For a long time, particularly since the World War II, nations have associated economic growth with development. Economic growth is an increase and advancement in the production and consumption of goods and services and is demonstrated by aggregate Gross Domestic Product (GDP). GDP, therefore, for all those years, has been the standard measure for gauging economic growth, even though it was only planned as a macroeconomic book-keeping tool. The application of GDP as a tool for measuring wealth for the country is misleading and does not serve the objective of economics as sustaining wealth within its intricate close and inherent associations. The GDP does not consider the dimension of inter-relation, not to say the very dependence of the economic system on it is surrounding. GDP is not an adequate measure of well-being as it does not consider the important factors (Abraham & Mackie 2005),
GDP per capita does not replicate the state of economic development and the circulation of incomes. For instance, increase incomes have almost completely benefited those on high earnings. This does not reflect the fact that not a lot might have transformed in terms of the ordinary of living for the typical individual on the street. GDP only puts into consideration the advancement and growth of industries without the regarding the negative shortcomings. It implicates that the growth of companies leads to the creation of employment to the common person. However, this industrialization has serious negative environmental impacts such as pollution. Many companies release their waste into the environment with making it less harmless which may lead to health complications (Beckerman, 1978).
There is no uncertainty that, for many people, long holidays and short working hours add to welfare as long as they are not accompanied by lower incomes. GDP is not a good indicator of growth since it does not put into consideration the leisure time, working hours that are available and whether the earnings are equally circulated across the economy. Hence, GDP cannot measure the quality of lives of a citizen. This is because GDP only considers the financial aspect of life. It does not include speed money and black cash which occupies a larger space in some country's economy. It also does not regard the expense of debt of the country. Besides people who make a livelihood by small work as stealing, begging, selling small things, moving to different places do not take part in increasing GDP. It also turns down personal feelings about pollution, degeneration of recourses and family stuff. Economists often assess well-being through measures of GDP per capita. This is to say that the various GDP per capita measurers are a clear pointer to well-being. They can easily tell the economists how well a country is doing or an individual is fairing on economically. These measures are critical to the eventual conclusion on the GDP per capita of the specific pointer in question (Beckerman, 1978).
In conclusion, better measures of material living standards than GDP per capita exist; despite the challenge of data availability and consistency which restricts the scope for cross-country. One such measure is national income, a concept that is more appropriate for the welfare of residents of a country. It is nevertheless a significant one, since richer economies are better placed to make and maintain other well-being-enhancing environments, such as a clean environment, the likelihood that the average person will have the right to education, and lead a comparatively long and healthy life. The increase in GDP per capita may also contribute to upholding a pluralistic autonomous society, with contradictory claims on total economy resources easier to solve in a growing than in a deteriorating or lessening economy. There is no doubt that whatever financial measure is chosen, its affiliation to welfare will be neither monotonic nor precise. As a result, any broad evaluation of welfare cannot depend on GDP or other financial measures alone. This need to be accompanied with other indicators relating to social and environmental settings. Measure of the quality of government will also be relevant to that assessment, as the welfare will be increased by institutions that enable freedom of citizens (Friedman, 2005).
Abraham K.G. and C. Mackie (2005), Beyond the Market — Designing Nonmarket Accounts for the United States, National Research Council of the National Academies, Washington D.C.
Beckerman, W. (1978), Measures of Leisure, Equality and Welfare, OECD, Paris.
Friedman, B. (2005), The Moral Consequences of Economic Growth, Knopf, New York.