Using GDP as a Measure of Living Standard

Using everlasting(a) domestic product as a Measure of Living StandardIntroduction legitimate gross domestic product is beat to assess changes in economical welf be oer date, to inst wholly inter subject ara comparison of gross domestic product, and for business cycle assessment and forecasting. (Parkin et al 2000).The gross landal product (now evaluated as gross domestic product) was introduced during military personnel War II as a valuate of wartime drudgery capacity. Now it is commonly apply universewide as forefinger of economic reach (http//www.redefiningprogress.org discoverd on world-class June 2008).gross domestic product is not accounting Household production, Quality improvement, the underground thriftiness, wellness and gum elasticty Expectancy, Leisure time, The Environment Quality, Equal wealth Distri furtherion, Political independence and social justice. GDP can be steady-going index finger of measure of economy financial backing exactly it is no t accu come out measure of hold measure. Improving livings bills is about silly families gaining entree to what is available at the time to make comfortable, healthy and rewarding .in the end, economic statistics only measure what they measure, we whitethorn not bear much relation to how well off we atomic number 18. (The individual Dec 2002)Source US department of state (www.usinfo.state.gov cited on twenty-second may 2008)PovertyRising Real GDP is not touch on on the reduction of poverty and change in living standard. regular army is the wealthiest boorish in the world having spicy sure GDP, notwithstanding more(prenominal) than than 35 trillion populate out of 294 billion of population confront hunger in 2006 and 390000 in 2005 harmonize to the US Department of cultivations plate food security deal, that 10.4% of entirely U.S adults and 17.2 percent of solely children faced the food insecurity in 2006. (www.ipsnews.net cited on 2second whitethorn 2008 )According to come off in 2005, India had population of approx. 1094.6 Millions and Pakistan had population of approx. 155.8 Million. (www.world border.org cited 13th may 2008).Real GDP per capita from 2000 2006Years info Source (United Nation, USA 2007 scotch and Social evaluate of Asia and the Pacific 2007)The authentic GDP gap between India and Pakistan shows that aver while Indian people ar give way being because average Pakistani People. merely poverty ratio shows that living standard of India is lower than Pakistan. By comparing Indias population below $1 and poverty line per daylight with Pakistan shows that living standard of India is not actually(prenominal) racy than Pakistan because people ratio living below $1 is high that mean they argon not using full re bloodlines of a meated bread and butter. So GDP is not representing the living standard of people and a alike not counting the poverty ratio.COUNTRYPopulationBelow subject atomic number 18a Poverty line Per day (%)1990-2004PopulationBelow $1Per day (%)1990-2005GDPPer Capita(PPP US $)(2005) chinaINDIAPAKISTANSIERRA LEONENIGERIAZAMBIA4.628.632.670.234.1689.934.3175770.863.867573452237080611281023About 10 sub Saharan economies argon suffering from malnutrition all the time. (The Observer 18th may 2008)Exchange Rate InflationIt is t coversome to compare living standard because re-sentencing rate of boorish do not show the domestic purchasing indicator of a specie e.g. any product cost in USA impart be 10$ only in China may be 5$. So comparison should consider these.Purchasing power party (PPP) is exchange rates between currencies are in equilibrium and when two countries purchasing power same. Gross domestic products are accounted on standard delegacy based on trade exchange, value of international (dollar) that is purchasing power parity. If the exchange rates of two countries same then the equipment casualty train lead be fixed for both countries products and serv ices. If the domestic price direct of any country step-up, then exchange rate will be depreciate to return PPP then that country will go steady pomposity. (www.ftb.bis.gov cited on 27th whitethorn 2008)According to World cant subject area (9th April, 2008) on youthfully increase the high prices of food will increase the poverty in despicable and developing countries. The rise in oil prices changes the each commodity price and result into increase in poverty, the 80% increase in prices of maize and 70% increased in price of rice played main link to increase in poverty. (World Bank 2008) According to head of UN, About 850 million people are face already the shortage of food and rapidly ascension prices could push up to 130 millions population into hunger trap.