Last Updated- Feb 13, 2009 11:21 - - 0 Comments


Graphic Business: Our obsession with GDP

gdpIs it that the true state of the Ghanaian econo­my is a mystery? It seems a mystery if you listen to the arguments in the media. Last week, a local newspaper reported that the country recorded a GDP growth rate of 7.2 per cent in 2008, but members of the Gov­ernment Transitional Team are prevailing upon the National Statistical Service to change the figure to reflect the current regime’s assessment that the economy is in dire straits.

According to the paper, when the “impressive” growth rate was revealed at the recent government budget consultative meeting at Akosombo, it generated so much debate because some members of the current government were not happy.

If indeed the provisional figures are correct, then as the paper rightly pointed out, it will be a good achievement. In fact in the coun­try’s history, growth rate of 7.2 per cent is rare.

In 1978, according to experts, the nation recorded a GDP growth rate of 9.3 per cent, and also 8.3 per cent in 1984. It is estimated that an improved agricultural sector accounted; for the impressive growth rate in both years.

But what accounted for the estimated growth of 7.2 per cent in 2008 is still unclear. Some commentators believe that massive spending in the last quarter of 2008 on the parliamentary and presidential elections played a part.

Other analysts are strongly of the view that it was not possible for the economy to grow by that much in 2008, given the slow global economic climate, especially with the cred­it and financial market crises that sent many industrialised economies into reces­sion.

However, we believe that our obsession with GDP growth as a reflection of the well­being of the nation is completely wrong.

We are aware that great economists, such as Paul Samuelson, a Nobel laureate and author, have described GDP as “truly among the great inventions of the 20th cen­tury, a beacon that helps policy makers steer the economy toward key economic objectives “. But that does not mean that it entirely measures the true state of an economy.

Defined as the sum of all goods and services produced in a country over time, without double counting products used in other output, GDP measures income, but not equality; it measures growth, but not destruction; and it ignores values such as social cohesion and the environment.

As we have reported before, in June 2000, for example, economics students in France published a petition on the web protesting the excessive use of mathematics in economics, which led to what they called “autistic science” (that is, out of touch with reality). They complained mainly about the repressive domination of neo-classical the­ory. They were later supported by other academics.

In the “Death of Economics”, Professor Ormerod, an economist; wrote: “Orthodox economics is in many ways an empty box. Its understanding of the world is similar to that of the physical sciences in the Middle Ages.”

We are of the view that it is the obsession of policy makers with mathematical models that has led them to be out of touch with reality.

The ordinary Ghanaian is very much aware of what goes into his or her pocket, and they will calculate their own “GDP” based on the reality on the ground.

Therefore, we should stop all the argument about GDP and pull together in one direction to move this great nation forward.

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