Global | Welfare and GDP in the time of COVID-19

The COVID-19 crisis has not only led to a fall in per capita consumption but also to increased inequality and a fall in life expectancy (expected to be temporary). As a result, the loss of social welfare has been greater than the fall in GDP.

Key points

• Key points:
• Although GDP per capita is a good aggregate indicator of market activity (with some limitations due to the digital disruption), measuring social progress requires additional information to traditional economic and social indicators.
• Instead of using GDP per capita as a yardstick for the economic success or failure of societies, at BBVA Research, we measure the social welfare provided by per capita consumption (private and public), leisure, equality and greater life expectancy.
• For the past six decades, the US has not been the leading country in terms of social welfare. Norway, Sweden, Switzerland and Iceland have maintained welfare levels as high as, or even higher than, the US.
• As regards Spain, its per capita income has been around 58% of that of the US over the last decade but its welfare has risen to 74.2% owing to its higher life expectancy, its lower inequality and its fewer hours worked.
• The pandemic is a warning of the need to anticipate other challenges. Given that climate change is possibly the most important of the challenges that we are already aware of, social welfare measures need to be extended immediately to account for the social cost of carbon.

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