Most will remember our discussions on a need for an improved economy,
particularly one that would appositely assign realistic value to ever
diminishing natural resources. The essay below expands more intriguingly
upon this, and recommends that we should not only include far more in
the old GDP formula, but that we need to revamp it almost entirely. The
piece does not take in the illegal economies, nor to any remarkable
extent that of falsely valued currency trades, etc., which we had talked
about, but explores cause and effect of many so-called positive market
conditions.
I've excerpted one of the paragraphs you'll find below.
Natalia Kuzmyn
*/"/**/ Most of the crucial life-supporting functions take place outside
the realm of monetized exchange. They are not part of the market or the
government - both of which function through money - but rather occur
through natural or social process. The help and care of parents and
neighbors; the cooling and cleansing functions of trees; woods in which
to hike and hunt; clean water in which to fish and swim; these all are
off the books. They do not register in the GDP until something destroys
them and people have to buy substitutes in the market. This is insane. A
tally of economic wellbeing needs to reflect reality, not just the
portion of it that is convenient for economists to measure."
/*
*THE THINGS THE GDP DOESN'T COUNT *
*JONATHAN ROWE
*/From congressional testimony
/That term "the economy". . . what it means, in practice, is the gross
domestic product or GDP. It's just a big statistical pot that includes
all the money spent in a given period of time. If the pot is bigger than
it was the previous quarter, or year, then you cheer. If it isn't
bigger, or bigger enough, then you get Bernanke up here and ask him what
the heck is going on.
The what of the economy makes no difference in these councils. It never
seems to come up. The money in the big pot could be going to cancer
treatments or casinos, violent video games or usurious credit card
rates. It could go towards the $9 billion or so that Americans spend on
gas they burn while they sit in traffic and go nowhere; or the billion
plus that goes to drugs such as Ritalin and Prozac that schools are
stuffing into kids to keep them quiet in class.
The money could be the $20 billion or so that Americans spend on divorce
lawyers each year; or the $5 billion on identity theft; or the billions
more spent to repair property damage caused by environmental pollution.
The money in the pot could betoken social and environmental breakdown -
misery and distress of all kinds. It makes no difference. You don't ask.
All you want to know is the total amount, which is the GDP. So long as
it is growing then everything is fine. . .
It isn't just you. The President does it, the media, the reporters
sitting at that table over there. They do it too. How many of them or of
you asked during the recent debate over the "stimulus" package, exactly
what it was that would be stimulated. How many of them say, when
Bernanke comes up here to report on the nation's growth, "Hey wait a
minute. What exactly are we talking about here?" Doesn't it matter
whether it is textbooks or porn magazines, childbirths or treatments for
childhood asthma born of bad air? Doesn't it matter whether the
expenditure comes from living within our means or from going into
financial and ecological debt? Don't we need to know such things before
we can say whether the increase in transactions in the pot - what we
call "growth" -- has been good or not? This is not an argument against
growth by the way. To be reflexively against growth is as numb-minded as
to be reflexively for it. Those are theological positions. I am arguing
for an empirical one. Let's find out what is growing, and the effects.
Tell us what this growth is, in concrete terms. Then we can begin to say
whether it has been good or not.
The failure to do this is insane, literally. It is an insanity that is
embedded in the political debate, and in media reportage. . . We hear
for example that efforts to address climate change will hurt "the
economy." Do they mean that if we clean up the air we will spend less
money treating asthma in young kids? That Americans will spend fewer
billions of dollars on gasoline to sit in traffic jams? That they will
spend less on coastal insurance if the sea level stops rising? There is
a basic fallacy here. The atmosphere is part of the economy too - the
real economy that is, though not the artificial construct portrayed in
the GDP. It does real work, as we would discover quickly if it were to
collapse. Yet the GDP does not include this work. If we burn more gas,
the expenditure gets added to the GDP. But there is no corresponding
subtraction for the toll this burning takes on the thermostatic and
buffering functions that the atmosphere provides. (Nor is there a
subtraction for the oil we take out of the ground.) Yet if we burn less
gas, and thus maintain the crucial functions of the atmosphere, we say
"the economy" has suffered, even though the real economy has been
enhanced. With families it's the same thing. By the standard of the GDP,
the worst families in America are those that actually function as
families - that cook their own meals, take walks after dinner and talk
together instead of just farming the kids out to the commercial culture.
Cooking at home, talking with kids, talking instead of driving, involve
less expenditure of money than do their commercial counterparts. Solid
marriages involve less expenditure for counseling and divorce. Thus they
are threats to the economy as portrayed in the GDP. By that standard,
the best kids are the ones that eat the most junk food and exercise the
least, because they will run up the biggest medical bills for obesity
and diabetes.
This kind of thinking has been guiding the economic policy minds of this
country for the last sixty years at least. Is it surprising that the
family structure is shaky, real community is in decline, and kids have
become Petri dishes of market-related dysfunction and disease? The
nation has been driving by a instrument panel that portrays such things
as growth and therefore good. It is not accidental that the two major
protest movements of recent decades - environmental and pro-family --
both deal with parts of the real economy that the GDP leaves out and
that the commercial culture that embodies it tends to erode or destroy. . .
