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Grossly Disputed Product
Absoulte GDP and GDP growth rates are often correlated to overall economic prosperity of nations. However, their relevance in this regard is quite limited
Issue Date - 10/11/2011
George Orwell states in his famous book Nineteen Eighty Four in Chapter 3 that, “…the choice for mankind lay between freedom and happiness, and that, for the great bulk of mankind, happiness was better. That the party was the eternal guardian of the weak, a dedicated sect doing evil that good might come, sacrificing its own happiness to that of others…” This Orwellian concept is still very practically relevant but has been buried under the deceptive and manipulative economic parameters predominantly used for measuring economic prosperity.

Economics can be really deceptive. The deception goes wider and deeper with the increase in the number of economic variables that goes into a calculation. And one of those economic parameters that hide more than what they reveal is the much touted Gross Domestic Product a.k.a. GDP and GDP per capita. Both these economic parameters are taken into account while measuring the economic prosperity of a nation and its population at large, but sadly fail to reflect the real prosperity of a nation.

The economic prosperity of a nation does not automatically imply social prosperity. There is hardly any correlation between economic development and well-being of a nation. Take Luxembourg for instance. The fact that it tops the charts when it comes to GDP per capita (highest in the world, $108,952 per year) and features among the top countries in the Human Development Index fails to ensure human prosperity. In spite of being a top performer in two of the world’s most reputed economic indices, the country does not feature as a good performer in the Happy Planet Index – that measures overall well-being of nation. This is evident from the fact that Luxembourg has one of the highest per capita carbon footprints and intentional homicide rates (1.45); well above nations like Egypt, Kuwait & China. Luxembourg has less than 5,000 guns per 100,000 popula tion but murder rates are much higher than nations with relatively higher rates of gun ownership!

Jeffrey D. Sachs, in his article titled Economics of Happiness, writes, “In the US, GNP has risen sharply in the past 40 years, but happiness has not. Instead, single-minded pursuit of GNP has led to great inequalities of wealth and power, fueled the growth of a vast underclass, trapped millions of children in poverty and caused serious environmental degradation”. This can be corroborated with the recent Wall Street Protests that speak volumes about the gloomy social condition of the US. So much so that a time series data analysis shows how the rich-poor divide has widen in the county and how the economic policies (that eventually escalated the economic growth) were always inclined towards the richest 1% of the population. Today, America is one of the riskiest nations with a high intentional homicide rate (4.8, more than a country like Bangladesh) and crime rate (the national crime rate was 3466 crimes per 100,000 residents as of 2009). The same goes for Norway. Norway boasts of having the world second highest per capita income ($84,144 per year) and tops the UNDP’s Human Development Score card. But it again fails to defend its reputation on the Happy Planet Index (wherein it ranks 88). Norway’s government is struggling with an increasing use of weapons during thefts & robberies and also an increasing crime rate.

One country that is trying to desist from the GDP obsession and promote Gross National Happiness is Bhutan. The country is trying to achieve overall happiness by adopting policies that promote culture, mental health, community development and social growth. Also, the nations that top the Happy Planet Index do not necessarily have very impressive economic variables. One such nation is Costa Rica. It has a per capita income of just $7,701, but has one of the highest life satisfaction rates and one of the longest life expectancy rates in world. Similarly, Cuba scores poorly on HDI and has merely $5,565 per year as per capita income, but fares better than the crony capitalists of the world. The intentional homicide rate is lower than the richest countries, the Gini Coefficent is better than many developed countries and life expectancy rates are better than US. Costa Rica’s rising education levels allow it to rank higher than US in the World Economic Forum gender gap index. Even the Environmental Performance Index ranks Costa Rica significantly better than other developed nations.

A disaster (like the recent recession) does provides avenues for economic development, but it isn’t a meaningful end in itself. Most countries that try to achieve high growth rates at the cost of social well-being fail to create an ambience for holistic social development – and revolts going on across the developed world substantiate this. It’s imperative for nations to reconsider how they calculate, or even benchmark overall prosperity.

Sray Agarwal           

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