Every year, as the budget is announced, journalists, opposition parties and businessmen scramble for pen and paper to note the precious figures that the finance minister sprouts out like a machine. In this melee, the GDP is the core indicator that allows us to judge the health of the economy. It will be compared to previous years and measured to the last decimal to detect growth or contraction. But it actually tells us relatively nothing about the state of the nation and it is quite misleading.

GDP, or Gross Domestic Product, simply measures all the products and services bought or sold during a particular economic cycle. However, it does not indicate the nature of these financial transactions, whether they made a positive or negative contribution to the country. Thus, by definition, GDP indicates that every monetary exchange adds to well-being. Anything devoid of cash value is promptly discarded. In the process, important contributions by some sections of society are completely ignored.

According to GDP, household work and the voluntary sector play no role in society. Crucial functions performed mostly by women in the home, like childcare, go unnoticed when solely measured by GDP. However, if someone is employed to do these jobs, GDP gains a positive value. It is somewhat a macho statistic, since it follows the worst of male thinking that all household chores are a woman?s responsibility. To put it bluntly, these tasks are regarded as possessing no value whatsoever.

<B>Turning disasters into benefits</B>

Furthermore, GDP grossly misleads us when it comes to the environment. With the risk of tsunamis lurking in the Indian Ocean region, Mauritius could be at risk of a future disaster. But many natural disasters arise from our mistreatment of the environment. On this issue, GDP creates a massive contradiction. Take the forest of Ferney and the insistence of the government to build a highway through it. GDP, which also incorporates all government spending, will rise for that financial year. If subsequently some species become extinct or severe droughts arise from the destruction of these pristine forests, then GDP would have counted an environmental catastrophe as a positive.

The same applies to pollution. As we pursue economic activities with scant regard for the environment, GDP increases. Then, when it is time to clean up the waste that has been generated by these actions, the cost is added to GDP. As such, the balance books present pollution as a double benefit for the population. The potential damage to human health and the environment is not taken into account, as if the economy and the people who run it are two mutually exclusive entities, unrelated in not even the slightest way.

Consequently, GDP operates in a vicious circle. All economic measures and counter-measures represent growth irrespective of their impact on society. For example, crime adds millions to GDP every year. As law and order deteriorates, the costs of locks, alarm systems, increased policing, property damage, insurance and so on boost the financial statistics. Like crime, divorce is also beneficial according to GDP. Lawyer?s fees, the need for a second household, and the expenses of a potential second marriage all represent added value. What GDP is not telling us is the human, emotional and psychological cost of these events.

Though income disparity is becoming a major characteristic of all economies around the world, GDP masquerades inequality. There is nothing in the figures to indicate the extent of wealth distribution (or rather non-distribution) in society. It even has the effrontery of showing the present economic model as a resounding success for everyone. According to the United Nations Development Fund (UNDP), we reached our highest GDP per capita value in 2002, at US$ 3 740, with an average annual growth of 4%.

But can we honestly say that everyone benefited equally from the rising tide? Though the standard of living rose, a significant portion of the society has been left behind. The UNDP puts the poverty level in Mauritius at 11.3%. The Human Development Index (HDI) of 2004 interestingly subtracts the GDP rank from the HDI rank. This calculation gives Mauritius a score of -15, whereas Seychelles, with a similar GDP to ours, gets only -2. This shows that despite the increasing wealth, we have not maximised our developmental potential. But if we are to believe the GDP only, the picture could not have been rosier.

<B>The ground reality</B>

GDP, despite its obvious shortcomings, remains the leading indicator of economic strength. But, at a time when the market economy is showing no sign of correcting the situation for those at the bottom of the ladder, alternatives must be considered for a real representation of society. The HDI is a perfect example of such a guide, comparing social progress with financial gains. But there are others like the Genuine Progress Indicator (GPI) and the Index of Sustainable Economic Welfare, which take into account the environment, domestic labour, health, education, crime and family breakdown. Under this more inclusive tabulation, while world GDP increased since the 60s, GPI also increased but then started to fall from the 80s onwards.

Last week, a group of biologists and economists calculated the value of all the services which nature provides us free of charge over a year. They came up with the figure of US$ 33 trillion, a sum, higher than the world GDP. This shows that we often take many aspects of life for granted in our pursuit of economic success. Though GDP remains the yardstick at the moment, it should be counterbalanced with the reality on the ground. Its presence in budgetary speeches is often capitalised by governments to boast of their performance and by opposition parties to play the role of demagogues. GDP hides too many cracks in economic policies. But in the everyday life of the common people these cracks cause real hardships.

<B>Diren valayden</B> Outlook Correspondent in Dublin