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?

Corruption destroyer of GDP and Ecosystem

You may ask, am I serious? Can corruption destroy Earth? Oh yeah! Corruption in any form, in any part of the world, has first and foremost a serious impact on our Eco-system. Why do we need to pay bribes?

1. To create more industrial corridors and emit more poisonous gases. Isn't Carbon credit a form of bribe? It is like failing in an examination and purchasing marks from your friends so that you can pass the examination. In this case, purchase is being made, using Public money!
2. To get something cleared from Government officials. Say for example, Passport verification or Licence examination. You're increasing their social status by illicitly increasing their income. These officials, if they spend on purchasing Goods and Services, they are creating a demand which isn't  natural. This has problem in three folds:


1. The demand created by summation of all such corrupt officers is significant and will create a bubble
2. If these officers decide to hide this unaccounted money, these notes will go mutilated, imagine the amount of Paper which needs to be used for printing currency and the amount a country has to spend on printing. You may curb Black money by removing particular series of notes from your economy. This doesn't solve the ecological problem. Who is answerable to all those trees which were fell to make these notes? coal burnt to keep the press running?
   To met this artificial demand, arising out of corruption, companies will have to produce more Goods and Services, which translates to nothing but more Pollution
3. With that in mind, the real GDP of any country should be
   
   Real GDP = GDP - % of level of corruption in that country
   
   For example, lets say GDP of country 'S' is 10. If we can estimate that level of Corruption is 3. Real GDP is 7.
   This % of corruption should be used to arrive at the real demand too
4. Look at the level of Corruption across the world. Now, are the GDP figures realistic? (Image source: transparency.org)
   
        
5. The above image shows, Five of 10 most Corrupt countries also rank among the 10 least peaceful places in the world
3. As the level of corruption increases, there is ample scope for humans to destroy wild life, fell more trees, increase in dust and pollution
4. Corruption not only increases the income illicitly, but also increases the luxurious needs. This robs an opportunity for the resources to be efficiently utilized. For example, a dishonest officer, earns more, and buys a luxury car, his need to purchase a car is not only dubious, but the GDP he created through the purchase of the car and also for its maintenance should not be accounted for as the purchase in itself is illegal and the most precious natural resource, 'Fuel' is not efficiently utilized.
5. According to transparency.org, BRICP nations and their overall rank amongst 168 nations are, Brazil - 76, Russia - 119, India - 76, China - 83 and Pakistan - 117. With some of the most populous countries having such low scores isn't a good news isn't it?

So, its an urge to all the readers, please do not accept or pay bribes.

(images are not owned by the Author. They are used only for representational purposes. Images downloaded from: http://www.transparency.org/cpi2015)