Among the countryís senior economic and banking managers, there are
intellectuals and international managers who are up-to-date.
Dr. Seyed Ahmad Taheri Behbahani is one of the unique personalities
in the world of science and practice.
I regret not paying homage to his recent book, "Mismeasuring Our
Dr. Taheri is on the verge of turning 90 and I wish him good health
and happy days.
Seyed Hussein Sanaei
Chairman & Editor-in-Chief, Iran International Magazine
Mismeasuring Our Lives
All over the world people believe they are being lied to, that the
figures are false; that they are being manipulated.
And there are good reasons for feeling this way. For years people
whose lives were becoming more and more difficult were being told
that living standards were rising. How could they not feel deceived?
ďNothing Is More Destructive of DemocracyĒ
ó Nicolas Sarkozy,
Mismeasuring Our Lives: Why GDP Doesnít Add Up
As we have seen from the crash of 2008, GDP can mask poverty and
or social unrest, as it is unable to record the number of people
being in debt or out of job.
Several years ago, by chance I had an opportunity to see a fascinating book
written by professor Ehsan Masood entitled ďThe Great Invention, The Story
of GDP and the Making and Unmaking of the Modern WorldĒ. This marvelous book
made me interested in the subject and urged me to translate the same into
Persian for the benefit of the academia, central bankers, policy makers and
This book is an interesting story about the history of appearance of GDP and
the motivations of those who first created this economic index for measuring
the growth of economy, hence it is claimed to show the development and
prosperity of the nations, so they called it ďThe Great Invention of the
Despite the fact that since the end of the Second World War, GDP has been
recognized and adopted as the favorite and principle index, by the world
leaders and the major influential international bodies, as the most
prominent and well accepted index for the measurement of the economic
development and prosperity of the nations, but this scale, ever-since, has
been challenged for its deficiencies, by the famous and prominent
economists, who believed that this was not an adequate measure to cover all
the major aspects of peopleís lives and to show the degree of their
prosperity and or their poverty and depravations.
As we have seen from the crash of 2008, GDP can mask poverty and or social
unrest, as it is unable to record the number of people being in debt or out
of job. The most powerful example of a country where attractive GDP figures
covered up deep social and economic problems was the well- known story of
Tunisia. The country which was famous as the crucible for the unrests and
the uprisings in 2011, known as the Arabs revolutions, and were frequently
called as the ďArabian SpringĒ.
These revolutions started in various Arabian countries, when a young street
vendor, named Mohamed Bouazizi, set himself a light on 17th December 2010
because of poverty. The man who was the sole breadwinner for his family,
took such an extreme decision as he did not have enough money to bribe the
cityís corrupt police to allow him to continue his trading.
Until the day Bouazizi committed suicide, it was believed by the economists
that Tunisia under the rule of Zine El Abidine Ben Ali was a prosperous and
growing economy with opened markets to international trade. Tunisia per
capita GDP was $4,169.00 in 2010, much higher than the years before, for
which the government was admired by the major international bodies,
including European Union and the OECD. The policies of Ben Ali were
enriching a small Tunisian middle class, which had enough money to spend on
more expensive things. This situation led to an increase in consumer
spending. The businesses were also investing and income from exports was
going up, particularly in clothing, crude oil, and high technology. What
they could not see in this scenario was that about one person in eight of
working age had no job. Because the figures of unemployment are not recorded
in the GDP formula, and it has no means to measure the prosperity, happiness
and the contentment of the people or otherwise. Therefore, Tunisia seemed to
be the model of growing economy.
This example demonstrates another deficiency in GDP. This index doesnít show
that there is rising inequality in a society. Even in the rich countries
where GDP has been steadily growing, average household income has not been
growing at the same rate. The resultant situation has shown that, since
1999, the growth and development in those economies has not translated into
prosperity for the middle and lower classes. According to the sources, on 16
September, 2014, The New York Times warns in its headline that:
ďYou Canít Feed a Family with GDPĒ
Here are other examples of the negative aspects of the GDP formula:
The destructions and the ruins resulted from the natural disasters like
floods and earthquakes, have positive values for raising the level of GDP of
a country, due to the amounts of expenditures incurred for the
Heavy traffic jams on the roads which cause pollutions and poisonous smokes
in the air which create respiratory diseases, counts positive in terms of
GDP, as you spend more on gas being consumed in the cars, and a lot of
expenses on doctors, hospitals and medication to cure the respiratory
Sarkozy decided to have a meeting with three prominent and
respectable thinkers all on the left of economic policy to
ensure whether they would agree with his thoughts on GDP.
