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Gross National Development (GND)
A New Economic and E-Government Tool

Proposal

To:

Honorable Minister, Yassin Jaber
Ministry of Economy
Republic of Lebanon

C/o
Samih Safieh, GM, SAAB
Board Member, Lebanese Association of CPAs

By:

Yones M,
10 - 2 - 1998
MTCG

Executive Summary:

The advances of ICT in the past decade provided unprecedented opportunities for socioeconomic development and government management. The introduction of low-cost PCs, client/server information systems, the global digital economy and e-government initiatives allow large-scale transactions automation, better information correlation and dissemination, performance measurement, and reporting for businesses and governments.

MTCG proposes the development of an automated e-government tool to support integrated decision-making of government agencies based on a new model called Gross National Development (GND). GND is a decision-making framework and measurement system that can be used to supplement or replace the current production-based system, known as the Gross National Product (GNP).

The main benefit of such a system is the creation of a more balanced policy decision framework that will improve the effectiveness and efficiency of government administration and investment allocation across development areas.

The project funding is proposed as a Private Public Partnership.

A brief history of modern economics and public policy limitations

During the Second World War, the Russian economist Simon Kuznets invented the concept of Gross Domestic Product (GDP) that became the scientific and policy standard for measuring economic output of countries. Mathematically, GDP is the total sum of final goods and services produced in a country in a year. Another similar and widely used metric is the Gross National Product (GNP), which is the total value of wages, rent, interest, and profits (including depreciation and indirect taxes, and returns on overseas investments) of a country’s residents. The famed British Treasury economist, John Maynard Keynes, used the concept behind GDP and GNP for war planning, which made them very popular. The GDP metric was promoted by the United Nations and its agency, the UNDP. Since then, government leaders used GDP as a benchmark to measure their development progress relative to other countries. The focus of the decision-making model for many government leaders was to create socioeconomic policies that will first and foremost promote GDP growth.

One of the limitations of the GDP and GNP measurement framework is that they do not distinguish between constructive or destructive policies and national activities. Therefore, growth of crime, wars and pollutions reflect growth in GDP and GNP. In his report to the US Congress in 1934, Kuznets noted:  "The welfare of a nation can scarcely be inferred from a measure of national income.”

Despite the wealth of available indicators and statistics collected by various government and development agencies, unfortunately, economists focuse too much on pricing commodities and spending instead of wellbeing and investment valuations. As of today, there is no alternative econometric system or tool to address the full limitations of GDP/GNP model. After reviewing economics literature, we found two pioneering concepts. In 1990, the UNDP’s Pakistani economist Mahbub ul Haq proposed the Human Development Index (HDI) as a new metric for ranking countries in terms of their progress. HDI incorporates new measures such as life expectancy, adult literacy rate, and adjusted per capita income. In 1993, Gro Brundtland, a Norwegian politician and head of Brundtland Commission proposed re-balancing the focus from economic growth to sustainable environmental protection. 

More recently, some politicians and researchers called for initiatives to incorporate new measures such as gender equality and environment accounting; however, they all provide proposals that add or subtract few dimensions to GDP and are limited in their point of view. There is a need for an integrated and weighted decision-making framework to manage all the dimensions and aspects of national development with primary focus on human well-being.

There is a need to design a new measurement system and metric that:

1. Makes clear distinction between positive socioeconomic activities vs. negative ones. This will help shift the mind of policy makers from focusing on volume or pricing of activities to the quality of activities that contribute to socioeconomic well-being. Negative activities can be discouraged as they can be at the expense of other dimensions of well-being;

2. Quantifies fundamental dimensions of citizens’ well-being to identify any underdeveloped areas. This will not only help public policy be more effective, but it also creates a framework for measuring government performance and thus builds a new system of national accounts, introduce accountability and incentive to serve all instead of special interests;

3. Presents a framework that measures the long-term impact of activities rather than just the short-term increase in GDP measures. Only then, peace and prosperity can be lasting. Short-term policy investment projects are discouraged if they are at the expense of citizens’ long-term well-being. This makes prioritizing investment decisions in favor of sustainable and stable growth, instead of cyclical inflation and recessions.

4. Can be simple and easy to implement using current ICT technologies.

Gross National Development (GND) – A New Economic Measurement Tool

The proposed government management and measurement solution is made of two parts:

1. Creating a new balanced decision-making and measurement framework

2. Creating a new data collection and reporting tool

1. The Decision Framework

The balanced framework considers five dimensions: Economic, Environment, Social, Health, and Government. Balanced does not mean equal decision weight on each factors or equal priorities; rather, balanced means taking into consideration all dimensions when deciding the allocation of public investments so that there are no blind spots. Balanced also means balanced development across all demographic areas of the country.

2. The Tool

The proposed tool is an E-government scorecard software to automate the collection and presentation of development for policy makers around GND framework and its system of measurement.

