GDP: The World’s Most Powerful Formula and Why It Must Now Change
by Ehsan Masood · 4 Mar 2021 · 303pp · 74,206 words
at the University of Massachusetts Boston, and author of The Untold Story of the World’s Leading Environmental Institution: UNEP at Fifty In memory of Mahbub ul Haq (1934–1998) Contents Title Page Dedication Preface to the Second Edition Preface Prologue: Lost History Introduction: The Great Invention One: GDP and Its Discontents
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than twenty-five years ago as an alternative to GDP but would stand for better things, according to one of its architects, the Pakistani economist Mahbub ul Haq.6 A dashboard of alternatives to GDP might also include Gross National Happiness, an innovation from the landlocked state of Bhutan. India’s Nobel
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Wealth and Industry (London: P. S. King & Son, 1922), 39. 6. Khadija Haq and Richard Ponzio, Pioneering the Human Development Revolution: An Intellectual Biography of Mahbub ul Haq (New Delhi: Oxford University Press, 2008), 101 One GDP and Its Discontents The government are very keen on amassing statistics. They collect them, add them
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close friends, and yet each of the three would later turn their backs on at least some of what they had learned. Amartya Sen and Mahbub ul Haq would openly revolt against the idea of organizing economies according to GDP. And Haq, an unlikely revolutionary, would lead the design of the United
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the inexperienced,” he wrote in the opening pages of his second book, The Poverty Curtain.3 But for the early part of his professional life Mahbub ul Haq was a thoroughly mainstream economist. After completing his first degree at Cambridge he headed for the United States, where he took a doctorate at
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There were still many refugee colonies. Small huts with tin roofs,” he says, as if explaining something that had happened last week. Together, Zahid Hussain, Mahbub ul Haq, and the Harvard team took the reins of national planning. And as they did so, those initial priorities to get kids into schools and build
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as a brake on competition and stopping others from establishing their own firms. And so on a spring morning in April 1968, a chastened Mahbub ul Haq took to the lectern at a management convention in Karachi. His audience of policy makers and members of the newly created West Pakistan Management Association
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that countries do not become more prosperous if government policies focus on stopping all but a small number of wealth creators from becoming ever richer. Mahbub ul Haq was not alone in discovering firsthand the damage that could be done by managing an economy through a narrow focus on GDP. Five thousand miles
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a) relevant and (b) useful in the sense that making a change will actually improve people’s lives in a discernible way. Dudley Seers and Mahbub ul Haq were early critics of a blunt, data-driven approach to creating and measuring prosperity. Haq’s 1968 speech changed the language of politics and economics
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? The Death of a State (New York: Penguin, 1983). 2. Sir Richard Jolly, interview with the author, Lewes, West Sussex, May 29, 2013. 3. Mahbub ul Haq, The Poverty Curtain: Choices for the Third World (New York: Columbia University Press, 1976), 3. Haq’s first book, The Strategy of Economic Planning: Case
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Economic Adviser, Ministry of Economic Affairs, Government of Pakistan, 1950), 333–340. 6. Gustav Papanek, telephone interview with the author, July 21, 2015. 7. Mahbub ul Haq, “An Evaluation of Pakistan’s First Five Year Plan,” The Strategy of Economic Planning: Case Study of Pakistan (Oxford: Oxford University Press, 1966), 136. 8
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Economic Planning, 1. 19. Ibid., 174, 181. 20. Economy of Pakistan, 119. 21. Though delivered without a text, the speech was later published as Mahbub ul Haq, “A Critical Review of the Third Five Year Plan,” Management and National Growth: Proceedings of the Management Convention Held at Karachi (Karachi: West Pakistan Management
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Association, April 24–25, 1968), 23–33. 22. Khadija Haq was the author of the work on which Mahbub ul Haq’s data was based and he credited her in his speech to the West Pakistan Management Association though perhaps a little ungenerously. He said: “Since
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found that Harvard was putting together a team of economic advisers to go to Pakistan.”4 This was the famous Harvard Development Advisory Service, where Mahbub ul Haq would learn his trade as a growth architect, and where Papanek, blacklisted at home, would spend the next 60 years in a career at
