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Discuss About The Components Of Genuine Progress Indicator.

Why GDP alone is not an adequate indicator for genuine progress

The Gross Domestic Product of a country, measuring the total value of the final commodities and services produced in the boundaries of the same, within a particular period of time, is the most popular indicator of economic growth (McAuliffe, 2015). However, Feeny et al. (2013), question the validity of GDP alone as an adequate indicator for the genuine progress of South Korea. This is because, although the concerned indicator measures the growth in the economic productivity of a country and the cardinal aspects associated with the same, it does not consider the overall welfare of the majority of the population as well as the country itself arising out of the economic growth (MacKenzie, 2015). In simpler words, the GDP of a country, shows the total economic growth, but fails to show the skewedness in the distribution of the income growth, the income inequality in the country as well as the other aspects like social and environmental conditions of the country, which also contribute robustly in the overall growth of the country and in the level of welfare of the population of the same (Nielsen, 2016).


As can be seen in the case of South Korea, the GDP of the country, over the years has shown impressive and upwards dynamics, which indicates towards rapid growth of the economy of the country. However, the growth has costed the environment as huge loss of resources has been recorded and also the income inequality of the country has increased in the contemporary period (Chang, 2013). The level of inflation in the country has also increased, which has costed the overall population of the country, especially those who did not receive the fruits of the economic growth of the country. However, these aspects are not considered in the GDP, thereby indicting towards its inadequacy as a genuine growth indicator.

There have been considerable literary works on the aspects of the primary factors which have contributed to the economic growth of South Korea in the last few years, as can be seen from the impressive GDP dynamics of the country. The main factors, in this context, as highlighted by different scholars are as follows:

  • The most important factor contributing to the economic growth of the country is that of the presence of robust human capital, as can be seen to measured in terms of high educational attainment or in terms of high numbers of enrolments of students in secondary schools and universities (Shin, 2013).
  • Another crucial factor contributing to economic progress of South Korea has been the accumulation of physical capital. The country has experienced high investments in industries and has also resorted in the path of immense export promotion.
  • Another reason behind the economic growth of South Korea, has been the inherent capacity of the country to adapt quickly to the continually changing technological aspects in the global framework and also the capability of the country to explore and take advantages of new opportunities (Henderson, Storeygard & Weil, 2012).
  • The increasing liberalisation and the free trade approach taken by the government of the country, has also contributed considerably in the growth of the economy of the concerned country as can be seen from its GDP growth dynamics.
  • As pointed out by several literatures the shock adjustment capacity and ability to maintain an equitable income distribution by the entrepreneurs have also contributed in the economic growth of the country (Park & Hong, 2013).
  • The growth of the economy of South Korea has also come at the cost of the loss of huge amount of natural resources, thereby leading to decline in the quality of the environment, which has resulted in the decline in the quality of life of a major section of the population of the country (Rodrik, 2014).

From the above discussion, it is evident that the economic growth of South Korea can be attributed to a considerable number of factors, including that of growth of human capital, physical capital, investment, export-oriented policies, high liberalisation, free trade, ability to quickly adapt to changing environment and other aspects (Kong, 2013). Some of these factors are expected to be positive to the overall welfare and development of all the aspects of human life while some may have detrimental effects on the same.

Factors contributing to economic growth of South Korea


As can be seen from the literary assertions, the primary factor of economic growth being the growth of the human capital, the same is expected to contribute to all aspects of human life positively. This is because with increasing educational attainment, the skills of the people as well as their chances to land up in better and lucrative career prospects increase, which thereby increases the economic and overall welfare of the people. However, there are also negative aspects of other contributing factors.

The huge export-oriented strategy taken up by the government, is expected to increase the level of income in the hands of a section of the population of the country, increasing their economic welfare and purchasing power, which coupled with increasing aggregate demand is expected to raise the overall price levels in the country (Shin, 2013). This can be seen to be evident from the high inflation rates, which are detrimental to the welfare of the underprivileged population. The increasing economic activities and industrial development can also be seen to be degrading the environmental balance of the country and the social tensions within families as well as the society can also be seen to be increasing as is evident from the high divorce rates and crime rates (Sachs, 2012). These indicates towards a degradation of the life quality of the population in terms of environmental and social aspects.

The standard Genuine Progress Index, in general, has 25 components within the three broad sub-groups of economic, environmental and social components of progress of a country, which can be seen to be as follows:

Figure 1: Components of Genuine Progress Indicator

(Source: Kubiszewski et al., 2013)

However, in their work, Feeny et al. (2013) includes only 18 components to measure the genuine progress of South Korea. The positive and negative components taken by the authors for measuring the overall progress of South Korea are highly relevant and significant for measuring the progress of the country. However, the list put forward by the authors, although seems to be adequate but do not seem to be totally exhaustive as there are several other factors which may have impacts on the progress of the country (Bagstad & Shammin, 2012). On one hand the list contains the factors like that of distribution index (which is required to study the inequality in the distribution of income), air and waste water pollution (which are required to take into account the environmental degradation of the country) and other aspects which reflects on the overall consumer welfare, the index lacks more sophisticated aspects like that of the work pressure felt by the labour force of the country and their effects on the overall social conditions of the country in the recent period.