( Metro quaternary June ,2008) so when inflation will increase, it will increase the poverty in despicable countries. In Real GDP, increase in price will account as inflation.Quality of GoodsGDP is a quantitative measu re, and thus does not let the value of improvements in product quality e.g. $200 dollar think costs the same as a $200 dollar earpiece 10 years ago ,it neer include the new technology is introduces or quality of goods improved.UnemploymentRising GDP means we are better off, but it is not actually happening. According to recent musical theme by the United Nations Development Programme (UNDP) whitethorn, 2008, Turkish youth hit by unemployment. In Turkey 18% of the total population young people aged 15-24, 30% go to discipline and 30 % ferment. This means that near 40% young people check no proper fosterage and/or are unemployed. It similarly reveals the extreme of sexual discrimination against female.So they are not able to get education because of family pressure. The report says that turkey has achieved continuous high economic yield of the order of 7.5 percent on average during the 2002-2006 periods. That mean turkey has strong economic growth but weaker human evolu tion. Turkey economy boosts cause of foreign debts. economic growth based on foreign metropolis means that country like Turkey overleaps the potential to handle unemployment and other socioeconomic ills. (www.wsws.org cited 16th may 2008).COUNTRYPopulationTotal (millions)2005 2015UnemploymentRate Total(% of Labour force)1996-2005AUSTRALIAUKCHINAINDIATURKEYZAMBIA20.3 22.460.2 62.81313.00 1388.601134.40 1302.5073 82.111.5 13.84.954.24.39.912LiteracyEducation is necessary and unfathomed part of all societies and globally competitive economies. Education can get over the poverty and inequality, improving the health precaution, enable the use of new technologies and knowledge. In an increasingly competitive knowledge based surroundings, primary education moldiness be the priority and it leads to high levels of education (http//ddp-xt.worldbank.org cited by 24th May 2008)Sources UNESCO Institute for Statistics (UIS), World Bank, UNAIDS, ILO, Household Surveys, IMF, awkward . Data are for the most recent year available in 2000-2005.If in a country more people will be literate it will increase the living standard of people and awareness of their rights. Curren( 2003) explained Illiteracy and other deprivations related to lack of basic education are significant obstacles to essentials of good living much(prenominal) as participation in economic activity, political life and conclusiveness making within family.Education is important for all age radical and gender but some countries gender discrimination is high and char discourages and their potential is not counted because of discrimination, education expenses, and household duties. In some countries girls are behind the boys in education and health motorcare because of their parents discriminations and neglect. So gender inequalities in woman start in primaeval and keep throughout their lives. (www.moe.gov.pk cited on twenty-second May 2008).According to World Bank report says that more than light speed million primary drill age children remain out of school. Because of poverty, parents concern of safety of their child, lack of school and bad teaching method. (http//ddp-ext.worldbank.org)CountryAdult LiteracyRate(% aged 15 and older)1995- 2005Combined gross enrolment ratio for Primary, secondary, and tertiary Education(%) 2005 Saudi ArabiaChinaIndiaPakistanTurkeyNigeriaU.A.E82.990.96149.987.469.188.77669.163.84068.556.259.9Source humane Development Report 2007/2008 (www.hdrstats.undp.org)Under Ground EconomyGDP neer count the greatest source of wealth i.e. the household and volunteer excogitate sectors go ignore entirely. GDP is not considering the factor of total production that people hide to avoid taxes because the production and services they are producing are illegal and never comes in GDP. (Parkin el at 2005) The black economy never comes in revenue, i.e. production by labor paid little than minimum wage rate, Labor are paid by with child(p) cash avoid Taxes, un i nform self employee, the tips m geniusy earned by taxi/cab drivers, waiters in Hotel Restaurants, Smuggling of products e.g. oil, etc. these transactions never comes in the calculates for GDP.An estimated 5 to 10% black economy adds to GDP in the United States and the UK and 30% in Italy. In the late 1990s, in Russia estimated 50% black economy adds to GDP(The economist 31st may 2008 ). A rotary of Household production carry on in developing countries never comes in economic transactions e.g. grass cutting, child care, embroidery sewing of cloths d oneness by female at home, growing vegetable at home, production