Sense Vs Nonsense Of GDP And Happiness of People

Sense Vs Nonsense of GDP And Happiness of People

Shashank Vikram Pratap Singh

Ph.D. Scholar

Department of Commerce

 Delhi School of Economics

University of Delhi

ssvikrampratap@gmail.com 

                                                         

The third president of United State Thomas Jefferson once said “the care of human life and happiness and not their destruction is the only legitimate object of good government”. If we decipher his statement correctly in more operationalize way, then the possible explanation of ‘care of human life and happiness’ could be- state of being (happy, health, comfortable and many more aspects of human life) and state of lives of people (how they feel, where do they stay, what do they do, natural environment they live and many more). But  how do we make the assessment for ‘state of being and state of lives’ and thus, good or bad government? Proxy indicators developed by reputed national and international organizations are the best possible solution. Therefore, the current status of ‘state of being and state of lives’ of people of India is as follows; the per capita income  at the current dollar is around $2,000 which is less than the world average of $10,722. It stands at 130^th place in HDI ranking, 140^th in Happiness Index, 147^th in World Inequality Index, 141^st  in Global Peace Index, 140^th in World Press Freedom Index, 78^th in Corruption Perception Index, 115^th in Human Capital index, 102^nd in global hunger index, 110^th in Human Freedom Index, 177^th in Environmental Performance Index, 145^th in Healthcare Access and Quality index, 108^th in WEF’s Global Gender Gap Report & 142^nd place on providing economic participation and opportunity to women and 62^nd in Inclusive Development Index. The present doctor-patient ratio is around 1:10000 as compared to the WHO prescribed limit of 1:1000. Similar pathetic position is there in the case of education sector and income disparity; 75 percent of grade three students and 50 percent of grade five students could not solve two digits simple subtraction which is unexpectedly lower than most of the African countries (WDR, 2018), and share of top one percent income earners has now reached to the highest level (22%) in the national income (Piketty, 2017). During 1980-2014, top 0.1 per cent of earners captured a higher share of total growth than bottom 50 per cent (12 per cent vs 11 per cent). Oxfam (2018) too echoes the similar finding and reported that 73% of the total wealth created in year 2017 went to top 1% affluent population whereas the lowest half of the population saw rise in their wealth by just 1%. Seeing the status of ‘state of being and state of lives‘ through these proxy indicators, it would  not be wrong to conclude that, it is not as good as it should be with respect to the rest of the world. But the status of other proxy indicators like size of economy and GDP growth rate are fantastic and one of the best in the world. India having USD 10 trillion (PPP) and USD 2.72 trillion (nominal) economy, is the third and seventh largest economy in the world respectively. It has crowned to be the fastest growing major economy in the world. Isn’t it conveying some contrasting judgement about GDP vs other aspects of human life and happiness? Can’t we equate people’s happiness with income and thus effortlessly made the assessment of nature of good or bad government? The possible answer lays in  nature and original intent of the world’s most fallowed statistical indicator (GDP), which is an outcome of political and intellectual battles among Clark, Stone, Meade, Keynes, Kuznets and Gilbert and two global events; great depression of 1930 and World War II (1939-1945). It was developed with the intension of measuring depression led economic progress and guiding democratic led Roosevelt government’s policies in more effective and efficient manner. It is the great invention which enables thinkers, politicians and policy makers to answer certain key questions like- Whether a country is fastest growing economy or not? Has Chinese economy overtaken the US economy? Will India surpass the Chinese economy in coming years? Is Ghana a poor country or not? But it does not answer; whether we are progressing in any meaningful sense? What is status of overall human life and happiness? Answers to these questions are being addressed incorrectly through the prism of income. Simon Kuznets, one of its main originators and earlier recipient of economic science Nobel prize once said “the welfare of a nation can scarcely be inferred from a measure of national income”. But the war time politics overruled the welfare notion, whose miscellaneous adverse result is quite evident before all of us. How did it happen that thinkers started looking everything with the prism of GDP and it became the dominated gospel indicator in public policy?  The power of system of metrics is the most plausible answer. Stiglitz, Sen and Fitoussi in their book, “Mis-Measuring Our Lives Why GDP Does Not Add Up” have written that “the theories we construct, the hypotheses we test and the beliefs we have, are all shaped by our system of metrics.” What if the system of metrics has many flaws? What if, the system of metrics has been developed to serve some specific purpose and now is being used for somethings it never developed to measure? This is the exact case with GDP which increase; when there are earthquakes, a fire, environmental disaster, human disaster and higher accident, higher medical cost, higher repair cost caused by poor transport and infrastructure, and goes down when a rickshaw puller takes the afternoon off to spend time with his lady love. “It counts the labor used and wood produced, when a tree cut down, but does not deduct the shade and beauty that are lost.” This is how, Banerjee and Duflo- this year economic science Nobel laureate categorically abridged the anti-mankind nature of GDP in their latest book Good Economics for Hard Times (p.153). Are we really passionate for suck kind of system of metrics, where it increases in anti-mankind circumstance and promoting a civilization where value of family does not count much?

