The real GDP

Below is an insightful commentary about what’s missing when we discuss our “economy.” The GDP is a number that is not just irrelevant but detrimental to the values we cherish and the lives we hope to have for ourselves and our children.

I’ve selected a few quotes here, but the piece is short and worth a read. I have always felt that profits and stock prices were not everything, but feelings don’t count for much in the workaday world. Jonathan Rowe lays out the details and the history of the wacky GDP in a clear, concise manner.

…Every time you say that “the economy” is up, or that you want to “stimulate” it, you are urging more expenditure and motion without regard to what that expenditure is and what it might accomplish, and without regard to what it might crowd out or displace in the process.

That term “the economy”: what it means, in practice, is the Gross Domestic Product–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 call Federal Reserve Chairman Ben Bernanke up here and ask him to do some explaining. 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…

This, by the way, is not an argument against growth. 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. 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.

The failure to do this is insane. It is an insanity that is embedded in the political debate and in media reportage, and it leads to fallacy in many directions. We hear, for example, that efforts to address climate change will hurt “the economy.” Does that mean that if we clean up the air we will spend less money treating asthma in young kids? 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 the logic is the same. 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, walking 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 who eat the most junk food and exercise the least, because they will run up the biggest medical bills for obesity and diabetes.

This assumption has been guiding our economic policies for the past sixty years at least. Is it surprising that the family structure is shaky, real community is in decline, and children have become petri dishes of market-related dysfunction and disease? The nation conceives of such things as growth and therefore good. It is not accidental that the two major protest movements of recent decades–environmentalist and pro-family–both deal with parts of the real economy that the GDP leaves out and that the commercial culture that embodies the GDP tends to erode. How did we get to this strange pass, where up is down and down is up?

To read more about how we got to “this strange pass,” click here for the rest of the article.

From “Our phony economy” in Harper’s Magazine by Jonathan Rowe.

The excerpt in Harper’s was taken from testimony delivered March 12, 2008, before the Senate Committee on Commerce, Science, and Transportation, Subcommittee on Interstate Commerce. Rowe is co-director of West Marin Commons, a community-organizing group, in California.

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