There are so many examples of expenditure that goes into the GDP that
has a questionable claim to the stature of growth and good, even from
the standpoint of those who make it. For example, much consumption is
compulsory, in that buyers have little choice. There is fraud, such as
the way seniors are cheated in reverse mortgage scams. There's also
products that are designed to lock buyers into an endless stream of
high-priced replacements, such as inkjet printer cartridges that are
designed to resist refilling.
Or what about car bumpers that are designed not to bump, so that a mild
fender bender turns into a $5,000 repair bill? . . .
The toughest case for the economic mind is addiction. The GDP assumes,
as most economists do, that people are inherently "rational." What they
buy is exactly what they want, and so their purchases must make them
happy in exact proportion to the prices paid. Yet addiction has become
pervasive. It has metastasized far beyond the usual suspects - gambling.
Tobacco, drink and drugs - and come to roost on such things as eating,
credit cards, and shopping itself.
How can anyone assume that buying makes people feel better when those
very people are engaged in a mighty struggle to do less of it. . .
The GDP makes no distinction between a $500 dinner in Manhattan and the
hundreds of more humble meals that could be provided for that same
amount. An Upper East Side socialite who buys a pair of $800 pumps from
Manolo Blahnik, appears to contribute forty times more to the national
well being than does the mother who buys a pair of $20 sneakers at
Payless for her son. . . . As included in the national accounts, an
accretion of luxury buying at the top covers up a lack of necessary
buying at the bottom. As the income scale becomes more skewed, as it has
in the U.S., the cover up becomes even greater. In this respect the GDP
serves as a statistical laundry operation that hides the suffering at
the bottom - when used as a measure of national wellbeing.
Another problem has to do with work, and the toll it takes on those who
do it. . . If the GDP subtracts depreciation on buildings and equipment,
should there not be a corresponding subtraction for the wearing out of
people? What about the loss in the value of their skills as one
technology displaces another? In the current accounting, this toll often
gets added to the GDP rather than subtracted, in the form of
medications, expenditures for retraining, and day care for children as
parents work longer hours. Most workers would regard such outlays as
costs not gains. . .
I doubt that it is possible to include all the needed information into
one single indicator. There are too many apples and oranges. To value a
parent's work in the home at the going market price, for example, is
both insulting to parents, and an exercise in self-parody for an
economics profession that cannot see beyond the realm of market price
But at the very least there needs to be an array of indicators that
connects such hidden forms of economic function to a larger economic
whole. Here are some principles you might find useful. . .
Time is perhaps the most basic form of wealth. Yet Americans, for all
their wealth, are the most time-impoverished people on earth. The time
they spend both working and consuming - that is, the time absorbed into
the market - comes out of the time available for their families and
communities; and both are going wanting as a result. Time is a finite
resource, just as coal and oil and dump space in the sky are finite
resources. To take more of it for work or consumption is to take it from
someplace else. You need to look not just at the money and stuff that
people have, but also at the time they have. . .
Most of the crucial life-supporting functions take place outside the
realm of monetized exchange. They are not part of the market or the
government - both of which function through money - but rather occur
through natural or social process. The help and care of parents and
neighbors; the cooling and cleansing functions of trees; woods in which
to hike and hunt; clean water in which to fish and swim; these all are
off the books. They do not register in the GDP until something destroys
them and people have to buy substitutes in the market. This is insane. A
tally of economic wellbeing needs to reflect reality, not just the
portion of it that is convenient for economists to measure.
Not everything that is called "consumption" represents advance up the
mountain of more. Here are a few examples:
--Compulsory expenditures that are built into products, such as cars
designed to cost a fortune to repair, and inkjet printer cartridges
designed to resist refilling.
-- Fraud and abuse, such as exorbitant fees built into credit cards that
issuers increase whenever they want.
-- Medical bills incurred because of other activities that increase the
GDP but degrade the environment. An example is medical bills to treat
asthma in children brought on by bad air.
-- Addictive consumption, which is shopping that the shoppers themselves
which they could drop. It is hard to see how this could add to
wellbeing, when the people are doing it thinks it adds to their own
misery instead.
--Defensive consumption, such as the double-pane windows that city
dwellers buy to keep out noise from boom box cars and the like on the
street.
It is not possible to parse out every single expenditure for its plusses
and minuses. But neither is it tenable to assume that every expenditure
represents a plus for the individual and society, just because somebody
has made it. Yet the GDP starts with just that assumption; or more
precisely, the people who interpret the GDP that way do. It is time to
begin to make distinctions.
The purpose of an economy is to meet human needs in such a way that life
becomes in some respect richer and better in the process. It is not
simply to produce a lot of stuff. Stuff is a means, not an end. Yet
current modes of economic measurement focus almost entirely on means.
For example, an automobile is productive if it produces transportation.
Yet today we look only at the cars produced per hour worked. More cars
can mean more traffic and therefore a transportation system that is less
productive. The medical system is the same way. The aim should be
healthy people, not the sale of more medical services and drugs. Yet
today, we assess the economic contribution of the medical system on the
basis of treatment rather than results.
Economists see nothing wrong with this. They see no problem that the
medical system is expected to produce 30-40% of new jobs over the next
30 years. "We have to spend our money on something," shrugged a Stanford
economist to the New York Times. This is more insanity. Next we will be
hearing about "disease-led recovery." To stimulate the economy we will
have to encourage people to be sick so that the economy can be well.
/Jonathan Rowe is a contributing editor of the Washington Monthly and a
founder of the Tomales Bay Institute
<http://www.earthisland.org/tbi/>/
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