Is GDP Gross Destruction Problem?

                         


Since 1934, the world is fed about its progress which is not. It is a statistical poison; we all have been consuming to feel good about our destruction.

 GDP is a false number and means that the gross also includes the destruction of human resources, natural resources and societal resources.


But why does GDP matter?

Countries are evaluated and judged by their GDP. The ministry of finance in each country shows off their most powerful number. The treasury department releases its quarterly results indicating how wonderful the economy is doing. 



Therefore, the policies depend on and around getting the GDP number up. Those foreign investors and financial institutions who want to invest look for higher GDP destinations as one of the critical factors.

Geo-politics, too, is based on the GDP numbers. The elite club of superpowers, emerging economies G-8 and G-20 respectively, are based on their GDP growth rate and size. 

In comparison, the same countries may have millions of their citizens struggling and living below the poverty line. It is a propaganda tool used by political parties and governments to advance their causes.





What is the problem with GDP?

GDP misrepresents a country state of affairs, especially the social and human side. Even the economic side of the country is distorted. 

For the sake of simplifying, take a hypothetical case of Brazil. Someday, if the president of Brazil decides to cut the entire amazon forest and sell its wood, to the world, even as raw wood, it will be the country with the highest GDP for the next 20 years. 

Botswana is doing the same as its president is advertising the rich timber resources to attract international business. The same is with mining and minerals. 

Cobalt is emerging as a highly sought after mineral for chipmakers and mobile manufacturers. The precious metal is mined in Africa, in one of the poorest countries with the most impoverished community. 

The community is facing severe health issue with birth defects and infertility. This human cost is not included in the GDP of the country.




By now, it can be concluded that the calculation of GDP is fundamentally wrong. It is a gross of the activity, whether the action is beneficial to the country or not.


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By now, it can be concluded that the calculation of GDP is fundamentally wrong. 

It is a gross of the activity, whether the action is beneficial to the country or not.

                                      




Manufacturing cigarettes and selling this hazardous product to the public is very much part of GDP, but a patient dying of cancer is not, till the time the patient is treated in the hospital and spends. 

The loss of life, family distress, social disruption and loss of productivity remains unaccounted for.

In another perspective, it is bad for the GDP if the population is healthy, and good for the economy, if people fall sick, undertaking expensive treatment.

If a soldier dies in an army operation, it is not counted in the GDP, while manufacturing bullets is included in the GDP.




Cyclists are bad for GDP because they don't pay road tax, insurance premium, parking, fill fuel, and repairs are the bare minimum. As a side effect, it makes people healthier. 

As a nation with a healthy population, there will be fewer doctors and health care services. While the environment will be cleaner, the health issues related to pollution will be fewer. 

Though the GDP will be lower, the well-being of the population will be higher.

The reverse is also true. More people falling sick will enhance the GDP.

Humanity is caged within the calculation of economic multipliers and GDP. If a Samaritan neighbour takes a sick to the hospital, it is a loss to the GDP as there is no economic activity. 

On the contrary, calling an ambulance will sound better to the economist. How do we calculate the contribution of teachers and social workers? 

The only criteria that GDP allows are their salary which does not include the motivation and positive spirit that a teacher brings to the newer generations, which inspires them to make a strong country.

The western countries (where this all began) have seen a deprivation due to the influence of GDP in the country's macro-policy. 

The family structure has broken because all the caring services of the family's duty have been monetised. Old people homes are ubiquitous, and elderly care services are prevalent.

 Either the government pays or private individual does, the economic activity is encouraging. It has degraded society in general, and the sensitivity stimulated by personal care has been replaced by entitlement to professionals. 

If these services are privately funded, the life-long savings becomes the source. The moral principles on which a society bases its strength is diluted. 

The government is encouraged to push more and more old people homes and, as a consequence, keep rotating the retirement savings into the economy.

Western economies are also distorted about consumerism. As long as a population is spending, GDP economists are happy. All policies lead to buying new things and repair less of them. 

Repair has become highly expensive, and repair versus buying new does not make a viable case. 

Hence, there are long queues at the recycling centres, where people are dumping goods, which could have been easily repaired. 

In many instances, those dumped items are in working condition and maybe a luxury in poor countries. Britain, Europe and the US exports tonnes of good quality used clothes to African and Asian countries. 

They are just given away because national habit is encouraged to buy more clothes, change wardrobe regularly to keep up with high paced fashion. 

One must not be surprised that many of those clothes were hardly worn once. If the fashion industry is to blame, they are responsible for bringing change multiple times a year. 

They have also segmented the market with numerous layers, thereby increasing the overall manifold volume of consumption.

