Wednesday, 21 April 2010

Om namo GDP aya namaha

“This house believes that GDP growth is a poor measure of improving living standards”. That’s the proposition in the live online debate being currently run by The Economist. You can access this debate here. At the time of writing this post 68% of the online voters agree with this proposition.

It seems rather the in thing to agree with the proposition. You can plausibly argue that there’s more to life than GDP. Gross National Happiness, first conceived by Bhutan the world leader in this concept, sounds appealing. Climate Change, Civil society, reduction in inequality – all seem to be nice concepts equally important to “living standards”. You can almost visualize the wrinkling of the nose at GDP, a very base and mercenary measure.

An opinionated blogger, such as this one, has a view, obviously ! And the view is largely based on the marvelous example of China.

The answer in China would be very clear. There is only one measure. GDP. Or rather growth in GDP. Full stop. Nothing else matters. Nothing will come in the way of achieving this. And look at what China has achieved with a single minded devotion to growth – a devotion so profound that it has replaced Taoism, Confucianism, Buddhism, etc as the predominant religion in China. I am not being flippant – the dominant religion in China is GDP.

There are some big advantages to achieving clarity, simplicity and strength in objectives. Deng Xiao Ping’s great contribution to humanity (not just to China but to the entire world) was this. Go for growth. Go for GDP growth. Go hell for it. Once this was clear, everything else flew from it. Dismantle state controls. Dismantle the awful consequences of the Cultural Revolution. Build Infrastructure. Allow migration of labour. Provide incentives to industry. Focus on exports. Keep costs low. Drive employment. I can go on and on. The ability of China to act and implement in such a breathtaking way is not just because of the political system they have chosen. Its also because they are very clear on what they want.

The end result is there for anyone to see. By any yardstick you want to invent, China will score higher than any other developing country. Some 200-300 million people have been lifted from abject poverty to a standard of living that would be the envy of every country in the developing world. And if you compare any yardstick you want (even ephemeral ones such as “happiness”) in terms of change over the last 20 years, arguably China will beat every country in the world including the US.

Back to the proposition – the proposition does not say "where" ? My response could be different based on which country or region we are talking about. The vast majority of humanity lives in the developing world. Therefore if I interpret the proposition to mean for the world as a whole, then it must be more applicable in a developing country setting.

My opinion is clear and unambiguous. GDP is the best measure for improving living standards. Even more than that, it is the ONLY measure. Its all fuzzy, warm and nice to talk about all sorts of objectives. For many many countries, especially India, they should forget about everything else. Just focus on GDP. That’s the only way to improve the living standards of your people.


PS - For the benefit of non Indian readers of this blog; the title of the post is a take on a Hindu religious chant to imply that GDP should be given an almost religious status !

22 comments:

  1. I firmly believe the reason why China is out-stripping India in terms of growth is because of the government they have. I am going to have violent opposition to this view and I do not have Communist sympathies. The fact remains however, that it is working for them in more ways than just increasing GDP.

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  2. @akila:
    communism in china is long dead and buried :) its confused-ionism now. As long as no one asks which philosophy they follow..the govt is fine :) if such a question is raised..no one wud be able to give an exact answer.

    thalaivary..indiala..GDP grow agutho ilayo..inga iruakra DGP ellam semma sizea irukanga :D can we take that as sign of growth? :D kita thatta same spelling thana?

    (aaha..maama's laam blog padika maatangannu oru thairiathula type paniten..usaara irukanum)

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  3. //the dominant religion in China is GDP.//
    And i think thats the reason they grow in GDP,and we grow with 'poli saamiyars' like nithyaananda,who grows their asharama's GDP.

    @ Gils: Ramesh will not be probably inviting cops to read his blogs,i believe this based on one comment he had written in Rammm's post.But by some remote chance they bump into this post and read the comment and go to your profile then navigate to your blog to find about your whereabouts....
    happa type pannaradhukke evalo kashtama irukku,i never believe they will do all this considering their laziness.

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  4. I don't believe GDP is the one and only indicator as you view it. It is also one and a key one at that since it ties up a whole lot of things, especially more work for more people.

    The best thing I believe about China is that they are a nation who do not want someone else dictating terms to them or being stamped on and will go to any lengths to achieve it including aggression, and have achieved it. Maybe we, in India need that kind of an outlook for all our waywardness.

