One way of improving employee engagement is to act on any feedback provided by staff members: words and promises must always be followed by actions. How well GDP measures the well-being of society. Gambian philanthropist and businessman Momodou Turo Darboe and his foundation, VDF, were last evening conferred the Gambian of the Year Award by The Standard... By Mafugi Ceesay Whatever business you’re in, people need to understand why you exist, what you want to achieve, how you aim to achieve it and, crucially, the role they can play. The black market, or the underground economy, includes illegal economic activities, such as the sale of drugs, prostitution, and some lawful transactions that don’t comply with tax obligations. A number of countries, including India, are paving the way. Today’s societies are increasingly driven by the growing service economy – from the grocery shopping on Amazon to the cabs booked on Uber. In 2014, research from PwC revealed that engaged employees are 87 percent less likely to resign. But delivering sustainable, long-term engagement in the modern workplace is more challenging than ever. Where disruptive innovations have made life easier for consumers allowing them to book their own flights rather than paying a travel agent, for instance – GDP only sees a shrinking economy. Limitations of GDP. Out of the gates in January they experienced a... Momodou Camara (Acca) As a step in this direction, India is also beginning to focus on the ease of living of its citizens. The gross domestic product can partly reflect the results of the economic activities. There are multiple ways to calculate and measure GDP, but neither of them includes any indicator of welfare or well-being. Momodou Camara (Acca) Keynes realized that if the government’s wartime procurement was not considered as demand in calculating national income, GDP would fall despite actual economic growth taking place. In 2018 alone, $689 billion was remitted across the globe according to stats from the World Bank. But before we attempt to improve upon the concept of GDP, it is instructive to understand its roots. B. A remanded prisoner Buba Drammeh standing trial for the killing of one Buba Jammeh during the Berending-Gunjur land dispute has escaped from... By Omar Bah For example, GDP takes a positive count of the cars we produce but does not account for the emissions they generate; it adds the value of the sugar-laced beverages we sell but fails to subtract the health problems they cause; it includes the value of building new cities but does not discount for the vital forests they replace. GDP is not the precise and flawless figure that many believe it to be it is merely an estimate. This is the currently selected item. In an economy with well-being at its heart, economic growth will simply be another tool to guide it in the direction that the society chooses. Suppose the quantities produced and their corresponding prices for 2011 and 2015 are as shown in the following table. Getting employees involved goes a long way to securing their commitment and engagement. Whether using a digital employee feedback platform or a market research tool, technology enables collective intelligence. d. all of the above are correct. There are numerous problems with this : - it does not take into account the 'black economy', … Employee engagement is a priority for many businesses, although it’s increasingly difficult to implement it. But the point of the discussions at Davos is … GDP does not incorporate any measures of welfare. All rights reserved. Our mission is to provide a free, world-class education to anyone, anywhere. We often hear that people can’t filter or prioritise messages because there’s too much noise around them. It cannot differentiate between an unequal and an egalitarian society if they have similar economic sizes. Defining your story and expressing it in an authentic way that people can relate to is key. As the framework upon which governments build countless policies, GDP aims to track the production of all goods and services bought and sold in an economy each year. The GDP does not adequately reflect the true health of a nation and needs to be replaced by more comprehensive measures. Sarah Arnold, Senior Economist at the New Economics Foundation (NEF), told World Finance that GDP as a measure of economic activity is simply a means to an end: “It has become so synonymous with national success that the rationale for pursuing economic growth in the first place seems to have been long forgotten.” Putting the flaws highlighted by Bean and Arnold aside, GDP is still an inaccurate measure of prosperity, as it fails to convey much of the value created in the modern world. “A good economy meets everyone’s basic needs; it means people are healthy and happy, and it does not stoke potential long-term trouble, such as extreme inequality.”, THE CURRENCY MARKETS Everything you do should ‘ladder up’ to your story, from learning and development to sustainability and client services. Beyond GDP: other ways to measure the economy . But a measure created to assess wartime production capabilities of a nation has obvious drawbacks in peacetime. Copyright © 2020 Harvard Business School Publishing. True. Measures that can help include listening to your staff and taking a different approach to measuring success. This means it is frequently conflated with wealth or welfare, though it only measures income. Explain using examples. The Value Of Goods And Services Produced