I REFER to Nominated MP Viswa Sadasivan's speech in Parliament,
reported on Wednesday ('Look beyond GDP for true measure of
welfare'), where he called on the Government to track indicators
beyond Gross Domestic Product (GDP).
Measuring GDP is important as it provides knowledge of the
amount of goods and services produced by our economy.
However, its shortcomings as a measure of standard of living
have been well documented, most notably by Nobel Prize economics
laureate Joseph Stiglitz.
GDP puts no value on leisure. Therefore, a society that works
longer hours will have a higher GDP, but it may not score in human
measurements like education and health.
It does not capture the work done in the non-paid sector. This
includes volunteer work, parenting and household chores, all of
which are essential for the well-being of a functioning and
gracious society.
It is also a measurement that ignores the impact of productive
activities on the environment. This is because negative effects are
not taken into account in the calculation of increased utility.
An extreme and perverse example is the recent BP oil spill in
the Gulf of Mexico. A disaster like that would actually increase
GDP, because to clean up the spill, jobs are created, while
measures to mitigate the harm also boost GDP.
There have been attempts to develop credible alternatives to
GDP. Examples include the United Nations Human Development Index,
which combines GDP with health and education measurements, and the
Happy Planet Index, which combines life expectancy, life
satisfaction and how environmentally sustainable a country's
economic activity is.
Nonetheless, many of these measurements are often dismissed by
governments, and it may take some time before measurements like
Bhutan's Gross National Happiness gain credibility.
In the meantime, a simple step towards looking beyond GDP is
simply to recognise that it was never designed to be an indicator
of an economy's welfare; it was simply intended to measure the
economy.
Seah Su Chen (Ms)