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cases zero—growth in their levels of living.” Indonesia was discovering that growth and inequality seem to go hand-in-hand, just as Pakistan’s Mahbub ul Haq had observed a decade earlier. But for the United States, it was largely mission accomplished: Indonesia was firmly within the US orbit, and it
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this aspect of her book that attracted an influential group of followers, including many whom we will meet in this chapter. While Dudley Seers and Mahbub ul Haq were part of a small group of rising stars among GDP-skeptic economists, Rachel Carson would boost the ranks of another, potentially larger group
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of an environmental threat. Paradoxically for our story, the countries independent of US/Soviet influence chose as their spokesman for the conference the Pakistani economist Mahbub ul Haq. Haq, as we saw earlier, had left Pakistan shortly after his “twenty families” speech and was deep on his journey from growth-centered economic
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communist boycott on its way to being partially settled, Strong next turned his attention to another looming crisis. The developing countries, strongly influenced by Mahbub ul Haq, were taking the line that environmental protection was something that countries did after they became rich. They were also angry at the fact that rich
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knew that the conference would collapse unless the developing countries participated, and once again he delivered his trademark diplomatic coup. Strong had sensed correctly that Mahbub ul Haq liked an intellectual challenge, and so, as with the Soviets, he invited the economist onto the conference’s preparatory team. Haq, said Strong, should
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the Human Development Index, Haq and his team would famously ignore the environment altogether. But in 1971, Maurice Strong’s offer was accepted, and Mahbub ul Haq would become the latest victim to an approach that Strong summarized to me in an interview in 2009 as “never to confront, but to co
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underdog status with the British delegation could also be a strength, especially when it came to building confidence among developing nations and with their spokesman, Mahbub ul Haq. In an interview in London in 2009, Strong shared the secret to straddling these two worlds. “I have always been radical but have always
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by his critics in London, who could provide valuable intelligence on what London was thinking and who would ultimately be loyal to Maurice Strong. Alongside Mahbub ul Haq, Strong enlisted the help of Martin Holdgate, environmental scientist and a former senior civil servant in the UK government. Holdgate brought the added advantage
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the state of physical knowledge was so thin, many eminent scientists and economists doubted that a computer could accurately forecast environmental collapse. The critics included Mahbub ul Haq, as well as the science journalist John Maddox, editor of Nature. Haq wrote a chapter in The Poverty Curtain dismantling many of the arguments
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am equally convinced that doomsday is not inevitable.”30 By the beginning of 1972 things were on balance looking good for Maurice Strong. Co-opting Mahbub ul Haq had helped to ensure that developing nations would end their boycott and there were high hopes that the Soviet bloc would do the same.
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borrow from international financial institutions such as the International Monetary Fund and the World Bank. The conditions of lending included the kinds of prescriptions that Mahbub ul Haq had designed for the young Pakistani economy, as these were seen as more favorable for growth to return. Richard Jolly and Frances Stewart were
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See Giovanni Andrea Cornia, Richard Jolly, Frances Stewart, Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth (Oxford: Oxford University Press, 1987). 12. Mahbub ul Haq, The Poverty Curtain: Choices for the Third World (New York: Columbia University Press, 1976), 107. Haq would openly talk about his belief that the Stockholm
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can be downloaded from http://www.mauricestrong.net/index.php/the-founex-report, accessed August 18, 2015. 16. While Maurice Strong regards co-opting Mahbub ul Haq as an important success, Haq himself wasn’t quite convinced that the conference had been worthwhile and called it “a bit of a disappointment despite
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“Look, you are a sophisticated enough guy to know that to capture complex reality in one number is just vulgar, like GDP.” —Amartya Sen to Mahbub ul Haq (1989) The 1972 United Nations Conference on the Human Environment would result in the birth of an unusual kind of UN agency. Instead of building
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where we go next in the story of GDP. Whereas Maurice Strong’s mission would be to attack conventional ideas on growth on environmental grounds, Mahbub ul Haq would use the discipline of economics to continue on his journey to dethrone how we measure growth using GDP. The Human Development Index, which
