In the 73rd Independence day’s address, the PM said that we need to work for “ease of living” along with “ease of doing business” by reducing interference of government in people’s lives, further adding one more angle to his earlier motive of “Minimum government and maximum governance”. Around the same time, Delhi Government kicked off a 15-day long “Happiness-Utsav” to celebrate the completion of 1 year of the launch of its happiness curriculum which was initiated in government schools for students of class nursery to 8th grade. Designed by 40 experts and launched in the presence of Dalai Lama, the curriculum includes 45 minutes of happiness period in the morning along with 5 minutes of meditation at the beginning of each period. Even more surprisingly, DU has launched a 6-month course on happiness this year. Why this happiness chase all of a sudden? It seems like one day everybody decided to give a thought to the question, why increase GDP? and came up with these steps. This article is all about revisiting the relevance that this mathematically calculated number holds in current times.
We know GDP,as a measure of economic growth that has often resulted in unstable diplomatic ties leading to a fall in global harmony, a number that has the power to reverse the decision of democracy and change governments, an issue that has kept many who could debate on genuineness of this number employed, has always been at the core of important decisions and policies. A rise in GDP has always been celebrated without realising that it is always easy to consume what we have without looking at what we are left with.
In 1937, Simon Kuznets came up with this idea to measure the productivity of each individual to reach a single number, rise and fall in which must indicate good and bad times, and this is how a statistic to end all statistics was born. Further Arthur Okun said that for every 3% growth in GDP, unemployment falls by 1%. Intuitively, employment is more closely related to welfare as greater income means a better standard of living, and this is how GDP found its supreme place in political parties’ campaigns and election manifestos because higher GDP would mean higher employment and higher income. However, Simon himself warned against its use as a measure of welfare.
Among its critics, GDP is referred to as Grossly Defective Product because it does not account for negative externalities, quality of living and future sustainability. In the words of Kennedy, it measures everything except what makes life worthwhile. This GDP rush has taken a great toll on health, environment and well being. Also, in the present dynamic environment moving towards globalization, the increasing share of the service sector and intellectual property rights becoming the real asset, the growth in numbers is largely misleading.
It is no accident that GDP figures for Ireland, a small open economy attracting US multinationals due to low corporate taxes, has become distorted. It witnessed a 26.3% growth just because few companies had relocated their base to Ireland while fundamentally nothing has changed except its debt to GDP ratio looking more sustainable falling from 108% to 79% in 2015. There is obviously an urgent need to keep some other indicators at the core of policies for the world to actually grow. Economic expansion was thought to be a catalyst for common well being during the times of global crisis but now if this narrow indicator is not reformed then another crisis will be inevitable.
While we can’t altogether get rid of GDP as it acts as a base to measure the debt carrying capacity of a country based on the volume of its economic activity, there have been various alternative ways suggested like GPI (Genuine Progress Indicator) which was proposed by Daly and Cobb in 1989. This used GDP as a base with an aim to measure sustainable economic growth. It made additions and deductions based on the positive and negative impacts of economic growth. The increasing difference between both testifies our unmindful ways of growth.
New Zealand has come up with the world’s first-ever Wellbeing Budget 2019, in which labor party led by the PM Jacinda Arden has prioritised happiness over economic growth by spending its limited funds on solving 3 main social issues that are child poverty, family violence, and mental illness. The opposition has criticised this move by saying these hollow efforts are just to entice people in the name of welfare. By this, the New Zealand government plans to improve the levels of Subjective Well being. This can be thought to be another measure introduced to overcome the disadvantages of the objectiveness of GDP. This measure attempts to find out the level of satisfaction based on self-reporting. Some economists are highly critical of this measure simply because of the reason that this experiment might give distorted results as their responses will be highly dependent on ethnicity, age, gender, and expectations, etc. However as pointed out by Costanza among many others, objective measures such as life expectancy, rates of disease, and GDP are only proxies for well-being that have been identified through the subjective study of judgment; hence the difference between both types of indicators might be superficial. But on digging further into the depths of rationality, one cannot deny that on reaching a certain level of income, more money will not result in satisfaction and that is where the distinction becomes imperative.
No doubt that the then noble-winning metric has proved to be too narrow in current times and the steps in search of alternatives along with growing self-destructive crimes in a fast-developing world, somewhere testifies the deep-seated realisation of our sufferings might not being the result of insufficient growth but growth in the altogether wrong direction. There is no denying the fact that GDP has to be supplemented by an indicator that can measure something as abstract as happiness, satisfaction or well-being but at the same time, the alternatives we have, to jump to are not perfect and demands greater research be materialized.