Drugs, Prostitutes and War
“[How countries] prioritize growth maximization without stopping to think about the costs.”
“One day in 2012 two accountants working at Britain’s Office for National Statistics embarked on an unusual project: they started counting prostitutes. Joshua Abramsky and Steve Drew were not bored; they were responding to a diktat from Eurostat, the statistical arm of the European Union, which wanted EU nations to standardize how they calculated national income.” [1]
'It’s alive'
The modern concept of GDP was first developed in the 1940s, influenced by two economists — Simon Kuznets and Maynard Keynes — as a way for the US government to figure out whether their country could sustain an all-out war in Europe as well as in Asia (during the Second World War).
Since then, countries have tinkered and tweaked with the formula to better suit their local economies — like in the case of EU — but the fundamentals have remained more or less the same: measure what is spent, what is earned, and what is made.
In 1950 — three years after independence — India’s GDP stood at $30.6 billion (just 4.2 percent of the world’s share). [2] But soon after, things started to improve and by 2018 the country’s GDP had reached $2.72 trillion (7.74 percent of the world’s share). [3]
But who is this growth for really?
A couple of important things happened in 2008 — The Dark Knight premiered in theaters, Jason Mraz released the album I’m Yours, and after a failed attempt at punching a friend I’d accidentally fractured my hand (I was 15 back then). The one thing that never figured on my radar was the housing market crash in the US — which I learned about years later when I watched The Big Short (also starring Christian Bale).
After the crash, India’s GDP dipped from $1.21 trillion to $1.19 trillion — but picked up soon after, reaching $1.30 trillion in 2009. And from 2009 to 2019 the country’s economy has doubled to reach $2.70 trillion. [4] Big numbers. Well done India. However, when we look at the distribution of this wealth the results aren’t so pleasing.
According to a study released by Oxfam in 2017, two days before the World Economic Forum in Davos (the annual event where rich people from across the world fly to in their private jets to discuss, among other things, climate change [5]) — just 57 people in India now have the same wealth as that of the bottom 70% population of the country. [6] That’s 57 people not 57 percent. Income inequality is at its highest level since independence. “The billionare boom is not a sign of a thriving economy but a symptom of a failing economic symptom,” Nisha Agrawal, chief executive officer of Oxfam.
‘Drugs, Prostitutes, and War’
In modern times, and against its inventor’s warnings, GDP has become a proxy for a country’s well-being. If the economy is growing, then things must be good. If it is shrinking, then not so much.
If GDP were a person, it would be indifferent, blind even, to morality. It measures production of whatever kind, good or bad. GDP likes pollution, particularly if you have to spend money clearing it up. It likes crime because it is fond of large police forces and repairing broken windows. GDP likes Hurricane Katrina and is quite OK with wars. It likes to measure the buildup to conflict in guns, planes, and warheads, then it likes to count all the effort in reconstructing shattered cities from the smoldering ruins. GDP is good at counting, but a pretty poor judge of quality. [7]
Over the past 73 years, India’s economy has gone from $0.03 trillion ($30 billion) to $2.7 trillion, but if most people aren’t feeling any benefit, then what precisely — and who precisely — is all this growth for?
Sources
[1] Pilling, David. The Growth Delusion. Bloomsbury, 2018, pp. 37
[2] Subramanian Swamy, Reset (2019); [Angus Maddison Data]
[3] Statista [link]
[4] The World Bank [link]
[5] Rebecca Ratcliffe, “Record Private Jet Flights into Davos as Leaders Arrive for Climate Talk” (The Guardian, Jan. 2019)
[6] Press Trust of India, “Richest 1 Percent Own 58 Percent of Total Wealth in India: Oxfam” (The Hindu, Jan. 2017)
[7] Pilling, David. The Growth Delusion. Bloomsbury, 2018, pp. 1
