From GDP to the System Health Index

Why our main economic metric is obsolete and what should replace it.

Imagine you are piloting a sophisticated airliner. But on your dashboard, there is only one gauge: speed. You don't know the fuel level, altitude, engine status, or the weather outside. You just fly as fast as you can. Absurd? Yet, for 80 years, this is how we have been managing our national economies, blindly trusting one indicator—the Gross Domestic Product (GDP).

GDP was created during the industrial era to measure a country's production capacity. It did this job perfectly. But the world has changed, and our main tool has not. Today, the pursuit of GDP growth at any cost is leading us to ecological disaster, social stratification, and spiritual exhaustion. It is time to admit: our compass is broken. We need a new "dashboard"—a System Health Index (SHI) that would reflect the true well-being of a nation, not just the pace of its consumption.

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The Seven Deadly Sins of GDP

GDP is not just incomplete—it is actively misleading, encouraging destructive behavior. Here are its key flaws:

1. GDP does not distinguish between "good" and "bad." GDP growth is recorded from everything that is produced and sold for money. Arms sales, prison construction, cleaning up environmental disasters, and treating people for illnesses caused by poor ecology—all of this increases GDP. A happy, healthy nation, from a GDP perspective, looks "stagnant."
2. GDP ignores nature. Cutting down a primeval forest and selling the timber is a plus for GDP. The standing forest itself, which produces oxygen and purifies water, has zero value for GDP. Resource depletion and river pollution are external costs that GDP does not account for.
3. GDP does not see unpaid labor. The work of parents raising children, caring for the elderly, and volunteering is the foundation of society. But because this work is not paid, it is invisible to GDP.
4. GDP is indifferent to inequality. GDP can grow even if all the benefits of that growth go to the richest 1%, while 99% of the population becomes poorer. For GDP, how wealth is distributed does not matter.
5. GDP does not measure quality of life. Stress levels, mental health, the strength of social connections, safety on the streets, and the amount of free time—all these key components of human happiness are off GDP's radar.
6. GDP encourages short-term thinking. Politicians focused on GDP reports are not interested in long-term investments in education, science, or the environment, the fruits of which will only be seen decades later.
7. GDP does not account for sustainability. A country can show rapid GDP growth by accumulating huge debts or selling off its last resources. It's like a sprint towards the edge of a cliff.

The Nation's "Dashboard": The Concept of the System Health Index (SHI)

The SHI is not a single number but a multidimensional model, a "dashboard" with several key indicators that together provide a holistic picture of the nation's condition. It should assess the health of the system across several key "capitals."

1. Human Capital (Health and Knowledge)

   Indicators: Average healthy life expectancy, infant mortality rate, access to quality healthcare, mental health levels (e.g., depression statistics), literacy and education levels.

2. Social Capital (Trust and Interaction)

   Indicators: Level of trust in society, crime rate, number of volunteer hours per capita, strength of family ties, level of social mobility.

3. Natural Capital (Ecology and Resources)

   Indicators: Air and water quality, level of biodiversity, carbon footprint, percentage of protected areas, rate of depletion of non-renewable resources, share of renewable energy.

4. Economic Capital (Sustainability and Fairness)

   Indicators: The quality of GDP growth, not just its volume. Level of income inequality (Gini coefficient), level of household debt, unemployment rate, economic diversification.

5. Institutional Capital (Governance and Freedom)

   Indicators: Level of corruption, rule of law, freedom of speech, level of citizen participation in political life, efficiency of public administration.