The faulty GDP

There is a proverb in English, 'Ignorance is bliss'. Unfortunately, there are certain things in life which you cannot ignore. Period. Every country today is in a race. Race to be the number one Economic Giant. Is there something wrong? In this case, yes. Other factors being constant, historically wars were waged by different races and what was the purpose usually? To expand their territory, so that, they would have access to more and more resources. Modern history repeats the story. Why do China or Pakistan want to have control on Kashmir? Water. Why does US want to control Middle East? Oil. Why are countries interested so much in Africa? Natural Resources.

                             

Why are Nations interested in Resources? More resources translates to more production at cheaper rates, which gives them the power of supply and the power to control markets. 'Producing' more is unfortunately viewed as an opportunity for more Sales and thereby Profits and one of the chief parameter which is used to measure a county's progress or prosperity is the amount of 'Production' or 'GDP'. (Though GDP is measured in 3 ways - Production, Income and Expenditure, this post chiefly is aimed at Production method)

They say, All the best things in life are free. What they don't tell you is , 'All the best things in life are free, as long as they are not commercialised'. The moment you assign a monetary value to a Natural Resource, it is no longer free! When we are utilising resources, we are doing so at a cost. The trade off here is, we are utilising the resources at future generations' cost. What we are ignoring today is to include this cost in the overall Production. What we are ignoring is to include the cost needed to replenish these resources.

Natural Resources, unfortunately as on date can not be replenished. It is only fair for us to use resources responsibly which we have borrowed from our future generations. If any Good / service when produced is being wasted repeatedly, means nothing but someone is producing them just for the sake of producing it. There is no real need. According to World food USA

• Every year, consumers in industrialized countries waste almost as much food as the entire net food production of sub-Saharan Africa (222 million vs. 230 million tons)

Stop wasting food!

What does it imply? These nations produced 222 Million tons of waste! They have produced this food by draining Water, Coal, Cereals, polluting air and destroying ecosystem etc., Who is accountable for this wastage? A nation which 'produces' this waste should be held accountable. This is just an example of Organic waste. Consider inorganic waste! This wastage ironically also forms part of GDP!

A country's GDP doesn't always give you the correct picture of its prosperity. A country with high corruption levels illicitly increases several persons' income. Government expenditure on welfare programs doesn't necessarily reach the target population. In such a scenario, a segment of population will have to spend a major part of the income on Basic needs. Corruption prevents certain segment in a country to participate in the 'production' part of the country and restricting their social class or status of living up-gradation. The income lost due to this corruption is also accounted as 'Government expenditure'. The income gained by several individuals illegally by corrupt practices could also be used to avail of the services or to buy goods produced by the country.

Don't you see the fault in our so called race to be an Economic super power? We are basing our calculations on certain parameters which conveniently ignores the facts and gives false hopes. Right then what should be the correct method of calculating GDP? According to me it should be calculated by reducing certain parameters from the GDP. Let's call these parameters Arka's Delta)

GDP = GDP - (Arkas Delta). Where Arkas Delta = (Cost required to restore renewable resources to initial state before utilising them + % of corruption in the country * GDP)

After arriving at GDP post the calculation, I would like to see which country Ranks first! What do you say? Is it a wake up call yet?