Ever since Simon Kuznets invented the Gross Domestic Product (“GDP”), this metric has become the Holy Grail in both economic and political lore. The economic health as well as hopelessness of nations are inextricably pegged to this number as are political aspirations and collective personal ambitions. In an era where growth represents the sine qua non of everything that can be measured, is this untrammeled obsession with GDP the only rational means of tracking national income estimates or are the much vaunted economists and the policy making mavens barking up the wrong tree? This is precisely what prize-winning journalist David Pilling attempt to answer in his extremely engrossing book, “The Growth Delusion.” (“The Book”).
As Mr. Pilling strives to enlighten us, there is a chasm of difference between the GDP which Kuznets envisaged to conceptualise as against the GDP as it is known today. To paraphrase Kuznets himself, “it would be of great value to have national income estimates that would remove from the total the elements, which from the standpoint of a more enlightened social philosophy than that of an acquisitive society, represent disservice rather than service. Such estimates would subtract from the present national income totals all expenses on armament, most of the outlays on advertising, a great many of the expenses involved in financial and speculative activities.”
Kuznets’ plea seems to have fallen on some resolutely deaf ears as society has not only become insatiably acquisitive, but the measure of its accumulations also has taken on a form that is extremely reductionist. The world over, there are three boiler plate ‘recipes’ for measuring growth, namely, the expenditure, income and production methods. “They measure what is spent, what is earned and what is made.” As Mr. Pilling, with a dash of wit and dollops of wisdom points out, what matters more is not what is being measured, but all those things that are being inextricably missed out. For e.g. to quote Mr. Pilling, “one author lists some of the activities that are not part of the economy as ‘giving birth to babies, raising children, cultivating a garden, cooking food for her siblings, milking the family cow, making clothes for her relatives, or taking care of Adam Smith so he can write the Wealth of Nations.” In other words, the diligent woman who is responsible for maintaining order and decorum in the entire family is completely excised from being counted as contributing to her economy. Drawing upon the work of Steve Landefeld, former Director of the Bureau of Economic Analysis, researchers in America published in the year 2012 a finding which postulated that, “if cooking, cleaning, washing, driving and so on were counted, these activities would roughly add $3.8 trillion dollars to the total size of the American economy.”
Growth is an animal of aggregation that cleverly hides from the vision of the unsuspecting, some dark and dystopian subterranean layers having the potential to cause dismay and despondency. A classic case in point of growth statistics obfuscating more pertinent and urgent denominators, was encapsulated by a paper by two academics, Anne Case and Angus Deaton. Carrying a not so appealing, doused in economics lingo title that read, ‘Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st Century’, this paper induced more than just a stir amongst its readers. The study unearthed the startling fact that, “from 1999 there had been a marked increase in the deaths of middle-aged White Americans.” This when, the American economy had surged from $10.3 trillion in 2000 to $18 trillion in 2015. This one single contradiction illustrates the perils of using growth as the sole metric to measure the ‘wellbeing’ of an economy.
Growth also comes at a cost. A cost that places immense burden not only upon the current population but also on the future generations, which inherit a not so enviable baggage in the form of environmental degradation. The world’s second biggest economy is racked by air pollution to such a dangerous degree that the hazard has even received a new nomenclature, “Airpocalypse.” As Mr. Pilling notes, “according to US standards, if the air quality index drifts above 50, you are at the upper limit of safety, though Beijing residents treat anything below 100 as reassuring…. A US official once described a reading above 500 as ‘crazy bad.’ During the worst of the Airpocalypse, it edged above 1000.” These negative externalities are neither subtracted while calculating GDP nor are adjusted in any manner to arrive at a more reflective and introspective measure of growth.
It’s not that attempts have not been made to factor in such negative externalities in measuring growth. In fact, China itself has pioneered, albeit reluctantly the employ of an alternative form of GDP termed the ‘Green GDP’. The brainchild of Niu Wenyuan, a well-known economist, and an adviser to the State Council, the Green GDP strives to place a value on the loss of biodiversity, and accounts for costs caused by such damage to the ecosystem. In the words of Niu himself, “we take the current GDP figures and we scrape away the parts that we believe are wrong or miscalculated. And in this way, we arrive at something that is closer to the real GDP.”
Alternative and alluring alternatives for measuring GDP have not merely been proposed but promulgated by law as well. In Maryland, the concept of the Genuine Progress Indicator (“GPI”) has attained immense popularity. The Maryland GPI website states: “GPI provides citizens and policymakers fruitful insight by recognizing economic activity that diminishes both natural and social capital. Further, the GPI is designed to measure sustainable economic welfare rather than economic activity alone. To accomplish this, the GPI uses three simple underlying principles for its methodology:
account for income inequality,
include non-market benefits that are not included in Gross Domestic Product, and
identify and deduct bads such as environmental degradation, human health effects, and loss of leisure time.”
The indicators used to calculate the Maryland GPI include, among others, Costs of Pollution, Household Investments, Services from Social Capital, Services from Natural Capital etc.
The small nation of Bhutan, has in a spectacular fashion taken the lead in instituting a solid and structurally viable alternative for measuring growth. Termed The Gross National Happiness (“GNH”) Index, the concept implies that sustainable development should take a holistic approach towards notions of progress and give equal importance to non-economic aspects of wellbeing. The GNH Index includes nine domains:
- Psychological wellbeing
- Time use
- Cultural diversity and resilience
- Good governance
- Community vitality
- Ecological diversity and resilience
- Living standards
While these alternative measures reflect a genuine attempt on the part of policy makers to invest the metric of measure with a semblance of purpose and direction, it is still no doubting the fact that GDP towers above all other substitutes like a veritable colossus. At the end of his book, Mr. Pilling argues passionately that the time is now ripe for us to move away from being benevolent to this colossus. We no longer need to proffer out benedictions at the altar of growth. He is absolutely right. While the general welfare and uplift of humanity as a whole might be joined at the hip by growth, all the shots need not be called by only of the congenital twins. Growth needs to walk in lockstep with other invaluable intangibles such as happiness, freedom, life satisfaction and peace. While it might be extremely tricky to place a sum on these unseen benefits, or even futile to engage in an act to ‘commodify’ them, it is imperative, invariable and inevitable that we at least begin to value them for whatever is their true worth.