Debunking the myth of ‘GDP = Development’

Many of us have watched & got impressed by the TED talk of Bhutanese PM on how the country is Carbon Negative. It is indeed adorable step from a tiny little himalayan country to refuse to go along with the GDP based conventional mainstream idea of development & to develop her own, more-holistic measure – Gross National Happiness. Its worth pondering upon – what is their motivation to refuse the idea of GDP & embracing GNH. Once we are clear about vision of  righteous development, Our ideas, our dogmas about Sustainable living on Individual, social and national level might bring a huge change.
GDP was developed as a war time measure. In 1930’s American and British economists developed GDP as a tool to help determine depth of the great depression, and it served the purpose very well. It helped govt to take informed decisions. During world war 2 it was re-purposed to help Allied powers to out-produce the Axis in terms of Weapon and armament production. And it served the purpose this time as well. Soon it became popular in western world and spread as a measure of development in all 1st western countries. Today the idea of GDP is equated to the development.
Many new age economists have realized the limitations of GDP as a measure of development, including few Nobel Laureates like Joseph Stiglitz, Amratya Sen. Some other prominent names who have criticized GDP  includes Herman Daily (Former world bank economist),  E.F. Schumacher (Author of Small is beautiful and pioneer Alternative economist) , Robert F Kennedy former US politician who criticized GDP saying – It can measure everything else but things which makes life worthwhile. Lets check what all  are arguments against GDP.

  1. GDP growth model does not differentiate between good and bad economic activity. E.g. GDP can grow even because of increase in road accidents or increase in wars or increase in number of cancer patients. There should not be a second opinion on this, that this cannot be called as Development. And these are just a few examples, there could be a exhaustive list of such ‘Bad for us’ or destructive activities which grows GDP. Such growth is termed as ‘Undifferentiated growth’.
  2. GDP essentially is a materialistic development measure. It considers only material aspect of Human existence. As a human being we have other dimensions of existence as well like our intellect, our emotions, our psyche, our spirit/consciousness, our society, our nature. Real development is to evolve and progress on the health, intellectual, emotional, psychological, spiritual and social level and to expand our consciousness. Purpose is to find our unique gift and give it a way through creative expressions, to make this whole existence thriving. Materialistic well being is just a tool to achieve this. GDP growth model makes materialistic well being sole purpose of human life. It aspires us towards unlimited maximization of material consumption and possessions & take us in opposite direction of real development.
  3. GDP paradigm expects unlimited, perpetual material growth and that to keeping material economy linear. But we live on finite planet. In reality, Nature is all about cycles, liner economy with infinite growth is practically impossible on finite planet. We should not wonder if either of the system collapses in future. Renown American thinker and author Edward Abbey says “ One who thinks Infinite economic growth is possible on a finite planet is either a madman or an economist” -. Fortunately many are realizing this flawed fundamental assumption that economy can grow infinitely. And some are also considering and talking about Circular economy these days.
  4. Environmental & social costs are systematically and conveniently ignored from economic calculations. Conventional economists have beautiful word to explain this -Externalities !
    When an automobile manufacturer does not consider the cost of clean air his products are polluting, its an externality. When a plastic bags manufacturer does not consider cost of degradation, cost of land-water-air pollution, cost of loss of non-human life, its an externality. When a chemical fertilizer/pesticide manufacturer does not consider the cost of loss of long term soil fertility, loss of human health, loss of lives of non human-beings, its an externalization.
    So on if we consider all those environmental and social costs , in the Balance sheets of companies , all the industries shall be in loss.
  5. Thinking in terms of systems, if we consider human as a basic unit of ‘Earth – as a one system’ – hierarchy of systems would look like – Earth => Countries (or Geographical units) => Societies/human communities => Human
    In nature, every sub-system works for the advancement & evolution of its supersystem Meaning if any system evolves or makes development, the supersystem also evolves. E.g. if a plant grows, forest evolves. If the development is abnormal, its then a cancerous growth and no more a symbiosis, it either kills the supersystem or the supersystem kills it. In GDP growth model since environmental and social costs are externalized, human individuals actually prosper on the cost of society and environment. e.g. Doctors, pharma companies earn more if more people are sick, if there is more pollution of water or air. Same with planet, Industries keep growing while Planet is dying.  It makes it then a cancerous growth.
  6. There are no subtractions of losses in GDP calculations – e.g. – Suppose in case of any natural calamity, if we have an infrastructural loss, this is a loss for the country and should be considered in calculations of GDP. But its not. Or if a local municipality destroys nice road in good condition, in the name of ‘repair work’ or ‘up-gradation to cement road’, it should be a infrastructural loss, this also is not considered in GDP calculation. In commerce language, on the balance sheet or profit/loss account of GDP, debit side is always empty, everything is just credited. It should be called an Imbalance sheet rather !
  7. What could be worse than this – Everything is done deliberately. Yes, the use of ‘Gross’ value is emphasized and made a norm,  only to hide Net Value. Subtraction of all the expenses/losses from the gross production, get us the ‘Net production value’, Yes you guessed it right – which could turn out to be negative even. This could indeed reveal the actual face of Development paradigm, and could prove that its a destruction and not the development.
  8. Many better indices have been developed by different new age economists, scholars – Net national welfare (eliminates debit problem in GDP), Quality of life, Physical quality of life, Country future indicators, Basics Human Needs Index, Index for sustainable economic welfare, Human-development index, Social Performance Index, Gross national happiness, Better life index and so on. GNH addresses most of the issues mentioned above and is one of the best choices till now.

Cuba, Bhutan or many villages world-wide with rich Natural heritage are trying to tell us something – Prosperity without economic growth is possible and first step towards such prosperity is to give up one sacred rule – “Growth is imperative and economy must grow on all cost”. We must stop worshiping the false god of false development !!!

– Aniket Motale



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