(Image Credit: The Sydney National Herald)
Yemi Kale held the lofty designation of Statistician General of The National Bureau of Statistics in Nigeria in 2014. This designation was giving him sleepless nights. A three-year study had as its outcome, the extraordinarily startling fact of the Nigerian economy being a whopping 89% bigger than what economists and statisticians deemed it to be! However, this positively euphoric finding also led to some irreconcilable incongruities. Kale’s own Bureau had five years earlier, gleaned from a somber survey that 94% of the Nigerian population considered themselves to be poor, while 61% were living in poverty. “If your country’s economy is growing solely because the rich are getting richer and you are working harder and harder just to maintain your living standard, then you are entitled to ask what, precisely, is all this growth for?”
Prize winning reporter and editor of the Financial Times for over two decades, David Pilling, employs a blend of tantalizing wit, thoughtful possibilities, and trenchant admonitions as he guides his readers, both lay and learned, on a journey into the potentials and pitfalls of the one economic measure, that has withstood the tests of time and theory to emerge as the gospel truth unanimously endorsed by policy mavens, politicians, and professors alike.
American economist and statistician, Simon Kuznets is credited with conceptualizing the notion of Gross Domestic Product (GDP). However, as Pilling painstakingly elucidates, the founding father never envisaged his creation to assume the marauding capitalistic Avatar that it is known for today. Kuznets wanted to eliminate certain negative externalities such as the costs of war, armaments, and ammunition, along with investment in “anything detrimental to social welfare” from the calculation of the GDP since those items detracted from the wellbeing of a nation. However, a precise distinction between “inherently good” and “inherently bad” was not the prerogative of people at the helm of running the affairs of a nation. Poor Kuznets was not to know that many decades following his fervent plea, four simple words, “It’s the economy stupid” would provide the closest representation of and a synonym for GDP.
In a gloriously humorous manner, Pilling explains why it is a perfectly acceptable practice to include the proceeds of stolen goods on the positive side of the GDP ledger, while omitting a housewife’s chores as not making any contribution to the economy, even though such an omission – according to a study conducted in the United States – sets back the economy by more than $3 trillion, on average.
As Pilling explains, many economists and politicians are awake to the material distortions that would arise because of an indiscriminate reliance on the metric of growth alone. There has emerged an innovative platter of alternative measurements such as the Genuine Progress Indicator (GPI) instituted by the State of Maryland in the United States and measures of happiness devised by Richard Layard of the London School of Economics. The progenitor to all these alternative measures is the Gross National Happiness Index promulgated by the tiny mountainous nation of Bhutan way back in 1976.
Pilling warns his readers of treating the GDP with totemic reverence by taking recourse to the analogy of the numbers found on the dashboard of a car. The fuel gauge may reveal the number of miles the car can comfortably cruise before a refuel; the speedometer may show the pace of such a cruise and finally another metric may show the kind of music being played. While each of these three facts have some utility value when considered individually, an attempt to combine all of them to derive a single digit or a meaningful result would lead to some absolute gobbledygook. Similar is the case with GDP with seeks to include within its basket the absurd and the asinine along with the sane and the sublime.
Pilling concludes his riveting book with a clarion call for his readers to move beyond GDP. While he accepts that GDP as a measure cannot be eviscerated and it facilitates some important decision-making mechanisms, it needs to be complemented with a whole raft of alternative metrics. Some suggestions offered by Pilling include GDP per capita (dividing the GDP by a country’s population), a measure that puts people rather than some hypothetical economic notion at the centre of policy making; including the dimension of inequality in calculations relating to growth; and placing reliance on Net Domestic Product (NDP) instead of GDP. The NDP subtracts from the Gross data, depreciation of capital goods.
The Growth Delusion is a breezy read that will goad the reader to think long and hard about a dated conventional metric that is being employed all around the world and the urgent need for a reliable alternative, when not leaving her in splits that is!