    I don't know if their people are really happy or not. It is all relative. Two sore thumbs still stand out. Weak freedom of expression (T words are still banned, I assume) and heavy political controls.

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  5. @Akhila - Thanks for your commenting here. Yes and no. Its because of the government, but not because its a dictatorial regime. I think its because they have set clear and well supported goals and then place a premium on achieving them. Almost like a corporate. The same system also created the horrible Great Leap Forward and the Cultural Revolution, when millions of people died of famine - the clear danger of such a system.

    @gilsu - ROFL. Absolutely true, the maamas are growing in size by gigantic amounts.

    @ambulisamma - China's story is a complex and deep one ; no one reason has contributed to their success. But I clearly believe it traces to some very fundamental and clear objectives. In 1978, Deng Xiao Ping came to Shenzhen and said his famous statement "Its fine to be rich". That was a positively majestic statement for the China of its times. It signaled the start of the manic focus on development.

    @RamMmm - I actually see China's over exuberant nationalism as their weakness. They needle others when they don't need to. But internally, the level of happiness is quite hih. There is no greater joy than to be lifted out of poverty. Everything else follows; first you have to not be poor. Hence my passionate articulation of the GDP goal.

    For sure there are a number of sore thumbs. Lots is not right in this place. The normal human failing of dissatisfaction and griping is as high here as anywhere else. However I don;t think any country can match the delta change in happiness over the last 20-30 years. And that was all because of economic growth.

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  6. success attracts followers isnt it? :) school daysla en handwriting kozhi kirukkal mathiri irukum (ipo matum muthu mutha irukaanu kraas kostinlaam pannapdaathu) my mom used to scold me saying "look at raja's (my classmate) handwriting..evlo nallaruku..nee yen ipdi kirukara". I used to say.."he writes with "hero" pen..athaan avan handwriting nallaruku" :) my mom bought me one..pen thaan change aaitay irunthichi handwriting maaravay illa :D :D Moral of the story..elephantuku wing otti vaaila nerupu koluthi vittalum athu dragon aagathu :D

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  7. @Gils-ROTFL at your description. Seriyaa kaamedi pannureenga. :-)

    Appicela Net illainnuttu, gabaal gabaalnu post comment ellaam varudhu. :-) Appicela firewall breachaaa? :-D

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  8. @Ramesh-One thing that is impressive is that they have got the population below poverty line to around 3% whereas here we have it at 25%. But no denying that a whole lot has moved upward there post Mao.

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  9. @rammmmmmmmmmmmmmmmmm:

    making hay wen security goes haywire :D :D gilsism :D

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  10. @gilsu - involved story to say the elephant can't be the dragon - sure it can't. But the elephant is a hugely powerful animal and can do its own miracles. But to not see the dragon and learn from it (both positively and negatively) would be profound stupidity.

    Btw, pass the hero pen ; me surviving with a cheap Chinese one !!

    @RamMmm - Yes; if India too focused on reducing poverty single mindedly (to a large extent Gujarat and Delhi come to mind as examples), in 10 years we too would be achieved a miracle. It can be done in our political system too , as some states and regions have shown.

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  11. It is little bit to do with political system, and more to do with the people,to be precise attitude of the people.

    We really do lack good leaders with good vision and that is the problem.

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  12. Probably I am bringing in a historian's view to it. But here's an intriguing trivia-

    I've started watching an old TV series 'Bharat ek Khoj' online since past 2 days. It starts from the Indus Valley civilization. What it says is, these people discovered agriculture and eventually started trading and bartering excess produce. This lead to creation of wealth and richness in that society. That left them with ample amount of time at hand. Thats the time when more innovations took place. And that civilization grew leaps and bounds in Art, Culture, Literature and Philosophy!
    --------------------

    I am sure there will be other measures to measure happiness, but we haven't crossed the first bridge yet! Economic stability and security is what an average individual first strives for. Everything else will definitely follow.

    India has definitely lot to learn about 'focus' from China. I may not agree on all their approaches to eradicate poverty. Eg. their idea of sheer Urbanization = Economic upliftment! But for the time being, they believe in it and they are all out to build massive cities all over the place! This raw determination is what the Elephant needs to learn from the Dragon!

