STRAIGHT FROM THE BIG CITY

Understanding the economy
Ike "Ka Iking" Seneres

Former National Economic Development Authority (NEDA) Secretary General Solita Monsod appears to be one of the few prominent economists who truly understand the difference between national growth and national development. She says that an increase in the gross domestic product (GDP) may indicate national growth but not necessarily national development, and she is absolutely right.
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Not too many people know that the Chairman of the NEDA is also the President of the Philippines, and because of that, all statistics released by the Palace coming out of NEDA would appear to be self-serving. Until now, the NEDA has apparently not recovered from the negative perception that it “cooked” official reports during the Marcos Era and continued doing so under Cory, Fidel and even under Erap. Could it be that the NEDA is now trying to redeem its name under Gloria?
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The GDP is an artificial device that is used to measure the total value of all goods and services that is produced by a country in a given year. It is artificial in the sense that the figures reported are not empirical but are instead theoretical, based on a set of assumptions that are rooted in mathematical estimations. Good as it is for planning purposes, I could not imagine what good it can do to measure the real state of development in our country, bearing in mind that it is fundamentally different from growth.
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For good measure (pun intended) other countries use “housing starts” as an indicator of economic growth. By comparison, a country could report an increase in its GDP, but that would not necessarily mean that its citizens could already afford to buy their own houses. Although the construction of more homes are theoretically included in the estimation of the GDP, it is very obvious that the rise in “housing starts” would indicate not just growth but also development, since the supply of housing would increase in relation to its demand.
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Before our government propagandists would go heads over heels over the alleged miraculous effects of a GDP rise, they should first have a reality check about the real meaning of this economic measure, checking as well how far this data sets would travel from the brains of the NEDA bright boys to the stomachs of our poor and hungry people, boys and girls alike. The NEDA could say that the GDP went up because more pomade was produced and more haircuts were “delivered” so to speak. I can see how pomade production could be quantified, but by what magical method could the government count the number of haircuts?
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Strictly speaking, the GDP is really just a measure of the aggregate value of goods and services produced by a country in a given year, without directly linking the data to its probable effects upon growth and development. In line with this reality, some sectors are advocating the inclusion of the value added created by housewives (homemakers) who cook for, wash laundry and iron clothes for their families, among other tasks. These sectors say that the value that these housewives created should be counted as products that are domestically produced.
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In theory, the GDP is really just a subset of the Gross National Product (GNP), the GNP being a measure of all goods and services produced by the country, including those that were produced or sourced abroad. Should the foreign remittances of overseas Filipino workers (OFWs) be counted as part of the GNP or GDP? It may be counted as part of the GNP, but definitely not as part of the GDP. I wonder how the government is booking OFW receipts into the GNP, but perhaps “indirect manpower services” would do.
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If there is anything to brag about, the government should boast about its estimated poverty eradication (EPE) rate whether or not its computation is directly related to the rise and fall of the GNP. By comparison, the EPE is a more concrete measure of the success or failure of governance, compared to the rather abstract measure of the GDP as an indicator of the economy getting smaller or bigger.
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For those who are reading my column for the first time, please take note that I am now using “poverty eradication” as my preferred term over “poverty reduction”, inspired by my new found belief that poverty could actually be eradicated, and not just reduced. Let us hope for the best!
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