Economy
GDP growth is a faulty measure of economic development

GDP growth for the sake of it should be consigned to the dustbin of economic history. An option is to replace GDP-orientation with a number of better measures of human well-being

 
‘Development’ is a word heard everywhere these days. Many politicians and economists swear by it. It has been an election slogan for some time. Once there were other slogans alluding to development. Thus, there was “Roti, Kapada, Makaan”, “Garibi Hatao” and “India Shinning”. Garibi is still with us forty years after the sloganeering. India, did not then, and does not now shine economically, for the vast majority of Indians. Several hundreds of millions do not have Roti, Kapada or Makaan. Certain models of ‘development’ are promoted, as ‘successful’. Thus, there is the Gujarat model of development. Human Development Index (HDI) is not a measure they use. It could be GDP (gross domestic product) or some other yardstick such as the endorsement of sections of media or business groups.
 
‘Growth’ is another word often heard in the context of development. It is synonymous with GDP, a long-used but faulty measure of development. Economists who swear by GDP growth hope that the prosperity occasioned by growth would trickle down to the masses. Joseph Stiglitz called it “GDP fetish”. “Inclusive growth”, which is quite fashionable, is another phrase bandied about. How those whom economic growth passes by would be included is left unsaid. The fixation with GDP is caused by belief in “trickle-down economics”, a facet of modern capitalism, now rebranded as, “free market”, which Galbraith termed, “innocent fraud”. Is the obstinate reliance that some of India’s economists place on GDP indicative of ignorance? Could it be due to other unknown motivators?
 
Having sworn by the GDP growth paradigm, economic policy is directed towards increasing it. This logic leads to pleas for private investment. Hence, policy must be “investment friendly”, meaning that private investors must be attracted by the probability of high profits. A way to do this is to sell public/national assets, like coal or minerals, cheaply to the private sector. The discretion to fix prices of these assets and allocate them indiscriminately has resulted in corruption and environmental degradation.
 
Since indigenous, private, investors are unable to bring in the required amounts of investment, the argument goes, policy is geared to attracting foreign investors. Hence, there is the constant refrain for FDI in this or that sector. “Global Investor Meets” are held and media headlines scream several lakh crores of rupees worth of promised FDI, for which, governments sign MOUs. They then take credit for growth-oriented economic policies. Following this line, most nations have become promoters of transnational investment. They vie with one another to attract maximum foreign funds. Governments have become mere administrators of economies piloted by transnational entities. Governments have ceded sovereignty to the transnational corporations. This has globalized world finance. Billions of dollars are transacted daily in speculative trading in foreign exchanges across the world. International finance has become a global casino, where the speculation extracts huge costs on unsuspecting countries and their people. The Asian currency crisis is a prime example of this. Western governments spent $10 trillion in taxpayers’ money to bail out the global financial casino, post the 2008 meltdown. 
 
The myth of development that transnational corporations, in collaboration with world financial institutions (IMF and World Bank) and pliable governments, forced on people of the less developed countries (LDCs),in the guise of reform, liberalization and “structural adjustment”, exacted immense social sacrifice without managing to eliminate or reduce poverty. Yet, the myth persists, almost magically. Outside of the western system, the cost of the Soviet variety of development was shortages and unimaginable human suffering by torture and incarceration of those who opposed it. 
 
The GDP growth model of economic prosperity leads to uncontrolled urbanization, degradation of cultivable rural land and displacement of millions from their homes and living spaces. Urban migration and its attendant aftermath of crime, slums, urban poverty and violence are the result of such economics. Here is Darwinism played out in the human species. The fittest survive. The world has become a Darwinian globalized village, says, Oswaldo de Rivero, Peru’s former permanent representative to WTO. He writes, “The Darwinian global village has a high street made up of the elegant ghettos of all the cities of the world. Slums, shanty towns and hovels proliferate in the back streets. In these new global urban areas—water, energy and food are scarce; sweatshops mushroom, along with air pollution, illegal work, child exploitation, unemployment, prostitution, petty crime and delinquency. Very soon, from these precarious and unhealthy global settlements—teeming with human energy, informal sector activity and unemployment—will spring the fate of many poor countries, for they will produce new politicians, businessmen and professionals, and they will spawn the delinquents and extremists who will threaten the established order”. Prof Davis of University of California called it a “Planet of slums”. In this scenario any attempt at “urban renewal” through mechanisms such as, JN-NURM (Jawaharlal Nehru National Urban Renewal Mission) is doomed to fail. For the last several decades, not a day passes without every newspaper highlighting urban woes. Has it made any difference? Is it not time to look for other solutions? 
 
