The Financial Express

GDP growth alone does not ensure economic equality

| Updated: October 20, 2017 23:28:15

GDP growth alone does not ensure economic equality

The economy of the country is projected to grow at a rate exceeding 7.0 per cent in the current fiscal year, according to provisional data of the Bangladesh Bureau of Statistics (BBS).

Gross Domestic Product (GDP) and per capita income are most prominent indexes used to measure the economy of a country. But there are lots of shortcomings - GDP is a broad measurement of a nation's overall economic activity that includes all private and public consumption, government outlays, investments and export minus imports but does not distinguish between those activities that promote well-being and those that degrade well-being.

For example, money spent for cleaning up an oil spill at the Shela river in Sundarbans increases GDP, although it goes against society's well-being.


Similarly more war, more pollution, more fires, storms, floods and cyclones can all make GDP grow because they can increase marketed activity in the economy.


Robert Kennedy in 1968 made this comment about GDP: "Our gross national product…counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts the destruction of our redwoods…Yet it does not allow for the health of our children the quality of their education or the strength of our marriages; neither our wisdom nor our learning; neither our compassion nor our devotion to our country which makes life worthwhile."  


To put it simply, economic growth is just a measure of how fast the GDP is growing. But growth and development are two different economic phenomena. Economic growth and economic development are often used interchangeably but there is a difference. Growth refers to the simple increase in per capita income of a country or measured by an increase in a country's GDP. It has no relevance to the much desired economic equality.


Nowadays, politicians have increasingly come to rely on economic growth as a singular tool for calibrating public policy. It is, however, undeniable that economic growth is one of the major factors of poverty reduction, but it is not the solution because it may benefit only a few. Instead, it's all about how we grow. We need to ensure that the share of economic benefits from growth reaches the poor. In a recent report, released jointly by the Bangladesh Bureau of Statistics (BBS), World Bank and United Nations World Food Programme (WFP), reveals that, of a total of 49.4 million poor people of the country, 15.9 million or 32.3 per cent lives in Dhaka and 8.3 million in Chittagong. This means nearly half of the country's total poor population lives in these two regions which have the highest contribution to the national GDP - with Dhaka metropolis alone contributing 36 per cent and Chittagong 11 per cent.


According to World Bank report, in Bangladesh, 26 per cent of the population are undernourished and 46 per cent of the children suffer from moderate to severe underweight problem.

Forty-three per cent of children under 5 years old are stunted and one in five preschool-age children are vitamin A deficient and one in two are anemic.

At least 53,000 children die every year in Bangladesh due to complications related to malnutrition; the country is exposed to the highest rate of child and maternal malnutrition in the world.

Around 67 million people don't have access to improved sanitation and more than 25 million people lack access to a safe water source.


Many communities live around open air sewage systems and have limited knowledge of hygiene. Yet for the privileged minority, the horrors of poverty seem to be a natural, inevitable part of our landscape.


Per capita income indicates the income each person would have if GDP were equally divided among the population of a country. It is an average estimate, so increase in per capita income from current US$1,316 to US$1,466 (provisional) does not necessarily mean a greater and equitable distribution of wealth for the greater populace.


A report, released by Oxfam International, entitled, "Working for the few," contains some startling statistics on what it calls the "growing tide of inequality."


The report states: Almost half of the world's wealth is now owned by just one per cent of the population. The wealth of the one per cent richest people in the world amounts to $110 trillion.

That's 65 times the total wealth of the bottom half of the world's population. The bottom half of the world's population, 3.6 billion people, owns the same as the richest 62 people in the world.


Bangladesh is no exception, here also the top few own the lion share of wealth of the nation, while the majority remains in the bottom and owns very little.

Recently, Finance Minister AMA Muhith said, although the rate of extreme poverty dropped significantly but income inequality is on the rise in Bangladesh.

Between 1984 and 2010, the share of the poorest 20 per cent of population in national income decreased from 2.9 per cent to 2.0 per cent, while for the richest 20 per cent of the population, it grew from 28.3 per cent to 37.6 per cent.

Undoubtedly, GDP and per capita income are universal, objective and very useful measurement but we should recognise their limitations.


The sole pursuit of GDP growth or per capita income shouldn't be governments' only objective, nor should GDP or per capita income be considered a definitive measurement of human welfare. We need to build people-centred economy where all citizens will have equal access to education, health and address issues of social protection, good governance and policies of redistribution of wealth - moving money from those with too much of it to those with too little.


Excessively focusing on economic indicators such as GDP growth and per capita income takes our attention away from the real measurement of a country's and people's progress-our overall well-being.


(author's e-mail address: [email protected])

Share if you like