Survival Of The Fittest : Debate Of The Indices

Economic Development: A key term that guides the policy decisions across the globe. But the question that arises before us is ‘what features define development?’ or in simpler words, how do we measure development? The answer to this question is pretty much intuitive, which includes well fed and well clothed people, access to luxuries and various commodities, to live in a healthy environment and so on.In the end of the day, it’s the material well being which leads to most kinds of advancements which is a policy goal in itself. Material well being is more like a necessary condition, but not a sufficient condition. This very point marks the beginning of the tug of war between GNP and GNH.

Let’s retrace back a few steps,in the year 1972 during an interview for the Financial Times at Bombay airport, the then King of Bhutan,Jigme Singye Wangchuck, said “Gross National Happiness is more important than Gross National Product.” The debate starts here.

GNP

Gross National Product or GNP is the value of all final goods and services produced in an economy inclusive of the net factor income from abroad. GNP has often been used as a measure of economic welfare of the people. Greater its magnitude, greater the level of economic development, but it has been asserted by various modern economists that merely the growth of per capita income or increase in GNP (which only includes the final goods and services produced by an economy +net factor income from abroad)  determines the country’s progress. Country’s progress also lies in the value of satisfaction that people derive from leisure.  The usual concept of GNP does not attach any significance to the amount of leisure people derive.

Let’s take a case study here, there are two countries: A and B. Suppose, Average working hour of country A is 7 hours whereas average working hour for country B is 12 hours. Country A is likely to have less national production or national income than country B but country A shall pitch higher public welfare by enabling the employees to enjoy more leisure and have a stable mind than country B. Not to forget the fact that public or the human resource is an integral part and factor of our economy, thus boosting the Economy -not in terms of the final produces but public welfare. 

Although modern industrialization has greatly increased the national income of the countries but by causing air pollution, water pollution, noise pollution it has reduced the welfare of the people. These are the scenarios where GNP has proved to be inefficient.

GDP

Here, we will reiterate the fact that material well-being is the prerequisite for attaining any given objective of the Public Policy. And that material well-being is measured by the Gross Domestic Product or the GDP. 

Introduced by Robert Kuznets,  the Father of National Income Accounting, this measure was intended to guide the Economic policies in nations during the post-World War  by providing a steady measure for calculating the Economic health of a nation and to frame the policies accordingly. The amazing part is that it is hard to question its effectiveness given its vivid use in the economies.

However, high stress levels among wealthier communities completely disqualifies GDP as a sufficient condition for well-being.  Why? Because, GDP does not include the costs of environmental and social degradation spent by the nations. In short, GDP ignores the costs incurred of achieving material well-being.

Let’s consider the case of the Middle East as a whole and Saudi Arabia in particular. Saudi is a nation which falls among the top 20 economies with highest GDP but let’s not forget the social conditions of the nation. What is the use of such a high GDP when the women of a country are getting the permission to drive a car at an age when women across the globe are successfully leading corporate houses and bureaucracies?  This clearly shows the fact that discrimination of gender is approved by the government. A nation where the status of women is undermined should not be called developed ideally but these are the areas which GDP fails to account for.

GNH

The king of Bhutan, Jigme Singye Wangchuck, calculated the cons of the widely used indexes discussed above and came up with a new index called Gross National Product Happiness. Gross National Happiness. Introduced in the year 1972 on the Indian Soil, it seeks to measure all the aspects apart from the material well-being. It seeks to evaluate the sustainability, quality of life, value of unpaid work, natural capital such as energy, air and water quality, sustainable transportation, levels of health and education, crime, pollution and recycling levels and the list is non-terminating. The question that arises is whether happiness can exist without any form of materialism. I guess it’s absolutely wrong because even though happiness cannot be bought with money, money is a part and parcel of happiness.

Imagine a situation where you have no money to provide good schooling for your child. Or maybe, you don’t have enough money to treat your parents of their ailments. Doesn’t it cease happiness?  Quite a number of these aspects,  lead us to material well-being. A nation which is prosperous enough will be able to provide quality education and healthcare to its citizens. Thus, we see the foundation of the very index is faulty. Then why did someone so experienced and educated introduce such a vague concept?

The answer to that is, Bhutan introduced the concept of GNH and made it a major constituent of its policies to veil its low level of Economic Development and to distract the world from the ethnic cleansing and human rights abuses that it committed in the pre-2008 period. Moreover, Bhutan is a nation which is home to around 9 lakh people and most of them reside in extreme poverty. Thus, the emergence of the faulty Index.

HDI

Later a holistic approach was developed by a great Pakistani economist, Mehbub Ul Haque. He named it ‘Human Development Index’ or HDI. Different questions which came across our minds regarding GNP, GNH or GDP was tried to solve in this concept.  The answers to those questions can vary from nation to nation which might include some common items such as sanitation, freedom from communal tensions, freedom of expression, crime rates, rights of the minorities and so on in their measure of development, some problems which can fit in a basket that is common to almost all the nations. The need of the hour is the development of such an index. The Human Development Index (HDI) incorporates within itself life expectancy, education and per capita GDP.A country with high levels of these three indicators scores high and is ranked higher in the Human Development Index. Therefore, in the Great Debate between GDP and GNH, the Human Development Index (HDI), serves as a tradeoff indicator between the two.

A concept is always broader than any of its proposed measures. Any suggested measure for any concept cannot fully capture the richness, the breadth and the depth of the concept itself. This is true of the notion of human development as well. In principle human choices can be infinite and change over time. Thus many more indexes are yet to be developed and discussed.

                                      

                               -Kriti Majumder &Raunak Maheshwari