At Home. The gross domestic product, GDP, does not accurately reflect the nations welfare. However, modern economies have lost sight of the fact that the standard metric of economic growth, gross domestic product (GDP), merely measures the size of a nation’s economy and doesn’t reflect a nation’s welfare. It continues to this day. When our measures of development go beyond an inimical fixation towards higher production, our policy interventions will become more aligned with the aspects of life that citizens truly value, and society will be better served. He rejected Kuznets’ version, which included government income, but not spending, in his calculation. THE START of the year has been a rollercoaster for stock market investors. Give two reasons why measured GDP does not reflect total production in an economy. It fails to include things such as the assets and wealth of the people in terms of their investments and links with the housing market. Yet policymakers and economists often treat GDP, or GDP per capita in some cases, as an all-encompassing unit to signify a nation’s development, combining its economic prosperity and societal well-being. Of course, adding lines to GDP statistics increases the level of GDP, but it does not alter the underlying economy. GDP’s preference for tangible goods also means it is insufficient at capturing the value of technology. to be continued! The impact of this work is unaccounted for simply because no money changes hands. *** Market prices are as at 6th. 1 – Start with a powerful story For one, GDP by definition is an aggregate measure that includes the value of goods and services produced in an economy over a certain period of time. Ease of living is the next step in the development strategy for India, following the push towards ease of doing business that the country has achieved over the last few years. In these cases, GDP is not an accurate measure of some components that *** These are indicative figures as per the 6th. High growth does not guarantee shared economic improvement, and slow growth does not necessarily imply widespread economic hardship. Using GDP as a measure of welfare has well-known problems, which are among the first things macroeconomics principles courses cover. How will you go about to attaining it? Economists has noted that GDP is just an aggregate measurement and it does not provide an accurate overview of income distribution. He argued that such data paucity made it difficult to estimate Britain’s capacity for mobilization and conflict. However, the GDP only reflects the "official" sum of all money made in the country for one year. Yet policymakers and economists often treat GDP as an all-encompassing unit to signify a nation’s development, combining its economic prosperity and societal well-being. However, high GDP growth does not reflect into an increase in the overall income of the people because they are still plagued with the burden high cost of living. Maxine’s purchasing power Answer Selected Answer: c. increased if the inflation rate was 5%. Modern economies need a better measure of welfare that takes these externalities into account to obtain a truer reflection of development. Rashtriya Swayamsevak Sangh (RSS) chief Mohan Bhagwat believes that Gross Domestic Product (GDP) does not truly reflect the economic performance of India, as it is a foreign concept. Having become such a familiar macroeconomic metric, it is easy to forget that GDP is a relatively modern invention. Google Classroom Facebook Twitter. Despite feedback, employees find that nothing seems to change. Correct Answer: b. both the GDP deflator and the consumer price index. The framework for monitoring economic growth was created for the US Government by Russian-born economist Simon Kuznets in the aftermath of the Great Depression, before modifications made by British economist John Maynard Keynes turned it into the indicator we know today. The coined phrase was once again brought to the limelight with respect to the … It is as well expected to evolve into a measurement tool to be adopted across districts. 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Momodou Camara (Acca) several things that GDP does not measure that are essential for both the economy and society While international payments have become... © 2020 The Standard Newspaper (The Gambia) - Site by, MOMODOU TURO DARBOE WINS GAMBIAN OF THE YEAR AWARD, Murder suspect escapes from Mile 2 Prison, Late Dibba’s family explains rejection of condolence money from Barrow, Letters: Nyang Njie’s statement is incitement and misleading, Constitutionality (or not) of current IEC chairman’s position, Why GDP is no longer the most effective measure of economic success, On the looming December protest; request to the Lord of the worlds, The neglected agriculture agenda and continued failed trade seasons ‘tret-tos’, Parsing the financial turmoil: What the markets imply about the economic impact of the coronavirus, Coronavirus – Africa: stronger partnerships crucial for successful implementation of Sustainable Development Goals in light of COVID-19, The simple guide to international money transfers, Top 10 biggest Gambian newsmakers of 2020. In 1968, Robert Kennedy, the brother of US President John F Kennedy, criticised gross national product a similar measure to GDP by saying it “measures everything, in short, except that which makes life worthwhile”. Environmental degradation is a significant externality that the measure of GDP has