I've written several articles on these pages about Environmental & Social Economics,
explaining a number of measures of well-being that would be much better
measures of a country's economic health than GDP. But governments
continue to compute, and announce with great fanfare, the monthly GDP
numbers as if they were the ultimate measure of human accomplishment,
and the media and stock-brokers meekly repeat the propaganda and the
myth that it is meaningful, while providing no publicity for, or
analysis of, alternative, better measures.
Maybe what's needed is to completely discredit GDP, which its inventors
never intended to be used for the purposes it is used today.
What exactly is GDP? There are a lot of articles written explaining its
computation (most of them incomprehensible to those without an
economics degree), and at least four dramatically different ways to
compute it. But let's make it simple:
GDP is the sum of all consumer,
corporate and government purchases and investments, adjusted for net
imports or exports and for price inflation.
The value of goods is assumed to be what people are prepared to pay for
them. Since there is no reliable way of quantifying the value of
services, GDP uses the total labour-hours is used as a surrogate. So,
bottom line, GDP is the sum of the amount of Stuff Made + the amount of Time Worked.
The utility of Stuff Made or of Time Worked doesn't matter: If the
government pays $150 to a defense contractor for an aircraft bolt,
that's what it's "worth" for GDP purposes. If consumers pay $25 for a
CD because the media oligopoly allows them to fix prices, that's what
it's worth. Since volunteer work and housework are not paid for, for
GDP purposes they're worth zero. Barter transactions involve no
exchange of money, so they're worth zero. If loggers clear-cut a forest
and turn the wood to pulp for newsprint, the value of the newsprint is
added to GDP. The uncut forest is worth zero. The GDP reduction for the
lost forest is zero, until and unless it is reforested, in which case
the cost of the reforestation is also added
to GDP. The environmental cost of the Exxon Valdez disaster is not
subtracted from GDP, rather, the cost of cleanup, and the lawyers' fees
for both sides in the fifteen-year lawsuit, are all added
to GDP. The replacement of decent wages with minimum-wage jobs due to
offshoring has no impact on GDP, but if the laid-off workers turn to
crime, the additional cost of police and incarceration are both added to GDP. If people are paid to dig ditches and then fill them in again, both activities are added to GDP. If
poor service takes five times as long to render as good service, then
poor service is 'valued' for GDP purposes, five times as much as good service.
In most years in the last century, and especially in the first years of this one, war has been the main business of America, and the largest single component of GDP.
GDP is all about quantity of stuff made and time worked; quality is not a factor. In fact, if making shoddy products forces people to replace them more often, that increases GDP. And the cost of shipping the additional garbage to the landfill and managing the landfill site also increases GDP.
Here, by contrast, is how the Genuine Progress Indicator is calculated (from Redefining Progress):
The Genuine Progress Indicator
(GPI) starts with those the value of personal economic activity that is
relevant to well-being. It then adjusts them for aspects of the economy
that the GDP ignores. It assesses the well-being of households, rather
than focusing exclusively on the number of dollars they spend. Personal
consumption expenditures are then adjusted for disparity of income
distribution using the Gini coefficient. The following non-monetary
benefits—ignored by the GDP—are the added in: (a) the value of time
spent on household work, parenting, and volunteer work; (b) the value
of service work done on consumer durables (such as cars and
refrigerators); and (c) improvements to public services such as
highways and streets. The GPI then subtracts these costs, expenditures
that do not improve well-being: (a) defensive expenditures, money spent
to maintain the household’s level of comfort, security, or
satisfaction, in the face of declines in quality of life due to such
factors as crime, auto accidents, or pollution; (b) social costs, such
as the cost of divorce, crime, and loss of leisure time; (c) the
depreciation of environmental assets and natural resources; (d) the
cost of money borrowed from abroad to finance consumption rather than
investment.
Now, we have to ask ourselves Who really cares only about how much stuff is produced and how many hours are worked?
They are the ones who benefit from perpetrating the myth that an
increasing GDP is something to strive for. The people who prefer this
index are those that are producing a poor quality product, or a product
that the public places a low value on, and those who are providing poor
quality service, or a service (like waging a war under false pretenses)
that the public places a low value on. And those who are underpaying
their workers or compelling them to work fierce hours and neglect their
families to make ends meet. And those who can hawk overpriced
investments only as long as people believe the economy is healthy. And
those who want to reduce government services and redistribute
taxpayers' money to the rich. The continued use of the worthless GDP
index benefits these people, and no one else.
So what do we do about it? How do we get the media to stop reporting
GDP, and instead report GPI and other measures of true well-being and
true economic health? And how do we get the media to tell the people
that the US economy is essentially bankrupt, and that their stock
market and other $US investments are wildly overpriced and headed for an inevitable and precipitous fall?
Well, we don't. The media,
after all, are themselves driven by the mandate to continuously
increase the value of their shares. That means they need to perpetuate
the myth that the economy is healthy, GDP is meaningful, and the stock
market isn't horribly overpriced. As I mentioned in my Eight Fronts post:
We need to give up on the
mainstream US media, which are in a hopeless conflict of interest,
beholden as they are to their corporate owners who are in turn beholden
to the government in which they invest millions of dollars and depend
for their oligopoly rights. The US needs media that are free to report
objectively, and that means they cannot be corporate-controlled. We
need to build a network of television and radio stations and newspapers
that are nation-wide and funded by an independent public foundation.
Investigative reporting, not a progressive viewpoint, is what will
bring these stations their audience and the influx of funding from
average Americans of all political stripes. Blogs and the IndyMedia are
a great foundation and a great source of programming content and talent
for these new alternative media, but we need to reach the 80% of
Americans who do not get the bulk of their news online, and we even
need to reach those who get their online news exclusively from one
extreme of the political spectrum or the other. Blinkers, even
progressive blinkers, are no answer. We need objective, factual
information, unrestricted investigation and fair and balanced analysis,
not more Faux News.
Part of that fair and balanced analysis would be objective and unbiased
economic analysis, including a refusal to publicize GDP numbers and
other corporatist propaganda. It would include revelations of the
disastrous condition of the US economy, driven by extravagant war
spending, reckless tax cuts, and the running of catastrophic budget and
trade deficits. It would include development and publicizing of GPI and
other, even better measures of true economic health and well-being. It
would include arguments and a process to smash the corporatist economic
hegemony and reinvest the money large oligopolies are currently
stealing from the American people, into a robust entrepreneurial
economy that would benefit all Americans.
And it would include desperately-needed investment advice that would
quickly allow Americans to extricate the money they have tied up in
overpriced stocks and high-risk US dollar denominated securities,
before they lose their pensions and their life savings.
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