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The Mismeasure of Progress: Economic Growth and Its Critics

Author(s):Macekura, Stephen J.
Reviewer(s):Gallardo-Albarrán, Daniel

Published by EH.Net (June 2022).

Stephen J. Macekura. The Mismeasure of Progress: Economic Growth and Its Critics. Chicago: The University of Chicago Press, 2020. 320 pp. $27.50 (cloth), ISBN 978-0226736303.

Reviewed for EH.Net by Daniel Gallardo-Albarrán, Rural and Environmental History Group, Wageningen University.

 

One major line of inquiry in economic history concerns the measurement of economic development in the long run. Over the past two decades, the field has thrived by furthering our understanding on important questions on the timing of the ‘Great Divergence’ or the consequences of industrialization for living standards (among others). However, there are issues at the core of this research strand that are often swept aside or are insufficiently tackled, as a result of using price-adjusted Gross Domestic Product (GDP), wages and similar metrics capturing purchasing power or economic output. For instance, which changes in an economy should count as economic development? How are narratives of long-term living standards influenced by the assumptions underpinning our measurement frameworks? These questions are of paramount importance to anyone interested in measuring or understanding long-run development, and Macekura’s work provides useful insights into them.

The Mismeasure of Progress presents a sweeping history of dissent, conflict, and disagreement around the concept of Gross National Product (GNP) and the growth paradigm, i.e., the idea that societies should maximize national income. Macekura follows the professional and intellectual trajectory of a number of experts who were crucial in developing and measuring GNP and GDP and establishing the system of national accounts, along with major critics of this endeavor. The book ultimately shows that the story does not end well for those critics who aspired to fundamentally change how societies measure national income and its preeminence in academic and policy circles, since GDP prevailed after all. However, knowing how their ideas developed is important to put in historical perspective current arguments against GDP.

The book contains six chapters as well as an introductory and a concluding chapter. The former sets the stage and draws parallels between current and past growth measurement critics. The development of the main argumentation of the book begins in the first chapter, which deals with a critical question: how did policy circles and the academic community come to associate living standards with GNP so narrowly? Before Simon Kuznets submitted his report on national income to the American Senate in 1934, concerns about the condition of the working classes triggered initiatives to gather information on different (non-income) aspects of people’s lives. For instance, the International Labor Organization conducted cross-national social surveys to measure workers’ access to food and shelter, and national statistical offices amassed data on suicides, crime rates, etcetera. However, the Great Depression and the Second World War consolidated national income statistics as a priority for policy makers, who used them to manage tight budgets and to mobilize large amount of resources for the war economy.

The construction of national income statistics and their adoption for economic policy was far from a smooth process, as the second and third chapters show. Already in the 1930s and 1940s, experts identified limits of national income as meaningful metric of economic activity and thus were skeptical of its usefulness to understand the economy of countries in different stages of development. Macekura illustrates this by highlighting the work of Phyllis Deane, a British economist tasked with measuring the economic capacity of the colonies in the 1940s. Her work in Zambia led her to criticize the national accounts as a clear comparable framework of economic activity, since it did not take into account that unwaged female labor and self-subsistence output were an important part of Zambian household production. In addition, a number of critics argued that the pursuit of growth had negative side effects for the natural environment and society, including greater poverty and inequality. The influential report Limits to Growth published by MIT in 1972 argued that ecological constraints would lead to a decline in population and living standards. An overemphasis on maximizing GDP was therefore misleading since economic growth had environmental costs that were not properly accounted for. Similarly, others argued that the pursuit of rationality and efficiency resulted in a spiritually aimless society too focused on mass consumerism.

Chapters four and five describe the crisis suffered by the growth paradigm in the 1970s and the search for alternatives that followed. The dependency of industrialized countries on fossil fuels (e.g., coal, oil) and other minerals (e.g., copper, zinc, lead) became increasingly clear to experts and the general public, as energy consumption surged after 1950 and economies suffered from the energy crisis of the 1970s prices when oil prices skyrocketed. For many, capitalist growth would ultimately lead to social disruption and conflict, although not everyone agreed. Intellectuals in the Global South saw maximizing GDP as a way to achieve prosperity and therefore opposed a zero-growth policy agenda in developing countries, which some even considered a new form of imperialist oppression. These discussions provided fertile ground for the development of social indicators that could replace GDP. Two influential metrics in this respect, which did not succeed in the end, were the Physical Quality of Life Index by Morris David Morris and the Measure of Economic Welfare by William D. Nordhaus and James Tobin.

Chapter six closes the main argumentation of the book by covering the revival and later debate of the growth paradigm during the last decades of the 20th century. The reliance on market mechanisms to reactivate the stagnating economies of the 1970s gave further impetus to the idea that maximizing national income will lead to long-term economic and social stability. However, and unlike the predominance of the growth paradigm in the 1940s and 1950s, the arguments and initiatives of critics reached a much broader audience than before. One example is the well-known Human Development Index that was embraced by the United Nations to enrich public discussion about international development in 1990. Even though this and other measures quantifying the environment and female work did not end up replacing GDP, they have significantly broadened the ideas around what constitutes development and how to advance it.

My main quibble with The Mismeasure of Progress is that it remains mostly descriptive. It excels at presenting the origins of dissent around GDP and the growth paradigm, and how some concepts and metrics emerged, changed, and at last were discarded. However, it would have been useful and interesting if Macekura had explained in detail why such ideas were ultimately ignored. To be sure, some parts give hints at why that was the case, but I missed a chapter (or various sections) providing a systematic review of various explanations and how they compare against each other. In addition, although this is a minor criticism, there is some argument repetition in a few parts that could have been avoided by referring the reader to other chapters.

Overall, this is an interesting book that complements earlier work on the origins and evolution of GDP (by Diane Coyle) as well as more technical work on how GDP mismeasures important aspects of citizens’ lives (by Marc Fleurbaey and Didier Blanchet). I think the first three chapters are particularly valuable for teaching purposes to chart the complicated origins of national income and how economists, far from a homogeneous group interested in advancing a specific agenda, fought against some of the very things the international community value most these days, such as gender equality, sustainability, or inequality. And perhaps this is one of the key lessons to extract from it: there is a long tradition of experts arguing that growth is non-neutral and we can learn from their history to craft more compelling alternatives to measure living standards in both history and the present. Agreeing on a definition or metric of progress is elusive and maybe impossible, but having public discussions about the shortcomings of our measurement frameworks will bring us closer to something that resembles a consensus worth pursuing.

 

Daniel Gallardo Albarrán is assistant professor in Economic History at Wageningen University, where he researches the roots of global health inequality and their implications for global welfare disparities. He is currently conducting a project funded by the Dutch Research Council on the determinants of clean water and sanitation since 1850 from a global perspective, and he manages the research portal Long-Run Health Matters (www.lrhmatters.com).

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Subject(s):History of Economic Thought; Methodology
Living Standards, Anthropometric History, Economic Anthropology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII