The Philippines' 6.6% GDP growth rate (Part 1)

Or so, as had been widely reported in the newspapers and acclaimed by sympathizers and critics alike.  Of course, we have a reason to rejoice.  Only recently, we were stamped with an investment-grade rating by one of the world's raters.  There are others, though, who argue that this achievement has not really trickled down to the masses.  Or to be blunt about it, they complain that only the rich did benefit from the growth - the poor didn't get a taste of what was supposedly a windfall for the people.  The majority probably did not fully understand.

The problem with GDPs, or gross domestic product, is that it is a word which belongs to the subject of economics, which many people fear to tread, and so they leave it to the experts.  Of course, those in business, especially the giants ones, respect its significance and so do not take the news lightly, especially when it involves getting such high marks, well ... 6.6 percent is high for the Philippines, historically.  And the GDP is a measure which is probably more understood by the rich, since economics is a subject more significant in higher studies - college level or graduate school rather than elementary or high school.  And since educational attainment is weighed heavier on the wealthier side of society, the poor seldom think about it.

But understand it, all of us should, as Yoda would have admonished.  For it answers many of the questions most of us have, on why we are poorer while other countries are richer, or why we have neighbors like Singapore and Hong Kong where families are generally well off as compared to ours here, and why poverty and its diverse images seem to pervade and linger in our midst, as we see in the course of our daily lives.  Many of us have grown bitter and repeatedly complain why we have degraded to this state from being one of the frontrunners in economic development in the middle of the last century.  The answer is GDP.

Before anything else, let me just state that this is an attempt to simplify what GDP is and why it is important in understanding our own socio-economic state.  This is not to argue that the GDP, or its derivatives, the GDP growth rate, and the per capita GDP are the sole measure of development, for certainly it is not.  To a certain extent, the counter argument that another measure, the HDI, or Human Development Index, is a better measure, is also worth our consideration.  Personally, both should be used in a constructive manner, for HDI alone does not also mean a truly progressive state.  In another setting, we'll discuss the nuances of HDI.

In its simplest sense, GDP is the sum total of all income earned in the country, in terms of goods and services.  It is also the sum total of all expenses spent - when you buy a certain good, you spend money on it, and the same money was earned by the person who sold you that item.  When you are paid your salaries, somebody else spent the same amount.  You add up all those transactions all over the country in a year and you have GDP.  Economists will frown on this definition but that's the simplest I could put it.  Whether income or expense, everything should be added up, whether by individual persons, or by big corporations.

Normally, the sum total increases every year, and measured in terms of GDP growth rate, in percent.  Thus, when you have a 6.6 percent growth rate, it means the total GDP for 2012, is 6.6 percent higher than that of 2011.  Almost always, GDPs grow, slower or faster, but growing nonetheless except in very rare abnormal situations when it can become lower, which state we call as economic depression or recession.  The GDP is usually expressed in US dollars rather than in the local currency, since it is a measure of economic growth which has to be compared with other countries, to really define the growth.

In another simple analogy, the GDP is the total income of the country which is what a family income is to a family.  What is important to note in that statement, is that not all actually earns the income - sometimes, in a family, only one does, and we call him/her as the bread winner.  The other point is that many members of the family may not be earning at all, such as the children or the older people, but they too add up to the expenses of the family.  Just like in a country. (To be continued...)