Why this obsession with GDP?

Why this obsession with GDP? Go the Bhutan way!

Somya Barpanda ,  St Stephen’s college

Ask about any country’s economic status and the quarterly GDP figure is the first thing you are likely to hear. In an age when the world thinks and speaks the language of figures, national GDP fluctuations are closely monitored, followed and reported. To flaunt a breathtakingly high GDP rate has become a fad in the international political and economic circles. India’s brief stint with the 8-9% growth rate is still much talked about and the quest to revive it is ‘supposedly’ on (though most economists now deem it chimerical for the country).

Increasing the GDP (or preventing its decrease at least) is one of the chief goals of the every government’s macroeconomic policy. However, this attitude of aggressively chasing a high national GDP has serious repercussions.

The creator of Gross Domestic Product(GDP), eminent economist; Nobel laureate Simon Kuznets, had defined his index to serve the limited role of accounting the total market-value of all the goods and services produced in a country in any given year. He himself had warned that one should not read too much into a nation’s GDP figure and misuse it to justify progress and prosperity. However, somewhere down the line, the world ended up doing exactly what Professor Kuznets had feared. As he watched helplessly, his invention started being used as a benchmark for a nation’s well being and its achievements. Each economy, in its blind pursuit for attaining a high GDP, ended up over-exploiting its resources. With total disregard for environment, forestlands were cleared at a rapid pace to make space for ‘value-generating’ industries and urban centres; mining activities were allowed to cross sustainable limits as they were deemed ‘GDP-enhancing’. A consumerist culture was encouraged to sustain high demand which was crucial to fuel economic growth. Humans began consuming 40% more resources than the earth’s natural regenerating capacity. As a result of all this, the prognosis for our planet today, is not good. While countries were gung ho about GDP, the broader developmental aspect of social welfare got sidelined. To illustrate, though India grew at around 8.5% between 2002-3 and 2007-8 and the policymakers made merry, the figure seemed hollow on the face of abject poverty, disturbing income inequality, poor health and education facilities and rising number of farmer suicides. As known to all, GDP never accounts for these features. It must be remembered that GDP growth is contributed even by wars, natural disasters and high crime rates!

Today, there’s growing concern regarding this self- destructive path that humanity is treading; economists realise the need for a fresh economic system which focuses on sustainability and better quality of life. Many indices which can overcome the shortcomings of GDP as a measurement of national welfare have been proposed say, UNDP’S HDI(Human Development Index),OECD’s SIGI(Social Institutions and Gender Index) etc. However, none of these has matched up to GDP’s potential of directing public policies. But Gross National Happiness (GNH) has; in Bhutan.

Bhutan has been one country which has defied the herd mentality of sticking to a GDP- guided growth path. Way back in 1972, Bhutan’s King Jigme Singye Wangchuk coined the term “Gross National Happiness” to signal his commitment to develop an economy which gave priority to social well-being. Since then, Bhutan has adopted GNH growth as its developmental goal which has a vision more holistic than western concepts of progress. The goal of GNH was articulated in Bhutan’s ‘Vision 2020’ document as- “Maximise the happiness of all Bhutanese and to enable them to achieve their full and innate potential as human beings.” It is not that the concept of GNH is merely subjective. GNH calculation technique involves 72 variables and 9 core dimensions- Psychological well-being, Culture, Time-use, Governance, Community Vitality, Living-standard, Ecological Diversity, Health and Education. These dimensions have been selected on normative grounds and are equally weighted. The country’s 10th five year plan is guided by the objective of GNH (and not GDP) maximisation with poverty eradication being the primary goal. A GNH Committee screens all proposed government policies prior to their implementation and passes them only when they are seen to add positively to GNH.

Over the years, Bhutan has made remarkable progress in poverty reduction and its human development indices have improved significantly. On a recent visit to India, the Bhutanese PM; Mr. Thinley said that today, 52% of his countrymen are happy, 48% very happy and only 3% not very happy. No doubt then that the Bhutan model is gaining good global popularity. In collaboration with the Bhutanese policymakers, world leaders are trying to develop a GNH-model for wider implementation. 2012 saw Bhutan representatives speak on the success of GNH in their country at various international forums. Given the evident dangerous nature of GDP-mania, it is only natural for the world to finally feel the need to embrace GNH.