October 31, 2003

                                                          War Institutionalized B The United Nations System of National Accounts                                                                                                                            

 

                                                                                       Table 1: The GNP B The Demand Side

(as interpreted by the UNSNA)

 

     Category

 

                                           Inclusions

 

                                         Exclusions

 

Consumption

 

1.  Goods purchased in the market.

2.  Goods consumed by a person whose primary production in          the labor force is that commodity.

 

Goods produced and consumed by Aunoccupied,@ Ainactive@ (not gainfully employed) women.(a)

 

Investment

   Investment by        Businesses

 

 

   Inventory               Changes

 

 

Investment by businesses of physical capital, such as new building, equipment, structures and machinery used in the further production of goods and services for sale.

 

Changes in the value of finished goods held in stock for future customers or of raw materials and partially processed (intermediate) goods firms buy to use in production, including: 

   1.  Unused weapons, including nuclear bombs.(b)

   2.  Forest clearance, land reclamation and improvement.        3.  The development of plantations, orchards, vineyards              and forests.

 

 

 

 

 

 

The following items have no value attached to them:

1.  Increases in natural resources due to growth, such as           growth of forests or standing crops.

2.  New discoveries, such as of mineral deposits. 

3.  Increases or decreases in numbers of wildlife.

 

 

Government

 

1.  Government expenditures on goods and services, including          food and uniform for the armed forces (at cost).  The               market price  of most general government activity being nil,        the value of  the services it provides is taken to be the cost of       their production.(a)

2.  Purchases of military equipment from other                             governments.

 

1.  Grants to other governments, whether in cash on in kind.          (These are treated as Ainternational transfers@).

2.   Sales of military equipment to other governments.  

 

Imports and         Exports

 

International transfers.

 

The value of military equipment transferred between governments.

(a)                Note that in the case of the government, a value of production attaches despite the lack of a market price, whereas in the case of the household, the value of services lacking a market price is considered to be nil, any expenditure assumed to be household consumption.

 

(b)               Until weapons are used, the value of their production (see Table 2) exceeds the demand for their use (Government consumption).

 

 

 

 

 

 

 

                                                       Table 2: The GNP B the ASupply,@ AIncome@ or ACost of Production@ Side

                                                                                               (as interpreted by the UNSNA)

 

     Category

 

                                    Inclusions

 

                                    Exclusions

 

Wages and              Salaries

 

The value of all production.  This includes the value of weapons, and among them, nuclear bombs.

 

 

 

Proprietors=             Incomes

 

 

 

 

 

Corporate               Profits

 

 

 

 

 

Rental Income

 

 

 

 

 

Miscellaneous        Corrections

 

The size of the statistical discrepancy with the demand side after all the calculations have been made.

 

 

 

 

 

 

 

 

 

 

 

                                                  Table 3: The GNP as a Measure of a Country=s Wealth B Criticisms

 

 

            Area

 

                                                                                Criticism

 

The Economy

 

1.  It measures the cash-generating capacity of a country rather than its productive capacity.  It was                developed to answer the question of how big a war effort the population could sustain.

2.  It does not show whether the economy is in equilibrium B whether demand and production are in                   balance.

3.  It does not measure wealth distribution and hence the absolute extent of the country=s poverty.

 

The Population

 

1.  It excludes all assessment of people=s well-being, such as working conditions and numerous non-market        activities.

2.  It implies that growth of output is correlated with qualitative satisfaction.

3.  It leaves no room for an alternative perception or for the human response to life.

 

Women

 

It excludes the unpaid production of (mostly) women and the reproduction of human life.

 

Children

 

It gives no value to investments in children, their maintenance, care and education.

 

Natural Resources

 

It pays no heed to the preservation of natural resources.

 

The Environment

 

It records destruction of the environment as growth.

 

War Accounting

 

It measures war in terms of production, profit, capital and Amanpower,@ not taking into account the ravages of war, such as poverty, homelessness, refugees, ruination of food sources and environmental degradation. 

 

Deaths

 

It gives a value only to deaths by arms.  The value of these deaths can be calculated from the difference between the value of the production of arms and their Aconsumption@ by the government.  Other deaths B even those related to war, such as from poverty, starvation, homelessness and disease B are not registered.  They do not enter the market.  Their Avalue@ is in registering no cost to the market.

 

Peace

 

It attributes little or no value to peace.

 

 

 

                                                                             

                                 The Gross National Product B History of the Concept

 

Early national income accounts were evolved in order to justify paying for wars. 

 

In England, economists John Maynard Keynes and Richard Stone, published a paper entitled, AThe National Income and Expenditure of the United Kingdom, and How to pay for the War,@ in 1939, in which they argued that war expenses should be paid for by taxation, the latter extracting the maximum amount possible from people=s redundant purchasing power.  By 1942, their ideas had been put in practice.  The War was the priority, the well-being of the population a secondary consideration.

 

In the United States, economist, Milton Gilbert, published a paper entitled, AMeasuring National Income as affected by the War,@ in 1941, in which he first offered the concept of Agross national product@ (GNP), to measure the relationship between defense expenditures and the country=s total output.  Again, the aim of his statistical analysis was how best to pay for the War.

