Disadvantage of using GDP to measure national growth
1. Excludes informal economy: GDP only measures the value of goods and services produced within a country's formal economy. It does not account for the value of activities in the informal economy, such as under-the-table transactions, bartering, and unreported income, which can be substantial in some countries.
2. Ignores income distribution: GDP does not provide information on how income is distributed among a country's population. A high GDP growth rate could benefit only a small percentage of the population, while leaving the majority of the people in poverty.
3. Neglects non-market transactions: GDP fails to capture the value of non-market transactions, such as volunteer work, household chores, and parenting. These activities contribute to the well-being of society but are not reflected in GDP figures.
4. Neglects environmental degradation: GDP measures economic activity without considering the negative impacts on the environment. Growth in GDP could be achieved at the expense of natural resources, biodiversity loss, and pollution, leading to long-term sustainability issues.
5. Inaccurate measurement of quality of life: GDP only measures the quantity of goods and services produced within a country, without considering the quality of life indicators such as health, education, and social well-being. A country can have a high GDP but still have high levels of inequality, poverty, and social unrest.