Prosperity
and GDP

Gross Domestic Product is a measure of the final output of a nation’s economy, and represents the market value of all goods and services produced in one year. It is both a measure of spending and a measure of income – the two should add up to the same thing. Because it is often the only figure available, GDP is widely used as an indicator of prosperity, to the extent that governments and economists everywhere make it a priority to raise GDP, and formulate policies with that aim in mind.

This reliance on GDP figures has unfortunate consequences, because GDP is a very poor measure of prosperity, for the following reasons:

• It ignores inequalities in income and wealth distribution.
• It is boosted by credit creation and spending based on debt.
• It takes no account of sustainability or the usefulness or desirability (ie, true value) of the activities it measures.

So although there is a link between the wealth of nations and GDP figures, it is a very crude and unreliable link, and I show in my book why the widespread practice of basing government policy on GDP figures has led to serious misunderstandings, and is partly to blame for the current failure to address the real issues.

Where does wealth really come from?

I explain in the book how material wealth – ie, the stuff we might normally think of as wealth, such as property and money (rather than ‘intangible wealth’, such as human potential and general well-being) must have its origins in the natural wealth of the earth. We add value to the earth’s natural resources through our labour, and this combination of resources and industry is the source of all our material wealth – of everything we have, in fact.



I explore what this means for future generations as we use up, often wastefully, more and more of the earth’s limited resources. I show how over 60% of all current wealth in the world has come from oil and gas, and examine the implications of this conclusion. (I can’t really claim it as fact, as it isn’t possible to prove beyond doubt, but I demonstrate why it must be so. Even in this age of widely and instantly available information, we don’t really know how much wealth there is in this world, or where it all originated.) 

I show also why there is less real wealth in the world than the dollar figures of various estimates (Credit Suisse and so on) suggest, because the value of money has lost its link to the real wealth of the earth, following the end of the gold standard and the subsequent creation of far more credit than the real underlying economy merits.

We can expect another crash soon, and we shouldn’t be too surprised if asset values fall by around one third, to reflect their true value relative to basic commodities.

For the same reason, we can expect retail prices to rise significantly over the next decade or two.

© 2014 copyright Michael Roscoe

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