Now that it’s good riddance to 2020, orthodox development pundits will be eager to monitor the quarterly statistics of Gross National Product (GNP) in 2021, oblivious to close to a century of proof that the aggregate money value of production is a very misleading indicator of human well-being.
In the first place, the incomes generated by many production activities are very unequally, and unfairly, distributed among the people. In the second place—and this is the theme of today’s piece—the GNP includes activities that are only instrumentally, and not directly, beneficial to the people.
Many of these instrumental activities are functions of government itself. The military, police, general administration, legislature, judiciary, economic planning unit, and national statistical system, are, in reality, the regrettable necessities that assure the orderly production of the goods and services used by the people for their direct benefit. Adding the value of government spending on such regrettables to the value of consumer goods produced, as conventional GNP does, is double counting, since the regrettables are part of the cost of producing the beneficial items. (Of course, private security services are also regrettables.)
As early as 1973, the United Nations proposed the term Net Beneficial Product (NBP) for what is left of GNP after excluding regrettable expenditures, as well as the expenses required to prevent the quality of life from deteriorating.
Taking the cue from the UN, and counting only government spending on education, public health, labor, and social welfare as beneficial, the Philippine NBP was estimated at 83 percent of the GNP of 1960, and to have fallen to only 75 percent of the GNP of 1972 (see Leonardo Sta. Romana III, “Indicators of Economic Well-Being,” in Measuring Philippine Development, Development Academy of the Philippines, 1976). Thus, GNP is a very poor substitute for NBP.
The UN did not follow up on the NBP concept, unfortunately. What the UN Development Program (UNDP) did was to develop the Human Development Index and estimate it for each country; the HDI is a statistical cocktail consisting of life expectancy at birth, number of years of schooling, and per capita income (thus keeping GNP as one ingredient). The UN has also stressed the multidimensionality of well-being by instituting Millennium Development Goals, and now Sustainable Development Goals.
The NBP concept survives in the work of institutions like the Center for the Study of Living Standards (CSLS) in Canada, which regularly estimates, among other things, the aggregate value of time wasted from road traffic while commuting to work. This adjustment would surely imply multibillions of pesos deducted from the Gross Regional Product of the National Capital Region, if implemented here.
In these times of the pandemic, the statistical contents of the GNP figures should be fully exposed so as to reveal what parts of national production of goods and services are directly beneficial, and what parts are only instrumental, or regrettable yet necessary: the cost of hospitalization of COVID-19 patients; the cost of the COVID-19 vaccines and other pharmaceuticals, and their logistical requirements; the cost of COVID-19 testing; the cost of masks, shields, and other personal protective equipment; the cost of lodging services and construction of new shelters mandated by quarantines; the incomes lost due to restrictions in locations to which people may go, and in times of the day during which they may travel; the unnecessary expenses incurred by people stranded away from home.
How much is the overall impact of the pandemic on the Filipino people? The best way to figure this out is to look directly at the conditions of the people themselves, inquire from the people, and respect the people’s point of view. The worst way is to rely on GNP.
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