GND = Health + Economic + Social + Environment + Government

The formula is not simple arithmetic. It is a proprietary algorithmic formula 

GND Dimension / Factors and Proposed Measure / Indicator

Health & Safety (Score)

% Unnatural deaths (Including homicide and suicide rates)

% Assault crime levels

% Impact of foreign and national conflicts (traumas, injuries and deaths)

% Terminal diseases to population rates (cancer, STD, etc.)

% Serious chronic diseases to population rates (diabetes, etc.)

Life expectancy

% Number of patients / per population (for different types and levels of major diseases)

% Obesity to population rates

% Physical patients’ rates

% Psychiatry patients to population rates including (Drug and alcohol abuse to population rates)

Other indicators

 

Social Dimension (Score)

% Domestic conflict to population (including riots, demonstrations, coups, consumer complaints, civil complaints, etc.)

% Public, school and domestic violence rates (can be linked to other dimensions)

% Legal disputes to population (lawsuits civil and criminal)

% Education level in population (including adult literacy, high school completion rate, vocational/university

% Divorce rates

Other indicators

 

Economic  Dimension (Score)

% Discovery, growth or depletion of classical production factors (natural resources, labor, capital, enterprise e.g. % Population Growth/GDP Growth)

% Growth in stock market capitalization (more important than number of listed companies)

% Foreign direct investment growth

% Export/Import

% Government debt/Income (economic health alert)

% Private debt/income

% Citizens debt (Average citizen debt to income ratio, Average enterprise debt to income ratio (alerts to health and vulnerability to economic crisis)

% Income distribution (removing extreme data points of bottom 0.5% and top 0.5%)

Minimum wage/basic living income

% Disposable income

% Poverty to population rate

% Income Distribution

% Banking and saving accounts growth (may not be feasible in some countries due to bank secrecy laws)

% Income Growth/Inflation Growth ratio

% Household retirement account growth

% Unemployment to working age

% of Forced unemployment to employment during past year.

% Real GDP/person (PPP$)

% Growth in GNP/GDP

Debt Service as % of GDP

Economic Value of time (such as %Work /time ratio to meet living wage and retirement savings)

Access to and cost of education

Access to and cost of leisure, entertainment and sports activities

Other indicators

 

Living Environment Dimension (Score)

Quality of Air, Food, Water, Land, Sanitation, Waste management services

Access to Quality utilities, electricity, transportation, Internet, phone

City Living: % Green area to concrete area in cities, % Noise and traffic

Access and affordability to Housing (per person and per household)

Population Concentration (overpopulation in cities)

Neighborhood Cleanness

Other indicators

 

Government (Score)

Individual Tax Burden

Business Tax Burden

Personal freedoms (regulations burden)

Business freedoms (regulation burden)

Perceived Rule of Law (can be moved to SWB)

Perceived Corruption (can be moved to SWB)

Efficiency and effectiveness of government transactions G2C, G2G, G2B, G2B (cost and time to complete transactions)

Level of public trust in government (Survey of satisfaction of trust and wasteful spending)

Efficiency and effectiveness of the justice system (cost and time to resolve legal disputes)

Government Debt/GDP (External Debt/GDP + Internal Debt to GDP)

International Relations (peace and cooperation)

Quality of internal and external security forces

(response and resolution times)

% of complaints against government employees to total employees

Reported discriminations incidents (such as racism complaints to media, school and courts)

Access to health

Access to police

Effectiveness and efficiency (cost) of legal system

Rule of law

Voter participation rate

Other indicators

 

Total GND Score = A customized weighted score of each of the above dimension

 

The proposed framework is flexible. Measures or indicators can be added, subtracted or regrouped, and dimensions may be consolidated or separated for simplicity. For example, health and safety dimension can be separated into two dimensions. Economic value of time (such as %Work/time ratio to meet living wage and retirement savings); quality, access, and cost of education; quality access to and cost of leisure, entertainment and sports activities may be expanded as separate dimensions or grouped under social or other dimensions. The framework also lends itself to any changes in government national accounts to fit future developments and innovations. The presentation of the framework can be adapted to fit a flexible decision model. A customized weight for each dimension for each development stage can be used to fit government priorities. So, one government can focus on sustainability, another on education and third on economic development or income inequality, as they see fit

The tool can be used to measure not only the aggregate national level of development goals, but also the various geographic and demographic areas that make up the state. GND Comparisons can be made on year to year basis covering Geographic Area, Rank , GND Score / Investment, Delta Score Year to Year, Progress Highlights & Key Issues

The successful implementation of such a framework can create a model for other countries.

MTCG can develop a customized scorecard for the current government to assist with public administration. The flexibility of this tool also allows the presentation of data collection in various forms. One form is to consider the application of private sector accounting best practices to government agencies. These dimensions and indicators can also serve as reporting items of a national balance sheet, profit or loss, equity (net worth statements) and the distribution of surplus taxes as dividends to the citizens. In such a governance model, citizens and companies will not view taxes as a burden but as an investment which they can measure its return on annual basis. The government can provide a snapshot and progress report and basis for short-term and long-term decisions and strategies for national development.

 



To learn more, please call:

M. Yones,

Senior Consultant, MTCG

Gross National Development (GND) (Microsoft Word Copy - Rich Text Format)


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