GDP RAISES ALL BOATS
The answer to Martha Nussbaum’s “What Makes Life Good?” [May 2] might have been different if she had presented some key facts, namely, that virtually every statistical test shows a strong relationship (“trickle down”) between growth in national income (GDP), which she disparages as a measure of well-being, and reduction in poverty. Why? Because increases in GDP raise paid employment—having a good paid job means not being poor for landless people like Vasanti, Nussbaum’s protagonist; it’s the default of poverty in today’s developing world. Even in African countries with large mining and agricultural estates and unequal income distribution, poverty has sharply fallen since 2005 because prices of minerals and cash crops have risen, and the incomes of miners and poor agricultural workers have improved.
How to create good jobs (every survivor in a poor country works, but typically in self-employment at a subsistence level)? Nussbaum praises the Capabilities approach: making job seekers better clothed, housed, fed and educated (“a crucial avenue of opportunity”). But in developing countries, where educated unemployment is rife, investing in job seekers’ right to education doesn’t create remunerative work; usually better qualified job seekers simply join the unemployed, or the brain drain if they’re lucky. More jobs require pressure on government (local, state and national) to invest in job creation.
Graffiti in one Indian village read, “We will give the Congress Party our vote if it gives us a job.” And it did, by promising 2 million government jobs to trigger more private sector employment. So “what makes life good” for Vasanti is not just reforming the household and bettering the village; it’s becoming a progressive national activist to influence decisions at the top of the power pyramid, not just decisions about education and security but also about capital investments and employment.
Massachusetts Institute of Technology
I am very grateful to Professor Amsden for her thoughtful and provocative letter. Her defense of GDP omits, however, a crucial question: how should we define poverty? I argue that the right question to ask is, What are people actually able to do and be?—in a wide range of areas, including health, bodily integrity, education, political rights and liberties, employment opportunities and quite a few others. If we think of poverty as the absence of the Central Human Capabilities on my list, then it is simply not true that increased GDP by itself “trickles down” to relieve poverty. Field studies of the different Indian states, conducted by Jean Dreze and Amartya Sen, show that growth is poorly correlated with achievements in health and education: Kerala, whose economy has not grown well, has stunning educational achievements (99 percent male and female literacy in adolescent years, dramatically different from the national averages I reported) and equally impressive health achievements; states like Gujarat and Andhra Pradesh, which have focused on growth, lag behind in health and education (see Dreze and Sen, India Development: Selected Regional Perspectives, Oxford, 1997). Nor does the independence of health and education from GDP disappear when we turn to the more affluent countries: Kerala’s general health achievements are similar to those of Harlem in New York City, which is good for a poor state in a poor country but shameful in a rich nation like ours (see Sen, “The Economics of Life and Death,” Scientific American, May 1993).
Now let us consider women’s vulnerability to violence, a key part of Vasanti’s story. Unfortunately, although good data are hard to come by, we can confidently conclude that our rich nation has a shamefully high rate of violence against women. The Violence Against Women survey published by the Bureau of Justice Statistics estimates that 18 percent of US women have experienced rape or attempted rape, usually from an intimate partner; the rate of other physical violence is approximately double that.
Finally, let us consider political and religious liberty: does increased GDP per capita “trickle down” to produce these good things? People used to say so, predicting that China would soon change. Time has told a different story. In short: if we think of poverty and well-being broadly, as I argue we should, increased GDP alone proves incomplete, and GDP information will not tell us how people are faring in these other, also important, respects.