Myanmar’s Growth, Beyond GDP

The International Monetary Fund (IMF) recently released it’s projections for GDP growth in the year 2016. The country on top of the list? Myanmar. At 8.6%. That’s a lot and is (on the surface) quite encouraging for a country who’s economy pales in comparison to even the economy of it’s neighbor, Thailand. With vast political and economic reforms have come increased consumer confidence, large inflows of foreign direct investment, and a strengthened partnership with “the international community”.

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But, as any economist will tell you GDP is a measurement of economic performance not a measurement of well-being. In fact, rapid economic growth, like what Myanmar is experiencing at the moment, can result in a range of effects on well-being. At the extremes of this range are effects that seem to be opposites of each other. Here is Ghatak, Ghosh, and Kotwal (2014) commenting on the past decade in India:

[2004-2013 was] a period during which growth accelerated, Indians started saving and investing more, the economy opened up, foreign investment came rushing in, poverty declined sharply and building of infrastructure gathered pace . . . [But a] period of fast growth in a poor country can put significant stress on the system which it must cope with. Growth can also unleash powerful aspirations as well as frustrations, and political parties who can tap into these emotions reap the benefits.

If the next decade for Myanmar looks at all like the past decade for India, many would consider this to be a success. As the economy opens up bringing with it accelerated growth, increased foreign investment, large investments in infrastructure, and a sharp decline in poverty on average; questions remain. Will these advancements unleash powerful aspirations or vast frustration? Will the dividends of peace, security, and democracy include the farmers, fishermen, entrepreneurs, and families in the rural areas or will the impacts be contained to the rapidly developing urban areas?

Measuring Well-being

Martha Nussbaum, perhaps one of the sharpest thinkers on development, poverty, and inequality, writes a critical yet constructive review of Angus Deaton’s recent book, “The Great Escape: Health, Wealth, and the Origins of Inequality“. This review (almost) has it all – from discussing the practical use of GDP as a measure of wellbeing to breaking down the inherent difficulty in cross-country purchasing power comparisons in terms of marmite and bourbon, Nussbaum exemplifies true academic criticism.

Really quite a necessary read, I’ve cut out my favorite section of the piece – but you should really read the entire article.

Basically, Deaton’s view is that welfare, or the good human life, has many component parts, each one valuable in its own right. The good life is much more than money: it includes health, education, freedom from discrimination and oppression (including “not to be the victim of others’ search for enrichment”!), and the ability to participate in democratic society on a basis of equality. Even that list of components is too simple, given that each component is itself plural. Health, for example, has many dimensions, including physical robustness, cognitive well-being, and life expectancy. Deaton is at his best when he insists that measures of well-being rest on ethical judgments, even in an area as apparently simple as health. Accentuating life expectancy, for example, has the effect of prioritizing mortality decline among the very young. Meanwhile a focus on height, used judiciously, can supply a part of the picture of how people are really faring in the prime of their lives, since height, affected by maternal and child nutrition, is strongly correlated with both bodily robustness and cognitive capacity.

Thus Deaton is strongly, and repeatedly, critical of the idea that we can measure human well-being by GDP per capita, a standard shortcut in the development literature, and one with large political implications. (Narendra Modi, India’s recently elected prime minister, campaigned on his alleged development achievement in Gujarat: but closer inspection shows that, while Gujarat did very well on average GDP, it did much less well than Kerala and Tamil Nadu on health and education, in part because of the excellent quality of government services in those states, while Modi appears opposed to a large role for government.) Even if average GDP were the best single number to use as an index of welfareand Deaton disputes this, making the familiar point that the profits of foreign investment are often repatriated by the investing country, so average household income would tell us more about how people are really doingno single number is much good, given the complexity of human lives and what is worthwhile about them. Average GDP, moreover, does not include work done in the home (a point often stressed by Nancy Folbre and other feminist economists that has finally made it into the mainstream), and it does not include the value of leisure. And although there is a general correlation between GDP and some of the other good things Deaton mentions, the correlation can be disrupted. The high average GDP in the United States, for example, does not tell us about the inequalities that make for ill-fare (bad health, bad education, lack of political voice) in a distressingly large number of the nation’s inhabitants. These points are not new; they have pervaded the development literature for some time; but it is good to see them ringingly endorsed.

Nor does Deaton succumb to the lure of the once-again fashionable idea that we can measure welfare by “happiness,” defined as moment-to-moment feeling. (“Once again” because the similar view of Jeremy Bentham in the late eighteenth century, soon aptly criticized by his student John Stuart Mill, has now been revived with great éclat by the psychologist Daniel Kahneman, though without attention to Mill’s critique.) Feelings are important, says Deaton, but they are not reliable indicators of how people are really faring, because people adapt to hard conditions and to some extent tailor their satisfactions to what they think they can achievethe phenomenon known in the economic literature as “adaptive preferences.” Moreover, Deaton adds, some valuable pursuits, such as love and the struggle for justice, require risk and effort, and may be accompanied at times by pain. Happiness, he concludes, is “a poor measure of overall wellbeing.” If we are to pay attention to survey data, he wisely suggests, we ought to prefer “life evaluation” surveys, which at least allow people to ponder many parts of their lives. But the important conclusion to draw, he says, is that there is no single measure of this complex notion, and “no magic question that provides a touchstone for judging well-being.”

Continue reading…

Links I Like [5.14]

1. 15 Famous Landmarks Zoomed Out to Tell a Bigger Story

2. Recalculating Kenya’s GDP

3. 21 of the Greatest Graduation Speeches
Confession: I have a soft spot for semi-intellectual overly existential graduation speeches.

4. Development Economics Defined?

5. Who Wants to Farm?

6. Pictures of North Korea

7. Bonus! Info-graphic from an excellent special issue of Science Magazine on the Science of Inequality.

infographic