Osmeña: Economic growth predicament

Antonio V. Osmeña
Estatements

ECONOMICS, in a sense, deals with household management. Today, however, the term mostly refers to the study of principles and customs that affect the production, consumption, growth and distribution of material wealth for human needs.

Unfortunately, for politicians, most economists, chambers of commerce and industrialists, economic growth is equated with progress. Only a vigorously growing economy, coupled with maximum production and consumption, is considered healthy and sound. Less Developed Countries (LDCs) are encouraged to develop and grow like the Most Developed Countries (MDCs). Economic growth is supposed to increase human well-being, help provide enough jobs, control inflation, help cure poverty and provide enough funds to clean up the environment.

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Today, the goal of ever-increasing growth has come under attack by a growing chorus of environmentalists. These critics argue that continued economic growth is neither possible nor desirable because of finite resource supplies and the limited ability of the government to absorb heat and other wastes. They believe the harmful consequences of economic growth often outweigh the benefits.

Our country’s leading presidential aspirants need to resolve the issue because most of their campaign promises are vague. They generally do not agree on the following points:

1. Some forms of economic growth are not desirable, necessary nor inevitable. In the words of the economist Herman E. Daly, “What we need is growth in things that really count, rather than in things that are merely countable.”

2. The major need is to use economic rewards and penalties to redirect growth and eliminate waste. Some things need to grow and some need to decline, because the Earth’s resources and the ability of the environment to absorb pollution are finite.

3. We know relatively little about which types of growth have good effects and which have bad, or about how to measure these effects.

4. If we place monetary costs on the bad effects, the price of any form of economic growth can be made to reflect such costs, and undesirable growth can be discouraged. But putting a price on the value of human life or the storage of nuclear wastes, for example, is difficult. In the case of nuclear wastes, the cost is passed on to future generations.

It’s time for our political and economic leader to redefine the meaning of gross domestic product, which today means the market value of all goods and services produced by the economy of a given area (usually a nation) in a given year.

To many economists, a rising GDP per capita (GDP divided by population) indicates the improved well-being of a nation’s citizens. To many environmentalists and to some economists, however, the GDP is a misleading indicator of the quality of life. It does not reveal how well goods and services are meeting human needs or how these are distributed among the people.

Some economists have pointed out that the GDP is not meant to be a measure of human well-being, but it is still used today.

Producing more cigarettes or liquor raises the GDP, but also causes more diseases. This increases medical expenditures, which increases the GDP, but in a negative way. More automobiles cause more accidents, more congestion and pollution, yet increased production also causes GDP to grow. Waste in government is also included in the GDP.

Most economists agree that we need a better indicator than GDP for determining the quality of life. In theory, we could list and put a price tag on all the “negative” products and services included in the GDP. The total value of these negative factors could be subtracted from the GDP to obtain the gross domestic quality or GDQ. Our country has many scholars who can develop definitions and measures of the quality of life, based on concepts like the GDQ. For example, how do we put a value on positives like clean air, clean water and silviculture?

Analysts argue that the inability to find perfect social indicators should not prevent us from improving the imperfect ones we now use. Probably, the scholars could use three possible social indicators—life expectancy, infant mortality and literacy—instead of the GDP per capita. This could be a useful guide for our 2010 presidential aspirants. The issues of health and education should be the major factors for the improvement of the Filipinos’ quality of life.