What is Economic Success?

Every day we see references to GDP and profit. Today, for example, we hear the World Bank has estimated that if the Ebola epidemic spreads beyond Liberia, Guinea and Sierra Leone to neighbouring countries Nigeria and Ivory Coast, the cost to those economies could be 3.3pc ($32.6bn) of the combined GDPs of those countries affected. We also read that Tesco issued a third “profit warning” last month and that Marston’s (brewers and pub operators) 356 “destination” and “premium” sites generate almost five times the profit per pub against the rest of its estate. Clearly the terms “GDP” and “profit” are useful in these contexts. They provide a reference for our understanding of the situation. But are they sufficient as our two main measures of economic success?

GDP and profit shape the way we think about the economy and business and have a deep effect on the way we behave. We strive towards higher GDP and higher profits and, of course, the generation of wealth should ultimately support the wellbeing of individuals as it pays for healthcare, education, infrastructure and many other services people in developed countries often take for granted. But, is it enough?

On Wednesday Cranfield students and members and guests of ICAEW took part in a discussion about what the characteristics of a successful economy and a successful business should be. The results were perhaps not surprising. Whilst money did feature on both lists, other more- difficult- to measure factors predominated. Education was common to both the economy and the business list as was integrity and good governance. Freedom of opportunity, healthy population and innovation were listed. Happiness was also cited – but only 90% as an element of discontent was seen as necessary for development.

Similar discussions have taken place around the country and results are more or less the same …. So is it time to reconsider and give greater weight to some of these factors when

measuring success? For more information about ICAEW’s project see http://www.ion.icaew.com/Talkaccountancyblog/post/GDP-and-Profit—Are-they-what-we-mean-by–economic-success–