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available to start straightaway. In 1988, more than a decade after the Stockholm environment conference and two decades after his “twenty-two families” speech, Mahbub ul Haq was preparing to pack his bags and once more return to the United States. For the previous six years, Haq had been back working in
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countries, Pakistan, Afghanistan and Iran.” They were traveling with Prince Sadruddin Aga Khan and their itinerary included lunch with General Zia and his cabinet including Mahbub ul Haq on the day of the crash. “Mahbub was supposed to join the president afterwards for the flight—but for some reason did not,” Jolly
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“How history might have been different if Mahbub had been on that flight,” Jolly says.4 There’s an interesting paradox in the life of Mahbub ul Haq. Some of his greatest achievements have been made possible by working for Big Men. His first patron in the 1950s was military ruler Field Marshal
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the spot.5 With his almost fifteen years of Pakistan policy-making experience supplemented by seven years working for Robert McNamara at the World Bank, Mahbub ul Haq knew there was no getting around organizing economies according to any measure other than GDP. And yet he longed for something different and more
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to being pitched a disruptive idea—it’s what happens every minute in Silicon Valley. And at the same time he will have seen in Mahbub ul Haq an entrepreneur capable of fulfilling Draper’s mission to shake up a settled bureaucracy, introduce the idea of competitiveness in developing nations, and give
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papers on which he wrote in neat and elegant longhand. He never filed away the correspondence he received and the replies he sent back.”17 Mahbub ul Haq did, however, write Reflections on Human Development, published shortly before he died. But neither this nor an edited collection of essays published in 200818
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determined to supplant GDP on the grounds that continuous economic growth is a recipe for continuous environmental degradation. It is to our collective loss that Mahbub ul Haq, a man with prophetic vision, dizzying analytical ability, and magnetic leadership qualities, was unable to see this and felt unable to work with them
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the Human Development Index,” in Reflections on Human Development (New York: Oxford University Press, 1995), 46. 7. Bill Draper also tells his story of meeting Mahbub ul Haq and publishing the Human Development Index in his memoir, William H. Draper III, The Startup Game: Inside the Partnership Between Venture Capitalists and Entrepreneurs (New
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in the Islamic World (London: Royal Society, 2010), 5–10. 17. Khadija Haq and Richard Ponzio, Pioneering the Human Development Revolution: An Intellectual Biography of Mahbub ul Haq (New Delhi: Oxford University Press, 2008), 3. 18. Ibid. 19. Sir Richard Jolly, interview with the author, Lewes, West Sussex, June 2014. 20. Paul
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statecraft, he was more than ready to take this small, landlocked picture-postcard nation out of the 19th century and into the 21st. Whereas Mahbub ul Haq needed a decade’s worth of experience as an economic planner to see the problems inherent in GDP-centric development, the fourth king Wangchuck would
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GDP because he is one of the first academic economists willing to bridge the gulf between Maurice Strong and Mahbub ul Haq. He could combine Maurice Strong’s environmentally based critique of growth with Mahbub ul Haq’s economic one. Like Haq he could see the dangers of a badly constructed index. At the same
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question. So, for example, a mainstream economist will want to understand how economies grow; an economist with an interest in public policy (such as Mahbub ul Haq) will want to understand the components of that growth and its implications for the lives and livelihoods of people. An ecological economist, in contrast, will
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. In 2007, a whisker before the financial crisis of 2008, Sarkozy asked the trio to gather more of their colleagues, just as Sen and Mahbub ul Haq had done.2 He requested that they summarize for him the latest thinking in alternative ways to measure economies and societies. This being a political
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of the frustrations of writing this book has been seeing how the struggles of so many great talents had so little effect on changing GDP. Mahbub ul Haq probably came closest to creating an effective global alternative to GDP in the Human Development Index, but this had zero effect on GDP itself.
