Anupam- The Dreamer

A prelude to GDP vs GNH debate

Sometime ago, I read a beautiful analogy of the economic activity and the associated circulation of money. Let me share that with you.

The economy of the world, in general, and the economy of a country, in particular, wants you to buy a car instead of a bicycle! Because when you buy a car, the car producing company and its supply chain companies earn money. They can pay their workers better who manufactured the car. Then, the car will need fuel to run. That’s where the oil exploration, oil refining and oil distribution companies come into picture. They all make money, when you buy their oil and drive more. Then, when the car runs on the road, it will need insurance, thereby making insurance companies rich. The road will need maintenance, making contractors rich. Then, the car will cause pollution, so to control that we need whole sort of technologies to reduce pollution etc. Thus, you see, it is a beautiful example of how a small car is running a whole portion of the economy.

Now, contrast this with running a bicycle instead. The manufacturing plant will be smaller and processes less complex. Thus, the bicycle company earns less and consequently their workers earn lesser. It doesn’t need any fuel to run. So, no income to oil companies from the bicycle. Then, the bicycle doesn’t need insurance. Again, no income to the insurance companies. It doesn’t cause much wear and tear of roads, the contractors will be on their knees. The bicycles also don’t cause pollution. So, there will be no need of carbon sequestration technologies etc.

Now, the quintessential question that arises is this- whether the world would want you to buy a car or a bicycle? No guesses for getting it right- obviously CAR DRIVES THE ECONOMY MORE, so one should ditch bicycle and buy a car!

But, wait! Which one of the vehicles is more economical, good for physical health, more environmental-friendly, easy to maintain? It is the bicycle! Here lies the paradox that I want to talk about!

The global GDP or a country’s GDP, although a very important marker of the health of an economy, in terms of the amount of goods and services produced and the scale of economic activities, does not stand a very good indicator when it comes to visualizing the bigger picture! In the above example, driving bicycle should be promoted, wherever possible and feasible, especially over short distances, as practiced widely in the Netherlands. Even, if it not good for the economy vis-à-vis car-based economy. Similarly, if every person starts to take care of his/her own health like doing physical activity, exercising daily, eating healthier foods, then the economy of the health sector will tremble! The people going to the hospitals will reduce, the medicinal demand will reduce, the treatment cost will come down, all of which is not good for the health sector economy. But, if it will be good for the individuals, then do we really care if the GDP of the health sector comes down? Definitely NOT!

The examples like these can be galore. The point in short is this- If the people or the societies start to become self-reliant and self-sufficient in some way or the other, then the GDP will likely fall to some extent. On one hand, it may seem that the country is not progressing as fast as it did earlier in the pure economic terms, on the other hand, it is even more desirable situation, as the country will be indeed progressing faster in other aspects like better health, better lifestyle, cleaner environment etc. If the self-reliance and self-sufficiency can lead to better future for us in some aspects, why do we need to measure these aspects in terms of money value only? No country or region can be self-reliant for all its needs, however even if we can make ourselves less dependent on the outside goods and services in atleast some aspects, will it not be good for us and the world as a whole?

Afterall, what is the aim of the human life? To be happy, right? Let’s, not confuse happiness with money only (or economy or GDP only). Money is an essential part of bringing happiness to our lives, in terms of fulfilling our basic needs and making the life more comfortable. However, it is not the only measure of our well-being, health, happiness and prosperity. Maybe, its time to treat GDP as only one of the several important markers of progress of humanity! Maybe, its time to give serious thought about the Gross National Happiness (GNH), which Bhutan already uses as its indicator of progress. GNH is a better indicator of the sustainable development as it takes into account a holistic view, contrary to GDP which takes into account only the economic viewpoint. And economics only will not take us anywhere, if we don’t take care of ourselves and our planet. Happiness comes from a variety of things, and economics is just a small part of it! The earlier we understand this, the better for us.

As far the GNH is concerned, I will leave you with this beautiful representation for now:

Image Source: Oxford Poverty and Human Development Initiative (OPHI)