EVALUATION OF GDP AS A MEASURE OF SOCIAL WELFARE AND THE ECONOMIES’ PEFORMANCE

Abstract

The article considers the methodological limitations of GDP and GDP per capita to respond to the current needs of society to reduce income and wealth inequality, the negative impact of human activities on the environment, growing debtness of present and future generations and other. Thus, the main purpose behind the study is to compare counties' economic performance using GDP per capita and the Inclusive Development Index (IID) in order to define whether countries follow the same pattern of development on the basis of different matrics. As a result of the comparative analysis different performance outcomes are observed for economies in terms of GDP per capita and the IDI. Some countries succeeded in making their growth processes more socially inclusive as they have significantly higher scores in IDI world ranking than based on GDP per capita. The other have significantly lower rankings in IDI than in GDP per capita, suggesting that their economic growth has not transformed well into social inclusion. The United States is a good example of limits of GDP per capita as a means of measuring economic activity, social welfare and prosperity. Despite the positive dynamics of GDP per capita, the influence of the other, no less important indicators, is strong enough to worsen the overall performance of the economy. Countries with higher GDP per capita rating exploit a materialistic concept of higher production. The use of alternative strategies for measuring social welfare and economic performance, in addition to output growth, will allow to identify and address more complex societal issues. In addition, it is advisable for Ukraine to choose alternative strategies for measuring social welfare and economic performance along with GDP metrics that altogether will better reflect the real trends of national economy development. Besides, development of Norway and Iceland may serve as benchmark for Ukraine.