Many people are getting impatient with gross domestic product (GDP) growth data, especially growth rates of 6% or higher, saying these numbers are “irrelevant”, “useless”, “misleading”, and “mean nothing” to their lives. Stronger criticisms of GDP growth numbers include “jobless growth” and “outright lies” that paint a rosy picture of an otherwise thorny and despicable society.
While there are some truths to these sentiments,
especially for people who live under dictatorships and harsh political repression,
a number of these sentiments are themselves misleading and full of angsts and
misdirected anger.
One recent article that got circulated well in social
media was published by the World Economic Forum (WEF) blog, “Five indicators
better than GDP.” The author cited a study by the New Economics Foundation
(NEF) and listed these five criteria as “better than GDP” and may imply that
GDP data can be dispensed with:
1. Good jobs. Employment statistics tell us what
proportion of people have jobs. They don’t tell us what proportion of those
with jobs are paid too little to afford a decent standard of living, or worry
about whether they’ll still have work next month.
2. Well-being. A growing economy is not an end in itself
-- it’s a means to improving people’s lives. Few would disagree that the
ultimate aim of public policy is well-being; we care about GDP because we
assume it means more well-being. So why not also measure well-being directly?
3. Environment. The NEF proposes a national indicator of
lifestyle-related carbon emissions, relative to an allocation calculated from
global targets for avoiding dangerous levels of climate change.
4. Fairness. Research increasingly shows that high income
inequality has negative social consequences, while casting doubt on the idea
that it incentivises hard work.
5. Health. The NEF proposes “avoidable deaths” as a
simple, easily-understandable measure that captures the quality of health
interventions -- not only treatment, but also prevention.
Let us take for the sake of argument that we can dispense
with, even throw away, GDP growth data and use those five indicators instead.
Then other problems can crop up, like some people will complain, “Why only
those five? Why not also include indicators on (6) affordable housing, (7)
efficient public transportation, (8) good anti-flooding, (9) more CCT welfare,
(10) cheap and stable electricity, (11) cheap nutritious food, (12) free or
affordable university education,... (100) fast, free Wi-Fi.”
Thus, a replacement of “irrelevant, useless, misleading,
jobless growth...” GDP data can actually result in numerous indicators that can
raise more questions and suspicious how they are computed, what factors are
included in their computation, for each of those 50 or 100 indicators.
So that WEF article, like many of its predecessor and
similar papers, is lousy. Computing the GDP actually involves tons of data from
so many sectors and sub-sectors. Whether computing the GDP on the demand side
(GDP = C + I + G + [X-M]) or the supply side (GDP = gross value added in
Agriculture + Industry + Services), lots of data in each of those factors in
the equation are dug, verified, and counter-checked. An overstatement of the
numbers last year to project a rosy achievement would mean possible understatement
of the actual numbers this year, or further tinkering of the data to sustain
the deception.
One problem with this method is that when people
continuously torture data, the latter will confess and the real numbers will
surface. So through time, various governments and their national statisticians
have learned to respect their real data, and if they have to torture it, not
too much otherwise the data will confess sooner than later.
Bottom line, GDP growth (or non-growth) data are the
result of hundreds or thousands of nuances in each sub-sector of the economy,
collating thousands of numbers to produce only two figures, (a) the value of
the flow of goods and services in one year, and (b) growth rate over the
previous year.
Having established this, let us now check GDP growth
numbers of the Philippines compared to its neighbors in the region. I chose the
years of each administration in the Philippines (see Table 1).
Then I got the average GDP growth for the yearly data of
these 16 members of the Regional Comprehensive Economic Partnership (RCEP),
plus Hong Kong and Taiwan as they are neighbors of the Philippines (see Table
2).
The above numbers show the following:
1. President Benigno S. C. Aquino III’s administration
has experienced or facilitated the fastest growth of the Philippine economy
over the past 3 decades. For his detractors who say that the 6.2% average
growth rate was “meaningless”; perhaps an average growth of 2%-3% would have
pacified them? Or they would be angrier because we could have grown much faster
than 3%?
2. The fastest growing economies in the ASEAN in recent
years is actually not the Philippines but Laos, Myanmar, and Cambodia. But
these nations have low economic bases and hence, potential for growth is much
higher than countries with bigger economic bases. Would the GDP detractors or
skeptics also dismiss the growth achievement of these three countries as
“meaningless and irrelevant”?
3. From 1980-1997, the Philippines has the slowest growth
rate in the Asia Pacific except Brunei and Japan, earning the ugly label of the
“sick man of Asia” for nearly two decades. Would the local GDP bashers consider
that fact as “meaningful, relevant” because the Philippines was the laggard?
Readers can make their own interpretations and
conclusions of the economic performance of the Philippines and other countries
from the table.
High GDP growth almost always create more jobs. If people
are jobless even temporarily, there are at least two possible explanations. (a)
They simply want to bum around and their rich parents or siblings, etc. can
feed them; or (b) they are industrious but have high “reservation wage”,
meaning if are offered P20k a month job, they reject because they are waiting
for a P25k a month or higher job offer.
High GDP growth expectation also produce high employment
and wage expectations. That is why some people who receive P30k a month last
year are disappointed that they only get a raise to P31k this year instead of
P35k or higher, so when SWS or other surveyors come to ask about their standard
of living, they feel bad or poor. And they become one of the GDP
skeptics/bashers.
Not that I am a fan of centralized economic planning. I
only with to point here that GDP bashing is actually more bashful than the
subject that they deride.
Bienvenido S. Oplas, Jr. is the head of Minimal
Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.
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See also:
BWorld 16, Growth, capitalism and inequality, August 22, 2015
BWorld 58, INDCs and PH energy realities, May 14, 2016
BWorld 58, INDCs and PH energy realities, May 14, 2016
BWorld 59, Free trade and Norwegian salmon, May 28, 2016
Ipagbawal ang GDP Growth, Part 2, March 30, 2015
Ipagbawal ang GDP Growth, Part 3, April 06, 2015
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