“GDP is not a good measure of economic performance, it’s not a good measure of wellbeing”.
Joseph Stiglitz, Economist and Nobel Prize Winner
“Nigeria is the largest economy in Africa, with a GDP of $492.892 billion (Nigerian Bureau of Statistics, 2015). Your country’s (South Africa) GDP is only $323,808”. Mr. Frank simply laughed and said,
“There is a difference between growth and development. In Africa, when a pawpaw seed grows up and keeps getting taller and taller without growing enough roots and branches, it loses balance on the day of great storm. I may not know much figures about the economies, but I know I am living a better life than you. I live in Johannesburg, our streets are well built and maintained. I attended the best university in Africa, the University of Cape Town. I studied computer Engineering and I can program, how many Nigerian university students can? President Obama came to South Africa twice, how many world leaders come to Nigeria? More people are living well in South Africa, more than 60% of your people are poor and illiterate. Those figures you gave me are meant to deceive you to keep answering giant of Africa. We are the giant of Africa because we live better”.
That was an interesting conversation between me and a South African journalist whom I met on Dr. Strive Masiyiwa’s facebook Entrepreneur’s Forum. Mr. Frank’s arguments brought me to a new level of consciousness about the African belief that growth doesn’t actually suggest development, and how perfectly it relates with GDP as the basis for measuring growth among economies. Gross Domestic Product (GDP) is the value of the final goods and services produced in a country in a year.
The more I tried to think about the meaning of GDP and the relationship it has with Mr. Frank’s statements, I saw a large difference between the GDP of a country and the actual economic situation of the country which is better judged by the level of comfort of the citizens: whether they have jobs, good roads, quality and affordable healthcare, level of freedom, level of inclusiveness, etc. I saw how wrong we have been to measure development and wellbeing by the value of goods and services that we produce, neglecting the level of comfort and satisfaction of those whom the goods and services are meant to serve.
Indeed, those figures that I gave Mr. Frank are meant to distract not only me but all Nigerians and give us false confidence that we are growing economically, when the basis of economic growth is the development of infrastructure, quality education, quality and affordable healthcare and the creating of good jobs. In the course of writing this article, I discovered that this year’s World Economic Forum annual meeting in Davos dealt extensively on this subject. Respected stakeholders like the Nobel Prize Winning Economist, Joseph Stiglitz, IMF head, Christine Largarde and MIT Professor Erik Brynjolfsson all agreed that GDP is a poor indicator of progress. One of the worst pitfalls of using GDP as an indicator of growth is that, it makes people to lose sight of the wellbeing of the citizens. It doesn’t tell the stories of poverty, lack, deprivation and inequalities in the economy.
In the race for economic prosperity, African economies should deviate from this global error and focus on using a Social Progress Index as a basis for measuring economic growth and development. This will help the African countries to see the welfare of their citizens as the basis for economic growth and development.