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The GDP Paradox~II

Successful development practitioners have always recognized the richness of this local wisdom.


An increasing GDP is often seen as a measure of economic success. However, it fails to account for the multidimensional nature of development or the inherent shortcomings of capitalism, which tend to concentrate income and, thus, power. GDP is not, on its own, an adequate gauge of a country’s development. The development includes not only an economic dimension but also involves social, environmental and emotional dimensions. We should remind ourselves of the memorable poser of Dudley Seers, first president of the prestigious European Association of Development Institutes (EADI) on development: “The questions to ask about a country’s development are: What has been happening to poverty? What has been happening to unemployment? What has been happening to inequality?” The last two decades have seen a phenomenal rise of a market-driven philosophy of growth over state-driven development models that dominated developing countries in the years that followed their birth and independence. One section embodied the values and principles of the older nonprofits including social movements, mass organizations and community-based groups.

The other section was located in the market and technology spaces and got rapidly populated by new-age nonprofits, social enterprises and online collectives. There is a fundamental contradiction between them. The old nonprofits’ worldview is premised on a systemic approach integrating social sciences in which the complexity, interdependence and interrelatedness of then-diverse factors at work need to be understood and addressed. In the approach of the newage nonprofits, by contrast, the emphasis is on finding technology-based managerial solutions for these issues. One is empathetic and human-driven; the other is purely symptom-driven and techno-centric. One of the dangers of excessive focus on GDP growth is manifested in the tunnel vision it has created among viewers: Issues affecting the poor and the marginalized have been sidelined, and their status quo persists. The rich continue to accumulate wealth, both by legitimate and illegitimate means.

The result is a no-brainer: greater inequality. GDP growth does not consider the extent of institutional corruption which is one of the biggest obstacles to achieving equitable, quality growth and distributive justice. A major example is the miserable state of the banking sector which is plagued with a gigantic amount of nonperforming loans and where defaulters enjoy near-immunity. India lags many of its south Asian neighbours on the human development index (HDI) primarily because of inequalities, according to a recent report by the United Nations Development Fund. These inequalities, in turn, hamper India’s economic growth. India is one of the most unequal countries in the world with the top 10 per cent controlling 55 per cent of the total wealth against 31 per cent in 1980, according to the 2018 World Inequality report. The bottom half control only 15.3 per cent of the total wealth. The report shows that while the wealth of the top 1 per cent has been increasing since the 1980s, the wealth of the bottom half has been sliding.

The dominant paradigm of development is focused on the expansion of economic growth, which, according to a top-down approach, would allow resources to trickle down to the poor, thereby improving their social status. Social interventions made with this idea in mind simply focus on improving the efficiency of processes that increase economic growth. However, this dominantideology has failed to ensure the welfare of the marginalized and instead has ended up reproducing unequal social systems. True social change involves a transformation in the social structure, which can only emerge if there is a change in the development of discourse and mindset. Several social economists believe that inclusive growth has to be grounded in inclusive governance. In the absence of inclusive governance, the people at the grassroots, that is the intended beneficiaries of social programmes are left desperately dependent on a bureaucratic delivery mechanism over which they have no effective control. Progress means a more just and equitable society.

This approach to progress must now be on our minds. We judge progress by GDP. That is a purely material way of doing it. We need a much broader definition of allaround, integrated progress. It is the new definition of progress toward which we should move. In India, we have made progress despite tremendous problems. But there are still large numbers of people who continue to remain deprived of the fruits of development. When we talk of progress, we have to realize that it is also a multidimensional concept. It is a concept that covers the entire gamut of human life on this planet. The alternative system would be participatory development, where the people themselves are enabled to build their future through elected representatives responsible for the local community and, therefore, responsive to their needs. Successful development practitioners have always recognized the richness of this local wisdom. It is in this context that real development paradigms based on participatory processes argue for the involvement of local communities in all strategies and approaches designed for their development.

The development expert Dani Rodrik laid major emphasis on the importance of “local knowledge” and argued that standardized “blueprints” must not emphasize at the expense of local learning and local experimentation. He believed that participatory and decentralized political systems are the most effective ways of processing and aggregating local knowledge. By involving local communities in development, we can ensure more equitable and just growth ~ something which is not captured by GDP. We have seen from experience that in most cases poor people cannot bring about change by themselves, especially if it involves taking on mighty power structures. They need others to join them, preferably institutions that could support them. They can hardly set up an institution of their own. There are many alternative measures, including the Human Development Index (HDI), introduced by the United Nations in 1990, and the OECD’s (Organisation for Economic Co-operation and Development) Better Life Index, which are far superior measures of the quality of life and well-being.

We need to have a broad and integrated view of development, which focuses on wellbeing and freedom rather than the standard indicators of economic growth. In the absence of measures for ensuring sustained equitable distribution of its benefits, economic growth has frequently perpetuated the concentration of wealth in the hands of the already affluent. Governments and donors are now realizing that if they have to significantly reduce poverty, they need to promote inclusive growth. There is now a broad consensus that inequality affects the impact of growth on poverty reduction, and it is necessary to look beyond a “growth-first” agenda and focus on inclusive growth