of hand made goods etcAccording to the latest estimate by Economists the calculation of the underground economy is to average 15% of national output for developed countries and 33% for developing countries. According to the survey Nigeria and Thailand have the world largest black economies accounting for more than 70% of GDP. (www.tutor2u.net/ economic science cited on 0 7th May, 2008).Changes in Leisure TimeFor the long life and leisure time as if we have more leisure facilities we live better, that never count in GDP. (Parkin el at 2005). GDP only takes the grocery value of output, therefore, Leisure (paid vacation, holidays, leave time), which shows increase of offbeat, satisfaction, and happiness is excluded in the GDP. distinct reports have been highlighted that there are longer working hours are in the States with compared to Europe which can cause stress and damage family life. Europeans have choice for shorter weeks and a longer holiday that will leads to better life and more happiness but not leads to higher GDP as compared to America.Income inequalityThe GDP only tells how much income we construct but it fails to tell how that income is distributed. So the GDP increases the gap between poor and rich people. The real GDP was the key indicator of measure of national progress. The growth in GDP is offset by increasing inequality, blue le vel of foreign dept, growing costs of unemployment, purlieu chores, and failure to defy wealth equality, i.e. in same economy might be one group is using all resources. (Mc Taggart et al 1999).The large spate of financial wealth real GDP per capita goes to small percentage of population. Income and earnings are unequally distributed among the population. Economic growth increasing withal accompanied that increasing poverty. If the income is uneven distributed, then increase in income per capita may disproportionately improvement a small group of high income earners and have little allude on reducing poverty. The gini coefficient is used to measure how evenly income is distributed. (www.bized.co.uk/virtual cited on twenty-first May ,2008The Gini coefficient (An INEQUALITY indicator ) varies from zero, that shows the perfect equailty of income. Latin America is the worlds most unequal region, with a Gini coefficient of around 0.5 in rich countries the figure is closer to 0.3.(T he economist 2008). inequalirty will incrase moverty and it will effect to slow drink down the economic growth cause poor people cannot afford to procure their needs e.g. education,foods etc . The chart below shows that income is more unevenly distributed in Zambia as compared to other countries .so GDP per capita income is fail to count that how income is distributed among the population.Data Source www.bized.co.uk cite on 21st May 2008 and World Bank development indicator 2007, Washington D.C. (www.hdrstats.undp.org cited on 21st May 2008)PollutionCrime, war, pollution, tobacco smoking, and car accidents all cause people to spend bills and so they all increase the GDP. The more trees we fell, fish we catch, fossil fuels we burn, greenhouse gases we emit, the more the GDP increases. (http//www.redefiningprogress.org)Real GDP never count for the quality of life e.g. cloudless water system, life foresight, leisure time, and it never count for the increase in commerce congestio n and way out of open space (www.bos.frb.org cited on 06th May, 2008)The causes to produce environment pollution are the carbon dioxide and Ozone depleting substance use. In china the spark of CO2 and ozone depleting substance use is greater than other developing countries. According to European space agency, Bijing and its surrounded cities have air pollution with the high level of nitrogen dioxide, which is dangerous for lungs. In 2005 when China was hosting for the Olympic Games in Beijing, satellite data has reveals that Beijing as air pollution crown of World. (The Guardian, Monday 31 October, 2005)In an over good deal of the report of WHO, the cigarette and tobacco product are polluting air as well and is the main cause of death. In 2003, 5 million people died most of in poor and over poor populations. (www.wsws.org cited twenty-second May 2008).Data Source Human development report 2007/2008 www.hrdstats.undp.org cited 5th May 2008)COUNTRYOzone depleting Substances use(gram s per capita)(2004)CHINAINDIAPAKISTANAUSTRALIASINGAPOREIRANMALAYSIATHAILANDjapan27.19.310.29.550.589.959.239.715.3Data Source (Table 29 United Nation, Economic and Social survey of Asia and the pacific 2007) andThe World health Organization says that almost 3 million people are died worldwide because of air pollution out brink and 1.6 from indoor 80% of illness and death in developing countries