GNP and GNI are outdated

By Sjoerd Nienhuys

There is a need for new values for wealth and national economic growth figures. GNP and GNI are outdated. 

The Human Development Index (HDI) is a much better measuring instrument for comparing countries than GNP (gross national product) or GNI (gross national income), but it only gives a ranking on a development ladder, and not a value. Bhutan evaluates its national situation, considering welfare and happiness as the most important indicators.

The World Bank and IMF use GNP and GNI as landmark figures to compare economic growth and development in different countries. These national total GNP figures do not reflect reality. It is more sensible to analyse the growth per head of the population (GNI) and additional parameters. But these other parameters are not easy to compile. 

GNP is calculated according to three different models, based on local production and the difference between imports and exports. GNP figures are used as if they were decisive for each country’s economic development.  A few billionaires and a larger group of millionaires on the one hand and many millions of people living in poverty on the other hand, as in India and China, may still produce a reasonable economic growth figure, even if the situation is not very social or democratic. In addition, the five points below do not include the gender gap.

Total GNP figures are based on flows of money, added together and converted to US$. These figures require adjustment and it is time that internationally new figures were developed which offer a better representation of real development. Here are five suggestions:

A.    Inflation correction:  This correction works well if the US$ remains a stable currency and is not devalued. All economic figures need to be corrected to allow for inflation of the US$ itself.  If they are not corrected, all these total GNP growth figures will be inflated. This will be similar to the devaluation of the poverty line of 1 US$ per day.

B.    Informal market: Governments do not measure the value of their informal market and do not include it in calculation of the total GNP; no product added value is calculated or taxes raised over the informal market. Many countries with a current high growth rate used to be developing countries with very large informal markets in which large quantities of goods and services were traded.  Yet many self-supporting people were listed as being under the poverty line as they did not make more than 500 US$ per year. Fifty years ago, in Africa, South America and Asia, many millions of subsistence farmers did not count as part of the economy despite having a reasonable and sustainable quality of living. When calculating total GNP, a realistic estimate must be made of the total value of the informal market, trade and subsistence farming. If these people enter the fiscal circuit, total GNP will grow, while in reality there will be no economic change at all. 

C.    Urban growth: A maize cob may cost a farmer € 0.05 to produce, but € 1 in the supermarket of a large town due to transport and trading. The effect is that the more urbanized a country is, the higher the price level will be, but without any added food quality. A farmer may live in a larger house than a city dweller, but the latter’s expensive house is included in GNP because it was constructed and is serviced within the framework of the formal market, while the farmer’s house is not. A subsistence farmer can have a reasonable quality of life on 500 US$/year, while the same amount may mean extreme poverty for an urban dweller.  Countries that currently have high total GNP growth also have a high level of recent urbanization. Current GNP figures therefore give an indication of the level of urbanization of a country, but not necessarily of wealth.

D.    Natural resources exports: When a country has resources of mineral gold, oil or hardwood forests, these represent a value in the country’s economy when they are made tradable through mining, refining and sawmills. When these resources are sold to another country, they are traded for virtual or paper money, which will lose its value by inflation if not wisely reinvested within that same country. Important here is the investment within that country.  Selling gold for paper money does not make a country richer. The current model of total GNP includes these exported resources and includes them in national economic figures. When Indonesia sells its hardwood lumber to Japan or Malaysia, or when the same lumber is transformed into timber products, and these products are then sold on the exterior markets, the added value makes timber workers and the country richer. A recalculation of total GNP considering only added value without resource exports would considerably change the figures of those countries which now sell their crude oil, raw copper or other minerals.

E.    Population growth: A country which has a total GNP of 3.5% and population growth of 2.5% over the same period has an average GNP per capita of only 1%. GNI per capita is a more realistic figure. A problem with this form of calculation is that birth rates in many less developed countries are estimated. In countries with low birth rates, like France or the Netherlands, the total GNP can be lower than in countries with high birth rates, while GNI per capita will be the same. A focus on total GNP figures is therefore misleading.

The above five issues are some of the reasons why fifty years ago many developing countries had a very low total GNP compared with all-registered and all-taxed European countries. Their large informal sector was not counted, their natural resourses were exported without internally added value, and they had high population growth. Export of unprocessed natural resources and population growth have a large influence on the more realistic value of GNP per capita. To compare growth figures over a longer period, these compensating factors need to be calculated over all these years. The IMF and World Bank should take the lead in presenting these adjusted growth figures. Since people’s social or economic welfare is not rated only to economic growth, better parameters such as the HDI, the Bhutan model or inequality need to be developed.

