[dropcap]O[/dropcap]n 14 April 2011 then Prime Minister Stephenson King, during his budget presentation, stated the following:
While the recession was still strong in the rest of the OECS member countries, all of which experienced negative growth in 2010, the economy of Saint Lucia grew by 4.4% in 2010 compared to an average of minus 3.2% for the OECS as a whole. The Eastern Caribbean Central Bank estimates that Saint Lucia will grow by 5.4% this year. Our own forecast is a more modest 4.5%, as we concentrate on the implementation of a job-creating growth strategy.
In response, an incredulous Kenny Anthony-led opposition SLP responded: “ . . . he is misrepresenting statistics to deceive the public. In 2010, the method in which GDP is calculated was changed. Instead of using 1990 as the Base Year, it was decided to use 2006 as the Base Year . . . if this new method of calculation is used for the period the Labour Party was in government, GDP growth would have been as high as 7.56% in 2006, when we were voted out of office.”
By November of the same year (2011) Kenny Anthony was sworn in as prime minister, having won the general election earlier that month. In his budget presentation in May of the following year, Anthony revealed that after careful revision by the statistics department, the actual GDP growth for 2011 was 0.6%—not the 4.4% previously indicated by the former PM. King, now leader of the opposition, spent a significant portion of his presentation attempting to explain to the House, and by extension the Saint Lucian people, what transpired with the original growth figure. He wasted no time in shifting responsibility, and, with it, blame, to the Director of statistics, Edwin St. Catherine, indicating that the figures in question were generated and supplied by his (St. Catherine’s) department. Even going so far as to call for St. Catherine’s firing if he had in fact supplied faulty information. St. Catherine, in an interview with the STAR, indicated that arriving at the GDP figures is a process, and at the time he supplied King and others with the 4.4% estimate, the process was significantly affected by data quality issues emanating from the Customs Department, due to poor record-keeping; data on imports of goods and services for the wholesale and retail sectors. A fact, which, according to St Catherine, was communicated in a letter to Permanent Secretary in the Ministry of Finance, Isaac Anthony and the team of technocrats who advised the former PM. King denied ever having received said letter. Round and round the nation went, listening to the heated debate as to what was the correct estimate of how much better (or worse) life had supposedly gotten for them in 2010. But is GDP really a litmus test for quality of life? Do you even truly understand what it is?
When GDP (Gross Domestic Product) was devised in the 1930s, and then the international standard for calculating GDP, the System of National Accounts (SNA) in 1953, the world was in the midst of major social and economic upheaval from two global wars and the Great Depression. President Roosevelt’s government used the statistics to justify policies and budgets aimed at bringing the US out of the Depression. As it became more likely that the US would become involved in World War II, there was concern about whether this would jeopardize the standard of living of US citizens who were just beginning to recover from the Depression. GDP estimates were used to show the economy could provide sufficient supplies for fighting WWII while maintaining adequate production of consumer goods and services.
(According to a paper published by The Frederick S. Pardee Center for the Study of the Longer-Range Future, entitled Beyond GDP: The Need for New Measures of progress: “Economists have warned since its introduction that GDP is a specialized tool, and treating it as an indicator of general well-being is inaccurate and dangerous. There is a growing realization that GDP is a measure of economic quantity, not economic quality, or welfare, let alone social or environmental well-being. Useful measures of progress and well-being must be measures of the degree to which society’s goals—to sustainably provide basic human needs for food, shelter, freedom, participation, etc—are met, rather than measures of the mere volume of economic activity.”
The paper suggests the continued misuse of GDP as a measure of well-being necessitates an immediate, aggressive and ongoing campaign to change the indicators that decision makers are using to guide policies and evaluate progress. The paper advises that: “We need indicators that promote truly sustainable development—development that improves the quality of human life while living within the carrying capacity of the supporting ecosystems.”
Are our indicators doing that?
Perhaps in no other way is the disconnect between GDP and standard of living made clearer than in the juxtaposing of various countries’ GDP and Social Progress Index (SPI) rating—a measure of a country’s capacity to meet basic human needs and facilitate the improvement of lives. Topping the most recent global SPI rankings is Denmark which had an SPI score of 90.57 and experienced GDP growth of 1.93% in 2017. Compare Denmark with a country such as India which ranks 93rd in SPI ranking with a score of 58.39 despite having an increase in GDP of more than 6% in the same year.
Using GDP as a litmus test for quality of life is analogous to looking exclusively at a company’s income statements without considering the assets on its balance sheet. A company can make its income look really good by all sort of financially unhealthy means such as liquidating assets, but over time this will reduce its productive capacity and other means of generating income. GDP appeals to politicians and technocrats, despite its obvious flaws, because it sums up production and output into, what appears to be, one number that can be presented to the inherently restless and woefully unsophisticated masses to signify the all-purpose term: growth. However, when one considers what it doesn’t take into account-—leisure, environmental quality, levels of health and education and activities conducted outside the country etc.—it’s clear that it is a lot messier a process than was imagined.
While GDP may confirm that a country is generally moving in a positive economic direction, it is not a litmus test for the quality of life of its citizenry. To use it as such is misleading and counterintuitive.
