GDP analyzes wealth production

It doesn’t even do that. It includes a lot of financial activity that generates absolutely no wealth at all and instead just shifts money from one place to another. It includes non-productive parasitical activity, financial manipulation in the FIRE sector, rents and other forms of unearned income.

There is also a ton of double counting involved even on the production front. All while failing to count unpaid labor that does create tangible value. And of course it ignores debt and liabilities, as this article: Why GDP is Fake points out. In fact it’s even worse than that, because it doesn’t just ignore debt, it counts interest on debt positively toward GDP.

The classic example of how nonsensical GDP is as a measure of wealth formation is this: imagine if everyone suddenly sold their houses to their neighbor. The GDP would go way up because of all the new loans and financial activity, but in reality nothing has changed at all about the housing situation, except people are more indebted.

Another classic example from Michael Hudson: the US Department of Commerce counts the rental value of homes owned by their occupants toward GDP in a concept known as “imputed rent”. Meaning if you own the home you live in and as a result don’t pay rent, the GDP includes the rent you don’t pay to yourself. So GDP goes up when real estate asset values go up. It is utterly absurd but that’s how it works.

GDP is “wealth production” only as seen from the point of view of bankers and speculators. It is objectively speaking a bad metric, yet liberal economic orthodoxy has universally embraced the “Cult of GDP”, so much so that they are unable to comprehend why, if line go up, are people still insisting that the economy is not doing well. We’ve seen countless articles of that sort in western publications.

And no, the problem isn’t fixed by switching to a GDP adjusted for PPP (although that is better) because the fundamental problems of the metric still persist.

I would suggest that a good place to look for an indicator of real productive output is energy consumption. The total energy consumption of a society roughly correlates with the level of real economic activity, though an adjustment for “energy deflation” is needed, that is improvements in energy efficiency thanks to technological advancement. If you do that you get a decent approximation. Not ideal but it’s a start.