used to gauge economic output of nations.

According to what I have read, an economy is a system by which people in a country meet their material needs. Central to this definition is people – it is a system by which people go about achieving fulfilling and happy lives.

GDP almost never takes into account whether or not the people’s lives are improving. This is largely because GDP is a monetary measure and only looks at monetary output. If a nation spends a certain amount of money on creating a transport system, GDP measurement doesn’t take into account whether or not this transportation system is any good.

It also doesn’t measure whether the lives of people are actually improving when there is a spike in national income. In major publications, we read statistics like ‘people in Zambia live on less than a dollar a day.’ Yes, this sounds very sad and inhuman in the American context, but in actuality living on less than a dollar a day isn’t that hard. This is largely because a dollar in Mumbai or Lusaka can probably get you more things than a dollar can in New York City or Columbus.

It makes no difference to the measurement of GDP whether the money is being used to buy food for the poor or stockpiles of AK-47s and machetes to fuel an ethnic cleansing.

The Economic and Social Council of the United Nations established three criteria to distinguish underdeveloped countries from developed ones. They established that gross national income per capita must be less than $750. They must share weaknesses in human resource base, meaning human resource is set back by inadequate nutrition, health care and education. Routine economic instability and average GDP per capita in 2000 of $281. The criteria used here again are money-centric and only account for actual human welfare in the second criterion.

Developing countries are being tricked or misguided into thinking that large increases in monetary output imply actually improving lives of people. Yet, GDP doesn’t take into account whether or not this money is adequately trickling down to everyone or whether or not $281 is really such a bad thing for someone in Luanda who can feed, clothe and educate his family for a few months on that amount alone.

Poverty is a problem of money, but also a problem of resources and what direction these resources are being directed in by leaders. If I’m a leader whose nation has a poor GDP and I’m told to improve it, I will invest in an industry of some sort. But what if that industry is destroying the environment on which people have farmed for centuries? It becomes a question of ‘should leaders invest in improving economic output or improving actual human lives?’

This should mean creating societies that are more equal gender wise, creating social and political stability and investing resources into things like food rather than large commercial farm crops like flowers.

In the end, it’s all about what we as humans want to focus on – creating profits or improving lives.

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