Economic growth isn’t ‘development’

I see no cause for anxiety about the slow-down in growth of our Gross Domestic Product, from 4.6 percent in the first quarter to 3.4 percent in the second quarter, according to the new national accounts figures released last Wednesday, because it didn’t mean that the Filipino people became economically worse off. In fact, the opposite happened: the people became economically better off in the second quarter.

Truly meaningful economic indicators pertain, not to production, but to people.  Among families nationwide, hunger dropped from 20.5 to 15.1 percent, and self-rated poverty dropped from 51 to 49 percent, between Quarter 1 and Quarter 2 of 2011, as was reported by Social Weather Stations last July 1 and July 8, respectively.

Thus, in the second quarter, the people’s economic deprivation lessened (or, their economic well-being improved), even though aggregate economic growth slowed down.

Therefore aggregate economic growth isn’t “development.”  So what is?

“Development” means progress in meaningful and sustainable human well-being.  This is the definition I gave in my talk on “Measuring Development” to the Council of Fellows of the Development Academy of the Philippines (DAP), last Thursday.  I have been doing theoretical and applied research on this subject since the 1970s.  This column is about five main points of my talk:

1. Human well-being is (a) multi-dimensional and (b) equitable.

The 1976 book “Measuring Philippine Development,” the report of the DAP’s social indicators project that I directed, listed the following dimensions of well-being: (1) health and nutrition, (2) learning, (3) income and consumption, (4) employment, (5) housing, utilities and the environment, (6) non-human productive resources, (7) public safety and justice, (8) political values, and (9) social mobility.  These are merely major dimensions, of course, with many sub-dimensions possible within each.

The 2009 report of the Sarkozy Commission on the Measurement of Economic Performance and Social  Progress (www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf) had a similar list of dimensions of well-being: (1) material living standards (income, consumption and wealth), (2) health, (3) education, (4) personal activities including work, (5) political voice and governance, (6) social connections and relationships, (7) environment (present and future conditions), and (8) insecurity, of an economic as well as physical nature.

True development is shown by evidence of improvements along many dimensions, not only a few.  Measuring it adequately requires multiple indicators, which need not be combined in a single index.

Both the DAP and the Sarkozy reports criticize the concept of Gross National Product as a misleading indicator of well-being.  Firstly, it is one-dimensional, related only to income and consumption.  Secondly, it is silent about equitable sharing of the production among the people.

The four points below are also made by the DAP and Sarkozy reports:

2. Equitable means being fair: (a) fair to the poor (vertical equity), (b) non-discriminatory (horizontal equity), and (c) fair to future generations (sustainable).

The SWS statistics on hunger and poverty are measures of vertical equity.  Comparisons of the well-being of women versus men, of Moros versus Christians, of the old versus the young, or of the handicapped versus the able-bodied are all measures of horizontal equity.

3. Sustainability requires stocks of “capital,” i.e. the resources that assure continuity of streams of well-being into the future.

The basic types of capital are physical capital (factories, infrastructure), natural capital (forests, minerals, gene pools), human capital (education, scientific capacity), and social capital (social institutions that serve to get things done).  Each of these can be quantified.

Accounting for true development thus requires not only statements of inflows and outflows over time, but also balance sheets at a moment of time.

4. Measurement of well-being is related to advocacy.

What truly matters should be counted.  What isn’t counted won’t get to matter.

It is quite proper for anti-crime organizations to count kidnappings, for human rights groups to count desaparecidos, and for media groups to count the assassinations of journalists. They cannot take for granted that such statistics will be collected by government agencies.

Data do not grow on trees, merely waiting to be harvested.  They are not found in libraries unless someone deliberately collected them and stored them in the first place.  Private advocates of change in the status quo should take the initiative to nurture collection of data that bring their causes to public attention.  The powers-that-be cannot be expected to assist data-collecting that exposes their unfair advantages.

5. Objective and subjective indicators of well-being are equally important.

Often, surveying the people directly about their own personal conditions is the most practical way to measure aspects of their well-being.  It should be done periodically in order to discover when their conditions are improving or deteriorating, and thus contribute to learning why this happens.

Good governance, for instance, is part of true development.  People who are badly governed feel bad about it.  They generally tell the truth about their feelings.  And, ultimately, they are the Boss.

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