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Socioeconomic Commentaries

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GDP is on the rise, but citizen does not feel it much!!!???
Iurie Gotisan, December 15, 2006

The GDP has grown!!! Official statistics have released a communication showing that the "character" called GDP, which was capable to ensure Moldovans with many things that they wanted, rose by 4.6% in January-September. Of course, not like characters but close to them. However, this is a strong enough rise, given the internal and external shocks faced by economy this year.

Born from calculations like the goddess from foam of the sea and because it became so important, the GDP does not need only a value to make it addressable, but also a visual identity. A table is the easiest thing and it is often done this way: my vision on world made me doubt over correctness of the GDP expressed in advances and declines. Balancing the Mr. GDP with my own experience, the commentary that came in my head was "there your are" in direct and indirect meanings.

I am discovering in books that other persons have also experienced my dilemmas regarding GDP; the first example is the creator of GDP, Simon Kuznets, laureate of the Nobel award for giving birth to GDP, who warned at the 1934 American Congress that the welfare level of a nation can be deducted approximately only after calculation of the national revenue. Late senator Robert Kennedy was more plastic and that's why I will cite him: "The Gross Domestic Product includes air pollution and advertising for cigarettes, and ambulance to clear our highways of carnage. It counts special locks for our doors, and jails for the people who break them. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, or the intelligence of our public debate or the integrity of our public officials. It measures everything, in short, except that which makes life worthwhile."

Three important economists of the time, Cobb, Halstead and Rowe, have compared the GDP with a calculating machine that can add but not subtract. The production of any kind was and it is from Americans and now Moldovans the indispensable element to measure the welfare. According to critics of GDP, the big mistake is that any economic activity is considered good and valid for national wealth: increased consumption of fuels is equal with welfare even if it means use of natural resources and pollution; consumption of alcohol and tobacco is OK because it also increases the consumption of drugs and medical costs, but is it a better quality of life? It means that the GDP is a bit wrong.

A fellow who came back home after staying one year in the West has told me much things about effect of finding again Chisinau and fewer facts about what happened in the West: it seems easier to accept and get used to the normality that some have it and we would like to have it, too, and it is harder to find again the daily occurrence from seven hills, though our situation is better regarding the GDP rise. We all have experienced either on our skin or found in tales of comrades what my fellow is living. This is a standard which would not be equal to percent or values per capita.

But why things go wrong in Moldova? This is a question with multiple and diverse answers. Where is the beginning? What is the main cause of the evil? Let's try to answer this question. Perhaps all evils in Moldova have one fundamental cause: the poverty. Roads are deteriorated because mayoralties are short of money to repair them. It seems that prices are high because we earn low salaries. Moldovan products are not very competitive because enterprises lack money to invest in modernisation, etc. The poverty is the cause of everything. It has two serious components with grave consequences: a component affects the state and its institutions and halts the modernisation, renovation of roads, friendly and efficient institutions, etc.; the second component affects directly everybody and its effects are very clear. But the poverty in our country is regarded as a natural phenomenon, a curse. Some countries face earthquakes. Others face floods. Moldova is facing poverty. However, there are explanations, there are solutions. We will give details with figures, GDPs, etc. Perhaps we should understand a little what is happening around us.

The medium salary on economy is the measure of poverty (or wealth). The National Bureau for Statistics said that the medium salary on economy in Moldova was 124 dollars. Thus, a Moldovan earns 124 USD a month. We know that this is embarrassing, but what does this really mean? Economies of all countries are becoming more interconnected. Nor Moldova is an exception in this respect. The times when a country or even a geographical area could ensure alone all necessary products had passed; now some countries are specialised in manufacturing laptops, others in producing petroleum. A major consequence of this phenomenon is that prices of products that may be exported are becoming closer in any country one visits. Thus, a laptop tends to cost in Moldova like in the United States. The same is effective for a barrel of petroleum or a costume Armani. Of course, some products (generally the domestic ones: vegetables, fruits, etc.) have different prices, but they are actually comparable.

OK. But why we earn only 124 dollars a month? We must study the dear GDP in this respect. The GDP is the value of all products made by economy of a country in one year. The GDP is actually the measure of wealth produced by an economy. When the GDP is divided to the number of residents, the GDP per capita is obtained. For example, the GDP per capita in the U.S. is approximately 36,300 dollars (the U.S. was taken as a reference, but any western economy may be analysed instead). It means that the wealth created by American economy in one year is worth 36,000 dollars for every American. The welfare create by Moldovan economy in one year (GDP per capita) is approximately 900 dollars per capita. The American GDP (per capita) is 40-fold higher than the Moldovan one.

Let's come back to salaries: the medium salary in Moldova amounts to 124 dollars. The U.S. pays a medium salary of 3,500-4,000 dollars a month. This ratio (1:40) is actually maintained: the medium salary of an American is about 40-fold higher than of a Moldovan. The Moldovan GDP is directly establishing the size of salaries in Moldova and the poverty rate and living standards. Finally, the equaliser "per capita" of the present GDP does not advantage us at all as individuals and individualities; I would like to stand out through a more decent, careful and human First Welfare Indicator, which people would understand.






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