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The right metric

  • Published at 11:00 pm January 27th, 2020
Economy
Photo: BIGSTOCK

Why GPI is a better way to measure growth compared to GDP

Although the economic growth of Bangladesh has been quite inspiring in terms of measuring it by our Gross Domestic Product (GDP), it’s safe to say that the case might be wildly different if we went by measuring the economy in terms of another, lesser-known metric: The Genuine Progress Indicator (GPI).

Though, to be fair, that claim would hold true for almost every country in the world, even the most developed ones.

Bangladesh has been ranked the world’s 7th fastest-growing economy by the International Monetary Fund for the FY 2018-19, with an annual growth of 7.9% in GDP. Bangladesh is definitely still quite developing economically, but surely not at the rate that our GDP is indicating, considering the environmental and social externalities.

The GDP is the monetary value of all finished goods and services made within a country during a specific period. The GPI on the other hand is a metric that is designed to take fuller account of the wellbeing of a nation -- only a part of which pertains to the size of the nation’s economy -- by incorporating environmental and social factors, which are not taken into account by GDP.

For a long time, GPI has been suggested to take precedence over GDP in terms of indicating a nation’s growth.

Simon Kuznets’ concept of GDP does not only exclude environmental and social externalities, but it is also prone to productivism and consumerism. For instance, GDP gains double when pollution is created, once upon its creation and again when is it cleared.

GPI, as opposed to GDP, takes resource depletion, pollution, effects on the ecosystem, health hazards, and social wellbeing into account in determining economic growth.

The contribution of Bangladesh’s readymade garments (RMG) sector towards the GDP was 11.17% in the FY 2017-18. But this contribution takes no account of effluents released and left untreated, resources depleted, workers’ health hazards, and social vulnerabilities.

Fisheries and shrimp contributed 4.39% towards the GDP in FY 2017-18, but climate vulnerability, salinity intrusion, unemployment, health hazards, and other externalities were not taken into account.

Being one of the most climate vulnerable countries in the world, Bangladesh can help in the cause to adopt GPI as the de facto economic growth indicator, if not as the only indicator, then definitely alongside GDP. 

SM Abdullah is a freelance contributor.