Comparing economic progress, or is it a joke?
I am reminded of a senior officer in the government who would ask all division heads to give total number of pending legal cases at the end of the month. The ones who could show none or just a few cases would be appreciated and those with a large number of pending cases would be publicly reprimanded. The irony was that the one with the largest pendency was the one who cleared the largest number of cases month after month. The second unlucky one was the one who had lesser number of cases but each was an extremely tricky case that took years to resolve.
Coming to the economy. Politicians tout economic figures during their period, choosing the base year as it suits them, especially those of inflation. So, you could say, the price of a particular item, which was Rs. 35 a kilo in 2013 has gone up to Rs. 65 now, becoming double in six years. Your opponent might take the figure of even 2 years before when the price of this item might have been high for some days, at Rs. 50 and claim that it has gone up just 30% in eight years. We have seen this even in newspapers: they compare figures in a way that shows governments or people of their liking in good light.
Besides this type of data-jugglery by politicians, there is a genuine but misplaced trend analysis by economists themselves. They may not be politically-aligned but the only available data that they can play with is in absolute terms, as in the case of pendency of legal cases. The GDP was one trillion dollars on a day last year and it has become 1.08 trillion dollars today, so it has grown 8 percent. Fine, but does it estimate the effort made by the government – no way. If there were successive droughts or years of copious rains, the base of a particular year was quite high or low due to earlier factors, or the crude oil price went up too high or turned too low – that would impact the growth rate much beyond the control of the government. Sometimes, the best decisions and appreciably hard work by the government might be washed away due to extraneous factors and sometimes the opposite would happen.
That apart, economic growth is a mere flat number. It does not measure actual increase in prosperity. It adds up all income/ expenditure including the most worthless one, and discounts efficiency and savings achieved through modern technology and procedural innovations. In addition, it does not tell about disparity and regional variations.
So, what do we measure in the name of economic growth? Pendency of cases at the end of the month. Some of it purposely, some because we do not want to do a better job, and some because we do not have the capacity to do better.
Coming to the economy. Politicians tout economic figures during their period, choosing the base year as it suits them, especially those of inflation. So, you could say, the price of a particular item, which was Rs. 35 a kilo in 2013 has gone up to Rs. 65 now, becoming double in six years. Your opponent might take the figure of even 2 years before when the price of this item might have been high for some days, at Rs. 50 and claim that it has gone up just 30% in eight years. We have seen this even in newspapers: they compare figures in a way that shows governments or people of their liking in good light.
Besides this type of data-jugglery by politicians, there is a genuine but misplaced trend analysis by economists themselves. They may not be politically-aligned but the only available data that they can play with is in absolute terms, as in the case of pendency of legal cases. The GDP was one trillion dollars on a day last year and it has become 1.08 trillion dollars today, so it has grown 8 percent. Fine, but does it estimate the effort made by the government – no way. If there were successive droughts or years of copious rains, the base of a particular year was quite high or low due to earlier factors, or the crude oil price went up too high or turned too low – that would impact the growth rate much beyond the control of the government. Sometimes, the best decisions and appreciably hard work by the government might be washed away due to extraneous factors and sometimes the opposite would happen.
That apart, economic growth is a mere flat number. It does not measure actual increase in prosperity. It adds up all income/ expenditure including the most worthless one, and discounts efficiency and savings achieved through modern technology and procedural innovations. In addition, it does not tell about disparity and regional variations.
So, what do we measure in the name of economic growth? Pendency of cases at the end of the month. Some of it purposely, some because we do not want to do a better job, and some because we do not have the capacity to do better.