Word: gdp
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...That meant attacking the problem at the root. Just as the U.S. saved too little while consuming too much, China saved too much and consumed too little. The result was a lopsided international trade scorecard. China ran huge current account surpluses - peaking at 10% of GDP in the first half of 2008 - and as a result accumulated a massive load of foreign exchange, which it turned around and loaned, mostly to the U.S. government, which enabled Americans to go on borrowing and spending. China, policymakers said, intended to break this unhealthy cycle. (See pictures of the making of modern China...
...overreliance on GDP is not just misleading, it's harmful. Focusing on economic growth blinds policymakers to other measures of progress. "If a policy is going to hurt GDP then it's difficult for that policy to survive," says Jon Hall, who is overseeing a search for better measures of progress by the OECD...
Despite its flaws, GDP has proved hard to replace - if only because it provides a single number which nations can use to measure themselves against neighbors and rivals. At an OECD conference in Korea later this month, attendees will try to develop an array of measures that take into account broader definitions of well-being. They have their work cut out for them. While the tiny Himalayan kingdom of Bhutan measures its gross national happiness, no major economy has followed suit...
Starting in 2004, China attempted to introduce a "green GDP," adjusted to reflect the cost of pollution. By the time officials computed the costs of tainted rivers, smoke-filled skies, shattered ecosystems and strip-mined hillsides, their growth figures had dropped so dramatically - in some provinces they fell close to zero - that the proposal was quickly scrapped. By 2007 the effort had collapsed completely...
...switch to a more comprehensive measure. But it's also another lesson on how misleading the current figure can be. The numbers that caused so much shock were a better reflection of the country's long-range economic health. It might take time before we find a replacement for GDP. Until then, there's little point in marking our progress against something that's so clearly wrong...