Getting real about measuring up
ICHIRA Tambo, who heads Japan’s International Co-operation Agency Research Institute, tells this story: “When I was a college student 35 years ago, I worked in facilitation, co-ordination and interpretation for development country participants in a training programme in Tokyo on underground water development.
“The students bought many electronic devices such as radios, televisions, calculators and phones. These were gifts for their families and friends back home. But there was one exception. An Ethiopian engineer did not buy anything. One day, I asked him why.
“I said: ‘Ethiopia is a poor country and your family waits for you and your gifts.’
“His response was unforgettable. ‘Mr Tambo,’ he said, ‘You say Ethiopia is a poor country. I don’t think so. I have stayed in Japan for three months now. The Japanese are not rich, in my eyes. You live in congested areas. In Tokyo, the houses are small just like birds’ nests.
‘The Japanese don’t have goats, chickens, cows or boats. If you don’t have any animals, farmland or a big house, it means you are poor in Ethiopia. I do not need a radio, a television or anything. If I have money, I will buy an animal for the farm.’” Tambo was one of a group of “high-level thinkers” who gathered in Durban at the weekend to discuss “Measuring Well-being and Development in Africa”.
The three-day discussion was hosted by the Minister of Economic Development, Ebrahim Patel, and participants included Nobel Laureate Joseph Stiglitz, Marco D’Ercole, the head of household statistics and progress measurement at the Organisation for Economic Co-operation and Development in Paris, Lorenzo Fioramonti, the director of the Centre for Study and Governance Innovation at the University of Pretoria, and Tambo.
Patel said the meeting was to investigate new ways of measuring human, social and economic development beyond gross domestic product. Several studies, which include the Stiglitz-Sen-Fitoussi Commission Report, have raised questions about the use of GDP as a measure of growth, particularly relating to how it neglects non-market and social transactions, stocks and flows of physical, natural and human capital, and broad distributional issues.
Tambo said Japan was a recognised example of how skewed GDP was as a measure of the well-being of a society beyond economic growth. “Japan is known as a country that achieved dramatic economic growth after World War II, but history does not tell of our struggle against the negative aspects of economic growth such as pollution. The Japanese have paid a high price for that economic growth,” he said.
Patel said the apartheid era in South Africa was another good example of how GDP as a metric did not reveal the whole truth of economic growth.
Metric
“From 1948 to about 1976, the South African economy grew at just under 5% a year. If GDP is our metric, then the country did very well. But what did the world see and the population experience?
“Growing inequality and poverty, and a low standard of education for millions of South Africans. In short, the economy did well, but the people did not.”
Stiglitz said a very large global movement was gathering momentum where discussions centred on what was measured, how it was measured versus what mattered to society. He used the US as a case study. “GDP has been going up in America every year except in 2009. But the median income is lower than it was 25 years ago. If GDP is going up but most people are not doing well, there is a sense that someone is lying,” said Stiglitz.
Fioramonti said research in Africa had proved that high economic growth had a “good friend” called climate change. “The country with the highest level of economic growth using GDP as a measure in 2013 was South Sudan, at 24.4%. Their growth is based on the extraction of natural resources, which has had a huge impact on the environment. When you start measuring things differently, the curve looks extremely negative. In fact, the people in that country are getting poorer and poorer.”
Fioramonti said GDP was not designed to measure real wealth. Economic contributors used to measure growth were also subjective. Following a meeting earlier this year with African statisticians, he said they wanted GDP as a metric to be complemented and integrated into a dashboard measure that should include human development, health quality, the quality and health of the environment and the opportunities for decent work.
He described GDP as a metric as “political statistical colonialism”. “It is true measure matters. But we have to regain democratic control over the targets we set ourselves in line with the needs and wishes and the cultural preferences of different countries,” said Fioramonti.