Buy essay on Well-Being GDP: Its Historical Background and Its Future

The paper focuses on the study of well-being GDP, its essence and measurement. Well-being GDP replaces the conventional GDP to measure the well being of nations and their development. In this regard, the study focuses on the comparison of conventional GDP and well-being GDP to reveal drawbacks of conventional GDP. Eventually, the paper reveals the fact that conventional GDP does not allow to assess the well-being of each individual in a country, but it shows the general development of a country. Instead, well-being GDP shows how people live and the standards of living in the country along with well-being and happiness of people.

 
Table of contents:
Introduction
Well-being GDP concept
Historical changes of the current capitalist economy
Efforts for well-being GDP developments among major nations
Systems of measurement and evaluation of knowledge capital
The basic framework for measurement of well-being GDP of South Korea
Conclusion
Works cited
Appendices

 
Introduction
The development of the modern capitalist economy tends to shift toward the development of a new type of society and socio-economic relationships, where the wealth of nations cannot be the absolute measure of their well-being. Instead, the high standards of living and the just redistribution of wealth within a nation or a state tend to become the major priorities of modern states and leading nations. In such a context, the measurement and evaluation of the economic development of countries and their wealth are essential for the adequate understanding of the well-being of nations. Traditionally, GDP was the major tool of the measurement of the wealth of nations. The higher the GDP was the more prosperous the nation was considered to be. However, in recent years, it has become obvious that the GDP does not necessarily mean the well-being of the nation. In stark contrast, the GDP rather mirrors the overall development of the nation but it fails to mirror the actual redistribution of wealth within the nation. This means that the wealth of the nation does not necessarily mean that all people living within a country are wealthy or live in accordance to high standards of living. In addition, the modern society, being highly materialistic, still slips to the concept of well-being in broader than material terms. In such a context, the concept of happiness emerges as one of the tools to measure the well-being of the nation. On the other hand, the happiness of people is often inseparable from their material prosperity. Hence, the concept of the well-being GDP arises, as an alternative to the conventional concept of GDP, which combines both economic evaluation of the development of a nation and happiness and well-being of the population. At the same time, the concept of the well-being GDP is apparently under-researched and needs in depth studies. At the moment, researchers cannot come to agreement on the methods of measurement and evaluation of the well-being GDP because the concept combines both material and non-material terms.