GNP and GNI are outdated

Tame the markets, civil society tells David Cameron and co in Liberia

Civil society groups call on UN panel to consider new economic models and equality as they discuss next development agenda

Political leaders must "move urgently" to address unsustainable growth and address the rising inequalities that have wreaked havoc on poor people, civil society groups meeting in Monrovia this week have demanded.

In a strongly worded communique to the UN's high-level panel (HLP), which is discussing the development framework after the millennium development goals (MDGs) end in 2015, NGOs and grassroots organisations said governments need to "tame and regulate the hubris of financial markets and unsustainable growth, thereby generating greater national policy space and more resources for human development, and keeping socially disruptive inequalities from getting worse".

The communique, published on Wednesday, added: "Alternative economic models and approaches exist that combine growth with human development and human rights in ways that are environmentally sustainable. 

These models are more participatory, can draw on new financing mechanisms and build on the energy, dynamism and creativity of those who are traditionally marginalised and oppressed. What's needed is the political will among global and national leaders and decision-makers to adopt such approaches and make them central to the post-2015 development agenda."

The outcome document emphasised the importance of human rights, particularly the rights of women, in the post-2015 process. It called on the panel, chaired by the Liberian president, Ellen Johnson Sirleaf, Britain's prime minister, David Cameron, and the president of Indonesia, Susilo Bambang Yudhoyono, to prioritise tackling violence against women and girls, especially sexual violence, and recognise the unpaid work women do in supporting development, such as caring for children and families. It said promoting women's rights, including sexual and reproductive rights, is "critical" to the success of the post-2015 agenda.

It added: "The agenda should include a reinforced standalone gender equality goal and expanded gender targets and indicators across the entire framework. Failure to do so would reverse the gains of the last 20 years." There is near universal agreement among women's groups that a separate gender equality goal is required in any new targets to follow the MDGs.

The communique also called on the panel to realise the potential of children and young people, and to include provisions for better education and skills training, as well as support for young people in getting decent paid work. It added that older people and those with disabilities must have "full and equal participation" in all stages of the economic process, and said smallholder farmers need to be better supported.

"We strongly believe that the post-2015 development agenda should be based on a vision of socioeconomic transformation and a strategy that will have at its core a commitment to protect and promote the human rights of people, to build their economic capabilities and thereby harnessing their potential and recognise them as key contributors to development," said the communique.

At a meeting to discuss the outcome document with some panel members, Professor Gita Sen, from the Indian Institute of Management in Bangalore, said the perceived wisdom that economic growth is necessary for poverty reduction really depends on what type of growth it is. Some economic growth is "producing vulnerability and impoverishment". "Is it [economic growth] producing jobs, or is it unsustainable or ripping off resources and making it impossible for farmers to produce?" she said.

Ousainou Ngum, from the Agency for Co-operation and Research in Development, told the panel that Africans, whose voices were not given much thought in the creation of the MDGs, need to play a major role. "Being at the table is critical," he said. African civil society groups are working on an "Africa agenda", setting out "concrete" proposals that are particularly relevant to the continent. The agenda will be presented at the next HLP meeting in Bali in March.

Amina Mohammed, special adviser to the UN secretary general on post-2015 development planning and ex-officio member of the HLP, told the meeting that human rights are central, and civil society groups would have a key role in ensuring they are upheld.

Homi Kharas, who is lead author on the final report of the HLP, due to be published at the end of May, said integrating business, economics and the social agenda is "something the panel takes very seriously". He added that he is "sure we will have one agenda for 2015", after concerns were expressed about a possible two-track process: the HLP is running in parallel with the open working group discussing a set of sustainable development goals. The objective is for both streams to feed into recommendations.

Tame the markets, civil society tells David Cameron and co in Liberia

Geldof bemoans lack of political leadership on climate | RTCC - Responding to Climate Change

By Ed King

An abdication of political leadership and reliance on broken business models is preventing effective action on climate change, Bob Geldof has told an audience in London.

