On May 22, the opening of the Chinese National People’s Congress featured a remarkable announcement from the Chinese Premier, Li Keqiang. In the midst of a global economic crisis the Chinese government has decided to not set a GDP target for the coming year. The move will confuse many local and provincial politicians, as growth was the key metric on which China’s success has been measured since 1990.
Without a GDP target there will be no pressure on politicians to achieve GDP growth at any cost, which has been the strategy of China and most of the world’s countries for several decades.
The Chinese appear to have recognized that chasing growth causes damage to the environment and reduces living and working conditions if used as the sole metric for national success.
Growth
The Chinese are certainly not planning to stop growing, but by deprioritizing GDP growth, the government will have the space to focus on improving healthcare and education and reducing ecological damage.
China is set to reach its target of eradicating poverty in the country in 2020, and the shift away from growth could easily mean that Chinese citizens will see a renewed focus on improving living conditions.
GDP growth has been the key metric for success that most countries around the world aim to achieve. But the link with GDP growth and improving standards of living is dubious at best.
The London Economic’s Jack Peat argues polling data shows that “GDP growth fails to deliver enhanced life satisfaction, poverty alleviation and remains environmentally disruptive.”
Incentives
The eternal push for economic growth brings with it incentives that ensure businesses and countries can never reach a satisfactory level of success, but instead must always keep “growing.” In the current economic paradigm, the idea of “next year’s GDP growth” invites direct foreign investment in a country much more than living conditions, security, or the education level of the population ever will.
The COVID-19 crisis has revealed that in a crisis, the use of GDP as the most important metric meant few countries had adequately prepared their healthcare system for an abnormal crisis.
It also meant governments had to force companies to produce important medical equipment and protective gear.
There had been no incentive to produce these items before, even though it would have benefited the public, as there is no reward for much but GDP growth.
Perpetual growth
The most important reason to decouple growth from success is the fact that we live on a planet with finite resources. Trying to realize infinite growth on a planet that is clearly and visibly struggling from over-depletion of its finite resources is a recipe for disaster. Climate researchers have argued that many highly-developed countries would actually benefit from degrowth.
For countries like China, there are many parts of society that still need growth. Better healthcare, education, and working and living conditions will likely become the next focus of China’s government after having dragged its population out of abject poverty.
If China stops using GDP growth as a metric for success, it could have far-reaching effects on our global economics.
A few countries have already signaled they will not consider GDP growth their key metric, but success in China could be a guiding light for other economies that are buckling under the need to forever grow.