WEF Warns Focus On GDP As Economic Performance Indicator Is Fuelling Inequality And Short-termism

It measures how 103 countries perform on 11 categories of economic progress in addition to GDP and focuses on three factors: growth and development, inclusion, and intergenerational equity or the sustainable stewardship of natural and financial resources (see chart right).

The Index has been constructed as the WEF said there is an "excessive" reliance by policymakers on GDP as the main metric of national economic performance, but it argued this fails to capture a country's broad socio-economic progress in measures such as quality of life, employment opportunity and economic security.

"Focus on GDP is fuelling inequality and short-termism," the WEF said.

"Decades of prioritising economic growth over social equity has led to historically high levels of wealth and income inequality and caused governments to miss out on a virtuous circle in which growth is strengthened by being shared more widely and generated without unduly straining the environment or burdening future generations.

"Political and business leaders should not expect higher growth to be a panacea for the social frustrations, including those of younger generations who have shaken the politics of many countries in recent years."

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Although GDP remains a necessary condition for achieving progress in living standards, the WEF said more needs to be done by policymakers in this period of global growth to "futureproof" their economies "without unduly straining the environment".

It pointed to the need for a more human-centric approach, where people and living standards are put at the centre of government policy.

Richard Samans, managing director and head of global agenda at the WEF, said: "Broad, sustainable progress in living standards is the bottom-line result societies expect. Policymakers need a new dashboard focused more specifically on this purpose.

"It could help them to pay greater attention to structural and institutional aspects of economic policy that are important for diffusing prosperity and opportunity and making sure these are preserved for younger and future generations."