Usurping GDP: Finding A Better Alternative

By THO Team Member, Sam Guider

America, like much of the developed world, has several beliefs that are followed almost religiously, one of which being the use of its high Gross Domestic Product (GDP), as a way of justifying its “upward” trajectory in terms of its development. It is paramount to Turkey’s development to seek improvement in other areas that correlate with their overall development, not just simply the goods and services produced in their country at a specified time. Measurements such as the Human Development Index (HDI) and the Genuine Progress Indicator (GPI) will be analyzed in this paper as a replacement for Gross Domestic Product, with an emphasis on Turkey and the importance in adopting a more accurate economic framework.

The consensus gentium, or consensus of the people, refers to the bandwagon fallacy, whereby something is accepted simply because relevant authorities or figureheads mutually agree. In turn, this creates a sunk cost for the global economy, where the global economies of today are determined by a fallacious number that dictates a country's vague “development”.

This new idea of development is illusory and vague on purpose. Development should not mean the same thing for every country, nor should every country's final stage of development resemble your standard democratically institutionalized neo-liberal framework. Indian Economist Haridwar Rai and Indian Roboticist Vijay Kumar explain that developing countries are looked at as if they are homologous- that they share the same type of infrastructure or lack thereof (Rai & Kumar 1990). The old idea of development is increased economic output and eventually industrialization to a new meaning of what Rai and Kumar describe as a “transformation” of a people (Rai & Kumar 1990). This transcending view of development is focused more on the internal self than the arbitrary economic growth these developing countries implore. Instead, Rai and Kumar echo: access to education and universal healthcare and the eradication of inequalities and poverty to be sought after from a more collective or community-based approach (Rai & Kumar 1990). Arguably, things many “developed” countries still lack.

GDP is a flagrant sum of everything that an economy produces over a given period. From the production and manufacturing of cars to the government's purchasing of fighter jets and warheads, the plastic waste we eventually find floating in our oceans, and even the coffee you bought this morning. GDP accounts for all of this and more. As Robert Kennedy once said, “GDP measures everything except that which makes life worth living" (Kennedy 1968). GDP accounts for the number of cars produced without also measuring the negative implications of the CO2 emissions into our atmosphere. GDP goes as far as to encourage someone to get into a car accident if it means more cars are being introduced into the market.

According to GDP, the value of urbanization is considered essential to development, whereas the vital ecosystems decimated as a result of this urbanization are nonexistent in its measure. GDP does not believe in quality over quantity — the opposite is true. A higher standard of development and progress is irrelevant when using GDP, because the quantity at which something is being produced and manufactured is more important than the quality, and there is no incentive in GDP to believe otherwise.

Emerging market economies like Turkey, need to begin the transition into a more legitimate reflection of economic, human, and sustainable development. The shift in the direction of relative economic development will not only benefit the home country doing so but the global economy as well.

The Human Development Index is an economic development indicator that provides us with a closer look into the education, life expectancy, and the Gini (Corruption) Index of individuals in a given country. Turkey has an average life expectancy of 78, with years of schooling averaging to almost 17 years, and a corruption index of 41.9 (a score of 0 indicates perfect equality where a score of 100 indicates perfect inequality), providing Turkey with exceptional developmental progress (World Bank 2019). With a very high human development index of .820 in 2019- a number that increased from .579 in 1990- Turkey has experienced radical levels of human development in these aforementioned categories of development (An HDI of 1 indicates high levels of human development, whereas the opposite is true for an HDI of 0) (Human development Reports 2020).

The Genuine Progress Indicator (GPI) is arguably the only alternative to usurp or overtake GDP as it takes into account all that GDP does on the economics side while taking into frame the other “pillars” to GPI; environmental, and social (Menegaki 2018). GPI recognizes that there are negative outcomes from economic activity that can affect an economy in the long-run. Externalities such as pollution, resource depletion, rising inequality, the threat of mass urbanization, and the cost of stealing something as simple as a candy bar. GPI sets out to simply measure the environmental and social costs of all economic production and consumption, while maintaining the human cost and well-being is positive and not negative (Menegaki 2018).