       Coming back to the question of good and bad government, I think government is in dilemma of assuming index of economic progress (GDP) as an indicator of every things including people’s happiness/wellbeing. There is a school of thought who believe in the theory of command over resources or purchasing power of commodities- more income- more consumption- more freedom of choice- high standard of living and thus can be used as proxy for happiness or human well-being. Therefore, if index of economic progress is increasing, it cares human life and happiness and hence government is taking cares of its legitimate objectives. But it is not as straight forward or black and white as it appears. The hard-core factual data of happiness report reveal that, none of the top five countries in terms of size of  economy have even placed in the top five in happiness report.  People have many dimensions of life which cannot be defined only with resources and its price. It is quite possible that an individual would be better off even having fever resources but having greater abilities for achievement in valuable domains of life. This is what Amartya Sen said while delivering lecture at the central hall of Cambridge University in 1985 “we could be well off without being well, we could be well without being able to lead the life we wanted, we could have got the life we wanted without being happy.” Other economic science Nobel laureates like Kuznets, Hicks, Arrow,  Nordhaus ,Tobin,  Kahneman, Deaton, Samuelson,  Solow, Stiglitz, too raise their concern for considering GDP as an indicator for care of human life and happiness. But it does not mean that, GDP is a  wrong and redundant indicator. As for as the measure of economic progress is concern, it is the ever-best invention happened in history of economics. Representation of complete health of economy through a single index having statistically sophisticated and universally accepted standardised methodology makes it the most followed statistical indicator across the world.

       Since its inception, it has become an instrument for politicians to convince to their electorate. Being followed at top by governments across the world, bound the intellectuals to see everything immensely with the prism of GDP without taking into the consideration of its good and bad uses, which later on tern into the subject matter of massive beyond GDP discussion across  discipline. It’s an insufficient and inappropriate indicator for gauging the care of human life and happiness, but it does not mean that, it should not be considered for public policies. It’s an important means (not an end) to achieve good ‘state of being and state of lives.’ Even empirical evidences of thinkers like Easterlin, MaxNeef, Helliwell and many more advocate for the same. Since mid-twentieth century many attempts have been being  made across the world  to gauge the happiness of people through different indicators, but none of the indicators have ever developed to perfectly replace GDP. Hence in spite of many flaws, it cannot be ignored at all. We need to change our perspective of looking everything immensely with the prism of Gross Domestic Product. So, as the case with good or bad governments. Our former President, late Abdul Kalam and honourable Pranab Mukherjee  too raised their concern for actual and bottom the line impact of  high GDP growth rate. Mukherjee, explicitly advocated for Gross Domestic Happiness besides Gross Domestic Product. Hence, Government of India too likes UK, France, Australia, OECD countries, Bhutan and few more countries, take initiate to look beyond GDP.