 

National income and product statistics had been used successfully for war purposes.  They continued to be used in post-war planning and by 1953, the GNP was well-established as a new form of accounting.

 

                                     The United Nations System of National Accounts

 

In 1953, the United Nations (UN) institutionalized a GNP-based a system of international economic measurement by adopting it for itself.  The United Nations System of National Accounts (UNSNA) was formalized with the decisive help of Sir Richard Stone who, in 1984, won the Nobel prize in economics for this contribution to the world body.

 

Today, the UN uses the GNP to assess annual contributions, appraise the success of development programs and identify deserving countries.  Its agencies, such as the World Bank and the International Monetary Fund (IMF) use it, as do national governments.  First World governments, multinational banks and multilateral agencies impose this system on debtor countries to determine balance of payments and loan requirements. 

 

                                            The Gross National Product B Definition

 

The GNP equals the sum of consumer expenditures, gross investment outlay and government expenditures on goods and services.  There is no deficit side. (See Tables 1-3).

 

 

 

 

 

 

                                                   The Human Development Index

 

Until the 1990's, the GNP was the only measure used to determine the relative Adevelopment@ of a country.

 

In the 1990's, the United Nations Development Programme proposed an alternative B the human development index (HDI).  This index has four components:

3.                  Life Expectancy at Birth B Data provided by the United Nations Population Division.

 

4.                  Adult Literacy B Data provided by the United Nations Education, Scientific, and Cultural Organization (UNESCO).                                                                 

 

5.                  Combined Primary, Secondary and Tertiary Gross Enrolment (as a proxy for knowledge) B Data provided by UNESCO.

 

6.                  Per capita Gross Domestic Product (GDP) B Data provided by the World Bank.  Data are made comparable by being converted to purchasing power parity United States dollars (PPP US$) which accounts for price differences across countries.  Thus, in any country, PPP US$1.00 has the same purchasing power as $1.00 in the United States.

 

                                                      The Gross Domestic Product

 

By 1995, midway into the UN development decade, while using the GNP as the economic indicator, Adeveloping@ countries were registering little or no growth.  AWithout a murmur on the world stage,@ writes Marilyn Waring, the UN quietly dropped the GNP from its vocabulary in favor of gross domestic product (GDP).

 

Whereas the GNP purports to measure the income-generating production of the residents of a country, the GDP purports to measure the income-generating production of the country, whether or not the resources are owned by that country=s residents.  Thus, interests, profit, and other forms of transfer from income generated in the country but accruing to non-residents, are part of the GDP but not part of the GNP. 

 

Using the GDP, Adeveloping@ countries were able to record growth and hence attract investment, even if this was at the price of giving up a truer measure of the well-being of the population.  The shift to GDP gives priority to economic growth and investment and obscures the needs of the population. 

 

 

 

 

 

 

 

 

 

                                                                    Conclusions

 

Pro-war Bias: Both the System of National Accounts and the Human Development Index developed by United Nations, have a strong pro-war bias inserted within the very definition of terms.  War activities have a positive value while peace is simply not taken into account.

 

ADevelopment@ is not ACivilization:@  Under the present system of accounts, encouraging a country to Adevelop,@ is also to encourage it to build up its defense apparatus and arms exports B and hence, increase the chances that it will wage war.

 

Anti-women, Anti-children and Anti-environment Biases: The United Nations System of National Accounts is also strongly anti-women, anti-children and anti-environment.

 

The United Nations should not be counted on to stop War.

 

 

 

 

 

 

                                                                     References

 

United Nations Human Development Programme

Human Development Report 2001 B Making New Technologies work for Human Development (Oxford University Press, New York, N.Y.), 2001.

Developing Countries: p. 259.

The Human Development Index: pp. 136-138.

The Gross Domestic Product: p. 138 and 254-255.

 

Human Development Report 2003 B Millennium Development Goals, A Compact among Nations to end Human Poverty, (Oxford University Press, New York, N.Y.), 2003.

Developing Countries: p. 363.

The Human Development Index: pp. 2, 190, 237-240 and 361.

 

Waring, Marilyn, Counting for Nothing B What Men value and What Women are Worth, 2nd Edition  (University of Toronto, Toronto, ON), 1999.

The Gross National Product                                                              

Demand Side:                                                

Consumption: pp. 48-49 and 52-53 and 86.

Investment: pp. 50-52 and 57.

Government: pp. 49, 52-53 and 86.

Imports and Exports: pp. 53-54.

Supply Side: pp. 55-57.

 

The Gross National Product B Criticisms:

The Economy: pp. 3, 46-47 and 57.

The Population: pp. 44-47 and 122.

Women: pp. 1, 3, 8, 23, 24, 58, 67, 70-71, 81, 86 and 125.

Children: pp. xxxi, 3 and 74.

Natural Resources: p. 3.

The Environment: pp. 1, 3, 40 and 126-128.

War Accounting: pp. 81 and 135.

Deaths: p. 140.

Peace: p. 3.

 

The Gross National Product B History of the Concept: pp. 44-46.

The United Nations System of National Accounts: pp. 1-3 and 38-39.                    

The Gross National Product B Definition: pp. 31 and 45.                

The Human Development Index: p. xxxiv.

The Gross Domestic Product: pp. 57-58.