Development “Beyond GDP”

The gross domestic product (GDP) is a misleading indicator of development which should actually focus on improving human well being which depends upon many factors that are non-economic. Irrationally high stress of GDP growth as development indicator has not only created long term climatic and environmental issues but has also reduced people to the status of mere goods-producers and goods-consumers.

GDP is a Deceptive Indicator of Development

The GDP is just like a speedometerGDP is often compared with a speedometer: all it can tell is the speed, whether your economy is going faster or slower. The speedometer of your car doesn’t tell you everything – it can’t tell you about overheating or how much fuel is in the tank. Most important: the speedometer can’t tell you whether you’re going in the right direction.

Imagine if the speedometer could talk and respond, and you ask: Are we heading in the right direction? It responds: Let’s go faster! That’s a pretty dumb answer. Again you ask: Can we turn left? It responds: Let’s go faster! Again, the same stupid answer. True. Yet, just look around; everyone seems concerned only about speed of the economy. No one asks the question, “Are we going in the right direction?”

The basic problem is that the GDP is just an economic number – total market value of products and services bought and sold. It is blind to all things that can’t be sold though they increase people’s well-being – housework, raising children, volunteering, etc. Likewise, it doesn’t count peace of mind and social harmony, community relations, status of health and education, leisure or sustainability and environmental issues. However, the biggest deception of GDP comes from the fact that it gets boosted by harmful things like natural disasters, polluting activities, diseases, and crimes and wars. In fact, the more you senselessly spend or waste or destroy the more it grows. Therefore, rising GDP is no guarantee of development going in the right direction.

In reality, it is entirely possible for an economy to go faster and faster without getting anywhere closer to the desired goals. So, what is the right direction of the economy? This is a rather easy question to answer: just ask people and they pretty much say the same things. An economy goes in the good direction when all people benefit equally and everyone feels healthier, happier and more satisfied. Right direction also means it doesn’t create potential sources of trouble for the future, such as extreme inequality, social tensions and environmental disasters.

The Fetish for Economic Growth

The fetish for GDP has created long term environmental and social issuesWhen Adam Smith laid the foundation of modern economics through his epic, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), he would have never imagined that ‘economics’ would rule the future generations ‘colonizing’ all other disciplines of human inquiry. Today the whole Western world follows the ‘faith’ called economics and considers economic growth as the only ‘holy’ measure of national progress, and the rest of the world drags along in the absence of alternatives. So, now we have a global culture where people religiously think that ‘GDP growth is the only highway’ that takes people to the paradise of eternal happiness.

Gone are the days when talks of culture, art, history, morality, religion or spirituality symbolized the progress of societies and their people. Now per capita consumption alone decides how developed you are. The more you consume the more developed you are supposed to be! So Americans are the biggest consumers walking on the planet. Of course, they also create the biggest amount of garbage. And, they live in the hallucination to be most developed of all!

If along the way, nature feels tired of replenishing ever increasing demand for its resources or glaciers are melting with ever increasing pace or if societies are stunting with ‘hyper individualism’ or if arms and weapons are penetrating even in the peaceful societies – they must be seen as an unavoidable ‘collateral damage’ of the battle of economic growth! These ugly issues should be left to the creatures called environmentalists and social scientists; after all it is their job and that’s what they are paid for!

If Human Well-being is Multidimensional, Why not Development

Human well being is multidimensional, so should be developmentThe GDP is the fixation of economists and statisticians who have the nasty habit seeing even complicated things in terms of simple numbers. And, here they want us to equate people’s well-being with GDP. In fact, they have successfully fooled the world into believing that there is nothing in human life beyond producing goods and consuming them.

But now more and more people are coming out dissatisfied, all around the world. They are increasingly realizing that the GDP doesn’t measure any of the important things like health, happiness, welfare, human or social progress, or environmental sustainability. It is not even remotely connected with any of them.

Economists’ mono-dimensional concept of development has increasingly come under scrutiny in the recent decades. If you are a multifaceted and thoughtful person you must also be feeling uncomfortable with the too narrow concept of progress given by the economists. You must be wondering: if human life is multidimensional why not development? Have things like family and community relations, cultural traditions, spiritual practices, moral values, living in nature, leisure time, good health, and freedom from stress become unimportant in people’s lives? Is development merely multiplication of wants or continual transformation of wants into needs?

Is the Love Affair with GDP coming to an End?

So, is our love affair with GDP coming to an end? This is what one would conclude looking at the noises coming from recent World Economic Forum discussions and other international debates. As the business landscape changes, inequalities rise, climate change worsens, technology chops jobs, demographics shift and the world clamors for a new order, the GDP is fast losing its sheen. All goods have an expiry date, after which it is not wise to them. So, why are we still using a tool that was devised for a totally different purpose in the war torn world of 1930s and 1940s?

New Emerging Paradigms

Companionship and social relationships are also important factors of people's well beingWith the availability of much better survey data which allow for new types of economic and social measurement, more and more experts are looking for well-being indicators to gauge progress. The issue of sustainability is gaining momentum as climate change worsens. For instance; Andrew Simms, director of the New Economic Foundation, says, “Economic Growth has failed on its own terms. You cannot have infinite Economic growth in a world of finite resources. Redistribution of the existing wealth is a far better way to go. It is now a case of paradigm shift or bust”.

Nobel winner economist Joseph Stiglitz points out that development is meaningless in the long run unless it is sustainable, equitable and participatory. He emphasizes that it is not just income that matters but overall standards of living which means giving importance to economic as well as social, cultural and environmental dimensions.

According to Amartya Sen, the real objective of development is to enlarge people’s choices in all fields—economic, political and cultural. It means people’s well-being should be the focus of development, not economy. This notion of human development is closely intertwined with issues of human freedom and human rights.

Perhaps the time has come to reopen the post WW2 debate about how we should define the economy, and ensure that we come up right measures of human, social and environmental well-being to guide economic growth.

You may also like to read:

Poverty Perspectives: Basic Needs Approach vs Capability Approach

Amartya Sen’s Capability Approach of Development

Why Poverty? Let’s Talk Development!

About Goodpal

I am a firm believer in healthy people (mind and body both), healthy societies and healthy environment. Please feel free to comment, share and broadcast your views -- I like rational and intellectual discussions. Thanks for stopping by. Have a Good Day!
This entry was posted in Amartya Sen, Economy and Business, Environment, Gender, Sustainable Development, Women and tagged , , , , , , , , . Bookmark the permalink.

One Response to Development “Beyond GDP”

  1. Pingback: What is Amartya Sen’s “Capability Approach” to Development and Poverty | Issues of India

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