Is this the only way forward towards a decent living standard for people? Are there alternatives? Yes, indeed. 
 
An option is to abandon GDP-orientation, replacing it with a number of better measures of human well-being. Former French President Nicholas Sarkozy commissioned a study by Stiglitz, Amartya Sen and Fitoussi to come up with measures that are more accurate. In the foreword to their report he said, “We will not change our behaviour unless we change the way we measure our economic performance. If we do not want our future to be riddled with financial, economic, social and environmental disasters, we must change the way we live, consume and produce”. Would the economists of India help the country make this change? To change one could go “back to the future” with Schumacher. As he propounded in his book, “Small is Beautiful”, small projects that directly benefit local people would certainly be more beautiful than the grandiose infrastructure schemes that displace millions, rendering them homeless and jobless, and driving them into Darwinian urban ghettos. Some amount of de-globalization is required. People must re-learn their lost art of living in tune with nature, husbanding natural resources carefully, investing locally to meet local needs. Rajiv Gandhi’s dream of Panchayati Raj is all but forgotten, in spite of the 43rd Constitution amendment. The thesis of inevitability of urban growth must be replaced by rural development, farm and agriculture development. Industrial corporate pesticide and petro-fertilizer farming must give way to organic farming with bio-pesticides. Rural and cottage industry with appropriate technology would be an ideal to strive for, instead of succumbing to western pressure for a consumerist India, ushered through devices such as FDI in multi-brand retail. Sadly, this might remain a forlorn hope, since, rather than “development with a human face”, the ugly face of predatory, global transnational capitalism seems to be just outside, battering at the Indian economy’s doors. 
 
Development that some Indian economists propagate is a myth. It is no magical panacea. The economic mantra of GDP growth should be consigned to the dustbin of economic history.
 
(The author is a citizen-activist, a retired missile engineer-scientist, former head of missile manufacturing and lay economist.)
 

 

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COMMENTS

Girish Pai

4 years ago

Excellent article. Wish this article opens the eyes of the powers that are. Its time to stop the mad darwinian economic syndrome.

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NSEL targets Rs1 lakh crore coal trading market annually

During FY13, coal imports are expected to increase further and the gap between demand and domestic production is estimated to be 148 MMT. If the average price is Rs7,000 per metric tonne, it works out to be around Rs1 lakh crore market per annum, the Spot Exchange said

 
Mumbai: National Spot Exchange Ltd (NSEL), electronic spot market for commodities, has said it is eyeing Rs1 lakh crore coal trading market annually through its online platform, reports PTI.
 
The exchange had last month launched coal contract on its platform enabling the coal stakeholders to carry out the transaction of purchase and sell through electronic platform.
 
Besides, it also enable large importers of coal to sell imported coal directly to end users without involving any intermediary.
 
"During 2011-12, imports stood at 99 million metric tonnes (MMT), 44% higher than the previous fiscal. This is expected to increase further during 2012-13 as the gap between demand and domestic production is estimated to be 148 MMT. If the average price is Rs7,000 per metric tonne, it works out to be around Rs1 lakh crore market per annum," NSEL said in a statement.
 
Large importers have to sell coal on credit, which is subject to counterparty risk. NSEL said it aims at organizing this fragmented market and to develop a transparent electronic spot market in imported coal. This new platform will lead to transparency in terms of quality of coal, its origin as well as its pricing, which is a major concern for the coal buyers in today's spot market scenario where the actual origin and quality of coal always remains a debatable issue, it added.
 
At present, total coal consumption in the country is about 645 million tonnes and production is around 540 million tonnes. Out of this, over 100 million tonnes of coal is imported from various countries to meet the domestic consumption requirement.
 
"This dominance is driven by a strong growth in key consuming sectors like power, steel and cement. As a result, coal imports have been increasing rapidly," it said.

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