On the whole, this index was designed and adopted by the wealthy nations
just to show the growth of the volume of their productions, the amounts of
money spent on the daily consumptions by the households and also the amount
of funds spent on the various governments projects. Above all, the wealthy
governments are very keen and proud of seeing their names to appear at the
high positions of the prestigious table of the worldís league. Hence, they
never agree to change GDP with another index which might show their
countries at the lower positions on the league table.
A great personality who seriously revolted against GDP and turned his back
to what he had learnt at the macroeconomics class of Cambridge University at
the time of John Maynard Keynes, was a young Mahbub-ul-Haq, who first serves
as the Pakistanís chief economist and later on as the Finance Minister of
his country. He was looking for an index that could take into account
quality of life, citizensí level of education, and their life expectancy at
birth. He later writes: ďAny measure [GDP] that values a gun several
hundred times more than a bottle of milk is bound to raise serious questions
about its relevance to human progressĒ.
Later on, when Mahbub-ul-Haq moves to USA to take up a position at the UNDP,
he invites his old friend of the old days of Cambridge economics class,
Amartya Sen, the prominent economist and later a Nobel Laureate, who was
too, against GDP, to join him in designing the ďUnited Nationsí Human
Development IndexĒ which has so far come closest to ďdethroning GDP.Ē
A canny and clever European politician who also was very much concerned of
the effects of GDP, was President Nicolas Sarkozy of France, who strongly
believed that GDP does not value those aspects of life that French culture
represents for, and even it does not value those aspects of life that have
no relations with money. Being impressed by the poor standards of living and
the discontent and doubt of the people all around the world, of the economic
data published by the authorities, he not only tried to discover the
problems and the deficiencies of GDP, but also to find a remedy for them.
His aim was ďto take a shot at no less than GDP itself.Ē
Sarkozy decided to have a meeting with three prominent and respectable
thinkers all on the left of economic policy to ensure whether they would
agree with his thoughts on GDP. He invited Joseph Stiglitz, the Nobel Prize
winner and an influential personality in support of reducing inequality;
also Amartya Sen, the co-inventor of the Human Development Index and now a
Nobel Laureate too, and also Jean-Paul Fitoussi, Sarkozyís economics
professor at Sciences Po, Paris.
In 2007, Sarkozy asked these economists to invite more of their colleagues
and organize a committee and discuss the issue of measuring the economies
and to summarize for him the latest possible alternative ideas for the
present GDP index. This committee was set up under the name of ďThe
Commission on the Measurement of Economic Performance and Social ProgressĒ
comprising thirty university professors and various experts and prominent
personalities from different influential world bodies. They spent eighteen
months to study and analyze, and finally prepared a comprehensive report for
President Sarkozy, on the ideal components of the indices and the criteria
for measuring of economic performance and quality of Life. The committee
members believed that the kind of metrics that are being used in measuring
our economic performances, will shape our beliefs and our inferences on our
standards of living. They recommended that we should shift our emphasis from
production to well-being and quality of life.
The concerns raised by President Sarkozy and the creation of this Commission
had attracted a global attention. There has been a resonance throughout the
world; even before the work of the Commission, as Bhutan had created in this
direction, a measure of GNH (Gross National Happiness), a symbol of total
happiness for its nation.
The Commission has identified the following key dimensions for the standards
of living and it has recommended that these standards should be taken into
Material living standards (income, consumption and wealth);
Personal activities including work;
Political voice and governance;
Social connections and relationships;
Environment (present and future conditions);
Insecurity, of an economic as well as a physical nature.
All these dimensions, shape peopleís well-being, and yet many of them are
missed by conventional income measures.
The Commissionís report covers in minute details all aspects of standards of
living and the various dimensions of the indices, necessary for the
measurement of wellbeing and the prosperity of the people and how to
organize the economies of the nations.
The Commission concludes its report with a comprehensive list of
recommendations on a wide variety of indicators for the assessment of
sustainability on various aspects of the standards of living.
The Commission believed that their study was neither the beginning nor the
end of a journey. They hoped that, what they have mentioned in their report
would be a sort of motivation for the concerned economists and policymakers
from different parts of the world to join them in this effort and come up
with any other solutions for creating a better and acceptable index for the
measurement of all aspects of the human life.
Let us hope
that this would be a motivation for the Honourable academia, economists,
statisticians and the media who are concerned for the social justice and the
economic development in our country, and perhaps they would join these
discussions and complete the unfinished journey of the selected Commission
of President Sarkozy.