How credible is the GDP calculation

How credible is the GDP calculation

Shawkat Hossain | Prothom Alo, May 15, 2019

Malaysian prime minister Dr Mahathir Mohamad in a statement on 20 April said, “We need to realise that our efforts to become a developed nation will not be achieved or recognised, if what we can show is only skyscrapers but our rivers are polluted, only barren land is left out of our wilderness and the air we breathe is badly polluted.”

Reading this statement, another statement of 40 years ago comes to my mind. Former US president John F Kennedy’s brother Robert Kennedy, who was a lawyer and a politician, in a long speech on 18 March 1968 at University of Kansas said, “Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television program which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”

As an indicator of development, the achievement of higher GDP was popular in the sixties. Robert Kennedy’s statement gave birth to a debate at that time. However, the economists backtracked from GDP in the seventies. However, too much love for GDP creates income disparity within the country. In any discussion of GDP, many recollect the statement of Robert F Kennedy. However, all have not abandoned the concept that GDP means development. The debate on GDP has not yet been finished. A lot of discussions on GDP should be held in Bangladesh. Bangladesh is one of the five highest GDP achievers. Bangladesh is also one of the countries of income inequality. It is unfortunate that when we are holding intellectual discussions on GDP, at that time we are talking about the credibility of GDP and authenticity of its statistics.

We have some sort of love for GDP. Some people say, “If they go to Hatirjheel, they think they are in a city like Paris. Dhaka city seems to be Los Angeles of USA from the sky. Kuril flyover seems to be a scene of a cinema.”

Ministers said Bangladesh’s contribution to global economy would be the same of Canada in the next five years. We may hear such statements in future. But it is very urgent to discuss what we are getting from this higher GDP. A question is left to be answered if there is no visible impact of the GDP.

Different research organisations have started raising questions over the quality of GDP. Bangladesh Institute of Development Studies (BIDS) organised a critical discussion on various issues of economy on 28 April. Questions on GDP were raised there. According to BIDS, the standard of GDP can be judged in two ways. One of these is income disparity, which is gradually increasing in Bangladesh. Another is employment which has not increased despite higher growth, the study shows. Like many, BIDS views it as growth without employment. The government is considering earnings from export and remittance as the major source of GDP. BIDS said the average growth of the export earnings and the foreign remittance has decreased in last couple of years.

Research organisation South Asian Network on Economic Modeling (SANEM) analysed in a similar way. According to the organisation, there is no congruity between the higher growth and the export and remittance earnings. There is no consistency between the higher industrial growth and the private sector investment. Moreover, Bangladesh is in the last row over cost of doing business. But the government says incremental capital output ratio is decreasing. There is also a question in this regard. The main thing is, the pace of poverty reduction has become slow despite over seven per cent GDP growth on an average in last five years. For example, the rate of poverty reduction has decreased to 1.2 per cent in 2010-16 from 1.7 per cent in 2005-2010. If this is the real situation, who take away the benefit of higher GDP growth? Is there any mismatch in calculation?

The research organisation Centre for Policy Dialogue (CPD) has criticised that in a similar way. According to the organisation, the contribution of different sectors is not visible. But the higher growth is being shown. As the investment has not increased against this higher growth, so the labour productivity has to be higher. But neither any technology nor any innovation has been added to Bangladesh that the labour productivity will increase revolutionarily. The income of workers is supposed to be increased if the labour productivity increases.

According to the statistics of the government, the disparity is increasing. The type of growth is being achieved, that is not satisfactory in terms of income and employment. The GDP Bangladesh Bureau of Statistics shows is not realistic. CPD has demanded how the GDP has been calculated.

The government has responded to the criticism. Finance minster AHM Mustafa Kamal on Saturday said, “I want to explain. Organise a roundtable and I shall answer all the questions.”

The debate over GDP is not for the first time in Bangladesh. For example, the growth of GDP was shown 7.11 per cent in 2015-16, but the growth in the agriculture was negative and the foreign remittance decreased. In 2016-17, the GDP growth was shown 7.28 per cent. But the remittance fell by 14 per cent in that year. On the other hand, the growth of the export earning was very little, slightly over one per cent.

The debate over GDP was noticed in the next year too (2017-18). In 2017-18, the GDP was estimated 7.65 per cent. But the achievement was 7.86 per cent. The WB said that the growth of GDP absolutely based on consumption expenditure would not be credible if the production capacity, investment and employment is not increased.

The crisis of credibility of GDP is also seen this year. It is very urgent to solve this crisis. After 48 years of our independence, we could not build a credible statistics management. It is unfortunate that we are talking about the credibility of GDP while the whole world is talking about the ways of being happy. The real picture of the country cannot be known until accurate statistics are available.

Private organisations PPRC and ICCB organized a citizen’s dialogue on 15 December. Former secretary of Statistics Division Riti Ibrahim said, “In my service life, I have seen how the statistics are prepared by the act of rubbing.” It is a high time to organise a big discussion on statistics system in the country.

* Shawkat Hossain Massum is special news editor of Prothom Alo. He can be reached at shawkat.massum@prothomalo.com

* This piece, originally published in the Prothom Alo print edition, has been rewritten in English by Rabiul Islam

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