Last Thursday, we stated a simple analogy - that the GDP (or gross domestic product) is the total income of the country which is what a family income is to a family. Two other derivative indicators are also important - the GDP growth rate, and the per capita GDP. The latter may be the more crucial one for it may define, on the average, the standard of living of an average citizen. The growth rate shows how fast we are growing, or “developing.â€
The per capita GDP, is a hypothetical amount based entirely on the presumption that all citizens of the country receive (or spend) the same income. The figure is computed by dividing the total GDP of a country by the total population, distributing it to all, equally. But in reality, people earn different incomes, and in fact, a lot of people do not earn at all (children, elderly, unemployed), while big corporations earn millions, and even billions, of pesos for their stockholders. The larger a country's GDP is, the higher the chances that more people or families earn more, relatively, of course, and can spend more.
Population, or its growth rate, plays a very important role. In an earlier series of write-up about Yishun, a sub-urban town in Singapore, we postulated why many countries are trying to control and reduce their population growth rates, while others who did before decades ago, are now pushing to increase theirs by encouraging more babies. It's all about per capita income, or the more realistic measure - family income. People don't live alone, they live in cells, and the smallest cell in the society where income is shared is the family.
Let's say, a country has 100 citizens, and has a GDP of P100 Million in one year. By the definition, the per capita GDP is 100M/100 or P1 Million per person per year. If by the next year, the GDP rose to P106 M, the GDP growth rate is 6 percent. But suppose two babies were also born and added to population, making it 102. The population growth rate is 2 percent. The per capita income then becomes P106/102, or P1,039,215.69 per person. The per capita GDP rose by 3.92 percent. If 6 babies were born that year, the per capita income would have been P106M/106, or still P1M, and wouldn't have changed at all!
The higher we increase our total GDP output, and the lower the population grows (but not lower than the natural replenishment rate), the higher would the incomes of our families improve, making their lives better. That's why good reproductive health and a balanced population policy are crucial for a country. There will always be three development frameworks to work on - the socio-economic one (GDP, equitable distribution, etc.), the demographic framework (population policy, migration), and the physical-spatial framework (land use, infrastructure). These can't be separated from each other.
With GDP, there are always two inseparable goals that a country has to pursue - to ensure that it grows as fast as it can (considering all factors involved, and the corresponding risks, which we will discuss at a later time), and to endeavor to distribute the growth to all citizens, but more especially to the poor. That's why everybody tried to eradicate feudalism in the last centuries because only the elite benefited while the rest of the people wallow in misery. Many still do, as you can see, in this country and many others, but most states now are more determined to uplift the lives of their poorer people.
Equal distribution of wealth still remains as a major goal of the Philippines as has been enshrined in the national development plans, past and present. But it's an objective much harder to achieve than plain GDP growth, and will take decades to come. Well, maybe never, since no country has ever reached that. What we can hope for is a higher family income for everybody, with a decreasing mismatch or gap between the richer and poorer segments of our population. A 6.6 percent GDP growth rate and an investment grade rating are certainly achievements we can really rejoice on, and which everybody should be thankful for. But equally important is for us to rally behind the president and his administration, and cooperate so that this growth will be sustained and improved, for the sake of our children and their future. (To be continued…)
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Best wishes to our good friend, Atty. Jim Feliciano, Assistant Secretary for Planning of the DOTC, who is celebrating his birthday here in Cebu, today. I wish you to have everything money can't buy. And money to buy everything else! :)