Abstract
Constant popular commentary has exhaustively looked at the key economic indicators associated with the idea of economic growth – the idea that, according to many, is the Holy Grail of economic objectives as it is expected that the more growth achieved the more positive economic outcomes will manifest across the whole economy. Whether this is right or not, the central measure of growth is, of course, Gross Domestic Product or GDP.
GDP is a term that is used across all media and is central to our common appreciation of the relative success of the economy, but it is also used in a cavalier fashion in terms of what it means as an indicator, what it describes and, often, what it does not say.
Diane Coyle, an academic economist at the University of Oxford, has brought us back down to earth in the context of this term by presenting a volume that exposes a not-very-widely known history of the term "GDP" and then analyses what it contains in the context of that history to demonstrate clearly that it has been deployed by many without a deep understanding of its true meaning or how it is calculated.
The volume itself is a relatively short work in the context of economic and business history. However, it is a very rewarding read as a result. Its relative shortness is achieved via Coyle’s very tightly written style which makes this volume a page turner as you find a new snippet of history or a new way of looking at this economic idea with every new folio.
The volume is divided into six substantive chapters, commencing with a review of the development of National Statistics in brief – a development that Coyle argues was mandatory in order for the idea of GDP to be both conceived and practically calculated. This chapter provides a very short and general overview of the issue until it reaches the 1930s where it does describe, albeit briefly, the attempts by various nations to develop National Accounts before discussing a definition and some thoughts on the idea of relativities in the evaluation of GDP outcomes.
Chapter Two is described as the “Golden Age” for National Accounts and GDP. This chapter ranges over the period from 1945 to 1975 and is more deeply economics-based than the previous chapter in that ideas such as statistics, exchange rates and purchasing power are all discussed.
Chapter Three goes on to suggest that the 1970s presented a legacy as a result of the post-World War II economics shibboleths being bowled over by unimagined nightmares such as stagflation, the crescendo of the Cold War, and the advent of social imperatives such as environmentalism and human development. Of course, GDP played a role in both identifying the impact of these “isms” and in helping to negotiate them. According to Coyle, the cumulative impact of the 1970s particularly was a new paradigm in economic thinking associated with National Accounts.
What Coyle describes as the “crisis of capitalism” experienced in the 1970s led to a reaction in both the UK and US with the advent of the Thatcher/Regan era. Chapter Four focuses on the impact of this period, which commenced with changing and yet reactionary ideas. The chapter ranges over the period from 1995 to 2005 and incorporates an interesting and useful description of the development of ideas pertaining to such elements as measuring services and the impact of the “New Economy”. In these pages, Doyle looks at the impact these new economic phenomena had on the actual calculation of GDP, the increasing complexity of the process, and the extent to which it remains as useful an indicator as it seems we still broadly think it to be.
Chapters Five and Six present less of a focus on historical events as Coyle discusses, respectively, ideas regarding the current zeitgeist and her thoughts as to what the future holds. However, that is not to say these elements do not present an interesting read for the historian. Each chapter evaluates GDP in the light of the change in focus that is occurring particularly in developing countries. Equity, development, economic output and welfare are some of the topics ranged over and which connect the earlier elements of the book with the forward-looking trajectory of the final chapters.
Overall, this is not a volume that should grace an accounting – or other – historian’s bookshelf simply for the historical content. It is far from a resource in that sense. It is, however, a well-written and fast-paced example of the art of taking history and weaving it into a narration that is relevant, focused and informative. Historians of accounting would, perhaps, find in it an exemplar of the importance of historical understanding and sensitivity to the effective evaluation of modern phenomena. Further to that, though, it also brings GDP into a practical perspective, highlighting both its limitations and its importance to modern economic analysis.