because of contaminate water.2.1 people die with diarrhea disease. (BBC NEWS www.bbc.co.uk cited on 21/05/2008)The 2nd factor for the human being to live healthy in this world is card-playing water. In 2004 Romania faced big problem in fairly drunkenness water. Many people became ill because of polluted water. According to WHO/UNICEF (joint monitor program) in the Romania only 18% of population of the rural had access to clean drinking water (www.ens-newswire.com cited on 22 May 2008). If we see real GDP of Romania in 2004, it comes in high human developed countries but real GDP fail to count the clean water source for the people.In 2004, In comparison with India and Pakistan, the %age of resources using improved drinking water in rural and urban shows that India is behind Pakistan, but if view the economic growth in real GDP shows that India is better than Pakistan.In 2005 in china water pollution increase and 2 million people suffered diseases caused by drinking water with high arsenic content and cancer. In the rural area 360 million peoples faced lack of safe drinking water. The pollution increased 70% in lake and river and sample test. but 95%of water tests were polluted. (BBC NEWS, www.news.bbc.co.uk cited by twenty-third May 2008)COUNTRY contribution of population withaccess to improveWater sources (%)(2004)Share of population withaccess to improveSanitation (%)(2004)CHINAINDIAPAKISTANNIGERIAZAMBIA77869148584433594455Data Source Table- 29 United Nation, Economic and Social survey of Asia and the pacific 2007Life carryancy and infant birth moralityGood healt h and long life is the hope of everyone which does not show up in real GDP, at least not directly. (Parkin et al 2000).Increase in Real GDP will spend money on the medical and health safety but it ignore new health and expectancy problem every years e.g diseases i.e. Aids, , drug addiction,, murder and suicide and natural disasters i.e. earthquake etc. In developing countries, in each year more(prenominal) than 500,000 women die in childbirth. In Asia and Africa, lack of access to trained health staff, modern medical facilities the ratio of maternalistic death may be more than 100 times higher as compared to woman in Western Europe and NorthAmerica. (www. worldbank.org cited twenty-second May 2008.)According to (WHO) report that in Japan life expectancy is higher. For example a sis born can expect to live 85 years having capable needs of life to live happy life e.g. food, vaccination and good education. On average plenteous funds to spend on music per year. But in same way i ts not same slip in Sierra Leone a baby will survive a life expectancy of just 36 years. Due to the non availability of resources one or more of children would die and on average could have enough funds a year to spend on medication. (www.worldbank.org cited on 21st May 2008)According to WHO report (2005), In Nigeria the maternal death rate is 59,000 with the population of 140 Millions. African continent countries are having high maternal death in the world. As compared to India, the maternal death is 117,000 with the population of over billion.According to official US report (2007) says that America has dropped from 11th to forty-second place in 20 years being a richest country in the world. The drop is due to more advance way of lifestyle, health care, and better food in the world i.e. Europe, Japan, Singapore and Jordon whose life expectancy is longer. In US the infant morality 6.8 deaths every 1000 births is also high. The worst life expectancy is figured in Africa that is 34.1 years. (The Guardian, 13th August, 2007)CountryInfant mortality rate( per 1000 live births) (2005)Life expectancy at birth (Years) 2005 MaleLife expectancy at birth (Years) 2005 womanishAustraliaUKChinaIndiaNigeriaSierra Leone55235610016578.576.77162.34640.283.381.274.365.347.143.4(www.worldbank.org cited on 21st May 2008) (United Nation, Economic and Social survey of Asia and the pacific 2007)In UK, Life expectancy at age 65 reached its highest level for both men and women. Men and women could expect live more 16.9 years and 19.7 years respectively. If mortality rates will be same is in 2004/06.Life expectancy at age 65, United KingdomAt birth Life expectancy has also its highest level for both males and females. Boys and girls born in the UK could expect on average to live to 76.9 years and 81.3 years of age respectively. http//www.statistics.gov.uk cited 17th May 2008choice IndicatorsThe flaws in GDP as a measure of national well-being have generated worldwide moves to develop a better index. Most work is focused on developing the index of sustainable economics eudaimonia (ISEW) also known as the Genuine mount up indicator (GPI).it has been constructed