Chasing the big dreams

Our economy, according to growth data, is shining and shining inspiring us to dream big.

Bangladesh's economic growth hit a record 8.15 percent in the last fiscal year. This is a continuation of the success of our growth. We averaged more than 6 percent growth over the last one decade. The strength of our growth is its consistency encouraging the government policymakers to claim that today's Bangladesh is financially strong and therefore a small bump cannot shake its core. Our target is to boost the growth to 10 percent in the next five years.

At present we are among the five fastest-growing economies in the world. Rapid growth enabled us to reach the lower-middle income country status in 2015. We want to be a middle income country by 2021, the year when Bangladesh will celebrate its golden jubilee. Per capita income of people will be over $5,479.

We have some more milestones to reach. Bangladesh has fulfilled all three eligibility criteria for graduation from the UN's list of Least Developed Countries (LDCs) for the first time and are on track for graduation in 2024. We desire to become an upper-middle income country by 2030 and a developed one in 2041.

There is no dearth of praise for growth success. It has been lauded by global financial institutions including the World Bank. They also forecast a rosy picture about our future growth. Bangladesh will be the world's 26th largest economy by 2030, according to an HSBC projection.

If we assess the health of our economy solely based on the growth data, we have no reason to be worried about. We will have plenty of reasons to celebrate the success.

This is why the Financial Times senior journalist David Pilling wrote a few years ago: "The beauty of gross domestic product is its single figure. It squishes all of human activity into a couple of digits, like a frog jammed into a matchbox. As this image of an unfortunate amphibian suggests, this condensing is also GDP's flaw."

He, however, raised some crucial questions: "How can the sum total of everything we do as human beings be so compacted? How can our activity be conflated with something as complex, nuanced and contested as our wellbeing?"

Our economic growth data alone looks bright and inspiring. But, if we assess other economic indicators such as the quality of our education, health, environment, and employment, and rising inequality and social injustice, we will find reasons to get worried. Our anxiety may increase further if we shed light on the fragile banking sector struggling with loan scams and unstoppable rise in soured loans and weakness in the stock market.

All these problems lead to important questions: Is our growth inclusive and sustainable? Can the growth data alone measure people's wellbeing?

The origin of GDP

This is interesting to note. The modern conception of gross domestic product – or the GDP – was a product of war. But, the original concept is a product of the Great Depression of the 1930s.

US economist Simon Kuznets is often credited with the invention of GDP, a device to measure economic growth. Kuznets attempted to estimate the national income of the United States in 1932 to understand the full extent of the Great Depression the US was experiencing then. He developed the first estimates of aggregate national income in the early 1930s at the request of the US Commerce Department.

In 1934, he and his team of researchers presented their findings to the US Senate in a 300-page report. The data from that report provided Congress and the US president with the first comprehensive snapshot of economic activity and led to the introduction of national income statistics in 1942.

This should be noted that nearly 30 years later, Kuznets received the Nobel Prize in economics "for his empirically founded interpretation of economic growth".

World War II contributed to the evolution of the modern definition of GDP. This time an UK economist is its inventor.

In 1940, one year into the war with Germany, John Maynard Keynes who was working in the UK Treasury, published an essay, complaining about the inadequacy of economic statistics to calculate what the British economy could produce with the available resources.

Keynes argued that such data paucity made it difficult to estimate Britain's capacity for mobilisation and conflict.

According to the UK economist, the estimate of national income should be the sum of private consumption, investment and government spending. He rejected Kuznets' version which included government income, but not spending, in his calculation.

Keynes realised that if the government's wartime procurement was not considered as demand in calculating national income, GDP would fall despite actual economic growth taking place. His method of calculating GDP, including government spending into a country's income, which was driven by wartime necessities, soon found acceptance around the world even after the war was over. It continues to this day.

The US economist, Kuznets never intended for his national account scheme to become the country's most relied upon measure of economic progress. In his original report to the Congress, he wrote: "The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income."

He understood that the tools he gave policymakers were limited. They didn't take into account all the aspects a true measure of economic wellbeing would have. By definition, national accounts tabulate only goods with a price tag, leaving out all the things we do for each other, such as the unpaid time that parents spend caring for their children, or the unpaid time adult children spend caring for their ageing parents. So, Simon Kuznets was adamant that his measure had nothing to do with wellbeing.

Can GDP measure wellbeing?

More than five decades ago, US senator Robert F Kennedy said: "Gross Domestic Product measures everything, in short, except that which makes life worthwhile."

He had a point. GDP is indeed a crude device to measure wellbeing. It represents the market value of all goods and services produced by the economy, including consumption, investment, government purchases, private inventories, and the foreign trade balance.

In recent times, many prominent economists have argued in the same line. At the World Economic Forum in Davos, Switzerland a few years ago, the International Monetary Fund's former head Christine Lagarde, Nobel prize-winning economist Joseph Stiglitz and MIT professor Erik Brynjolfsson noted that "GDP is a poor way of assessing the health of our economies and we urgently need to find a new measure."

Two economists – Amit Kapoor and Bibek Debroy – in a joint article published in the Harvard Business Review in October 2019 have also come up with the same views. Economic growth, they write, has raised living standards around the world. "However, modern economies have lost sight of the fact that the standard metric of economic growth, gross domestic product (GDP), merely measures the size of a nation's economy and doesn't reflect a nation's welfare.

"Yet policymakers and economists often treat GDP, or GDP per capita in some cases, as an all-encompassing unit to signify a nation's development, combining its economic prosperity and societal well-being. As a result, policies that result in economic growth are seen to be beneficial for society."

