What's Wrong with Ranking Sixth in the World by GDP? Countries Where the Numbers Rise but Life Gets Harder

Lately, I have often heard that Japan will be overtaken by the United Kingdom and India, falling to sixth place in the global GDP rankings.

India has more than ten times Japan’s population, so it is only natural that it would eventually overtake Japan. But the prospect of being overtaken even by the United Kingdom gave me pause.

So I looked into the British economy and found it quite interesting.

Its nominal GDP is certainly large. But prices and rents are also high. London’s housing situation is particularly severe, and even living in a decent room reportedly imposes a substantial burden.

The United Kingdom may overtake Japan in GDP, but that does not mean ordinary people’s lives are becoming proportionately more prosperous.

GDP was never a measure of national happiness in the first place. Higher prices can push up nominal GDP, but that does not make life any easier.

If rents double and GDP rises as a result, are landlords not the only people likely to celebrate it as economic growth?

The Idea of Expanding GDP by Increasing Immigration

Another issue I question is immigration policy.

In the United Kingdom and other Western countries, accepting immigrants increases the population and labor force, which can also raise total GDP.

That is obvious when you think about it. A larger population means more consumption and more labor, making the overall economy more likely to grow.

Whether that makes the people already living there more prosperous is a different question.

A growing population needs more housing. It also places greater pressure on social infrastructure such as schools, hospitals, and public transportation. If housing supply cannot keep up, rents rise even further.

I oppose policies that accept large numbers of immigrants for the purpose of increasing GDP.

Of course, I understand the argument that immigration can address labor shortages. But if the focus remains on increasing the population simply to preserve the size of the economy, productivity will never improve.

If there are not enough workers, pursue labor-saving measures and automation. If the population is shrinking, design a society that can function with fewer people.

Would that not be far healthier?

If a country must keep increasing its population merely to preserve its GDP figures, that is less an economic policy than a treadmill designed to protect a number.

Stocks Are Booming, but Ordinary People’s Wallets Are Empty

A similar phenomenon is occurring in the United States.

Stock prices rise and giant technology companies earn enormous profits. Meanwhile, housing prices, rents, and medical expenses squeeze household budgets.

People who own financial assets or real estate become even wealthier as asset prices rise. For those who own neither, only the cost of living goes up.

People can live in the same country while inhabiting what seem like entirely different economies.

It was once assumed that economic growth would eventually make ordinary people’s lives more prosperous. Today, however, the benefits do not necessarily spread widely.

GDP increased. Stock prices rose. Corporate earnings reached record highs.

None of that pays the rent.

Would Japan Be Happy If It Returned to Second Place in GDP?

Should Japan, then, inflate its GDP through intense inflation?

Suppose salaries doubled and GDP rose substantially.

But what if rent, food, and utility bills tripled?

The economy would be growing on paper while life became harder than before.

I want no part of that kind of economic growth.

Japan also has to contend with a weak yen. Because GDP measured in dollars is heavily affected by exchange rates, a fall in the rankings does not mean that domestic living standards have declined by the same proportion.

Japan’s economic stagnation and low wages are certainly problems. But when public safety, transportation, healthcare, and everyday infrastructure are taken into account, life in Japan still has considerable strengths.

There is no need to import the high inflation and housing shortages of other countries merely to regain a place in the GDP rankings.

No One Lives on a GDP League Table

In the first place, how much does it matter to ordinary people whether their country ranks third or sixth in the world by GDP?

What matters is being able to work an ordinary job and live an ordinary life.

People should be able to pay the rent, eat, occasionally enjoy travel or a hobby, and avoid excessive anxiety about retirement.

Achieving that requires not a competition over total GDP, but higher productivity per person, lower living costs, and greater prosperity in real terms.

I find little appeal in inflating GDP by increasing the population or expanding the nominal size of the economy by raising prices.

If preserving the label of “economic superpower” makes life harder for the people, the priorities are completely backward.

A country can rank near the top of the global GDP table while ordinary people cannot even afford a home. In what sense is that country wealthy?

People cannot live on GDP rankings.