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nations that the assistance they were providing under the Marshall Plan wasn’t being misspent and was contributing to the growth of economies. Seers and Mahbub ul Haq both understood that GDP, at its core, wasn’t really about benefiting developing countries at all, but they still had no choice but to
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the development economist Khalid Ikram and to Javed Jabbar, a onetime minister in two Pakistani governments. They helped me to locate the original text of Mahbub ul Haq’s landmark “Twenty-two families” speech to the (formerly) West Pakistan Management Association in 1968. It was a privilege to be invited to address
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published 1969). Khadija Haq and Richard Ponzio, Pioneering the Human Development Revolution: An Intellectual Biography of Mahbub ul Haq (New Delhi: Oxford University Press, 2008). Mahbub ul Haq, The Strategy of Economic Planning: Case Study of Pakistan (Oxford: Oxford University Press, 1966). Mahbub ul Haq, The Poverty Curtain: Choices for the Third World (New York: Columbia University Press, 1976
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Statistics, July 25, 2012, accessed July 31, 2015, http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q2-2012/index.html. Mahbub ul Haq, “A Critical Review of the Third Five Year Plan,” Management and National Growth: Proceedings of the Management Convention Held at Karachi, April 24–25,
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. Sen’s involvement with alternate approaches to national accounting goes back to 1990, when he formulated the Human Development Index (HDI) with friend and colleague Mahbub ul Haq. The HDI incorporates into a nation’s accounts GDP modified by education and health. Sen and Haq met at Cambridge University in 1953, where they
Irrational Exuberance: With a New Preface by the Author
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–59; and Barry Eichengreen, James Tobin, and Charles Wyplosz, “Two Cases for Sand in the Wheels of International Finance,” Economic Journal, 105 (1995): 162–72. Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg have edited a volume (The Tobin Tax: Coping with Financial Volatility [New York: Oxford University Press, 1996]) of papers commenting
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& Ross, 1996. Frankel, Jeffrey. On Exchange Rates. Cambridge, Mass.: MIT Press, 1993. ———. “How Well Do Foreign Exchange Markets Work: Might a Tobin Tax Help?” in Mahbub ul Haq, Inge Kaul, and Isabelle Grunberg (eds.), The Tobin Tax: Coping with Financial Volatility. New York: Oxford University Press, 1996, pp. 41–81. French, Kenneth R
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the “commodity power” flexed by the Arab oil-producing countries in the oil embargo of 1973–1974, Global South nations came together in what economist Mahbub ul Haq called in 1976 a “trade union of the poor nations.”2 They wielded state sovereignty “as a shield and a sword,” using the forum of
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. A WORLD OF SIGNALS 1. Robert E. Hudec, Developing Countries in the GATT / WTO Legal System, rev. ed. (London: Rowman and Littlefield, 2007), 31. 2. Mahbub ul Haq, The Poverty Curtain: Choices for the Third World (New York: Columbia University Press, 1976), 169. 3. Balakrishnan Rajagopal, International Law from Below: Development, Social Movements
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. No one has calculated this vector of progress underlying all the dimensions of human flourishing, but the United Nations Development Programme, inspired by the economists Mahbub ul Haq and Amartya Sen, offers a Human Development Index that is a composite of three of the major ones: life expectancy, GDP per capita, and education
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Source Initiative, ‹http://www.opensource.org/docs/peru_and_ms.php›. 113. A good regional study of the extent and details of educational deprivation is Mahbub ul Haq and Khadija ul Haq, Human Development in South Asia 1998: The Education Challenge (Islamabad, Pakistan: Human Development Center). 114. Robert Evenson and D. Gollin, eds
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Source Initiative, ‹http://www.opensource.org/docs/peru_and_ms.php›. 113. A good regional study of the extent and details of educational deprivation is Mahbub ul Haq and Khadija ul Haq, Human Development in South Asia 1998: The Education Challenge (Islamabad, Pakistan: Human Development Center). 114. Robert Evenson and D. Gollin, eds
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enthusiasm for a rose-tinted past. The United Nations has a whole agency devoted to Development, the UNDP. I find their reports invaluable. Pioneered by Mahbub ul Haq, and influenced by Amartya Sen, UNDP recognises that development involves much more than economic growth. It uses a Human Development Index, HDI, that includes measures
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by Philip Arestis and Malcolm Sawyer at the London Business School, September 1996. For a rehearsal of all the arguments, see The Tobin Tax, ed. Mahbub ul Haq et al., 1996. See The Independent, London, 2 September 1996. Auerbach et al. in Tax Policy and the Economy, ed. Summers and Bradford. Making Democracy
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Hamper (1992) Rivethead, Fourth Estate, London. Charles Handy (1989) The Age of Unreason, Arrow Business Books, London. Charles Handy (1994) The Empty Raincoat, Hutchinson, London. Mahbub ul Haq, ed. (1996) The Tobin Tax, Oxford University Press, Oxford. Nigel Harris (1996) The New Untouchables, I.B. Tauris, London. Paul Harrison, (1983) Inside the Inner
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