It takes us to the next concern of moving the consumerism economy to keep lifting the GDP. The environment is not accounted for anywhere. 

The depletion of natural resources does impact life on this planet. Drying rivers, overused farms, fishless oceans and endangered marine life, plastic waste in water system and synthetic food are a consequence of GDP growth.

 Air, water and soil pollution – unabated in all growing countries is no exception. Their short- and long-term consequences are subject to worry for the activists and academics but not the economists. 

GDP focussed economists and politicians get by without accountability.

After the 9/11 attack, all parties in America and Europe made it a propaganda agenda to make people consume more. 

A drop in GDP would mean terrorists sounding successful in terrorising the population into their homes. 

Hence, they advertised to return to their usual consumption habit. The call to the public sounded like this:

"The patriotic thing to do is, hold your stocks and buy more; get on an airplane and get on with doing business".


Such is the impact of GDP as a success factor that even the terrorists measure their actions with this misplaced economic parameter. 

While the national governments have successfully won the battle with the GDP, they have lost the battle in fighting terrorism. 

Consequently, billions of passengers worldwide continue to strip (partially) themselves and their belongings at the airports.

 Twenty years on after the attack – and the terror in flying continues, unquestionably. In this case, both the GDP and the terrorists are winners.

The calculation of GDP is another problem area, giving a flawed picture. In 2010, Ghana changed its base-year methodology for the estimate of GDP. 

Suddenly, it jumped from being a poor African country to a middle-income nation. It depends on which calculation can be conveniently taken for the purpose. 

GDP according to World Bank using World Development Indicators, the Penn World Table or the Maddison Project Database, give different numbers to GDP and state of the nation.

If GDP was the indicator of a nation's strength, then those on the top have failed miserably during the COVID pandemic. 

The worst affected countries sit in the G20 club of prosperous economies. So, something is seriously wrong with the direction in which the GDP is taking us all.


What are the alternatives of GDP?


GDP may be a measure of growth, but it is certainly not a measure of the people's well-being or economic welfare. Humans are social animals, and life on the planet is sitting on a delicate balance. 

Different pressure groups have realised that GDP is not the correct measure of growth. Even the inventor of the GDP, Kuznet, was sceptical about the unlimited usage of GDP. 

He did plead the policymakers to distinguish between the "Quantity" of economic growth and its actual "Quality".  

While a number can indicate growth, it is certainly not translating into humanity's progress and well-being. 




Like many other governments in the developed world, the French government instituted a commission to have a relook at the possibility of an alternative index of well-being.

The final report suggested the measure in three parts. The first being classical GDP issues enhanced to measure economic well-being. 

It would mean the population is involved in economic activity and an equal opportunity for all. The other part included quality of life to be measured for every citizen, and the third was sustainable development and sustainability. 

It concluded that all growth must be accompanied by methods that will not lead to the destruction of resources, including people and the planet.

There have been various experts across the world who have suggested different indexes to measure the country's objective and subjective progress. Here is the list:

Fulfilment of Human Needs Index (FHNI) – Clarke

Index of Social Progress (ISP) - Estes

Human Scale Development Model – Max-Neef

Sustainable Society Index (SSI) – Van De Kerk and Manuel

Calvert-Henderson Quality of Life Indicators – Calvert and Henderson

Physical Quality of Life Index (PQLI) - Morris

Happy Life-Expectancy (HLE) - Veenhovan

Index of Economic Well-Being (IEWB) – Osberg and Sharpe

Human Development Index (HDI) – United Nations Development Programme

Economic Aspects of Welfare (EAW) – Zolotas

Index of Sustainable Economic Welfare (ISEW) – Dale and Cobb

Measure of Domestic Progress - Jackson

Environmental Sustainability Index (ESI) – Yale University

Genuine Savings Measure (S*) – World Bank

Ecological Footprint – Wackernagel and Rees

Eurostat – European Standard based on UN Commission on Sustainable Development

Environmentally adjusted Net Domestic Product (eaNDP)

The challenge that remains with the international community is to unify a standard unit of measure for these indices. There are challenges to this unification.

 Different countries have different paths to progress and base their progress on ideology. Also, it is much determined by the economic history of the country. 

As a brief example, the USA criteria for progress will be vastly different from that followed by Bhutan, who, by the way, was the first country to base their progress on Happiness Index.





Finally, where are we?

The pursuit of GDP had made countries, their society and their people a commodity. Their services are tracked and monetised to reach a number. 

Last so many years, ever since the invention of GDP, economics have become so powerful that it has enslaved people to market forces. Today, the only way to view the economic world is GDP.

Hence,

There are no Nations.

There are no Cultures.

There are no Humans.

There are only Markets.

 


 

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