GDP and Nigeria’s economic transformation (2)

(By Jonathan Ekperusi)

“In 1997, the Human Poverty Index (HPI) was established, highlighting the ‘deprivational perspective’ in human development measures, as judged by the way the poor and the deprived fare in each community. The HPI showed that lack of progress in reducing the disadvantages of the deprived cannot be ‘wished away’ by large advances made by people who are better off. The HPI was considered to reflect three different perspectives on poverty, including income poverty – income below a poverty line –, ‘basic needs’ – representing the deprivation of a basket of basic material needs – and capability poverty – the absence of an individual’s basic capabilities to function.“

GDP was first developed by Simon Kuznets for a U.S. Congress report in 1934. The U.S. Congress commissioned Kuznets to create a system that would measure the America’s productivity in order to better understand how to tackle the Great Depression. After the Bretton Woods conference in 1944, GDP became the main tool for measuring a country’s economy. Gross National Income (GNI) equals GDP plus income receipts from the rest of the world minus income payments to the rest of the world.

   HDI is well-suited for measuring economic development over time, and for allowing meaningful comparisons between different countries. HDI focuses on three dimensions of economic development: Longevity, adult literacy, and per capita income. The HDI helped to dispel some of the widely held notions about what was required to ensure economic development. The HDI reveals that economic growth does not automatically translate to economic development.

    In 1996, the UNDP introduced a measurement of deprivation to reflect the percentage of people lacking basic or minimally essential human capabilities rather than examining the average state of people’s capabilities. The Capability Poverty Measure (CPM) broadens the notion of poverty. The CPM measures capability poverty as against income poverty. The CPM was designed with three dimensions in mind – the capability of being well-nourished and healthy; the capability of healthy reproduction; and the capability to be educated and knowledgeable.

  In 1997, the Human Poverty Index (HPI) was established, highlighting the ‘deprivational perspective’ in human development measures, as judged by the way the poor and the deprived fare in each community. The HPI showed that lack of progress in reducing the disadvantages of the deprived cannot be ‘wished away’ by large advances made by people who are better off. The HPI was considered to reflect three different perspectives on poverty, including income poverty – income below a poverty line –, ‘basic needs’ – representing the deprivation of a basket of basic material needs – and capability poverty – the absence of an individual’s basic capabilities to function. The three components of the HPI mirror the dimensions of the HDI – survival, as measured in the percentage of people expected to die before age 40; exclusion from knowledge, measured by the percentage of illiterate adults; and standard of living.

   Over the years, other parameters for measuring economic development have emerged. The Genuine Progress Indicator (GPI) or Index of Sustainable Economic Welfare (ISEW) addresses many of the criticisms of GDP and HDI by taking the same information supplied for GDP and adjusting for income distribution, adding for the value of household and volunteer work, and subtracting for crime and pollution. Gross National Happiness (GNH) measures the quality of life or social progress in more holistic and psychological terms than GDP, working on a complex set of subjective and objective indicators to measure ‘national happiness’ in various domains (living standards, health, education, eco-system diversity and resilience, cultural vitality and diversity, time use and balance, good governance, community vitality and psychological well-being), which are used to assess progress towards GNH, as a nation’s priority, above GDP. It was perhaps based on this parameter that Nigerians were adjudged the happiest people on earth.

   The Composite Wealth Indicators (CWI) measures yearly material wealth, as an amended version of GNI to include depletion of natural resources and the costs of pollution; biological wealth, as measured through life expectancy, and the expected material wealth to be produced by an individual during his/her lifetime. The Future Orientation Index (FOI) demonstrates that Internet users from countries with a higher per capita GDP are more likely to search for information about the future than information about the past, which findings suggest that there may be a link between online behaviour and real-world economic indicators. The FOI found a strong tendency for countries in which Google users enquire more about the future to exhibit a higher GDP. The results hint that there may potentially be a relationship between the economic success of a country and the information-seeking behaviour of its citizens online. The World Governance Index (WGI) is based on the MDGs to be attained by the year 2015.

  In Nigeria, the protests of meeting the MDGs have greatly dwindled by insecurity and the struggle for political domination. With the release of the 2015 elections timetable by the Independent National Electoral Commission, it is easily predictable that Nigeria may not meet the MDG targets. Rebasing Nigeria’s GDP does not therefore imply economic development unless appropriate policies are formulated and properly pursued to deliberately transform the Nigerian economy.

• Concluded.

• Ekperusi is the managing partner, Excellence Solicitors, Effurun-Warri, Delta State.

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