Components of Genuine Progress Indicator

The Genuine Progress Index, which has been taken into considered by Feeny et al. (2013), has various relevant components which are required for measuring the actual progress and overall welfare of the population of the country, especially in the contemporary period of considerable social dynamics. However, it would have been more robust if few other components of GPI could have been included in the measure adopted by the concerned authors. One such example is that of loss of leisure hours which is not considered by the authors. Although it does not seem to have any rapid or short-term effect, however, in the long run, this may create feeling of dissatisfaction and depression among the pressurised employees, affecting their family lives and social lives. The net capital investment also needs to be incorporated as it shows the positive aspects of economic progress of the concerned country. The development of industries and businesses, number of employment generation, overall income of the population of the country and inter-generational welfare of the population of the country considerably depend on these aspects. Thus, inclusion of these components of standard GPI would have been helpful in making the model adopted by the authors adequate (Lawn & Clarke, 2008).


The analysis of Feeny et al. (2013), reflects at several factors which are found to be crucial driving components of the GPI index constructed by the authors for the purpose of measuring the overall and genuine progress and development of the country in the recent periods. Of these, as per the assertions of the authors, the first and foremost driving factor of the GPI of the country is that of the private consumption expenditure occurring in the country over the period of time. This constitutes of the bulk of the aspects developing the GPI. However, apart from this factor the distribution index, cost of air pollution, value of the non-paid household labour and similar components like that are also seen to carry weightage in the GPI per-capita measurement by the concerned authors. The GPI per capita of the concerned country can also be seen to be considerably related to the inflation dynamics of the country and human capital and per capita exports also play considerably crucial roles in the aspects of driving the dynamics of the GPI formed by the concerned authors for South Korea in their research paper.

The dynamics of the GPI per capita for South Korea, for the last three decades, as per the findings for the work of Feeny et al. (2013), can be seen to be considerably differing from that of the dynamics of the GDP per capita of the concerned country within the same period of time. For instance, although private consumption expenditures are crucial factors incorporated in both the GPI per capita and the GDP per capita indices of South Korea, differences can be seen with respect to the components of the same included in both the measures. Like the private consumption expenditure on the durables are not taken as driving factors for the GPI per capita but are considerably important for the purpose of calculation of the GDP per capita of the country (Nelson, 2012).

Inadequacy of Feeny et al.'s list of GPI components

The primary reason behind this difference between the driving factors behind both the measures is that while the calculation of GDP is done, it is assumed that the benefit and welfare of consumption or purchase of the commodities and services are accrued to the concerned consumers, fully, at the time of purchase only. For this purpose, the aspects like that of expenditure on consumer durables are included in the GDP per capita measure (Bleys & Whitby, 2015). However, in case of the GPI calculation, it is taken into consideration that not all benefits of the products are not accrued to the consumers immediately at the time of purchase and can be received by the consumers over time. Thus, these are not the driving factors of GPI at the time of purchase. Again, aspects like air pollution and similar domains are not included in the GDP but are driving factors of GPI as the latter considers economic, social and environmental aspects unlike that of the former which considers only income growth and total productivity of the country (Giannetti et al., 2015).

From the above discussion and from the data and literary evidences present in the domain of the economic and overall development and progress of South Korea, it can be seen that there lies a noticeable anomaly in the domain of economic and overall progress of the country (Giannetti et al., 2015). On one hand, while the GDP statistics show impressive progress of  the country over  the last three decades, thereby reflecting towards an expected increase in the overall welfare of the overall population of the country, on the other hand, considerable gaps and loopholes can be seen in these aspects as the fruits of the economic progress do not seem to be percolated among all sections of the population of the country and the aspects of high inequality, environmental damage and social tensions can be seen to be crippling the progress of South Korea over time.

Keeping this into consideration, it can be asserted that for the purpose of promoting greater genuine progress of South Korea, the government needs to concentrate on aspects other than the growth of the GDP of the country. Particularly, the government needs to focus on the following policies and their proper implementation:

  • The government of South Korea needs to focus on decreasing the level of income inequality which exist in the country over the last few years and which can be seen to be increasing with the increasing economic progress in the country.
  • The government also needs to implement contractionary monetary policies in order to decrease the level of inflation in the country, which can be seen to be increasing with the increasing aggregate demand in the country due to concentration of high income and purchasing power in the hands of a small section of the population of the country (Kates, 2018).
  • The government also needs to strengthen and impose stricter environmental policies for the purpose of protection of the environment and for proper and fair utilisation of the natural resources of the country, so as to increase the overall welfare of the people of the country.
  • Government of South Korea also needs to look into the aspects of work conditions and work stresses of the labours in the country and also needs to device and implement policies to develop the living standards of the overall population of the country in order to reduce the social tensions and crime rates of the society (Bauer, 2013).