failed to reflect. Gross domestic product (GDP) does not reflect many things that individuals do for themselves. Over the past few years, we’ve run online focus groups with more than 5,000 employees. GDP growth does not necessarily go hand in hand with positive social or environmental development in an economy. GDP does not reflect real income of Sarawakians, says Abg Jo Mar 9, 2019 @ 9:11 Abang Johari (third from right) and SDNU president Tan Sri William Mawan Ikom (third from left) with other state dignitaries cutting the cake in conjunction with SDNU's 63rd anniversary. At Brandpie, we’ve worked with organisations across many different sectors, industries and geographies, and have identified five common areas that help drive employee engagement. So, according to GDP, a country like India is considered to be on the growth path, even though Delhi’s winters are increasingly filled with smog and Bengaluru’s lakes are more prone to fires. Another aspect of modern economies that makes GDP anachronistic is its disproportionate focus on what is produced. Because there may be a few very wealthy people while the rest live in abject poverty. The focus would instead shift towards more desirable and actual determinants of welfare. GDP does not reflect total production in an economy as it is too narrow in measuring the economy as a whole. In an independent review of the UK’s economic statistics published in 2016, Sir Charles Bean wrote that GDP is often viewed as a “summary statistic” for the health of the economy. Successful employee engagement initiatives require senior leadership alignment, a desire to embrace new technology without being led by it and, most importantly, a willingness to really listen to and democratise the views and opinions of employees, regardless of their seniority. His method of calculating GDP, including government spending into a country’s income, which was driven by wartime necessities, soon found acceptance around the world even after the war was over. Elsewhere, valuable areas of work have always existed outside of the GDP framework, including housework, caring for sick family members or friends, and volunteering. What’s more, GDP is not the precise and flawless figure that many believe it to be it is merely an estimate. Broadening the scope of assessment to include externalities would help in creating a policy focus on addressing them. So that people have developed the new methods to replace GDP to measure the economic welfare. “Importantly, GDP… does not reflect economic inequality or sustainability (environmental, financial or [otherwise]),” Bean wrote. “Importantly, GDP… does not reflect economic inequality or sustainability (environmental, financial or [otherwise]),” Bean wrote. GDP is perhaps the most closely-watched and important economic indicator for both economists and investors alike because it is a representation of the … ENTREPRENEURSHIP CORNER What’s more, GDP is not the precise and flawless figure that many believe it to be – it is merely an estimate. The GDP measures the … As Robert Kennedy put it in his famous election speech in 1968, “it [GDP] measures everything in short, except that which makes life worthwhile.”. Economic growth has raised living standards around the world. In a 2014 speech, Andrew Haldane, Chief Economist of the Bank of England, said the economic value of volunteering could exceed £50bn ($63.7bn) per year and that is before tallying up the impact on the volunteers’ wellbeing, which includes reducing stress, improving physical health and learning new skills. Environmental degradation is a significant externality that the measure of GDP has failed to reflect. We need alternative metrics to complement GDP in order to get a more comprehensive view of development and ensure informed policy making that doesn’t exclusively prioritize economic growth. GDP on haircuts, psychoanalysis sessions or music downloads and it becomes distinctly fuzzy,” Pilling wrote. In this lesson summary review and remind yourself of the key terms and concepts about the limitations of GDP. “We know what a good economy that allows people to flourish should be,” Arnold said. The first step towards creating a shared vision is to have clarity of intention. GDP includes the cost of buying pollution-control equipment, but it does not address whether the air … b. the value of goods and services produced at home. Changes in the quality of life For example, a retired person usually earns no income and would get a pension most often than not. ‘You cannot eat Gross Domestic Product (GDP)’, goes the old-cliche on quantifying economic progress. Reducing it is hard, but armed with the right data, it’s possible to work with internal stakeholders to prioritise what’s important and what’s simply ‘nice to have’. The numbers suggest that voters are not swayed by juicy-sounding headline numbers that do not reflect … We know now that the story is not so simple – that focusing exclusively on GDP and economic gain to measure development ignores the negative effects of economic growth on society, such as climate change and income inequality. 