The Hidden Cost of GDP growth
Last week there was a deluge of opinions in the media on GDP levels and predictions for the future. It has become such a popular economic indicator to measure growth, that its limitations have been all but forgotten. In the backdrop of the COVID 19 pandemic and the ensuing lockdowns, the significant role played by people working in jobs that are labelled as essential services but whose salaries do not reflect the essentialness of their jobs was highlighted across the world. Healthcare workers, sanitation workers, grocery store attendants, public transport workers and so many more. Typically, these workers are from lower income groups and many of them are women. Thanks to their commitment to their work, all over the world and at home, people were able to weather the initial and subsequent health crisis and lockdowns. Many of them work for Government or local administration run public services, which do not operate primarily for profit making but as an essential public service. Now, as the lockdowns ease and the crises dissipate, the preoccupation with GDP endures and yet again the services of these women and men fall into the shadows.
At this juncture in time, when most economies have almost recovered from the second wave of the pandemic, the important questions to consider are: “Is GDP a true representation of the economic development of a country? Does focus on the GDP implicitly encourage inequality?” In other words, if policy makers continue to focus only on reforms and schemes that are tailored for the profit making of businesses, are they doing it at the cost of inclusive growth? Simply put, inclusive growth means that every person who is able and willing can participate in the labour force of the country, earn a livelihood, live with dignity and enjoy the same legal protections.
Apart from the glamorous GDP number, there are many other economic indicators or indices that are published by reputed institutions around the world which reflect the state of the economy, its labour force as well as the quality of life of its people. Typically, countries are ranked according to their performance. The pandemic has illuminated for us that the time has come for policy makers to consider socio- economic indicators like the Human Development Index, Gender Inequality Index, Global Hunger Index, the Happiness Index and others which measure the economic well-being of all potential and current labour force participants. These indicators are relatively unknown as they tend to be ignored by the popular economic and business media but they are important for the nurturing inclusive development of the economy. Ideally, these indicators should be considered in conjunction with GDP to inform policy decisions. But are we ready to change the economic growth narrative? Take a look at this table:
Can you see that there is a price to being paid by the race for an ever-increasing GDP? And that price is Inequality. India’s rankings on these crucial parameters are not on par with the other top GDP ranking economies. The toxic effect of this inequality has already pervaded various systems which are core to sustained economic development– education, legal, financial and healthcare to name a few. The results are becoming obvious if we dare to look. If we want different outcomes, we need to review our objectives and change our approach. The price of this inequality in the economy has to be paid, there is no free lunch. The table above provides a peak into the cost at which India ranks so high on the global GDP stage. In 2018, WHO reported that India ranks number one worldwide in the number of people suffering from mental health issues and facilities and staff to handle cases is severely limited. Further the World Bank reported last year, that India’s female labour force participation is just 21% compared to the world average of 38%. And who can forget the controversary regarding the Thomson Reuters Foundation Report in 2018 which bestowed on India the top position in the ranking for the most dangerous country for women. These numbers are just the tip of the iceberg. If the one of the objectives of economic growth is equal opportunities and access for all, there are many other social indicators on which we need to dramatically improve our performance — not just indices like the Ease of doing business and reducing corruption in business — which are inherently geared towards increasing the GDP.
If we truly want the generations that follow us to have a better quality of life and a higher standard-of-living we need to adopt this change now. If we want an inclusive and sustainable economic future, we need to change our perspective on economic development now. The economic progress and financial success of a few cannot continue to come at the expense of the many. The lessons from this pandemic must be learned and necessary changes adopted so that essential service workers are able to come out of the shadows and claim their place in the economic growth of the country.