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GDP All About Policy Makers, Not About Putting The People First!

An English economist named William Perry, in an effort to attack landlords against unfair taxation during warfare between the Dutch and English between 1654 and 1676, developed a basic concept of Gross Domestic Product or GDP. It was further developed by Charles Davenant in 1695. GDP as we know it today was developed by Simon Kuznets for a U.S. Congress report in 1934, but was first introduced on the floor of the U.S. Congress in 1937.

GDP is defined as the total market value of all final goods and services produced in a geographic area within a specific period, usually one year. It is a key measure of a country’s economic wealth. Its value is also used to determine the size of an economy. In short, it’s a measure of the level of economic activity in a country periodically. While business, policymakers, and investors use GDP to assist in their strategic decision making, it must be noted that this economic indicator has some limitations.

As a measure of outputs produced in a country, it does not account for the quality of people’s lives. It is not a well-being measure. For instance, people could be adversely affected by the degradation of the environment through the process of economic activity. Such degradation could lead to serious public health issues with immense financial pressure on the public’s purse.

The process of economic output could also be done in an environment of poor physical working conditions. GDP does not capture whether or not workers have sufficient occupational safety and health standards, proper wages, and proper work hours.

A country could have massive output, but the distribution of income from such output could benefit only a minority. Some studies have documented increased income inequality in the face of economic growth—particularly in developing countries. The Gini Coefficient is the statistic that is commonly used to measure the level of income distribution, a statistic that is completely absent from the work program of Caribbean governments’ statistics departments.

The brief limitations outlined above are in no way undermining the importance GDP. As stated above, it is strictly an economic measure—not a measure of people’s well-being. The focal point in most parliamentary debates rightly highlights the performance of their respective economies, using GDP figures. However, debaters tend to use it as an all-encompassing indicator, while failing to highlight indicators that speak to the social development of their people.

In fact, there are alternative GDP measures that focus mainly on people’s happiness rather than the traditional output of goods and services. For instance, guided by Buddhism and mindfulness principles, in 1972, King Jigme Singye Wangchuck declared that his focus will be directed into growing the Gross National Happiness (GNH) rather than growing GDP. The index therefore looks at variables such as: living standards, health, good governance, ecological diversity, resilience, time use, psychological wellbeing, cultural diversity, and community vitality.

Another is the Thriving Places Index (TPI) developed in 2016 by U.K. charity, Happy City. The main purpose for this index is to provide local organizers and public policymakers a snapshot of the welfare of their people. As such, its primary pillars are: sustainability, equality, and local conditions.

New Zealand now refers to its fiscal budget as a Well-being Budget. Its 2020 budget, for instance has priorities such as ensuring improving child well-being, at the same time reducing child poverty. Other budget priorities include, improving the health outcomes for all New Zealanders; supporting New Zealanders to benefit from technological innovation; and lifting their incomes, skills and opportunities.

The above GDP alternatives, among others, do have their own shortcomings like the traditional GDP. However, the driving force behind the alternative GDP methods are people centric. In other words, economic activity should not be an end to itself but a means to achieving increased happiness and improved wellbeing.

Failure to meet these ideals is a dereliction of duty by any elected policymaker. It is very easy for policymakers to hide behind economic indicators, and use these measures as their legacy—as their performance certificate. But while good economic indicators are important, the well-being or the development of a people is even more important.

Public officials also have the tendency to point to public sector investment programs (construction) or even private investment, especially foreign investment, to highlight their performance. Again, these are important economic initiatives, but it is futile if these activities do not redound to improving the lives of the general populace.

While private sector investment is profit-driven, policymakers should ensure that its citizens are not worse off in terms of public health, environmental degradation, loss of patrimony, and social restrictions. Likewise, public investment programs should be implemented to achieve maximum value for money given the limits on government’s revenue.

One of the administrative structures for achieving value for money from public sector investment programs is to ensure that the procurement or tender process is efficient and effective. Unfortunately, elected officials usually bypass or totally ignore this important structure, and rely totally on hand- selecting or assigning direct awards to selected contractors to undertake public investment programs. Such practices tend to open floodgates for corruption and wastage. And while the proverbial elephants keep getting fat through this abused means, the insects and the grass below them (the people) are being crushed and starved.

It is no wonder that while elected officials may boast about construction or investments, and even economic growth, the general public tend not to feel its positive impact. Any public policy or public program that is not people-driven is person-driven. It becomes all about the policymaker and not people. Unless it becomes the people first, they are doomed.

The success (or failure) of elected officials should therefore be judged by the change in the living standards of the people they represent. Improvements in economic indexes may be necessary but certainly not sufficientin creating better living standards and conditions for a people. Every government program or policy should have the people asits basis or foundation.

Poverty alleviation or its reduction, affordable and quality healthcare and education, preservation of history and culture, the protection of the environment, income and gender equality, and the like, should be the guiding force a people-first agenda.