Download Take economic growth measures beyond the usual GDP

Business Daily
Date: 31.10.2016
Page 11
Article size: 398 cm2
ColumnCM: 88.44
AVE: 168044.44
Take economic growth measures beyond the usual GDP
For more than a half century,
pression, and are not at the mercy
the most widely accepted
of natural or man­made disasters.
measure of a country's eco­
nomic progress has been changes in
What is the relationship between
its Gross Domestic Product (GDP). If
is only one of the means to achieving
development. Growth alone cannot
growth and development? Growth
ever there was a controversial icon
from the statistics world, GDP is it.
produce development ­ it can only lead
It measures income but not equal­
to material affluence, though we don't
ity, it measures growth but not destruc­
know whatthe characteristics ofthat
tion, and it ignores values like social
material affluence are.
cohesion and the environment. Yet,
Does growth lead to equitable dis­
governments, businesses and probably
tribution of wealth or a concentration
most people swear by it. As the old quip
goes, we value what we measure.
The GDP does not adequately re­
of wealth in just 10 per cent of the so­
Cost of living: GDP measures income but not equality and it ignores values like
ciety? Does growth lead to better edu­
social cohesion and the environment, file
cation and healthcare for everyone,
flect the true health of a nation and
needs to be replaced by more compre­
or does it lead to the creation of elite
schools and hospitals?
ing against the future rather than lift­
hensive measures. The GDP measures
ity. If a business used GDP­style ac­
counting, it would aim to maximise
the nation's economic performance
gross revenue — even at the expense
Development, on the other hand, is
because it is determined by the market
value of all final goods and services. Us­
of profitability, efficiency, sustainabil­
a very political term whose meaning
and should focus only on growth. De­
ity or flexibility. That is hardly smart
changes from person to person. Agood
velopment would then automatically
ing this measure exclusively has placed
or sustainable.
Kenya at or near the top economically
for decades in the region.
ing our level of income.
Some economists argue that we
should not worry about development
way to define it is that development
occur. Other economists feel that we
Clean air doesn't get counted in
leads to the increase in the quality of
should focus on development prima­
GDP. The value of having a stable
life of individuals, whether materially,
rily, and see growth as a means to de­
Economic growth is basically an
accounting measure. It measures
climate doesn't get counted in GDP.
socially, psychologically, politically, or
velopment. I subscribe to the latter.
Open source information that people
how much m oney is changing hands
spiritually. All individuals have some
potential and some capabilities that
well­being must be those of the degree
in the economy. Growth occurs when
don't have to pay for every time they
use it doesn't get counted. So part of
would enable them to achieve their
the value and number of commercial
the problem is that there are things
potential. Development removes the
to which society's goals (provision of
basic human needs for food, shelter,
transactions increase in the economy.
that are really important to our eco­
nomic well­being that GDP doesn't
constraints that prevent individuals
freedom, participation...) are met, rath­
For example, if you cookfoodathome,
from unlocking their capabilities and
er than measures of the mere volume
the GDP doesn't increase.
measure.
realising their potential.
But if you eat at a restaurant, it
On the other hand, another prob­
These constraints include pover­
Useful measures of progress and
of marketed economic activity, which
is only one means to that end.
does. Similarly, if parents raise their
lem is, there are things that do get
children directly, GDP doesn't in­
crease. But when parents put their
counted in GDP that actually don't
ty, illiteracy, lack of skills, bad health,
malnutrition, discrimination, totali­
ments to GDP can be used as meas­
enhance our welfare. So GDP mixes
tarianism, and disasters (natural or
ures of economic activity while others
kids in a daycare centre, then GDP
up good things, bad things, counts
man­made).
increases.
some of the bad things but not some
It's not a very good measure to un­
derstand development of a society. It
is also highly value­neutral, which can
of the good things. Gains in income
about economic growth. It's about
— in an attempt to measure the extent
that come at the expense of future
building a good society. This good
to which development is using up the
income, at the expense of future gen­
society is one where individuals are
affluent, educated, highly skilled,
than living off its interest.
be a bad thing.
GDP ignores social costs, environ­
erations shouldn't really be counted
as gain.
mental impacts and income inequal­
They should be counted as borrow­
Thus, development is not just
Various alternatives and comple­
measure changes in community capi­
tal — natural, social, human, andbuilt
principle of community capital rather
healthy, and well fed, and do not
NDIRANGU NGUNJIRi, managing partner,
face discrimination and political re­
Watermark Consultants, Nairobi
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya