One of the subjects I write on in this blog most frequently is my opposition to the idea that economic growth (i.e. growth in GNP or GDP) is contributing to an increase in well-being (see, e.g., here). There is a correlation between them in some times – but in others it is quite the opposite. Today I found an impressive example of the latter. Interestingly, I found it while listening to a lecture by a professor of mine – whom I already mentioned in this blog. It is one coming from the past of Germany, from the most horrible part of it – the Second World War.
Consider this picture:
It shows the economic growth in Germany during the 20th century. As one can see, in the time of the world war it was positive – declining, but positive. Now, is there anybody who would like to claim that Germans were well off during the war? Maybe they were during its first part, until, say, the Barbarossa operation. But it is sure that they were not after that. Anyway, if one takes GDP as an indicator of well-being, one would be forced to conclude that Germans were better off in 1943 than in 1942(for instance). The decline in GDP (not in its growth rates which are shown in the above picture) started shortly after the end of the war, in 1944 – and then it took huge dimensions. That corresponds with the historical reality. But if there would be any causality (and there is equality between saying that GDP is an indicator of well-being and claiming that GDP growth causes increases in well-being), this correlation would have to be visible at all times – but, as I already have shown, it does not. Although Germans suffered much at least in the last 2-3 years of the war, GDP was still increasing in this period.
One question remains: why was there still economic growth in? It is actually straightforward, but I nonetheless wish to emphasize this point here: GDP is a measure of industrial production. During wars the industry is busy. Especially when there are ever more frontlines and ever more fighting – then there is a big need for arms, transportation, food etc. So the industrial output is rising. But, at the same time, ordinary citizens are suffering. First, just because there is war. Second, because all the products are delivered to the frontlines – not to them. (Of course, soldiers are suffering as well, although they receive most of the production in some way or another.)
One may say that this is so only in times of war, that I am describing an exception and generalizing it. I don’t think so, but if you need more arguments against GNP/GDP as an indicator of well-being, please continue reading here.