GDP measures everything '…except that which makes life worthwhile'

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

Fundamentally, the goal is to have a more 'just and equitable' society that can be perceived as economically thriving and offering citizens a meaningful quality of life. Therefore, various research evidence that we need reliable metrics to knowhow we are performing on the yardsticks of our economy, sustainability and social harmony at the same time.

Countries still use a 20th-century metric to measure wellbeing: Gross Domestic Product, or GDP and still consider using it as a measure of national well-being, something for which it was never designed for. Simon Kuznets is often credited with the invention of GDP – but he wanted to estimate the national income of the United States in 1932 to understand the full extent of the Great Depression – while the modern definition of GDP can be attributed to John Maynard Keynes during WWII.

Essentially, both policymakers and economists alike often like to treat GDP as an umbrella unit to signify a nation's development, tying together its economic prosperity and societal well-being, externalities of economic growth on society, e.g., climate change and also income inequality. GDP by definition is an aggregate measure that includes the value of goods and services produced in an economy over a certain period of time. There is no scope for the positive or negative effects created in the process of production and development.

Environmental degradation, for example, is a significant externality that the measure of GDP has failed to reflect. The production of more goods adds to an economy's GDP irrespective of the environmental damage suffered because of it.

Over the years, given the intensity, incidence and severity the very issue of poverty, backwardness and social exclusion in many developing countries continue to be very crucial one at this juncture inasmuch as despite the fact that many of the nations are resource-rich, resources the people remain poor. Either planning remains in paper or the projects are started well but left in the lurch thereafter.

World Bank referred to this situation as 'poverty in the midst of plenty'. In many of such economies, the programmes for poverty alleviation are seen not to be making significant impacts. The fruits of growth need to percolate down to the micro-level. The reality - poverty and social exclusion continues to exist as a serious problem and the rural areas continue to be the worst affected. Essential needs such as healthcare, public transportation, the supply of drinking water, all-season roads and primary schools remain urgently required to solve multidimensional poverty and backwardness in the imbalanced regions.

Careful scrutiny, in more detail and depth in areas relating to housing, sanitation and other rural infrastructure for the alleviation of rural poverty. Side by side, the urban poverty incidence continues to create manifold problem inclusive of haphazard growth of the regions.

Dr Amartya Sen very judiciously relates poverty to entitlements, which are taken to be the various bundles of goods and services over which one has command, taking into cognizance the means by which such goods acquired. Better not forget that poverty arises due to insufficiency of different attributes, such attributes are health, literacy, housing and access to public services, of well-being that is necessary to maintain a subsistence level of living.

Bringing in economic inclusion in the true sense of the term is a complex and time-consuming process and as such any haphazard or myopic move will simply push back the endeavours and nothing more.

Surely, the Government at all levels has embarked on several programmes in order to alleviate the incidence of poverty and its severity. Side by side, given the low response of households to escape from the scourge of poverty, it can be said that many of these programmes have failed to make significant impact. That is why poverty, social exclusion, and sub-regional backwardness, are better countered as a multidimensional phenomenon of which income is definitely one aspect.

With a multidimensional approach, it is possible to identify the main causes of poverty, backwardness, social exclusion so as to adopt realistic policies to reduce the intensity by viewing development as improvement in an array of human needs and not just growth of income since well-being is intrinsically multi-dimensional from the viewpoint of capacity and functioning.

Equally, there has to be a stubborn focus on distributive justice so that everybody gets access to the growth results, getting duly involved in the processes, which, in turn, could help in implementing the socioeconomic policies aimed at reducing poverty diffusion. Reforms efforts should be directed towards education, women empowerment, improving the status of those employed in agriculture, and improving the housing/sanitation conditions.

Measures that encourage people to take up especially market-friendly farm [agriculture plus allied] activities, as their multidimensional poverty is higher than those in other sectors in a rural area. Also, lean heavily on infrastructural development coupled with boosting the quality backed primary education and ensure that healthcare facilities in the rural are within the reach of the rural people. It is already well established that multidimensional poverty and backwardness decrease with an increase in the educational level of the house head and increases with increase in age and household size.

The UN Environment Programme-led Inclusive Wealth Index shows the aggregation through accounting and shadow pricing of produced capital, natural capital and human capital for. The global growth rate of wealth tracked by this index is much lower than the growth in GDP. In fact, the 2018 data suggests natural capital declined for 140 countries for the period of 1992 to 2014. The Index's findings include strong recommendations to help reach global goals, also known as the SDGs. It looks at tracking countries' productive bases is key, as a declining asset base naturally implies a non-sustainable trajectory.

We are already too late in ensuring that the dilapidated health facility is rehabilitated since healthcare, public transportation, the supply of drinking water, food, all-season road, and primary education is urgent and important at this stage in solving the multidimensional poverty / low level of human productivity in rural areas. It is better not to forget that housing/sanitation and economic condition / security are no less main factors responsible for continuous backwardness.

There is, thus, the crucial need to assess the entire task lying ahead from a comprehensive angle, especially from the point of view of the capability of functioning in as much as the capability aspects view individual well-being in terms of what a person is actually able to do or to be, given the set of functional support by the institutional framework as capabilities essentially calls for combinations of beings and doings that a person can achieve and reflect the real set of options that a person has to achieve, what she or he values and thus include the freedom of choice.

To conclude in Chiappero's logical and pragmatic thinking – "Functioning achieved are strictly related to the intrinsic characteristics of the people (age, gender, health and disability conditions) as well as to environmental circumstances (at the socioeconomic and institutional level but also referred to the household environment), and the conversion process of the available resources into well-being is strictly related to and dependent on these individual and environmental features". There's more to growth than 'produce or perish'!