GDP is not all

Two years ago around this time of the month I was thinking about my bachelor thesis and I was trying to decide my topic. My degree was in political sciences and international relations and I would have loved to research something on democracy, but unfortunately the professor I had chosen had already too many students and hadn’t accepted me. Therefore I had turned to another professor, whose subject was economic development. She had already agreed on being my mentor in July and had told me to get back to her office in September with a topic and a sketch of the outline, so I was preparing myself for that.

There were a couple of interesting topics that she had presented in class and I was trying to choose among them by reading some literature that I found online. In the end I decided to go for a study on the Heavily Indebted Poor Countries Initiative (HIPC), a joint program of the International Monetary Fund and World Bank. My research question was: does the program work?
I’ll spare you all the numbers, papers and indicators I read in order to write a summary on it and I’ll just say that it started in 1996 and that its goal is to cut the external debt of those countries that meet some particular requirements while reducing poverty. After I wrote the summary I realized that it would have been impossible for me to go through ALL the countries which had participated and to analyze ALL the indicators, therefore I decided to do a case study on one country. I checked which countries had participated to the program since its beginning till the very end, and I chose one of them: the winner was Uganda!
I wrote a few pages on Uganda’s history using a book that a professor from South Africa had once told me to be very good (one year later a student from Uganda told me the exact same thing) and I went through all the indicators for GDP, poverty, Gini coefficient, debt ratios etc. The answer to my question “does it work?”, as I expected, was: it depends. So I said what I thought it depended on and wrote all my findings. The professor liked my arguments and in December I exposed my thesis in front of the commission.

The commission was composed of three economy professors specialized in three different fields. After the exposition of my findings every professor asked me one or two questions. I answered to all of them quite well except for one, and it was exactly that one which taught me the most. The question regarded a particular table (I will remember for the rest of my life that it was Table 8) which showed how the incomes of different workers changed depending on the prices of the goods they sold: when prices increased, their incomes were higher and when prices decreased, their incomes were barely sufficient to make a living out of them. Pretty easy. Or so I thought. Her question was: “what does this tell us?” I suddenly became a piece of ice. I didn’t know. I couldn’t find an economical answer because the answer was already there: price up = income up, price down = income down. So I answered that it meant that goods’ prices highly influenced people’s living conditions. But that wasn’t good enough. “Why so? What does this tell us?” she asked. I said I didn’t know and she gave me the answer, an answer that I hadn’t considered at all, an answer that wasn’t economical at all. “It tells us that the contracts that they have don’t protect them as much as they should and probably that the laws that regulate their contracts are not adequate,” she said. I was simply amazed: she had gone beyond economics, she had shown me the connection between economics and the real world.

This was already a huge lesson, but a couple of days later I received an even bigger one. It was after my graduation ceremony at the moment of food, wine, family and friends. Three of my highschool friends had done a photoshop with a picture taken from the tv series “The Big Bang Theory”. It is one of the episodes in which Sheldon and Amy host an episode of “Fun with flags” and in the picture they were holding the photoshopped flag… A flag I blankly looked for a few seconds before asking: “Which flag is it?” “Uganda’s!” Was of course the answer they gave me. Of course! I had talked about Uganda’s external debt and poverty ratio SO much that I should have recognized Uganda’s flag! Nope! Not at all! That was the sign that made me understand once for all how little numbers tell us and how important it is to go beyond them. They certainly measure many things and help us compare things, but it is important to go beyond them. I thought I had done that by adding a historical and a political point of view, but clearly it wasn’t enough.

Lesson learned, next time I’ll do a better job!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s