First, we must ask "What are the two facts that seem to oppose, surprise, or contradict?"
Here, the argument rather clearly indicates these in the sentence beginning "Despite."
So, the question is, "Why do the citizens want to be better than G rather than have a higher GDP?"
(A) This doesn't help us answer the question as to why they prefer to be ahead of G rather than have a higher GDP.
(B) This does not help explain the citizens' preference.
(C) Is out of scope.
(D) Is irrelevant.
(E) Gives us a reason why the citizens prefer scenario (1) -- because they value being more powerful than Country G.