These policies are not necessarily expected to increase the GDP per capita of the concerned country, directly (although it can have indirect positive impacts on the same), but these policies, if implemented correctly and monitored appropriately, are expected to increase the overall welfare of the population of South Korea, thereby contributing to greater genuine progress of South Korea.

Other potential components of GPI


The Genuine Progress Indicator of South Korea, unlike most of the East Asian countries, can be seen to be consistently increasing over the last three decades, along with the growth of the GDP per capita index of the concerned country. The more or less consistent growth in the GPI of the concerned country, as shown in the work of Feeny et al. (2013), can be attributed to several discrete factors and reasons.

Firstly, the human capital of the country has been improving and increasing impressively (in terms of skill, technological adaptability, educational attainments and other human attributes), which in turn can be seen as one of the primary factors behind the impressive industrial development of the country, which in turn has resulted in higher employment generation and increase in overall quality of life to some extent (Talberth, 2012). Apart from the same, the aspects of high technological adaptability and a responsive and flexible as well as liberal mindset and work process of the government of the country have also contributed to the same to the development and robust progress of the GPI of the country as can be seen from the GPI per capita of the concerned country over the last few decades. However, some of the positive aspects can be overestimated due to the way in which the authors calculate the GPI in their paper and the GPI per capita dynamics can be affected to some extent if factors like loss of leisure hours and aspects similar to that are included in the measurement of the GPI per capita of the concerned country (Bartelmus, 2013).

References 

Bagstad, K. J., & Shammin, M. R. (2012). Can the Genuine Progress Indicator better inform sustainable regional progress?—A case study for Northeast Ohio. Ecological Indicators, 18, 330-341.

Bartelmus, P. (2013). The future we want: Green growth or sustainable development?. Environmental Development, 7, 165-170.

Bauer, P. (2013). Economic analysis and policy in underdeveloped countries. Routledge.

Bleys, B., & Whitby, A. (2015). Barriers and opportunities for alternative measures of economic welfare. Ecological Economics, 117, 162-172.

Chang, K. S. (2013). The Korean State and Social Policy: South Korea Lifted Itself from Poverty and Dictatorship to Affluence and Democracy. By STEIN RINGEN, HUCK-JU KWON, ILCHEONG YI, TAEKYOON KIM, and JOOHA LEE. New York: Oxford University Press, 2011. vii, 137 pp. $52.50 (cloth). The Journal of Asian Studies, 72(1), 219-220.

Feeny, S., Mitchell, H., Tran, C., & Clarke, M. (2013). The determinants of economic growth versus genuine progress in South Korea. Social indicators research, 113(3), 1055-1074.

Giannetti, B. F., Agostinho, F., Almeida, C. M. V. B., & Huisingh, D. (2015). A review of limitations of GDP and alternative indices to monitor human wellbeing and to manage eco-system functionality. Journal of Cleaner Production, 87, 11-25.

Henderson, J. V., Storeygard, A., & Weil, D. N. (2012). Measuring economic growth from outer space. American economic review, 102(2), 994-1028.

Kates, R. W. (2018). What is sustainable development?.

Kong, T. Y. (2013). The politics of economic reform in South Korea: A fragile miracle. Routledge.

Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T., & Aylmer, C. (2013). Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics, 93, 57-68.

Lawn, P. A., & Clarke, M. (Eds.). (2008). Sustainable welfare in the Asia-Pacific: studies using the genuine progress indicator. Edward Elgar Publishing.

MacKenzie, D. W. (2015). Gross Domestic Product. Wiley Encyclopedia of Management, 1-4.

McAuliffe, R. E. (2015). Gross Domestic Product. Wiley Encyclopedia of Management, 1-1.

Nelson, L. C. (2012). Measured excess: Status, gender, and consumer nationalism in South Korea. Columbia University Press.

Nielsen, R. W. (2016). Unified Growth Theory contradicted by the absence of takeoffs in the Gross Domestic Product. arXiv preprint arXiv:1601.04686.

Park, J., & Hong, T. (2013). Analysis of South Korea’s economic growth, carbon dioxide emission, and energy consumption using the Markov switching model. Renewable and Sustainable Energy Reviews, 18, 543-551.

Rodrik, D. (2014). The past, present, and future of economic growth. Challenge, 57(3), 5-39.

Sachs, J. D. (2012). Government, geography, and growth: The true drivers of economic development.

Shin, J. S. (2013). The Economics of the Latecomers: Catching-up, technology transfer and institutions in Germany, Japan and South Korea. Routledge.

Shin, K. Y. (2013). Economic crisis, neoliberal reforms, and the rise of precarious work in South Korea. American Behavioral Scientist, 57(3), 335-353.

Talberth, J. (2012). A new bottom line for progress. In State of the World 2008 (pp. 46-59). Routledge.

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