Economic growth is often considered by many economists and politicians as the gold standard for development and, by implication, of people’s well-being. However, those who put the interest of ordinary people at the centre of their measurement of social progress acknowledge that GDP measurement is a defective tool to gauge prosperity.
At a recent E&Y Malta Attractiveness Event, the editor of the Financial Times for Africa, David Pilling, argued convincingly that economic growth would matter to people’s lives if it gives them what they want, like longer and healthier lives, better public facilities and cleaner air. GDP statistics, however impressive they may be, mean little to ordinary people if they do not translate themselves into improvements in living standards.
Mr Pilling makes a valid observation in his book Growth Delusion by arguing that gross domestic product is not enough to distinguish between wealth and well-being. When asked about Malta’s present remarkable economic performance, he replied with some relevant questions. How is the economic wealth being distributed? Is the median income of Maltese families improving as significantly as GDP growth?
Rather than ask what a typical person is doing to boost economic growth, policymakers should be asking what the economy is doing for the average person. Many economists are today devising new metrics to measure well-being beyond the GDP statistics.
One way of doing this is to have a balanced scorecard that captures different aspects of people’s prosperity. GDP gauges cash flows in the economy. A country’s balance sheet measures other aspects that define wealth beyond the economic perspective.
Such an exercise should include the stock and the enhancement of human capital through education and high quality of life. It also looks at the sustainability of economic activities and the costs incurred to achieve growth.
Malta’s impressive economic growth in the past few years will only be relevant to people if it improves the quality of their lives today as well as in the future.
Mr Pilling also made incisive comments about the challenge of migration from Africa to Europe. He pointed out that migration is a fact of human existence. It has always happened and will continue to exist because people will want to move as a result of hardship, war or political repression. Modern communication developments mean that distressed people in Africa will see the opportunities that exist in other continents, like European ones, and will even risk their lives to share in what developed nations can offer.
Europe’s strategy to stop the wave of migration from Africa by offering aid to African countries may be having undesirable effects.
Mr Pilling rightly argues that assistance can, at times, fuel corruption and dependence, even if it is undeniable that aid can help to reduce infant mortality and to restore some sort of normality in emergencies. Still, European leaders will be deluding themselves if they believe that aid to Africa alone will halt migration.
It is refreshing to have experienced people like Mr Pilling from time to time commenting clinically on the way we are managing our macroeconomic environment and dealing with the challenges we are facing, like widening income disparity and migration.
Politicians’ rhetoric and political spin create too much noise for most people to reflect on what well-being means to them.
This is a Times of Malta print editorial