Let’s focus on the invisible
#GDP discussions are often at the forefront during #budget and #election talks, fixating on the visible metrics like spending, deficits and tax collections. However, I’m more intrigued by the silent third factor of GDP: innovation and productivity. Its this unseen, nonlinear element that shapes the fortune of Labour and Capital.
The Cobb-Douglas function reminds us that GDP comprises Labour, Capital, and Total Factor Productivity. Focusing solely on labour and capital often narrows our conclusions:
- Labour - we need more people working longer hours
- Capital - we need more money being generated from somewhere (mainly taxes, deficit is also a tax on the future income)
But imagine the impact if we shift our vocabulary towards #prosperity, echoing the sentiment of #viksitbharat. Our goal should be more than just working harder or paying more taxes. It’s about becoming more #prosperous and progressive.
Modern capitalism and policy must emphasize innovation, technology, rule of law, trust, rights to property, and productivity. Moves like "ease of doing business," GST, and IBC are steps towards enhancing these factors.
I have found that the vocabulary of the discourse changes outcomes. Can we engage our entrepreneurs, board rooms and business leaders in bolstering the rest of the 'third factor’.
Embracing Matt Ridley’s definition of #Prosperity - increasing goods or services earned with the same work effort - could redefine our national discourse, balancing focus between the numerator and denominator.
In the spirit of intellectual honesty, it's important to consider different viewpoints, like those expressed by Bill Gates. [Bill Gates' Critique](https://www.gatesnotes.com/Africa-Needs-Aid-Not-Flawed-Theories)