Turkey’s rapid GDP growth over the last three decades has created an affliction of social inequalities and environmental issues that has gone unnoticed due to GDP not even recognizing or preposterously attributing pollution and the like towards positive growth (Menegaki 2018). Turkey has a current GDP of $720.1 billion and a GDP/capita of $8,538.17 according to the World Bank. Take the United States for example, with a GDP/capita of almost $64,000 yet a GPI/capita of just $15,953 (Fox & Erickson 2018). Unfortunately, the GPI of Turkey has yet to be calculated and we can only assume that, similarly to the United States, its economic development is overstated (Menegaki 2018). By adopting indicators like GPI, Turkey can more accurately measure its economic success.

GDP does, however, provide us with valuable information such as the funds which we want in life; healthcare and education being just two examples. Now, GDP per capita, which is the measurement of GDP divided by the total population, is an obvious correlation of development, and therefore we must not throw it away entirely. Indian economist Debraj Ray says that “per capita income is a powerful correlate of development, no matter how broadly we conceive of it. Thus we must begin, and we do so, with a study of how per capita incomes evolve in countries” (Ray 1998).

When analyzing the GDP per capita of Turkey, with a few exceptions in the Middle East and North Africa regions, Turkey has a higher than average per capita GDP of roughly $8,500 compared to an average of about $6,600 for the region according to the World Bank (2020). As an emerging market economy, Turkey has a ways to go in terms of its economic development and its GDP per capita; however, relative to its region, it is performing at a higher than average measure (World Bank 2020).

The ingenuity behind Simon Kuznets and GDP as an economic indicator is indisputable. However, Kuznets was aware of its limitations saying, “the welfare of a nation can scarcely be inferred from a measure of national income. If GDP is up then why is America down?” (Stiglitz et al). Kuznets’ sentiment was unfortunately not shared with the western world and has become the benchmark for most measurements of economic development.

In the book, The German Ideology, Karl Marx was quoted saying it is essential that we as a society begin “replacing the domination of circumstances and chance over individuals by the domination of individuals over chance and circumstances” (Marx & Engels 1932). Indian economist Amartya Sen believed this sentiment by Marx to be true. Where the process of economic development must be concerned with what individuals can and cannot do (Sen 1983). Put simply, by enhancing individuals' freedoms or their capabilities, they will then be able to achieve various functions through further development.

The bilateral relationship Turkey has with the United States is rather unique being that Turkey has one of the largest economies in the world. As a vital NATO Ally and strategic regional partner in Middle East & North Africa (MENA), Turkey’s development is essential for not just the United States, but for the rest of the Euro-Atlantic community. Implementing policies of trust, foundations for democratic institutions, and committing to uphold human rights creates a flourishing environment for Turkey and for the region (U.S. Department of State 2021). Turkey is an essential piece of the global puzzle and we (the United States), along with the rest of the world, must begin to recognize the implementation of sustainable economic indicators and ideas that can help shape the stagnant developing world. Sustainable economic development is essential for the betterment of the global society as we see many inequalities like poverty and the level of access to education remaining in much of the developed world of today.

Neoclassical assumptions of how global economies function no longer have footing, or at least they should not be propped up to be perceived as though they do. Individuals have never been motivated by profit maximization, nor have the decisions made by consumers been based on the maximization of utilities. Markets are imperfect and, at times, volatile, and maintaining equilibrium is virtually impossible.

Turkey is one of the World's largest economies and an economic powerhouse in its region, yet it remains an “emerging” market economy. It has the potential to take the proper and monumental strides in showcasing its other indicators of economic development, like the Genuine Progress Indicator and the Human Development Index, rather than the broad and often misconstrued measure of GDP. Turkey has a high growth potential, however, it must recognize more sophisticated indicators which account for human, societal, environmental, and of course economic improvements.


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