Page 24 - Msingi Afrika Magazine Issue 15

Economy

The World Bank was established GDP doesn’t account for quality of The problem lies in the convention-
to provide investment funds for goods: Consumers may buy cheap, al assumption that GDP growth is
infrastructure reconstruction and low-quality, short-lived products equivalent to progress and national
development in war-torn areas and repeatedly instead of buying more wellbeing. GDP does not mea-
less developed nations in areas such expensive, longer-lasting goods. sure standard of living or societal
as Latin America. In theory, the Over time, consumers could spend wellbeing, as an index of economic
governing structures of these insti- more replacing cheap goods than output. The GDP mainly measures
tutions were supposed to provide an they would have if they had bought a country’s economy and is used
equal voice to all member countries. higher-quality goods in the first as a measure for economic growth
In practice, because of its political place, and GDP would grow as a patterns. It does not capture the so-
and economic strength following, result of waste and inefficiency. cietal value of government services,
the Second World War, the US While the GDP can be a good which contribute to societal welfare,
dominated both institutions. As a indication of how well a country is as well as issues affecting the wellbe-
result, the US dollar, economy, and doing financially, there are several ing of citizens such as air pollution,
economic policies became the de limitations of the GDP. One of the or leisure.
facto standards against which other most important limitation is that
countries were compared. the number usually provided by the The Way Forward
GDP does not take into account The time has come that the GDP
Therefore, over a long time of the citizens’ quality of life, or how measurements are revised, trans-
economic growth – measured by producing the products and services formed and made relevant to our
GDP – it has become the sine qua that make up the GDP impacts on African setting. We need a GDP
non for economic progress. To- the environment, and, therefore, the that will look into the performance
day GDP and economic growth resources, of the country. This num- of both the First economy and the
in general is regularly referred to ber also does not factor in financial Second economy.
by leading economists, politicians, transactions that are not reported to
top-level decision-makers, and the the government, making the report- We need a GDP that will look into
media as though it represents overall ed GDP often lower than what it is the informal economy. We need
progress. in reality. GDP measures that will measure
Criticisms of the GDP and Need economic activity and changes in
for Transformation The current GDP formula fails, for community capital—natural, social,
Every country, particularly, in example, to measure life expectancy, human, and even the extent to
Africa, has what is known as an infant and maternal mortality, edu- which development is using up the
“underground economy,” which is cation, literacy, public health, etc. principle of community capital rath-
defined as transactions between two A high GDP does not necessarily er than living off its interest.
parties that are not reported to the indicate a sound economy, since Right now, the GDP methodology
government. In South Africa, this GDP does not measure the long- works against the values of our
underground economy is referred term sustainability of visible growth. African metaphysics and cosmology,
to as the “Second Economy”. As A country, for example, may have particularly Ubuntu philosophy. It
the government has no real means a very low savings rate and/or mis- is divisive, in that it caters only for
of tracking these dealings, they are directed investments; and thus will the ‘developed’ countries, but not
not included in the calculations, and show an artificially high GDP num- for the under-developing countries.
this missing information is one of ber. Then the question is: What’s The GDP methodology right now
many limitations of GDP. In some the point of measuring growth if is not inclusive and not collective,
areas of the world, the underground we can’t tell whether that growth is which means it is still informed by
economy makes up a large part of sustainable over the long or even its Western perspective of individu-
the amount of gross domestic prod- medium term? alism, as against African perspective
uct that a country generates. Often- of collectivism.
times, with the lack of information The current GDP measures every-
regarding a country’s underground thing except that which makes life Therefore, to determine an alter-
economy, many places technically worthwhile.” native GDP methodology, that will
have a higher GDP than what is There is a significant agreement that take into account the African set-
reported. the GDP provides a distorted view ting, requires a thorough research,
of trends in economic performance. where we would reconcile the two

24 | we tell the true afrikan story