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It’s not the economy, stupid!

Venky Vembu | Updated on December 24, 2018 Published on February 23, 2018

You don’t count: The GDP is not designed to measure unpaid housework, or a breastfeeding mum’s societal contribution to raising a healthy baby   -  Vijay Soneji

The Growth Delusion: The Wealth and Well-Being of Nations David Pilling Bloomsbury Non-fiction Rs 499

How do we course-correct when the GDP, that magic code defining success, throws up an optical illusion?

Developmental economist Ha-Joon Chang once wryly observed that economic numbers are like sausages: you don’t know what they really are until you cut into them. “And once you know,” he added, “you become very sceptical.” Perhaps no numerical “sausage” has been chewed upon, by experts and amateur analysts alike, with greater relish, and no single data-point tracked more assiduously and fetishised as much as a country’s Gross Domestic Product (or GDP), which claims to encapsulate everything that goes into making a nation’s “economy”.

The “economy”, such as it is, is all around us, notes author David Pilling. Like other divine forms, this “GDP God” too cannot be seen or touched or smelt. But it is the “background noise of the modern world.” Most politicians and policy analysts — and even laypersons who otherwise cannot distinguish an economic strand from a hole in the ground — worship at its altar. It is the mirror that, we believe, reflects the state of our economy, and so long as it shows us growing more muscular year upon year, quarter upon quarter, we convince ourselves that, as the poet said, “God’s in his Heaven/ All’s right with the world.”

The Growth Delusion: The Wealth and Well-Being of Nations David Pilling Bloomsbury Non-fiction Rs 499

But what if the GDP mirror in front of which we preen ourselves is not quite the bathroom variety — which shows us up, warts and all — but more of the fairground variety, which distorts and amplifies our features? What if much of the “growth” the mirror says we’ve accomplished is only an optical illusion?

That’s the fascinating exploration on which Pilling, a prize-winning journalist with the Financial Times, takes us. Pilling is not, as his many critical observations may suggest, arguing for GDP as a measure to be scrapped. Rather, what he wants to do is to pop the hood, open up the autoworks to show us why the dashboard of our car may be flashing all the wrong signals when it says we’re cruisin’ along just fine.

The genius of GDP, he writes, is that it somehow manages to squeeze all economic activity into a single number: it provides a snapshot of one version of reality. “But the problem with growth as measured by GDP is that it has become the overlord of measures. It is the number we use to define success.”

Disassembling the innards of GDP data, Pilling points to its specific failings. For instance, the measure, born in the 1930s as a child of the Great Depression and coming of age during the War years, was designed primarily to keep record of physical production. It is hopelessly ill-equipped to make sense of the modern service economies. As Oscar Wilde observed in another context, it “knows the price of everything and the value of nothing.” It doesn’t deign to count transactions where no money changes hands. If you go around to a friend’s place to help out, you’re not contributing to GDP. Unpaid housework doesn’t count either. Nor does the free education a government may provide. The GDP god is also blind to a breastfeeding mum’s societal contribution to raising a healthy baby, but if she buys infant formula, she sets the cash registers ringing and becomes visible on the radar of economic growth.

Likewise, when a 17-year-old with mental health issues buys an assault rifle, with which he mows down schoolchildren in Florida, he’s doing his bit to keep the wheels of the economy spinning. So too are hospitals that inflate bills, and tobacco companies that profit from selling “cancer sticks”. It’s accounting of the most perverse “Show me the money!” kind: in many cases, it values precisely the opposite of what is actually beneficial.

The implications of this are stark. If growth, as it is measured, is flawed, so too will be what we get in terms of direction and public policy, given that GDP is the denominator in many of public policy’s most important recipes. The “growth delusion” may also account for why people’s perception of their own lives doesn’t quite match the breathless “topline growth” that economies, including India’s, are seen to be registering. That, and a disquieting lack of faith in the wisdom of experts and in the sanctity of official data, also explains somewhat the rise of Trumpism and the Brexit vote.

The scepticism that GDP has engendered has, over time, given rise to alternative measures that hope to capture a sense of broader societal well-being, not just the revolutions of the hamster-wheel of economic growth. These include the Green GDP measure, which accounts for the environmental cost of “development”; the Happiness Index, with its emphasis on mental health wellness (somewhat controversially, its proponents accord this even higher priority than poverty alleviation efforts); the Genuine Progress Index, which factors in leisure time and unpaid housework, and treats commute time, pollution and spending on crime prevention as negative contributors to societal welfare; the Human Development Index; and so on. However, none of these alternatives, Pilling concedes, are robust or broad enough to supplant GDP altogether. So, the answer, he reasons, is not to replace GDP, but to add to it “so that we can flesh out a more nuanced view of our world.”

Just as important, Pilling makes a persuasive case to improve how we measure public services to the extent that they contribute to improvements in human capital, even if they come without a price tag. Overall, The Growth Delusion is a thunderous, fact-based affirmation of what should have been self-evident: that growth is not an end in itself, but a means to achieve the goal of societal well-being, measured more faithfully and honestly than the GDP “fairland mirror” currently does.

Published on February 23, 2018
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