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  13. on Saturday, i went for a wedding - typical south indian wedding - so you can imagine - a buffet dinner on the reception and people decked in yards and yards of silk and gold (including self) relishing the variety of eatables and then came running a small girl (maybe the child of one of the cleaners). she was wearing a torn piece of cloth barely covering herself, came running between the crowd and requested for a piece of sweet and promptly got shooed away by people as well as their expressions!! the picture of the girl remains in my eyes and i could not sleep that night!

    sorry, this may be lil unconnected to the topic, but i feel that while GDP is a measure of overall flourishment, it has to be supplemented by a measure of the quality of flourishment. unfortunately, there isnt a universally acceptable and applicable measure and to that extent we have to live with only GDP as a measure. I am not an economis to give a measure but i would feel if there was a way to measure which segment of the pyramid has indeed grown and if it happens to be the bottommost, thats when my country is uplifted.

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  14. I agree with what Sandhya is saying in that no measure of economic development is complete without a measure of the income disparity. The way I see it we need some summary statistics to calculate the overall economic well being (let's keep happiness aside for now) and so we go with the sum of everyone's wealth (GDP) or some average measure (per capita GDP). Maybe we need to go beyond the mean of the distribution and look at standard deviation or range to get at income disparity. I have no idea how you would go ahead and compute such a number which would capture the standard deviation in household incomes, for instance. So it is not to say that GDP is the wrong measure but just that it is not a sufficient statistic to understand the economic wealth of the economy.

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  15. @Zeno : Amen

    @Deepa - Totally totally agree ; you put it much better than I did. Cross the first bridge and then think of the others. Well said.

    @Sandhya - Plizz to put of photo decked in silk and gold !!Don't fully agree with your thought; see comment to J

    @J - It is the cart before the horse story. First we have to create wealth before we get teary eyed about distribution. China has really taught me how true this is. In their race to economic development, they don't pillory the rich; they don't make them feel guilty; they encourage everybody to get rich. This from a country which was rabidly communist three decades ago. One of the biggest differences in culture between the two of us is this. Meet a poor man in India and tell him about the rich. He will rant and rave on how unfair this is, how he has been discriminated against, how all the economic development has favoured only a few, etc etc. Meet a poor man in China and show him the rich. He'll ask you how he can become one himself. This is not a cliche - its really true.

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  16. I want to add a point to your reply to J. We shouldn't bother too much about the disparity between the wealth of a rich and poor. Our concern should be an opportunity for basic minimum respectable earning for every person. If a person is richer than the rest, it might be well deserved thanks to his merit.

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  17. I want to clarify that keeping an eye on income disparity does not mean handing out dole. All that I am advocating is growing GDP while providing equal opportunity to participate in the wealth creation. So even as economies focus on growing GDP, they need to track how this GDP growth is distributed across the population. This is a way of evaluating whether everyone has the chance to succeed if (s)he so desire, is capable and is willing to work hard for it. I think a uni-dimensional focus on the GDP number will work for a while but if it comes with lopsided wealth creation in the society then that is likely to be a huge problem of its own.

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  18. @J - Completely agree. My quarrel with those who cry loud about income distribution is that they have usually earned nothing but want to partake in a free lunch. But if you leave the commies aside, absolutely - we should gun for giving everybody who's talented and willing to work hard a real hand up in coming good in life.

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  19. Only people who has a deep understanding of China in recent developments, can write such a brilliant article. I fully agree with your point of view. You are a China Expert. As a Chinese, I know that most Chinese people are satisfied with their lives.

    --Dave's mom

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  20. @Dave's mom - Aww - I'm honoured by your incredibly kind compliment. I am no zhongguo tong, danshi wo zhongguo de jingji, wenhua feichang gan xingqu.

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  21. Very well said Ramesh!

    Clarity and simplicity of objectives is what counts for sustainable results. I would not know which metric could be best suited to measure the growth, but once objectives are set out, should be followed rigorously. Actions are what need to be taken in order to drive the growth and progression. All the activities mentioned by you (wherever undertaken in any developing economy) would definitely lead to exponential growth!

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  22. @Vishal - Very true. In any system of government, be it dictatorship or democracy, once good objectives are clearly set and there is single mindedness in execution, development is sure.

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