GDP and productivity statistics viewed overlooking much of what we truly value

By: | Published: February 18, 2019 4:09 AM

GDP and productivity statistics are viewed overlooking much of what we truly value.

gdp, gross domestic product, world economic forumToday, GDP and productivity statistics are viewed overlooking much of what we value, even when using a narrow economic lens.

At a session on ‘More than GDP’ at the 2019 World Economic Forum in Davos, New Zealand PM Jacinda Ardern argued what, of late, has been advocated by many leading economists that, while countries measure their economic growth, several other factors impacting quality of life go unmeasured. “We need to address the societal well-being of our nation, not just the economic well-being,” Ardern said.

Someone in China recently wrote a musical tribute ‘In the name of GDP’. Germany had a similar song in the 1980s—a satire on the consumption frenzy. A view has been gathering steam that progress is not measured merely in terms of GDP graphs, BOP tables or swelling foreign exchange, that GDP and productivity growth are important, but they are a means to an end, not ends in themselves.

Today, GDP and productivity statistics are viewed overlooking much of what we value, even when using a narrow economic lens. In a March 1968 oration, Robert F Kennedy decried idolatrous belief in GDP which, he lamented, did not capture “the beauty of our poetry or the intelligence of our public debate. It measures neither our wit nor our courage, neither our wisdom nor our learning. It measures everything, in short, except that which makes life worthwhile.”

Nobel laureate Joseph Stiglitz called for an end to ‘GDP fetishism’. The OECD-hosted High-Level Group convened by then President Nicolas Sarkozy in 2008, the Stiglitz-Sen-Fitoussi Commission led to ‘OECD: Beyond GDP: Measuring What Counts for Economic and Social Performance’ report. To capture not only aggregate economic performance, but also people’s quality of life, it adopted a new motto ‘Better Policies for Better Lives’ and launched OECD Better Life Initiative, resulting in advancing the ‘beyond GDP’ agenda.

OECD Better Life Index Country Reports contains metrics (housing, income, jobs, education, health and environment, community and public engagement, life satisfaction, safety, and work-life balance) that, it is claimed, better reflect what leads to well-being. While 23 countries scored higher than the OECD average of 80%, Denmark at the top, 13 others fared below the average, with Turkey at the bottom.

It was the king of Bhutan, Jigme Singye Wangchuck, who in 1972 noted that GDP alone did not measure what people want and that “gross national happiness is more important than gross national product.” The UN General Assembly placed the concept on the global development agenda in 2011, and declared March 20 as International Day of Happiness.

The World Happiness Report (WHR) 2018 finds India 133rd amongst 156 countries, sliding from 122nd position in 2017, based on parameters like GDP per capita, inequality, life expectancy, public trust (lack of corruption in government and business), social freedom and generosity. India was among the countries that recorded sharpest decline in the score from 2005-07 to 2013-15. In 2018, most SAARC countries rank ahead of India: Pakistan (75th), Bhutan (97th), Nepal (101st), Bangladesh (115th), Sri Lanka (116th).

A similar project aimed at overcoming limitations of GDP is the Social Progress Index (SPI) launched by Michael Porter, Scott Stern, Roberto Loria and colleagues. It was evolved as a “better measure of a country’s level of development.”

While it would be unrealistic to put a dollar value on stirring oratory like Kennedy’s, it is relevant to understand our basic economic progress by considering seminal changes in the goods and services we consume.

As Erik Brynjolfsson and Andrew McAfee explain in ‘The Second Machine Age’, much of our increased welfare over the past century has come not just from making existing goods more cheaply. Digitisation brings a related but subtler benefit to the vast array of goods and services. E-retailing has expanded the set of goods available to consumers.

In a way, like Daniel Bell elicited the debate half a century ago by questioning the validity of humanistic ideologies, repudiating youthful idealism and baring ‘the ambiguities of theory’, ‘the complexities of life’ and ‘the exhaustion of utopia’, the concept of GDP as a criterion of a nation’s well-being is under the lens. Not irrelevant it is to beckon India’s ancient, classical notion of Trivarga (artha, dharma, kama) defining the goal of life, seeking a balance between them.

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