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In such a situation, the study and detailed analysis of the concept of the well-being GDP and basic methods and approaches to its measurement and evaluation can help to find out effective ways to the implementation of the concept of the well-being GDP in the real life to the extent that the well-being GDP can become the new philosophy of the new capitalist economy, where the well-being of each individual will be prior to the well-being of the nation and where the national wealth will be distributed justly and all members of the society will be happy.
Well-being GDP concept
The concept of the well-being GDP is closely intertwined with the concept of GDP – Gross Domestic Product. At the same time, the concept of the well-being GDP is a broader concept because it enrolls such concepts as happiness and well-being. In fact, it is due to these specificities researchers have so much difficulties with the clear definition of the concept of the well-being GDP and, what is more important, to find the ways to the well-being GDP growth. In such a context, it is important to dwell upon the concept of GDP and its evolution to the concept of the well-being GDP.
First of all, specialists define GDP as follows: “Gross domestic product (GDP) is the most widely used measure of economic activity” (Stiglitz, et al., 21). In fact, this is the general definition of the concept of GDP which stands on the ground that GDP represents the measurement of the economic development and productive forces of countries. Basically, GDP mirrors the economic development of countries and their position in the world economy. At the same time, GDP mirrors the level of the accumulation of material values within countries and their economic potential. The high GDP means that a country has a great potential and it has already reached the high level of economic development. GDP mirrors the welfare of a country because it summarizes the economic activities and their measurement in financial and economic terms. In this regard, it is important to lay emphasis on the fact that the measurement refers to material values of a country and its economic activities but the concept of GDP does not involve non-material values and, what is more important, it does not mirror the actual position of individuals within a country.
At this point, it is possible to speak about consistent drawbacks of GDP and the criticism of GDP from the part of different specialists and researchers. In fact, the wide gap between the GDP rate and the well-being of individuals comprising the population of the country, where GDP is measured is one of the major reasons for criticism of GDP as the means of the measurement of the well-being of nations. What is meant here is the fact that the traditional concept of GDP mirrors the actual economic performance of countries but it does not reveal the actual position of individuals within nations. For instance, GDP does not show the living standards of the nation and how much individuals can afford high standards of living. In addition, the traditional concept of GDP fails to show the actual position of each individual in the country. Instead, the traditional concept of GDP shows the prosperity of the entire country, even if the wealth of the nation is distributed unequally. For instance, a few percent of the total population can appropriate the larger share of the nation wealth, whereas a large part of the population can live in poverty.
Furthermore, specialists argue that the underlying basis of criticism of GDP as a measure of welfare is the divergence between the critic’s values and market values (Dipietro & Anoruo, 699). What is meant here is the fact that the standards and values used in the assessment and evaluation of GDP may be diverse and they do not always coincide. To put it more precisely, the critic value can use the different set of values which does not mirror the market set of values while measuring and evaluating GDP. The difference may be substantial if the values differ consistently. At the same time, the market values can differ consistently and they do not always work in different countries. For instance, there are countries, where the open market economy does not work but when the values of the open market economy are applied to measure their GDP, the result is likely to be misleading because the GDP measured and evaluated on the ground of the open market economy values will not mirror the actual level development and GDP of the country where there is no open market economy at all.
Nevertheless, the first step towards mitigating some of the criticism of GDP as a measure of living standards is to emphasize national accounts aggregates other than GDP, for example, by accounting for depreciation so as to deal with net rather than gross measures of economic activity (Stiglitz, et al., 23). In fact, this means that GDP does not mirror the actual situation in the economy and the position of individuals within the society. The gross measures fail to reveal the actual position of individuals and, therefore, they cannot be used to measure the well-being of the society or nation. On the other hand, in pure mathematic or economic terms GDP shows basic trends in the economy and the welfare of a state or nation.
In addition, today, it is important to remember that the modern economy tends to globalization and nations live in the globalized world where frontiers and barriers between nations tend to disappear. In this regard, the economy and economic relations accelerate the process of globalization. Therefore, GDP should take into consideration the process of globalization because economic activities change under the impact of globalization and it is the economic activities that affect consistently the measurement and evaluation of GDP. In such a context, specialists lay emphasis on the fact that “in a world of globalization, there may be large differences between the income of a country’s citizens and measures of domestic production, but the former is clearly more relevant for measuring the well-being of citizens” (Stiglitz, et al., 24). In this regard, it is worth mentioning the fact that the process of globalization contributes to the shift of the production facilities. This trend is particularly strong in developed countries which shift production facilities to developing countries to save costs on labor force and to get rid of production and manufacturing facilities, which may have a negative impact on the environment. At the same time, it is the production that defines the well-being of citizens, whereas income is rather a conventional tool to measure the well-being of citizens because the income may vary, it may raise and drop consistently but without the production the income will decline steadily or fast. Nevertheless, the traditional concept of GDP does not take into consideration this trend and this difference between income and production.
In actuality, specialists lay emphasis on the fact that GDP has four major limitations which restrict its use as a measure of well-being. First, it includes the replacement of depreciated capital: it is a “gross” concept (Deutche Bank Research, 4). In such a way, the traditional concept takes into consideration the total production but it fails to expand the measurement on the effects of the production and the capital or investments can have on the development of the economy.
The second difficulty with GDP is that it measures income produced in a country but not how much income people in that country receive (Deutche Bank Research, 4). In fact, this is the problem which has been discussed partially above. As the matter of fact, the problem is that GDP measures and devaluates the income produced in a country but it does not mirror the actual income of citizens of the country. This means that a few can earn the main part of the national wealth, whereas the majority will get a smaller part of the national wealth. At this point, it is possible to speak about the redistribution of wealth and the extent to which such redistribution is just or unjust. However, the conventional concept of GDP does not allow to measure and evaluate the redistribution of the national wealth within a country. Therefore, even the high GDP does not mean that incomes of the majority of the population are high. At the same time, the income of individuals is closely intertwined with standards of living because people cannot afford high standards of living if their income is low. At this point, GDP still fails to reveal the standards of living of individuals but, instead, it shows the general economic development, gross production of a country and its wealth without précising the redistribution within the nation.
Third, since GDP only counts monetary transactions (including estimates for those in the shadow economy), it misses many other activities that people value like caring for children or elderly at home (Deutche Bank Research, 4). At this point, it is important to lay emphasis on the fact that the conventional concept of GDP focuses on material values and it ignores non-material values, such as caring for children, for instance. In fact, GDP focuses on the quantitative analysis of the economy and it is practically deprived of the qualitative analysis, especially in regard to non-material values. Instead, the well-being GDP implies the inclusion of qualitative measures and analysis into the concept of the well-being GDP and the analysis of non-material values which affect the well-being of people. To put it in simple words, the conventional GDP focuses on the economic development and performance of a country, whereas well-being GDP shifts toward the measurement and evaluation of well-being of people in the context of the analysis of GDP and overall economic development of a country. Moreover, well-being GDP takes into consideration the well-being of people which includes not only material but also non-material values, which make people feeling comfortable and happy.
Finally, GDP includes many items that do not boost human well-being (Deutche Bank Research, 5). In fact, GDP focuses on various items which do not affect the life and well-being of people in their regular life. Nevertheless, these items are important for the economic development and they affect the national wealth directly or indirectly but they fail to affect the redistribution of wealth or the level of income of people. For instance, some items may affect the life of a small group of people only, such as certain industry, if the trade with some countries slows down and export drops. In such a situation, industries and companies involved in the international trade may suffer from decline, whereas other industry can keep growing. As a result, the overall economic effect of the deterioration of international trade will lead to the deterioration of GDP growth, whereas some people and companies will keep improving their position.