In an impassioned and often angry address to students from the Hult International Business School, the veteran singer and activist argued a ‘new politics’ is needed to cope in a world where national boundaries are being rendered irrelevant by technology.

And he warned that if politicians fail to tackle extreme poverty and hunger in Africa and China, the world could be trapped in a cycle of price volatility and conflict.

“Be under no doubt that we live in a period of historic cusp,” he said. “This will be talked about in 3-400 years. We’re undergoing and living through not just a crisis within the system but a crisis of the system.

“In that confusion you get a tremendous lack of leadership – it’s because that whole notion of leadership has been usurped. Certainly the web suggests whole other different types of politics and leaderships.

“The political paradigm for the 21^st century must be cooperation, consensus, that dreadful word which politicians hate – compromise. If the political logic of the 20^th century, that murderous most suicidal century of all time was competition – where else do we go?”.

Speaking to RTCC ahead of his speech Geldof admitted he had been encouraged from meetings with UK Prime Minister David Cameron, who he feels is committed to taking action on world hunger and global warming.

Cameron says the singer’s 1985 Live Aid concert convinced him of the need to support foreign aid spending, and is currently co-chairing a UN panel focused on developing a successor to the Millennium Development Goals, which expire in 2015.

The Prime Minister has also indicated in a film for the enough food IF campaign he will make ending global hunger one of the themes of the UK’s G8 Presidency this year.

Yet in terms of real action, Geldof, whose high-profile status as a hunger campaigner allows him to lobby leaders across the world, says the Prime Minister and his peers are hamstrung by political short-termism and a lack of interest from the public.

“Climate change is one where I don’t doubt his generation, they can see the benefit of change but the cost is so huge in the current climate and we don’t feel climate change. We see it on the news,” he said.

“Humans act not out of self-interest but to the need of the moment. Politicians are just you, and they will act on the political needs of the moment.

“It’s in our interest to spend money now and build a new economy built on alternative energies, but when you can frack the fuck out of the planet and end up crashing carbon rates so they’re back to the 1990s what compulsion is there for you to do more?”.

‘Gab’ fest

Geldof also spared some vitriol for the world’s business leaders, who he implied were complicit in global poverty.

He told the audience – the majority of whom were international students – to go against their instincts and ignore huge business gatherings such as the World Economic Forum in Davos, where the business elite gather once a year to talk shop.

“I’ve been to Davos a couple of times and it just struck me how redundant that gab fest is,” he said.

“You get over three days what are supposed to be the minds of our time gathering – to do what?

“To talk about their ideas which have already failed. Every generation fails, it just depends by how much. And I know that mine has failed almost absolutely.

He added: “This world is up for grabs, it’s a fascinating time, it’s entirely plastic and malleable. Make it into what you want it to be. I know that sounds like your inspirational bollocks but it’s possible.”

Geldof bemoans lack of political leadership on climate | RTCC - Responding to Climate Change

Colombia's Economic Empowerment

"World Judiciary Summit" in Lucknow affirms call for a World Parliament | Campaign for a UN Parliament

Judges and legal experts from over 60 countries deliberated on more democratic and more effective global governance

The establishment of a world parliament was a main subject endorsed at the 13th "International Conference of Chief Justices of the World" that was convened by City Montessori School in Lucknow, India, this weekend. At the meeting, chief justices, judges and legal experts from over 60 countries deliberated on the need of strengthening international law in order to meet the challenges of global problems such as climate change.

At the opening, chief justice Benjamin Odoki from Uganda stated that "steps are needed to constitute a world judicial system and world parliament. No one is above the law, international law must be strictly enforced and implemented." Uttar Pradesh Assembly speaker Mata Prasad Pandey emphasized that a world parliament was "the need of the hour."

According to the organizer of the conference, Jagdish Gandhi, the chief justices gathered in Lucknow generally agreed "that even though the cultures and traditions of various countries are widely different, still there prevails an underlying unity as we are all members of one human family. Therefore, we need one enforceable international law to hold us together and prevent wars. Only when world laws are uniform and equally applicable on all countries, can we hope for a peaceful and happy world society." Dr. Gandhi added that the participating chief justices are convinced that this mission "can only be accomplished by the establishment of a World Parliament with representatives of all countries."

