GDP not true measure of well-being

By Li Xing
0 CommentsPrint E-mail China Daily, February 18, 2011
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Soon after the global financial meltdown, several leading economists called on world leaders to learn from the crisis and rethink one of the conventional indicators of economic development: gross domestic product (GDP).

GDP, they pointed out, measures economic activity, not economic benefit.

"If we have poor measures, what we strive to do (say, increase GDP) may actually contribute to a worsening of living standards," Nobel Prize laureate Joseph E Stiglitz wrote in an article titled GDP Fetish.

Unfortunately, GDP continues to be used as a convenient indicator for measuring national, and especially regional, economic performance.

Internationally, there has been a clamor in the media this week about China "officially" overtaking Japan as the world's second largest economy. However, most Chinese media have taken the news with a grain of salt, pointing out that while China's GDP reached $5.88 trillion last year, its per capita GDP (less than $4,000) lags far behind that of most developed nations.

Within China, however, the obsession with GDP continues and regional GDP figures are still eulogized, with all but Shanghai registering double-digit growth.

"Jiangsu's GDP in 2010 surpassed 4 trillion yuan ($607 billion)", boasts the official Jiangsu provincial government website in big, bold, blue type on Wednesday.

There is no denying that the Chinese economy has continued to grow despite all types of challenges, such as natural disasters. Every region has its own achievements to celebrate, in addition to double-digit growth.

Jiangsu's per capita GDP last year reached $7,700. It ranked first in the nation in the scope and amount of foreign direct investment, as well as in the amount of scientific and technological innovation and achievement.

Guangdong province amassed more than 4 trillion yuan in GDP last year; its per capita GDP reached $7,000. It also leads the nation in the number of high-tech development zones, the number of new companies listed on the stock exchange, tourism revenues, and the combined capacity of nuclear power plants in operation and under construction.

Meanwhile, the province enabled 10.4 million farmers to get access to clean drinking water and helped upgrade toilets in 1 million farming households.

But as Simon Kuznets, the inventor of GDP, warned in 1934: "The welfare of a nation can scarcely be inferred from a measurement of national income."

However, there are projects that while benefitting some people and enhance GDP have negative consequences as well.

In Jiangsu's Xiangshui county, development of a chemical industrial park several years ago brought the county much-needed foreign direct investment and tax revenues. However, local people live in constant fear after an explosion at the park killed and wounded more than 50 people in 2007.

In November last year, some 30 workers were poisoned as a result of a chlorine leak in one of the plants in the park. Early in the morning of Feb 10, residents heard that another explosion was imminent and attempted to flee. Four people were killed and dozens wounded in the ensuing chaos.

Nanfang Daily reported last month that when septic tanks were installed in residential areas to upgrade toilets, the waste water was discharged directly into the waterways near residents' homes.

"The once flowing rivers are dead; the water is dirty and polluted," the newspaper reported.

New roads linking villages to towns and cities have immediate economic benefits. In many cases, however, parts of the waterways are filled in during construction.

While GDP continues to grow, these seemingly small oversights not only compromise people's pursuit of health and happiness.

As China finalizes its next five-year plan, it should ask leading economists and statisticians to devise better economic indicators that more accurately depict the nation's social and economic performance.

The author is assistant editor-in-chief of China Daily. E-mail:

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