for assorted countries i.e. US, Germany, Britain, Sweden and Australia. In Australia calculation of GPI shows that GPI was generally less than GDP measure until 1976, it grew at nearly the same rate and from 1976 to 1996 the GPI did not increase. (Hamilton C. 1997 cited by Mc Taggart et al 1999)In 1995, redefining progress, a non profit public policy organization, based in northern California, introduce a measure of progress that is Genuine build up Indicator (GPI). GPI basic start with the same accounting framework as the GDP, but then makes some distinctions with same indicators as GDP. GPI counts the beneficial progress as positive and destructive activates as negative. GPI add contribution of household activity volunteer work as hiring some one to do it. but real GDP ignore this contribution that m oney never change hands, GPI calculate income distribution as GPI will rise when poor receive large portion of income and go down if small portion of income received.GPI subtract these factors that are family break down nuisance and pollution. In real GDP family break down crime are expenses to addition in well being but GPI minus this cost comes from crime or divorce. Real GDP treats pollution as when it created and when it is clean up that is twofold gain. But GPI subtract the cost of water and air pollution as damage to human health and environment by increasing the nation wealth people should get the more leisure time and more free time for family or other activities.But the GDP ignores the loss of free time. The GPI goes up if leisure time increases. When people spend money to protect against misfortune or spend for improving their living standard i.e. accidents, drinking water filter, pollution control devices etc the GDP counts as additions but GPI treats these expenses a s cost.http//www.redefiningprogress.org cited on 28th May 2008)GDP provides a fancied sense of progress by comparing with GPI. The chart illutrstae that real (inflation adjusted) US per capita GDP and GPI growth between 1950 and 2004, the GPI figure significantly starggle GDP. It shows that when resource depletion, crime costs, and volounteer sector costs, etc., are accounted for, then the per capita net benefit of a rising GDP is fully invalid. (http//www.redefiningprogress.org cited 2en June 2008)In 1990s United Nations created the human development index (HDI). It Examine that how the people are well being. It shows three indicators that are life expectancy at birth, school and adult literacy and real gross national product measure at Purchasing Power Parity in US dollars (The Ledger www.bos.frb.org cited 27th May 2008).Human GDP per capitaDevelopment business leader PPP US$0.70 2600Tajikistan 0.67 24500.64 23000.61 21500.58 2000Pakistan 0.55 18500.52 17000.49 15500.46 14000.43 12500.40 1100Source HDI and GDP refer to 2005 as reported in the 2007/2008 Report. (www.hdrstats.undp.org cited on 13th May, 2008)In 2005, HDI highlights the very large gaps in well being and life chances for Pakistan.(Figure 1) It shows that the GDP per Capita was high but the HDI indicator was low showing that people are not well being. The HDI for Pakistan was 0.551 which gives the country 136th rank out of 177 countries. (www.hdrstats.undp.org cited on 13th May, 2008)ConclusionThe major injury of Real GDP using as an indicator is a measure of living standard. Real GDP is the good measure on economic growth but it fails to measure that how the people are living and are they happy. It does not true impact that if a country is having high GDP and export 100 percent production will also have high living standard. In the view of interchange real GDP with the GPI, as for as west concern it will be very hard for them to adopt this because their concern is to strong the economy and b usiness interest.But economic growth does not bring the happiness. As for as economic growth and living standard of country concern, GPI is good indicator for measure living standard, but social and non-market costs are included are at dispute. might be thease are the reason GPI has not achieved further as common usage.Overall, however, the GPI aim is to measure the quality of economic well-being but GDP measure the quantity of economic growth. So GDP is failing to measure the living standard of people it should be replace by GPI.ReferenceThe Ledger www.bos.frb.org/education/ledger03/measure.html Federal Reserve of bank of Boston, (cited 06 May 2008)Parkin M, Powell M. Kent M., economic science 6th edition, London Addison Wesley Publishing, chapter 20Parkin M, Powell M, Matthews K. (2000) Economics 4th Edition Addison Wesley Publishing, p.543-547McTaggart D., Findly C., Parkin M. 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