2. THE COMMODITY MARKETS IN THE GREATER BANJUL AREAS Gross Domestic Product (GDP), our core measure of prosperity, was developed during the industrial age. We believe that this more holistic measure will provide more accurate insights into the state of development of the Indian economy. Countless free online services have moved outside the realm of economic activity measured by GDP, including Google, YouTube and Wikipedia. It’s not clear that it does. Gdp does not reflect a. the value of leisure. It has been labelled “the most powerful statistical figure in human history” by author and lecturer Philipp Lepenies, and named “one of the great inventions of the 20th century” by the Federal Reserve Bank of St Louis. Coming up short At the World Economic Forum’s 49th annual meeting in Davos, New Zealand Prime Minister Jacinda Ardern revealed that she would create the world’s first ‘wellbeing budget’ in order to prioritise the health and welfare of her country’s citizens. Like many of the ubiquitous inventions that surround us, the modern conception of GDP was a product of war. It was designed to measure production capacity and economic growth. When considering how big an economy is, or how it compares over time or with other economies, it should be remembered that there is no ‘right’ amount of GDP or of GDP growth. She said: “We need to address the societal wellbeing of our nation, not just the economic wellbeing.” Economic growth and, by proxy, wellbeing is currently measured by gross domestic product (GDP). India, for instance, where we both work advising the government, is developing an Ease of Living Index, which measures quality of life, economic ability and sustainability. Video content, meanwhile, helps keep 53 percent more employees active, while two thirds of workers found their company app to be easier and faster to use than other sources, such as emails or printed materials. What’s more, GDP is not the precise and flawless figure that many believe it to be it is merely an estimate. Only once you know the ‘why’ can you establish the ‘how’. Arnold believes this observation is still true today: “GDP is not a particularly useful measure in and of itself because it doesn’t tell us much about the direction of our economic activity or help us to determine how to govern it.” The NEF believes there are five indicators that GDP doesn’t take into account that could help measure national success more accurately: job quality, wellbeing, carbon emissions, inequality, and physical health. GDP also fails to capture the distribution of income across society – something that is becoming more pertinent in today’s world with rising inequality levels in the developed and developing world alike. There is no scope for the positive or negative effects created in the process of production and development. October, 2019. The Value Of Leisure. 3 –Listen to your people Top 5 ways to boost employee engagement Harvard Business Publishing is an affiliate of Harvard Business School. GDP was developed during the manufacturing age and, as David Pilling, Africa Editor of the Financial Times, wrote in his book The Growth Delusion: Wealth, Poverty and the Wellbeing of Nations: “[GDP] is not bad at accounting for production of bricks, steel bars and bicycles.”, Where it struggles, though, is with the service economy, a segment that accounts for a growing proportion of high-income countries’. GDP was not designed to assess welfare or the well being of citizens. 2 –Less is more So, what work does GDP not reflect? It struggles to account for today’s intangible assets—services, insights, and networks. Our measure of economic growth and development also needs to adapt to these changes in order to give a more accurate picture of the modern economy. “Importantly, GDP… does not reflect economic inequality or sustainability (environmental, financial or [otherwise]),” Bean wrote. Further, GDP includes only legally produced goods and services and excludes underground market exchanges. We know that people value and appreciate the opportunity to make their voices heard. C. The Quality Of The Environment. Suppose that a very simple economy produces three goods: pizzas, haircuts and backpacks. This is probably the most obvious issue. c. the quality of the environment. The Ministry of Housing and Urban Affairs has developed the Ease of Living Index to measuring quality of life of its citizens across Indian cities, as well as economic ability and sustainability. More accurate insights into the state of development economists has noted that GDP is quickly falling out place! 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Created to assess wartime production capabilities of a nation has obvious drawbacks peacetime! Ways to calculate and measure GDP, innovation even if it means a better quality of life GDP... It’S time to acknowledge the limitations of GDP, innovation even if it means a better of. Being called into question and services and excludes underground market exchanges to a. Few very wealthy people while the rest live in abject poverty to include externalities would help in a... From the grocery shopping on Amazon to the cabs booked on Uber GDP only describes the value goods... Flawless figure that many believe it to a bakery for $ 30, which sells... National income should be the sum of all money made in the following.... Gdp not reflect economic inequality or sustainability ( environmental, financial or [ otherwise ],. The past few years, we ’ ve run online focus groups with more than 5,000 employees provide an overview. To the cabs booked on Uber “ we know that people have developed the new methods to replace GDP measure! Are not reflected in GDP that makes GDP anachronistic is its disproportionate focus on what is produced accurate overview income! Clarity of intention securing their commitment and engagement it was designed to wartime!