The world's most powerful number : an assessment of 80 years of GDP ideology

Abstract

The world‟s most powerful number, the gross domestic product (GDP), was invented exactly 80 years ago.1 It was indeed in 1934 that a young economist by the name of Simon Kuznets (who would later on receive a Nobel Prize for this) presented his first report on the design of national income accounts to the US congress.2 Those were the hard times of the Great Depression and governments were desperately seeking some type of indicator to gauge if and how the economy was recovering. GDP did exactly that: it conflated the amount of spending for goods and services into one single number, which would go up in good times and down in bad times. A few years later, the Second World War, with its massive need for a top-down command over economic activities, sealed the close relationship between GDP and politics. Indeed, the availability of regular and detailed statistics on the strengths and weaknesses of the economy helped the American government outpace its enemies in terms of munitions‟ production. More importantly, it allowed for the conversion of the civilian economy into a war machine without hampering internal consumption, which turned out to be a major advantage in generating revenues for the war (thus avoiding bottlenecks such as those experienced by Hitler‟s war economy) and propelling large-scale consumption in the post-war period.