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The PelicanWeb's Journal of Sustainable Development

Integral Human Development
Spirituality, Solidarity, Sustainability, Democracy, Technology, Nonviolence

Vol. 5, No. 9, September 2009
Luis T. Gutierrez, Editor

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INVITED ARTICLE

EDITOR'S NOTE

There has been a propensity, deeply ingrained in the international development community, to equate GNP growth (and growth in GNP per capita) with economic development. This propensity became more intense during the second half of the 20th century, as both GNP and GNP per capita experienced exponential growth, and developers were delighted to communicate the good news by showing fancy charts with growth curves pointing to the sky.

The bad news were hardly noticed. The bad news is that the exponential growth of GNP served to mask a widening gap between the rich and the poor worldwide; and even more so between the very rich and the very poor. Most of the "GNP growth" was going to the rich and very rich, with practically nothing "tricking down" to those living in poverty. As Dr. Mahar Mangahas shows in this article, this may be called "economic growth" but it is not "economic development."

The article deals mainly with the Philippines, but it is generally applicable to all the developing nations. They may be "growing," but they are not "developing." For authentic development must aim at the eradication of poverty and other forms of social injustice. Readers from all countries are encouraged to share comparative data on GNP and poverty with Dr. Mangahas' Social Weather Stations (SWS). It is urgent to overcome the myth that GNP growth is a good and fair indicator of economic development.


Study poverty more than GNP

Mahar Mangahas
Philippine Daily Inquirer,
Manila, Philippines
22 August 2009
Reprinted with Permission

When IMF chief economist Olivier Blanchard claimed, last Aug. 18, that the recovery of the global economy has started, he was being optimistic specifically about forthcoming growth in world output (the sum of all countries’ Gross National Products), and not about forthcoming reductions in world poverty as well.

Probably Mr. Blanchard, like establishment economists in general, assumes that reduction in poverty automatically results from growth in GNP. For sure, he cannot quantify—indeed, no one can quantify—the short-run impact of GNP on poverty, simply because world statistics on poverty are produced in dribbles, only once every few years, whereas world figures on GNP gush out in a steady quarterly stream.

The sheer availability of the GNP data stream fostered the concentration of economic research on the dynamics of production rather than on the dynamics of poverty. This stream produced its own terminology—such as the definition of a recession as two successive quarterly declines of GNP, which is operational only if the latter is measured quarterly.

Now, what does the term “recession” imply for the dynamics of poverty? Does poverty increase as soon as GNP declines? Can it be stalled and/or alleviated by safety nets? For how long will there be an increase in poverty—will it be two successive quarters? Just as business cycle analysts gauge how long it takes for a recession to hit bottom, poverty specialists should gauge how long it takes for poverty to peak. Finding answers to questions like these is not easy. But the way to do it certainly starts with having statistics on poverty as regularly as on GNP.

Unfortunately, there is very little pressure from the international development institutions to promote the frequent measurement of poverty, notwithstanding the adoption of so-called Millennium Development Goals to radically reduce poverty and hunger throughout the world.

The Philippine quarterly statistics on poverty are exceptional. To my knowledge, the most rapid statistical tracking of poverty in the world is here in the Philippines, on account of the SWS quarterly surveys of poverty and hunger. With the official figure on poverty now three years out of date, and that on hunger now six years old, the SWS figures have, for some time, been the only ones used (with the source unmentioned) in State of the Nation Addresses.

The self-rating system may not be standard, but it is nonetheless valid. Above all, it is economical and practical. Our latest numbers, for the Second Quarter of 2009, are 20.3 percent of families suffering from involuntary hunger (released July 27, 2009) and 50 percent rating themselves as poor (released Aug. 4, 2009). The poverty series is quarterly from 1992, and the hunger series is quarterly from 1998; all are welcome to use them.

If anyone knows of any other country in which national poverty is measured quarterly, by whatever technique, please let me know. Be aware that the subjective measurement of well-being is, slowly but surely, becoming increasingly accepted around the world.
My dream is for poverty and hunger to be incorporated into econometric modeling of the Philippine economy, to enable joint analysis of economic growth and equity for the first time. The scale of such modeling work is beyond the resources of SWS; just keeping the data series going is already a significant job.

As a starting point, let me mention some peculiarities in the time patterns of Philippine poverty and Gross National Product—which is more meaningful than Gross Domestic Product or GDP. GNP is larger since it includes the contribution of overseas Filipino workers.

Philippine GNP has some seasonality. It always peaks in the fourth quarter (Q4), and then subsides in Q1. It rises a bit in Q2, is steady or else falls in Q3, and then peaks in Q4 again. On the other hand, neither poverty nor hunger has noticeable seasonality.

Discounting its seasonality, Philippine GNP has been rising steadily in the past two decades. But, since Philippine poverty has not been falling steadily, one can see that the relationship between GNP and poverty is not at all close. Actually, poverty has been quite volatile. In a matter of two quarters, the poverty percentage is capable of falling from 60 to 50, as well as rising back up to 60. But since the last time it hit 70 was already 15 years ago, I can concede that steady economic growth eventually lowers poverty.

To find the determinants of a volatile variable, one must consider factors which are also volatile. My first candidate to explain why poverty has been volatile is the factor of inflation. The record-high 74 percent self-rated poverty in 1985 occurred after hyperinflation of two years. Later on, general inflation ranged from zero to 20 percent.

A gain in the income of the poor can be wiped out by a burst of inflation. GNP growth by 4 percent with inflation at zero computes as equal “in real terms” to GNP growth of 9 percent with inflation at 5 percent; but the latter is clearly onerous to the poor. As the poor may be differentially affected by inflation of the price of food, the price of electricity, etc., these should be separately examined.

At present, the development experts aim mainly for GNP growth, and assume that it will be good for the poor someday. I would rather that, by studying the dynamics of poverty, they instead learn how to reduce poverty steadily, and just let the GNP fend for itself.

Copyright © 2009 by Mahar Mangahas

ABOUT THE AUTHOR

Born January 23, 1944 in Manila, Philippines, Mahar Mangahas is a Filipino economist who has done research on Public Opinion, Quality of Life Indicators, Poverty, Economic Inequality, Land Reform, Rice Policy, and Perspective Planning.

Schooling ~ Ateneo de Manila: Grade School, 1954, High School, 1958; University of the Philippines: A.B., 1962, M.A., 1965; University of Chicago: Ph.D. (Economics), 1970.

Current position ~ Co-founder, and President since 1985, of Social Weather Stations (SWS). A private, non-stock, non-profit organization, SWS is the Philippines’ leading institute in quality-of-life monitoring, public opinion polling, and social survey data archiving. Webpage: http://www.sws.org.ph.


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ABOUT THE AUTHOR

RELATED WEB SITES:

Republic of the Philippines

Map of the Philippines

UN Development Program in the Philippines

Philippine Human Development Network (HDN) 2009

Human Development Report Philippines 2009

Human Development Index Philippines 2009

Social Weather Stations (SWS)

Global Organization Against Corruption (GOPAC)

"Human development, if not engendered,
is fatally endangered."

Mahbub ul Haq
Pakistan (1934-1998)

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