A surreal illustration showcasing the world's progress puzzle, highlighting the importance of well-being.

Beyond GDP: Why Measuring Societal Well-being is Key to a Sustainable Future

Nico Varela in Business & Economy August 2025 • 4 min read.

"Rethinking progress in the 21st century: Moving past economic indicators to embrace holistic measures of societal and environmental health."

In the 21st century, the concept of sustainable development has become increasingly critical. While leaders and thinkers widely acknowledge its importance, turning words into concrete action remains a challenge. This is especially true in places like Albania, where progress is often gauged almost exclusively by Gross Domestic Product (GDP).

However, relying solely on economic indicators like GDP growth to assess societal advancement has been questioned for decades. These measures often fail to account for crucial 'welfare indicators' such as the happiness and overall well-being of a society's members.

This article explores the limitations of GDP as a measure of progress and champions a more comprehensive approach. By incorporating well-being and environmental sustainability, we can gain a more accurate understanding of societal progress, particularly in nations striving for sustainable development.

The Flaw in the Formula: Why GDP Falls Short

A surreal illustration showcasing the world's progress puzzle, highlighting the importance of well-being.

Let's consider a real-world example: Imagine the construction of a new highway leading to the neglect and eventual failure of businesses along the old route. While the new highway project boosts the GDP, the economic losses suffered by those old businesses are often overlooked. This scenario highlights a fundamental problem: GDP tallies economic activity but fails to reflect true societal well-being.

This example illustrates the inadequacy of using economic measures alone and underlines why sustainable development must factor in both current conditions and future prospects. In essence, 'sustainability' and 'sustainable development' must be central to the efforts of today's generation, not only because economic measures can be deceptive, but because sustainable development is inseparable from a free society.

GDP Doesn't Account for Environmental Costs: Economic growth can come at the expense of natural resources and environmental quality.
GDP Ignores Social Well-being: Factors like health, education, social connections, and security are not directly reflected in GDP.
GDP Can Mask Inequality: A rising GDP can hide the fact that wealth is concentrated in the hands of a few, while many struggle.

John Perkins, in his book 'Confessions of an Economic Hit Man,' highlights the paradox: 'The growth of GDP may result even when it profits only one person... and even if the majority of the population is burdened with debt... Yet, from a statistician standpoint, this is recorded as economic progress.'

The Path Forward: Embracing a Holistic Approach

The time has come to look beyond GDP as the sole measure of progress and embrace a more holistic approach that values well-being and sustainability. By adopting comprehensive measures like the Happy Planet Index and prioritizing quality of life, environmental protection, and social equity, we can pave the way for a truly sustainable and prosperous future.

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Everything You Need To Know

Why is relying solely on Gross Domestic Product (GDP) as a measure of progress inadequate?

Relying solely on Gross Domestic Product (GDP) is inadequate because it paints an incomplete picture of societal advancement. GDP focuses primarily on economic activity and often fails to account for crucial 'welfare indicators' like the happiness and overall well-being of a society. For example, the construction of a new highway might boost GDP, but the economic losses suffered by businesses along the old route are often overlooked. This highlights that GDP doesn't reflect true societal well-being and neglects aspects such as environmental costs, social well-being, and income inequality, which are critical for sustainable development.

What are the key limitations of using Gross Domestic Product (GDP) as a primary measure of progress?

The key limitations of using Gross Domestic Product (GDP) are multifaceted. Firstly, GDP doesn't account for environmental costs. Economic growth can deplete natural resources and degrade environmental quality, which GDP doesn't reflect. Secondly, GDP ignores social well-being factors like health, education, social connections, and security. These elements are vital for a high quality of life but are not directly measured by GDP. Lastly, GDP can mask inequality. A rising GDP can conceal the fact that wealth is concentrated in the hands of a few while many struggle, thus, failing to provide a holistic view of societal progress.

How can we move beyond Gross Domestic Product (GDP) to achieve sustainable development?

To move beyond Gross Domestic Product (GDP) and achieve sustainable development, we must adopt a more holistic approach that values well-being and environmental sustainability. This involves incorporating comprehensive measures like the Happy Planet Index, prioritizing quality of life, protecting the environment, and promoting social equity. By focusing on these broader indicators, we can gain a more accurate understanding of societal progress and ensure a truly sustainable and prosperous future. This also includes considering the long-term impact of economic activities, ensuring that current progress doesn't come at the expense of future generations.

How does Gross Domestic Product (GDP) fail to reflect real-world scenarios, like in the case of new infrastructure projects?

Gross Domestic Product (GDP) fails to reflect real-world scenarios accurately, especially when considering infrastructure projects. For instance, the construction of a new highway increases the GDP, indicating economic growth. However, GDP often overlooks the negative impacts, such as the decline of businesses along the old route due to reduced traffic. While the new highway might improve transportation efficiency and boost economic activity, the losses experienced by existing businesses are not adequately accounted for in GDP calculations. This scenario highlights that GDP alone does not reflect the overall well-being of the society, making it an insufficient measure of true progress and sustainable development.

In what ways does the concept of 'sustainable development' relate to the limitations of Gross Domestic Product (GDP)?

The concept of 'sustainable development' is directly related to the limitations of Gross Domestic Product (GDP) because sustainable development requires a more comprehensive understanding of societal progress than what GDP provides. Sustainable development emphasizes balancing economic growth with social well-being and environmental protection. The limitations of GDP—such as its failure to account for environmental costs, social well-being, and inequality—directly hinder our ability to achieve sustainable development. By focusing solely on GDP, we risk pursuing economic growth at the expense of these crucial aspects. To achieve sustainable development, it is essential to move beyond GDP and embrace holistic measures that consider all dimensions of societal well-being, thus ensuring that progress benefits both current and future generations.