Essay and Answer Writing → UPSC Essays

GDP along with GNH as the indices for measuring progress

Post the Great Depression in 1930s, economists’ devised newer ways of assessing a country’s economic prowess. One of the most notable of all of the Depression-era advances in economic theory was the refinement of what we call the gross domestic product (GDP). This economic indicator had been around in some form before the Depression, but it functioned as a guesstimate of the value of a nation's economy. Economist Simon Kuznets improved it dramatically by applying real data to measure the total value of all of the goods and services produced in a nation within a given year. Since then, GDP has become a valuable tool for evaluating how well or poorly an economy’s doing at a certain point in time. However, it had led many to question whether these parameters, i.e. value of goods and services produced by a nation, is enough to judge its and its citizens’ well-being? Shouldn’t it include something that goes beyond just plain economic factors? Someone had said once “It is not how much we have, but how much we enjoy that makes happiness”. It is in this regard that Gross National Happiness (GNH) has been devised. It is a measure of the quality of living, the concept was first introduced by the Bhutan royalty in 1972. The essay shows that GDP along with GNH should be used as a measure to evaluate a nation’s progress. 
 
What are indices? What is GDP and GNH? 
Indices work as indicators allowing one to compare two or more countries – their progress, failure, and other such measures. These are also used by a country’s policy makers to use their resources effectively, based on the data and result gathered through the indices. Two measurements have been used to get a sense of how well a country is doing. One is GDP, or gross domestic product, the amount a country earns. The other is its unemployment rate. But when it comes to figuring out how well a country is serving its citizens, these tools might not only be incomplete: they may not in fact be that helpful at all. On estimates of social progress, for example – which measures aspects like access to education, food and affordable housing – poorer countries often outdo their wealthier counterparts.
GDP – 
·Gross Domestic Product is a measure of the level of income yielded by an economy over a stipulated period - generally this time period varies between one quarter and a complete year depending upon the end period when data is published by the authoritative body. 
·It is actually an estimation of the size of the market underlying the economy on the basis of goods and services sold in it through the specific time span.
·This is essentially a measure that takes into account only productive activities though measures are adopted to avoid double counting; transfer of financial assets between hands is ignored while estimating the same. In other words, only those goods and services produced or sold legibly in the domestic market are included in the GDP measure of an economy. 
GNH-
·Gross National Happiness on the other hand, is a measure of the quality of living. 
·The concept had been introduced by the Bhutan royalty in 1972 in alignment with the spiritual lessons from Buddhism which is largely the national religion of the economy. 
·Thus Bhutan emphasises upon spiritual development through aiming to maximise Gross National Happiness rather than material development as recognised by the Western nations through optimising GDP.
·Unlike GDP, Gross National Happiness cannot be measured quantitatively. Most of the proxy variables which could be considered as components of the happiness quotient in an economy are subjective in nature. 
·There are 7 such qualitative factors which could be used to measure the amount of happiness an economy is enjoying at any point of time. These factors: economic well-being, environmental well-being, physical well-being, mental well-being, workplace well-being, social well-being and political well-being.
 
Why GDP alone is not enough?
GDP is a reliable indicator of economic health. As reliable as it is, however, GDP really only measures one thing - money. GDP measures the money being made by the interaction of production and consumption in an economy. For some people, this indicator tells them everything they need to know; others believe that money is one of many other factors that determine an economy’s health. Simply put, there are more important things to consider, like happiness, for example.
 
Two other factors which characterise GDP are that they do not represent the allocation of resources across cross-section. In addition, the components underlying GDP do not include most of the factors used by an average individual, which is why it cannot be regarded as a measure of social welfare. In fact, a rise in income need not reflect a betterment in the standard of living as has been empirically found in many researches. For instance, between 1958 and 1987, real per capita income of Japan was raised five times that was reflected through an increased production of consumer durable goods, though no considerable change in the average level of subjective well-being in the nation. 
 
Income is not best indicator of well-being as other aspects that lead to good life such as sanitation, education, equality, empowerment etc. are not considered by this index. For example, countries such as Costa Rica, Cuba and Bangladesh that have performed well on human development indicator (HDI) despite low incomes shows that income criteria cannot be enough to judge the overall standard of living. 
 
GNH can complement GDP
GNH is distinguishable from GDP by valuing collective happiness as the goal of governance, by emphasising harmony with nature and traditional values as expressed in the 9 domains of happiness and 4 pillars of GNH. According to the Bhutanese government, the 4 pillars of GNH are:
·sustainable and equitable socio-economic development
·environmental conservation
·preservation and promotion of culture
·good governance.
 
The 9 domains of GNH are psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. Each domain is composed of subjective and objective indicators. The domains weigh equally but the indicators within each domain differ by weight. The domains work differently depending on the person’s GDP. For instance, if there are two people, one whose life is consumed with working, leaving barely any time for friends and family, while the other, though not as good in working conditions, has still enough time to spend quality time with their friends and family: the person who spends time with family and friends ends up having a larger GNH. In other words, a person is happier, or can be happier, in life when focusing on the little things.
 
This should not mean that assessing GNH is enough in itself. A major setback in this regard is that subjective well-being cannot be measured efficiently through quantitative variables. Although many researchers have suggested way outs from the same, the truth is that no one has put forward a definite set of variables which could actually represent the level of happiness among the people in an economy. Most of these variables are subjective in nature and might lead to biased results in case that a survey is conducted. In other words, there is no benchmark against which the level of happiness could be measured or compared.
Happiness tells us how well a society satisfies the major concerns of people’s everyday life. GDP is a measure limited to one aspect of economic life, the production of material goods. The aphorism that money isn’t everything in life, applies here. If happiness along with GDP as a leading measure of societal wellbeing, will be more meaningful to people’s lives.
 
Conclusion
It should suffice to say that no one indicator is perfect or enough to gauge a country’s progress. All indicators, including GDP and GNH have their share of advantages and disadvantages. GDP reflects a country’s income and production level, GNH on the other hand is a criteria for well-being. Together, human happiness and wellbeing should be at the heart of the decision making and governance that will shape future investments in scientific and technological research, development, and commercialisation.
 
(Source: money.howstuffworks. com / wordpress.com / Wikipedia.com) 



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