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Thursday, 30 October 2014 00:47 - - {{hitsCtrl.values.hits}}
The Chief Guest at the Annual Sessions, Vidya Jyothi Professor Dayantha Wijeyesekera, Chancellor, University of Vocational Technology, stressed the importance of economics on investment in tertiary education. In particular, technical and vocational education through foreign loans would be beneficial to the nation only when employable human capital is developed and not by purely constructing buildings and procuring equipment, which are most often underutilised.
He stressed that impact analyses of earlier similar projects should be carried out prior to getting into further debt, so that the same mistakes and omissions are not repeated. Referring to infrastructure development specially on the road sector, Prof. Wijeyesekera emphasised the importance of even distribution of development both in urban and rural areas, while expressing the distinct difference between expressways and highways by stating that ‘All Expressways are Highways, but all Highways are not Expressways’, as this is quite often misquoted.
Professor Indraratna delivering the Presidential Address stated that GDP, acronym for ‘Gross Domestic Product’ is one of the most, if not the most, popularly or frequently used terms in Economics literature, documentation, debate and discussion. At the same time it is one of the most misunderstood, misinterpreted and misused terms. GDP is the total net value of goods and services produced within a country or by a nation during a given period of time.
Prof. Indraratna noted that quality of life or human welfare includes material welfare as indicated by the available per capita goods and services as well as non-material welfare-if one may use that term, covering environmental quality, safety and security with law and order and rule of law.
He also noted that the GDP measure is crucial in political economy, but at the same time most difficult to correctly measure and the measure has its own limitations. Many refer to GDP and repeat it without knowledge of its true nature, significance, uses and limitations.
In our own country questions have been recently raised in regard to its conceptual significance, methods of its measurement, its relevance or validity at current market prices and its ability to express inequality, disparity, poverty and welfare. It is because of these reasons that SLEA had thought it fit to select GDP as a Measure of Quality of Life of a People as the theme of this year’s Annual Sessions.
Dr. S.S. Colombage, formely Professor of Economics of the Open University and Director of Statistics, Central Bank of Sri Lanka, the keynote speaker at the Annual Sessions stressed that GDP is often used as an indicator of quality of life though it is not meant for such purpose.
Simon Kuznets invented the concept of GDP in 1934 so as to track the economic activity in the United States which was badly hit by the Great Depression, As GDP growth was associated with the resulting improvements in living standards including jobs, sustained incomes, food and nutrition, health, shelter and education, it was interpreted as progress of social wellbeing. What is good for GDP is good for society became the norm.
Realising the danger of using GDP in such a manner, Kuzents himself warned against using GDP as an indicator of social progress. The criticisms against GDP have been compounded in recent decades due to factors such as income disparities, environmental degradation and global financial crises.
While recognising these drawbacks, Dr. Colombage emphasised that dashboard indicators would be ideal to track the social and environmental dimensions while retaining GDP to measure the aggregate production, income and expenditure for macroeconomic management. GDP is doing what it is asked to do, i.e. measuring economic activity, and therefore, it is unfair to expect GDP to tell us about quality of life, he noted.
Many eminent economists, statisticians and academics presented papers and engaged in discussions at the technical sessions that covered four sub-themes, namely (a) GDP and its nature and significance, (b) Measurement of GDP and its limitations, (c) Doubling per capita income as a Target, and (d) Productivity enhancement and enabling environment.
Prof. Athula Ranasinghe, Dean, Faculty of Arts, University of Colombo in his presentation noted that GDP has gained increased public concern due to its recognition as a proxy of social wellbeing. Its use in designing macroeconomic policies has also raised public interest. Public concern is not only confined to GDP figures, their trends and composition but also extended to methodological issues of GDP calculations, he noted.
Ven. Prof. W. Wimalaratana, Head, Department of Economics, University of Colombo highlighted that GDP is a significant component of the national economy and it is interrelated with the overall economic variables including employment, income, consumption, government revenue, exports, imports and social-wellbeing of a country. Sustained GDP growth transforms an economy into advanced status. Ven Wimalaratana all pointed out that GDP measure guides policy makers to take corrective steps in advance to maintain macroeconomic stability.
D.C.A. Gunawardena, Director General, Department of Census and Statistics stated that the Department of Census and Statistics (DCS), which is the official agency for national accounts, compiles a wide range of statistics apart from GDP. They include Gross National Income, Gross National Disposable Income, savings, capital formation and capital finance accounts.
The benchmark Supply and Use Table (SUT) and the 80-sector input-output table are some of the recent initiatives of the DCS. Gunawardena highlighted the practical difficulties faced by DCS in compiling GDP and other data.
Dr. Priyanga Dunisinghe, Senior Lecturer in Economics, University of Colombo critically assessed the GDP compilation. He noted that GDP is an essential economic indicator, and different indicators should be devised to capture social and environmental considerations.
W.A.Wijewardena, Former Deputy Governor, Central Bank of Sri Lanka made a presentation on the government’s goal of doubling per capita income between 2011 and 2016 with an underlying annual GDP growth target of 9% and drew special attention of the audience. While appreciating these optimistic goals, he emphasised that we should be mindful of the technical, economic and righteous caveats behind the growth targets.
Technically, by fixing an overvalued exchange rate could artificially raise per capital income (PCI). The economic caveat is that it is questionable whether a rise in PCI would bring about an improvement in people’s wellbeing. The righteous caveat is concerned about the freedom of people as an index of true wellbeing. Refuting these arguments, Dr. P. Nandalal Weerasinghe, Deputy Governor, Central Bank of Sri Lanka emphasised that measuring PCI by using an assumed depreciated exchange rate is a flaw as all macroeconomic variables including PCI would have changed had such an exchange rate was actually in operation. He also stressed that doubling PCI was never a target but an outcome of an overall macroeconomic framework.
Focusing on productivity enhancements for sustained growth, Prof. H.D. Karunaratna,Professor in Business Economics, Faculty of Management Studies, University of Colombo asserted that during the early phases of growth, countries usually experience ‘flying gees’ pattern of production growth characterised by shifts in the leading sectors, industries and regions due to changing patterns of competitiveness.
Presenting the results of a study conducted by him for different provinces in the country, he emphasised the importance of such data for decision making, it was noted. Dr. Saman Kelegama, Executive Director, Institute of Policy Studies of Sri Lanka in his presentation emphasised the weaknesses of GDP as a measure of well-being and the need to capture non-monetary dimensions of quality of life through other indicators.
He drew attention of the audience to a multitude of alternative indicators that have evolved through various global initiatives. They include the UN’s Human Development Index, Genuine Progress Indicator, Ecological Footprint and Happy Planet Index.
Discussions of the Annual Sessions were enriched by the contributions of the panelists Dr. M. Ganeshamoorthy, Dr. S.P. Premarathna, Prof. Sirimal Abeyratna, and Dr. Anila Dias Bankaranaike.
