GDP: an ugly measure of economic health

I’ve been watching the political “debate” the last couple of weeks. I’m in the US now. I have a green card. The election has caught my attention largely because in Canada, from the time a prime minister calls an election until the election itself, it takes 38 days. I also just finished a book, What’s the Economy for, Anyway?

 Sifting through all the posturing and bombast of the election, I couldn’t help feel the two, the elections and the book, were connected. The book points to the problem of having Gross Domestic Product (GDP) the all-mighty measure of economic health. That point orchestrates a lot of the rhetoric in both parties.

Looking at a list of a few things that are good for GDP ( a measure of the money spent in a country)  will clarify this:

  • Sale of 350 billion cigarettes plus the $10 billion in ensuing lung cancer (bad for our health but good for GDP)
  • Crime: police salaries, lawyers and 2.3 million behind bars, more per capita than any other country in the world
  • Deepwater Horizon oil spill: the billions spent in clean up and liabilities paid being much better for GDP than just selling the $490 million worth of lost oil
  • Military spending: $500 billion a year, more than the next 50 countries combined
  • Financial products: the $650 trillion derivative and swap markets, while providing no real product is like a main line fix for GDP, which is why politicians are so keen to not regulate banks

Looking at those figures in fact may clarify why on the surface the US seems to have this amazing per capita economy and this dreadful amount of poverty and unemployment. It depends what you measure.

The ideal is unlimited GDP growth. Economists assume if people can buy more stuff they will be happy. Ironically whether you actually are happy or not, as measured by GDP, is irrelevant.

Because GDP dominates economic policy it dominates government policy. It was created in the late 1930’s (called Gross National Product then) to create parameters to help get the economy moving again. At the time forests and water were considered wildly abundant and shirts and shoes scarce. Now the opposite is true. Forests and water are becoming scarce and shoes and shirts are abundant.

Forests and water are natural capital. GDP gives no value to natural capital. None. Not a dime. Nor to human capital. Or social capital.

Natural capital is also, minerals, wildlife, fish, air, soil, plus living systems like rainforests, wetlands, the ocean. All these are considered free and unlimited. If someone suggests the need to protect some aspect of natural capital it first must be proven it will not “hurt the economy”, that is slow GDP.

Human capital (our education, capabilities and talents) and social capital (our connection to family, friends and community) fare no better. Zero in terms of GDP.

Bobby Kennedy in a speech in 1968 said GNP “ measures everything in short except that which makes life worthwhile.”

It’s that “worthwhile” part we need to focus on. That’s where the beauty lies. Abraham Maslow spoke of the things we need as human beings after the basic needs of shelter and food are met. He had eight or nine parameters, including the need for beauty and the need for art and culture.  Interestingly I just noticed that Mitt Romney intends to cut all funding to PBS, the National Endowment to the Arts and the National Endowment to the Humanities. Simple (in the sense it isn’t your retirement money that would be gone, so the complaining won’t put people on the streets) and responsible (we must do something to reduce government spending) and useless (a drop-in-the-bucket solution).

The government serves a blind outdated economic machine. As the economist Robert Repetto said, we follow a system with “ illusory gains in income and permanent loss in wealth.”

2 thoughts on “GDP: an ugly measure of economic health

  1. As a re-starting, struggling, painter in Wales, I ordered your book on Composition, which arrived this morning. I like it so much that I have ordered your Authenticity book too.
    And here I am reading your blog, feeling as if I have hit the jackpot! Thank you!
    Jane

  2. I’m stunned by the clarity of your observation about GDP as the unholy grail, and what it does to life & beauty. It is so, indeed – and it’s good to hear another artist state the sad truth in terms of damaging life by losing beauty. Too often I find artists separate themselves from what’s deemed “politics”, never seeing the connection of all of it to all of it. I usually settle for a sad remark that we can’t make people care, and that if something doesn’t immediately make money for some corporation, it’s declared irrelevant unless a large enough voter bloc squawks loudly enough and throws enough money at Congress (thereby giving money the upper hand again, of course, sadly). I prefer your elegantly written analysis, and thank you. So, now, how do we get millions of artists to recognize the situation and vote to alter it?!! (Yeah, well, one can dream . . .)

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