GDP is Only Part of the Story

Sin Chew Jit Poh
19 November 2014

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The recent Khazanah report on GDP in Malaysia is very interesting. My take on it is that there is a very big discrepancy between the GDP of Kuala Lumpur compared to the rest of the country. This is especially true of the two northern states of Kedah and Perlis and the east coast states of Kelantan and Terengganu. The report I read made no mention of Sabah and Sarawak.

This discrepancy is really quite huge with the nominal GDP of KL being almost seven times higher than that of Kelantan. This is worrying indeed because it is obvious that income distribution is very much focussed on the capital. It is worrying but not surprising. In a capitalist system it will be quite common to see that the centres of commerce will be where the money is.

 

But income and income distribution is only part of the story. I contend that what is most important is the overall quality of life. So, the part of the report that should cause most worry is the fact that many households, in particular rural households, still do not have basic amenities like running water and flush toilets. These small things are vital to not only easing one’s life ((it is no easy task hauling water from one place to another) but also health.

 

Other important factors that contribute to a quality of life is the confidence that there is social safety net. By this I mean that there is good public health care, schooling and other fundamental facilities. Public healthcare is vital so that our people do not have to fear getting sick (unlike in places like America where healthcare is a business and one is held hostage by the insurance companies) and public education is important so that there is the opportunity for upward social mobility. In other words, it doesn’t matter if our GDP is high, what really matters is what is being done with it.

 

And even with GDP being high in KL, really, how rich do you have to be to enjoy the good life? Let us take an example I am familiar with; university lecturers. A professor will be earning quite lot of money based on the national average. I dare say he will be in the higher brackets of earnings. Yet if we compare a professor in the early 1970s to one today we will see that although the chap from the earlier time (you can recognise him by his flared trousers and sideburns), is earning a smaller pay packet, he can buy much more with it.

 

Taking the old fashioned test that you should spend four month’s salary on a car and three year’s salary on a home, the 70’s prof can buy an imported European model and a bungalow. A current prof can buy a Myvi and if he is fortunate a three room medium sized apartment. So even amongst the high income earners, wages has gone up, but the quality of life not necessarily so. Add to this, concerns about public healthcare meaning the need for health insurance and concerns about education meaning the need for private schooling for children, and then we can see that life can be an economic struggle.

 

So, just who is benefitting from this high GDP of ours? It is not the rural folk. It is not necessarily even the high income city folk. Who indeed?