The subject of a world parliament was addressed in many interventions. The First President of the Supreme Court of Turkey, Ali Alkan, for instance, stated that "a democratically elected world parliament, some amendments in the UN charter like exclusion of veto powers and an enforceable legal system are the ways which can help us protect the future of the world's children and generations yet unborn."

At the previous conference last year, a final resolution was adopted unanimously that included the recommendation that "for the enactment of world law", a "World Parliament may be constituted."

With over 44,000 pupils, City Montessori School is recognized as Guiness record holder for being the world's largest school. The instituion considers itself the "self-appointed guardian of the world's two billion children and of future generations."

"World Judiciary Summit" in Lucknow affirms call for a World Parliament | Campaign for a UN Parliament

Anti-Corruption Views – The world must do a better job of tracking investments and results: Both now and for the next global development goals

 Abridged version from article by By Ben Leo submitted at One.org

The current Millennium Development Goals (MDGs), which were adopted unanimously by 189 UN member states in 2000, provide some helpful signposts.  Arguably, the MDGs’ greatest strength is that they are meaningful, measurable, and message-able.  By rallying the world around a set of concrete goals, the MDGs have helped to deliver some of the most awe-inspiring progress in human history.  Since their adoption, roughly 600 million people have been lifted out of extreme poverty; more than 6 million Africans have started receiving AIDS treatment; over 5 million lives have been saved because of vaccines; and nearly 51 million more African children are in school.

Despite the MDGs’ many strengths, they also have a number of shortcomings that must be addressed in the post-2015 framework.  First, the goals were developed by technical experts in donor capitals, the OECD, and the UN, with little input from ordinary citizens in developing countries.  This top-down process made it difficult to ensure that the goals properly responded to citizens’ most pressing concerns – even if they mobilized unprecedented global action.  Early signs suggest that the UN has learned from its past mistakes.  They are going to great lengths to solicit input from the poor, marginalized, and vulnerable – as well as politicians, development experts, and civil society organizations.  This is an excellent first step (see ONE’s report calling for this last fall).  Now the HLP, and the UN powers that be, need to digest the boiled down takeaways from the reams of ‘stakeholder’ input and use them as the starting point for the next set of goals.

Second, the lack of reliable, timely, and accessible data on MDG-related investments and outcomes has been a major challenge to both tracking progress and ensuring that interventions are effective.  After decades of effort, we still do not know enough about how much money is available (both domestically and externally), where it is going, and what results it is achieving.  This is one of the biggest scandals of the development field.  For example, over 40 developing countries lack enough data on extreme poverty levels – arguably the most important MDG – to actually track progress.  Let me say that again.  Insufficient data makes it impossible to know, for nearly a third of developing countries, whether their MDG poverty goal has been met.

Moreover, time lags for data on MDG-related outcomes remain unacceptably high (when they are even available).  On average, extreme poverty data is nearly five years old.  Data on hunger (e.g., malnutrition) is four years old; followed by data on gender equality, education, and HIV/AIDS, which is at least three years old, on average.  This must change.  Only with timely and accessible data on investments and outcomes, can we deliver real accountability for the trillions of Naira, Pounds, Pesos, Euros, Rupees, and Dollars being spent and to ensure that we are constantly learning and adjusting our actions as we go along.

Together with thirteen organizations from Africa, Asia, Latin America, Europe, and the United States, the ONE Campaign has released a report today that outlines a series of recommendations to address these critical issues.  First, we are calling for an open and transparent design process, ensuring that input from citizens in developing countries forms the core of the new global development goals.  Second, we are calling on all developing and developed countries to provide consistent and timely reporting on investments and outcomes related to achieving the new goals.  Third, we are calling for new investments in statistical capacity and open data systems to give citizens and policy-makers ways to use relevant information to hold governments and other stakeholders accountable.

The existing MDGs demonstrate the power of purpose.  By channelling the world’s attention and fire-power, they have helped catalyse some of the most important development advancements in history.  Yet, we are only halfway home on this front.  More, much more, must be done over the next three years.  As we sprint to the finish line, and start to consider the next race, we must also seize the opportunity to fix the faults of the present.  By implementing these proposed enhancements, the world can further maximize the impact of scarce development resources and accelerate progress in the fight against extreme poverty and other pressing priorities in the future.

Anti-Corruption Views – The world must do a better job of tracking investments and results: Both now and for the next global development goals

Ralph Nader Green Festival Washington DC 09-30-2012 Part 1