KUALA LUMPUR: Almost a decade ago, as a foreign correspondent based in New Delhi, India, I had the opportunity to visit Bhutan, the only country in the world that acknowledges the happiness of its citizens as a benchmark for progress as opposed to the universally-used Gross Domestic Product (GDP).
The concept was new for me then, having reported and measured economic growth based on only GDP data and various metrics such as manufacturing, employment, expansion of the services sector and loans growth.
GDP remains a good measure of a country's economic growth, but it has its limitation - something which has long been debated and continues to be debated by economists globally.
International Monetary Fund (IMF)'s External Relations Department assistant director, Tim Callen had said that the GDP is not a measure of the overall standard of living or well-being of a country.
He explained that although changes in the output of goods and services per person (GDP per capita) are often used as a measure of whether the average citizen in a country is better or worse off, it does not capture things that may be deemed important to general well-being.
In other words, it leaves out the human factor.
For example, increased output may come at the cost of environmental damage or other external costs such as noise, said Callen in an article entitled "GDP: An Economy's All" published in February last year.
Hence, the Gross National Happiness Index (GDH) used by Bhutan that emphasised on sustainable development seems more relevant now than ever as the pandemic-hit world saw a growing divide between the rich and the poor, not only financially, but also in terms of access to vaccines and the recovery phase.
In that context, Prime Minister Tan Sri Muhyiddin Yassin's call for GDP growth to not be viewed as an end in itself is timely.
He said post-pandemic, the matrix must be replaced by more humanistic measures of the economy's health and citizen's well-being.
"Public policies must focus much more on the needs of the most vulnerable who want to live and earn with dignity, rather than focusing excessively on making it easier for big investors to increase their wealth, with hopes of trickle-down economic effect," he said in a video address at the Nikkei's 26th International Conference on the Future of Asia.
In his speech, titled "Shaping the Post-COVID Era: Asia's Role in the Global Recovery", Muhyiddin said a new dashboard of metrics to assess a society's health -- such as measures of inequality and economic vulnerability, or whether growth is financially and environmentally sustainable -- needs to be promoted as part of the recoupling of economic growth and social equity.
The great economic divergence in the recent decades has resulted in pockets of concentrated wealth both among and within nations, he said, adding that this is partly due to increasing returns from capital input (sometimes inherited or accumulated over generations), compared with the stagnant returns from labour input.
In hindsight, there is a need to also reconnect financial markets with the real economy. The relatively cheap debts that currently fuels higher returns for financial markets does not translate into a better 'real economic' performance or job creation.
In this regard, Muhyiddin rightly pointed out that Asia has to wholeheartedly tackle market failures.
"Underneath the abundance of the few, lies a high degree of inequity.
"Poor countries and their people are not poor because they don't work or try hard. In many instances, poverty and exclusion come from working in an unfair system, where the weight of privilege outweighs the possibility for hard work to translate into social mobility," he said.
New Asian institutions have to be created to level the playing field and to build a future where people of all backgrounds can excel and be judged "not by the circumstances in which they were born, but by the content of their character", said Muhyiddin, quoting the famous words of Dr Martin Luther King, Jr.
Undeniably, GDP will continue to play a crucial role in accessing a country's growth and developments, but it is good to start addressing its shortfalls to create a more holistic and sustainable development.
As such, the Prime Minister's address today indicated that government is on the right track - GDP alone is not enough to ascertain growth.
The people's needs, welfare and happiness, especially those who are vulnerable, must be taken into account as well to measure the true health of the economy.
-- BERNAMA
Bernama
Thu May 20 2021
Undeniably, GDP will continue to play a crucial role in accessing a country's growth and developments, but it is good to start addressing its shortfalls to create a more holistic and sustainable development. Unsplashpic
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