For most of the Kenyan poor, economic growth is just an irony. Despite the fact that Kenya's gross domestic product (GDP) averaged 5.9 percent annually between 2010 and 2018, growth has done little to the needy.
Two-thirds of Kenyans’ still live in poverty, making less than $3.2 per day (and have since Kenya’s independence). Latest (2021) Human Development Index (HDI) report places the country at 152 out of 191 countries with a 0.575 value, down from 0.578 and 0.581 in 2020 and 2019 respectively.
All this shows the inappropriateness of using GDP as the central benchmark for a nation’s success. It proves GDP merely measures the size of a nation’s economy and doesn’t reflect a nations’ welfare.
Yet much focus on GDP, as an all encompassing unit to signify a nation’s development, shows why this approach will not work for a sustainable tomorrow.
For starters, GDP measures market output: the monetary value of all the finished goods and services that are produced within a country making it a sign of economic productivity, not of societal and environmental well being.
Focus on GDP means policies that result in economic growth are favoured at the expense of what matters: health, education, equality, state of environment or many other indicators of the quality of life.
This is why despite the trend of Kenya’s GDP per capita showing a gradual and consistent rise over 100 percent since 2010, the Gini coefficient never moved - marginally moved from 43.65 to 40.77 during the same period.
Stated differently, the percentage points of GDP witnessed over the years have less connection with the lives of average Kenyan. In an ideal world, according to the trickle-down theory, Kenya should have experienced poverty reduction going by the growth. Talk of GDP growing but not for all of the right reasons.
All this shows there are cracks in the foundation. If GDP has failed to capture a myriad of societal costs and benefits, it also means our economic policies have fallen short of creating inclusive and sustainable societies. A rethink is, therefore, necessary.
So when the Kenya National Bureau of Statistics (KNBS) states that the economy grew by 5.2 percent in the second quarter (2022) compared with 11 percent in the same period last year, we also need to know a little more; is pollution rising?
Are our natural resources depleting? Is our poverty headcount rising? This is crucial. So for instance, if our median income is stagnating even as GDP rises, that means the fruits of economic growth are not being shared.
All that to say, focusing exclusively on GDP and economic gain to measure development ignores the negative effects of economic growth on society.
Even the Nobel-Prize winning economist Simon Kuznets, who is often credited as the inventor of the metric, warned that GDP was not a suitable measure of a country’s economic development or well being.
It’s time to acknowledge the limitations of GDP and expand our measure of development so that it takes into account a society’s quality of life.
Mwanyasi is the managing director Canaan Capital
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