GDP may have improved but our lives haven’t

The Permanent Secretary (PS) Mr Ramathan Ggoobi to the Ministry of Finance recently wrote an opinion article in the Daily Monitor, educating us about Gross Domestic Product (GDP). Despite the PS’s attempts to explain GDP as “your everyday life,” he inadvertently unearths what is problematic about GDP and its deficiencies in measuring human well-being.

GDP tells a single and convenient story of economic health as it flattens and abstracts the complexity of everyday life into a single digit-- a proxy for how well we are doing. Contrary to the PS’s argument that GDP cares about non-material wellbeing such as freedom of choice, self-esteem, and peace, evidence shows that all these are secondary, as ultimately GDP only concerns itself with the monetary value of goods and services. For the neo-classical school of economics, peace is not desired as an end in itself, but to create the atmosphere for uninterrupted market production. The example the PS uses of a bullet fired near a restaurant sending customers scampering proves my point. Even the presence of war does not dock any points off a country’s GDP as all war-related expenditures still contribute to, actually, even boost GDP growth.

This preoccupation with GDP means that our economic policies become vested in revenue whatever the cost to wellbeing. The inequalities and injustices that arise from those policies are only secondary, apparently to be addressed as a matter of course when GDP has reached a certain threshold. For example, for every swamp that has been reclaimed to construct a hotel, a contribution to GDP has been made through wages to workers, purchase of building materials, etc. We know from our experience living in Uganda that despite the rise in GDP as a result of these commercial activities, it does not translate to the non-material well-being of the community. Instead, we have seen floods that have displaced (mostly poor) people from their homes, bridges swept away in downpours, lives lost, etc. Whatever expenses are spent on fixing these roads and houses contribute to GDP. If one gets sick because of contaminated flood water, money spent on user fees in hospitals contributes to GDP. In essence, GDP is the rise in the cost of living, all abstracted to sell the fallacy that the economy is growing and that by extension our lives are also improving, even as our pockets haemorrhage. We could say that GDP is the total of the commodification of our lives. 

My second point of contention with the PS’s op-ed is the idea that “whatever we produce from our daily sweat is what economists condense into an abstract monetary measure called GDP.”

Some work is not considered work at all, sweating profusely from it notwithstanding. Only work and production involving monetary transactions matter, which automatically leaves out a large swath of economic activities that generates economic and non-economic value, particularly those performed in the household and community. While the PS praises people working in their gardens and farms to better their lives, he does not say that GDP ignores the value of food that one spends hours toiling to produce, if it ends up directly on one’s plate, without going through the market first. This essentially means that those small gardens that fed us during the Covid-19 lockdowns, remain invisible when measuring economic growth because they are not within the production boundary of GDP.

In other words, GDP foregrounds market exchange and would not consider self-sufficiency outside the market as important. In short, what is considered valuable is only that which is measurable, and that which is measurable is only that which produces monetary value. What might be wrong with this? Well first, by not measuring these goods and services, it renders them invisible and erodes their value.

The majority of this work is performed by women and the poor who are already relegated to a low social status. To misrecognise this work is to further entrench their subordinate position. Secondly, at the point of provisioning, an economic system that foregrounds monetary value will in turn seek to reward mostly those sectors that are seen to contributing to the national cake. So non-monetary production, even if it generates value in the market is largely not budgeted for.

Feminist economics thinking has been demanding for the decentring of GDP as the most important metric for economic performance for decades now, and proposing models that do measure “everyday life”. I invite the PS to join us on this journey.

Leah Eryenyu is a political economy analyst.