The need to look beyond GDP
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Date sent: 2020/11/10 03:05:45
CONTINUING with the topic of the Outcome Budget, why not such an exercise for the Finance Ministry itself?Quete In Davos, the Finance Minister, Mr P. Chidambaram set out 8 per cent GDP growth rate as his goal. Then, one of the desired outcomes for the Finance Ministry could be 8 per cent GDP growth rate. The Minister even had a recipe ready: Mobilising resources, accelerating savings, and making India a manufacturing hub of the world. That recipe may be treated as first order solution. How to mobilise resources better, how to stimulate savings further and how to manufacture what the world wants, would constitute solutions of the second order. Growth is quantitative, not qualitative. Once concern expands from quantity to quality, technology becomes crucial only when we master technology will we have an assured platform for world-class manufacture, can we mobilise resources better and also put our savings to best use. For that reason, we may consider emulating, even surpassing, Western nations in technology as the solution of the third order. Thomas Kuhn has explained in The Structure of Scientific Revolutions how the West has dominated the world in science and technology for the past four centuries. His analysis may be difficult to follow but his answers to the conundrum are simple: (a) Western scholars continuously questioned the received wisdom. (b) They experimented with new ideas, even hopeless looking ones. (c) When a new idea functioned better, they discarded the old; they changed tack. (d) Then, they started all over again, questioning the new wisdom itself. This continuous churning of ideas did not mean any disrespect for the progenitors of the old. Western scientists replaced Newton's Laws with the Einstein equation without any reduction in the awe and respect they had for Newton. We may grow at 8 per cent but we will not become economic giants until we start questioning received wisdom, raise questions, not as carping criticism of others, but as a means for self-improvement. (Remember, Reliance has the world's largest refinery but is dependent on others for technology [url=www.cigarettessupermarket.com]Marlboro Cigarettes[/url].) Next, we should have the courage to experiment with new ideas and to stop borrowing ideas from others. Further, to top it all, we should learn to accept, even encourage change. Are we ready? For a start, why should we not question the prevailing wisdom that places GDP growth rate as the ultimate in economic management? GDP growth misleads; it gives a false sense of success. It does not distinguish between the income generated by desirable activities and the income of those that are not: For instance, it treats income from the sale of cigarettes on par with the salary earned by a teacher. In other words, economic output includes both "goods" and "bads". The GDP measure cannot separate them. Further, to counter the "bads", we need "anti-bads" more policemen, more cancer hospitals and the like. They are not a symptom of good health; yet they get included in the GDP. The measure we need is "goods" minus "bads" minus "anti-bads", not "goods" plus "bads" plus "anti-bads" which is what GDP is. Rapid growth rate has yet another drawback: Unless difficult-to-implement precautions are taken, it increases rich-poor disparity. Increasing disparity is inevitable with rapid growth: Fast growth requires highly skilled but scarce labour. Hence, wages of skilled professionals rise rapidly. Simultaneously, with rapid growth rate the market for unskilled labour shrinks, and so do their wages. Thus, the rich become richer and the poor become poorer. Further, GDP growth rate does not capture fully the reduction in the purchasing power of money. For instance, land prices in Delhi have shot up a thousand times in the past 40 years, some 20 times faster than the price of gold. At the same time, water has become more scarce; its quality is distinctly worse. Electricity supply is fitful and much less reliable. Security has become far worse: Forty years ago, few houses had bars in their windows. Any thief could have entered simply by pushing the window open but few did. Now, not only windows, the neighbourhood itself has barred gates with watchmen prowling around without much effect. Pollution has increased alarmingly. Yet, people accept without question the euphemism that "property values have gone up tremendously"! Professor Jeffry Sachs has an alternative to this preoccupation with GDP growth rate [url=www.cigarettesonlinesale.com]Marlboro Cigarettes[/url]. He emphasises investment in social infrastructure over GDP growth rate. Growth rate in investment in social infrastructure corrects several of the flaws of GDP growth rate: It measures only the good; it enriches the poor. However, it will not fully capture reduction (or wastage) in purchasing power. For instance, a flyover in a city will be equated as hundred or even a thousand times more valuable than a rural road. It will not capture also rural-urban disparity. The table indicates the vast gap between the targets of Bharat Nirman for rural upliftment with what the city of Chandigarh has [url=www.cigscoupons.com]Wholesale Cigarettes[/url]. Hence, mere counting of social infrastructure investment is not enough. We need something better than the growth rate in investment in social infrastructure as our indicator of a good outcome. That indicator should have also the advantages that GDP growth rate has simplicity and measurability. The question is how to develop a simple, measurable indicator for the admittedly complex qualities of social and economic welfare. There is a story of a good man who prayed to God so well that He was persuaded to grant the man a boon. On hearing about this offer, the good man got all greedy and started asking for all sorts of things. God replied that he was entitled to one and only one boon. Then, as a desired Outcome for the Finance Ministry why not choose growth rate of villagers with at least high school education? Here is a measure, simple, yet it encompasses a lot. Directly, it measures the growth of human capital in villages. Indirectly, it captures increase in employment, particularly educated employment in rural areas. Thereby, it includes economic growth as well as reduction in rural-urban disparity [url=www.wholesaleusacigs.com]Newport Cigarettes Carton Price[/url]. The fact that educated people live in villages and not commute to work from cities (the way they do in satellite towns), indicates that quality of social infrastructure is high in villages, has become better than in satellite towns and has become competitive with that of cities. Undoubtedly, growth rate of educated residents in villages will not have the weight of orthodoxy that GDP growth rate has; it cannot be compared with what happens in other countries [url=www.cigarettesss.com]Tobacco Shop[/url], at least not yet. It is certainly not accepted wisdom. The point here is not the replacement of GDP growth rate by the growth rate of educated rural population but to question age-old shibboleths, and look for alternatives [url=www.usacigarettesshop.com]Marlboro Red Cigarettes[/url]. That kind of questioning, and the tolerance of such questioning, are the basic tools of progress, the tools that the West mastered four centuries ago. Will the rules of the Finance Ministry encourage such questioning of hoary ideas? Will the new budget promote experimentation of such ideas? Will it see the bigger picture and not get stuck with the small one? To emphasise the point, let me quote the UN Secretary General, Mr Kofi Annan, about an incident in his school days: One day the professor put a large sheet of white paper on the wall. The paper had a little black dot on the right hand corner. When the professor asked, "Boys, what do you see?" we all shouted: "A black dot!" The professor stepped back and said, "So, not a single one of you saw the white sheet of paper. You only saw the black dot. That is the awful thing about human nature. People never see the goodness of things and the broader picture. Related articles: Best Cigarette Tobacco For Rolling Online Cigarettes Store |
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Date sent: 2021/11/07 14:05:03
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Date sent: 2021/11/07 14:06:22
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