They argue: "We know now that the story is not so simple – that focusing exclusively on GDP and economic gain to measure development ignores the negative effects of economic growth on society, such as climate change and income inequality.

"It's time to acknowledge the limitations of GDP and expand our measure of development so that it takes into account a society's quality of life."

Mark Thoma, a professor of macroeconomics at the University of Oregon, in an article in 2016 for CBS News focused on five major problems to measure welfare by using GDP. One of the problems is GDP counts "bads" as well as "goods". For example, when an earthquake hits and requires rebuilding, GDP increases. When someone gets sick and money is spent on their care, it's counted as part of GDP. But nobody would argue that we're better off because of a destructive earthquake or people getting sick.

The other problem is GDP doesn't adjust for the distribution of goods. Again, economist Thoma writes: "Imagine two economies, but this time one has a ruler who gets 90 percent of what's produced, and everyone else subsists – barely – on what's left over. In the second, the distribution is considerably more equitable. In both cases, GDP per capita will be the same, but it's clear which economy I'd rather live in."

The other problem is GDP isn't adjusted for pollution costs. If two economies have the same GDP per capita, but one has polluted air and water while the other doesn't, wellbeing will be different but GDP per capita won't capture it.

Given those arguments many economists have concluded that GDP is not a measure of human wellbeing. Therefore, we should not feel comfort by assessing the health of the economy solely based on growth data. If we do so, we certainly miss the bigger picture. Problems including rising inequality, poor education and health, lack of governance in financial sector and joblessness speak about the bitter truth: growth did not ensure improvement of the quality of people's lives as much as expected.

Where does our future lie?

With our government policymakers continuing to paint a rosy picture of the economy banking on the growth, some experts however are voicing concerns pointing to weaknesses in the economy. Their concern is about sustainability of our growth as the economy is experiencing some problems, including troubling rise in inequality and soured loans and fragile stock market, and a slump in private investment.

One of the major weaknesses in our growth story is unemployment. This is why experts often call it jobless growth. Inequality is also a killer.

Five years ago, the International Monetary Fund backed economists who argue that inequality is a drag on growth in a discussion paper that has also dismissed right wing theories that efforts to redistribute incomes are self-defeating.

The Washington-based organisation that advises governments on sustainable growth said countries with high levels of inequality suffered lower growth than nations that distributed incomes more evenly.

Backing the analysis by Joseph Stiglitz, it warned that inequality can also make growth more volatile and create the unstable conditions for a sudden slowdown in GDP growth.

In 2015, the United Nations offered a view that sustainability includes a focus on areas as diverse as poverty, hunger, health, education, gender equality, environment and social justice.

"Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working age population," says the global body, explaining the necessity of decent work and economic growth, one of the UN Sustainable Development Goals (SDGs).

"There needs to be increased access to financial services to manage incomes, accumulate assets and make productive investments. Increased commitments to trade, banking and agriculture infrastructure will also help increase productivity and reduce unemployment levels in the world's most impoverished regions."

Bangladesh's economic development is being offset by massive inequality despite an improvement by a notch in the Human Development Index (HDI). The HDI notes that Bangladesh is facing vast inequalities in income, education, health service and employment based on region, gender, dominance and income groups.

These are roadblocks to Bangladesh becoming a developed country. To sustain the economic progress, Bangladesh needs continuity in priority reform areas: financial sector, fiscal, infrastructure, human capital and business regulation.

In view of Asian Development Bank President Takehiko Nakao, if Bangladesh wants to become a developed country by 2041, it needs to clock in at least 10 percent economic growth for the next two decades.

To expedite the growth, we must make our growth inclusive by a variety of measures. We must take measures to ensure social justice by fighting inequality.

The gap between the rich and the poor seems like it is always expanding. The fact that some people struggle to buy enough food for their children while others get millions of dollars in a severance package is simply not fair. Equality doesn't mean that everyone is rich, but it should mean that everyone is able to meet their basic needs and live without being afraid that one setback could put them on the streets. Social justice is about securing everyone's economic stability.

We must ensure quality of education to ensure social justice. No Bangladeshi university has made it among the top 1,000 universities in the world in a global ranking by the UK-based Times Higher Education (THE) World University Rankings 2020 published last September. India and Pakistan have 36 and seven universities respectively.

Quality of education will generate skilled manpower to build our country. The readymade garments sector is the main source of our export earnings. But in more than three decades, we still have a crying need for skilled professionals as the industry lacks skilled mid-level management.

Our remittance earners are also low-skilled. According to the World Migration Report 2020 of the International Organisation for Migration, Bangladesh ranked 6th among migrant origin countries. However, it did not have any berth among the top 10 remittance-receiving countries that year and it is only because of the low quality of education.

We must fight environment pollution. A polluted environment destroys people's vitality. For example, there has been an alarming increase in the number of patients with respiratory diseases as the air quality deteriorates day by day. In the last five years, the number of asthma patients rose by a factor of 24 to 78,806 in 2019 from 3,326 in 2015. Deaths from the disease went up 10 folds to 588 from 56 in the same period.

Our ranking in other global indices such as rule of law, corruption, press freedom, democracy and doing business is also poor. All those indices indicate we have come a long way to fulfil the dream of our Father of the Nation Bangabandhu Sheikh Mujibur Rahman who dreamt of a country free from social injustice and inequality.

All our future course of actions should focus on making our growth inclusive, sustainable and free of all sorts of inequalities. If we can do so, the big dreams will no more remain as dreams. It will come true FAST.