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Let's Ban the GDP

by Chris Kulczycki Thu Nov 3rd, 2005 at 02:07:51 PM EST

There was a request to put this in the debate box, but since there is room for two only, will keep this close to top of recent diaries for a time ~ whataboutbob. (Actually, if it starts life as a diary it can't be moved to the debates box - Colman)

NOTE: The following was written for an American audience, but I think European Tribute readers will find that it also applies in certain European countries.

The GDP index is a dangerous thing; we should consider banning it. It does more damage than drugs, or guns, or hurricanes combined.

Neo-cons are particularly enamored of the GDP. "The GDP is up; great; we can afford to cut taxes for corporations and the rich" or "the GDP is down; darn; we'd better cut taxes on corporations and the rich to stimulate growth." They use the GDP as measures of national success.

GDP, or Gross Domestic Product, is the total value of final goods and services produced within a country's borders in a year. That's a stupid way to judge how a country is doing. It's not even a particularly good way to measure the strength of an economy.

Continued


Using this broad economic indicator as the main measure of national well-being results in a ridiculous and harmful distortion of priorities. It results in bankruptcy legislation that aims to help credit card companies, energy bills to aid big oil, prescription aid for the benefit of drug companies, conservation legislation for timber companies, and environmental bills for the sake of big industry.  

The GDP is up this year; growth was at 3.8% last quarter. Are you happy, feeling optimistic about our country, want to stay the course, confident in your children's future? No? I didn't think so. So what is wrong with the GDP? Here is a good summary from Redefining Progress. I've added few notes in [brackets].

Since its introduction during World War II as a measure of wartime production capacity, the Gross National Product (since changed to Gross Domestic Product -- GDP) has become the nation's foremost indicator of economic progress. It is now widely used by policy makers, economists, international agencies and the media as the primary scorecard of a nation's economic health and well- being.

Yet the GDP was never intended for this role. It is merely a gross tally of products and services bought and sold, with no distinctions between transactions that add to well-being, and those that diminish it. Instead of separating costs from benefits, and productive activities from destructive ones, the GDP assumes that every monetary transaction adds to well-being, by definition. It is as if a business tried to assess its financial condition by simply adding up all "business activity," thereby lumping together income and expenses, assets and liabilities.


On top of this, the GDP ignores everything that happens outside the realm of monetized exchange, regardless of its importance to well-being. The crucial economic functions performed in the household and volunteer sectors go entirely ignored. The contributions of the natural habitat in providing the resources that sustain us go unreckoned as well. As a result, the GDP not only masks the breakdown of the social structure and natural habitat; worse, it actually portrays such breakdown as economic gain.

GDP treats crime, divorce and natural disasters as economic gain:

Since the GDP records every monetary transaction as positive, the costs of social decay and natural disasters are tallied as economic advance. Crime adds billions of dollars to the GDP due to the need for locks and other security measures, increased police protection, property damage, and medical costs. Divorce adds billions of dollars more through lawyer's fees, the need to establish second households and so forth. Hurricane Andrew was a disaster for Southern Florida. But the GDP recorded it as a boon to the economy of well over $15 billion.

GDP ignores the non-market economy of household and community. [This includes barter and unreported income]:

The crucial functions of childcare, elder care, other home-based tasks, and volunteer work in the community go completely unreckoned in the GDP because no money changes hands. As the non-market economy declines, and its functions shift to the monetized service sector, the GDP portrays this process as economic advance. The GDP also adds the cost of prisons, social work, drug abuse and psychological counseling that arise from the neglect of the non-market realm.

GDP treats the depletion of natural capital as income.

The GDP violates basic accounting principles and common sense by treating the depletion of natural capital as income, rather than as the depreciation of an asset. The Bush Administration made this point in the 1992 report of the Council on Environmental Quality. "Accounting systems used to estimate GDP" the report said, "do not reflect depletion or degradation of the natural resources used to produce goods and services." As a result, the more the nation depletes its natural resources, the more the GDP goes up. [For example, pumping oil is treated as income, but since the oil can never be replaced, it should be treated as capital depletion]

GDP increases with polluting activities and then again with clean-ups.

Superfund clean-up of toxic sites is slated to cost hundreds of billions of dollars over the next thirty years, which gets added to the GDP. Since the GDP first added the economic activity that generated that waste, it creates the illusion that pollution is a double benefit for the economy. This is how the Exxon Valdez oil spill led to an increase in the GDP.

GDP takes no account of income distribution. [this is a huge problem] :

By ignoring the distribution of income, the GDP hides the fact that a rising tide does not lift all boats. From 1973 to 1993, while GDP rose by over 50 percent, wages suffered a decline of almost 14 percent. Meanwhile, during the 1980s alone, the top 5 percent of households increased their real income by almost 20 percent. Yet the GDP presents this enormous gain at the top as a bounty to all. GDP ignores the drawbacks of living on foreign assets.

In recent years, consumers and government alike have increased their spending by borrowing from abroad. This raises the GDP temporarily, but the need to repay this debt becomes a growing burden on our national economy. To the extent that Americans borrow for consumption rather than for capital investment, they are living beyond their means and incurring a debt that eventually must be repaid. This downside of borrowing from abroad is completely ignored in the GDP.

In short, the more we spend, the better off the country must be.

Fortunately, there are several alternative ways of measuring how we're doing. But first, just for a comparison, here are the top 10 economies by nominal GDP in millions according to the IMF:

1.    European Union $12,865,602
2.    United States $11,734,300  
3.    Japan $4,671,198
4.    Germany $2,754,727
5.    United Kingdom $2,133,019  
6.    France $2,046,292
7.    Italy $1,680,112  
8.    People's Republic of China $1,653,686
9.    Spain $1,041,338  
10.    Canada $993,443  
11.    South Korea $680,409

Of course things look a little different if we look at GDP (PPP) per capita. PPP is purchasing power parity. The PPP measures how much a currency can buy in terms of an international measure (usually dollars), since goods and services have different prices in some countries than in others. This is probably a better measure of how we're doing, thought still not very good. Here is the top ten in USD according to the IMF (except for San Marino, which is from our friends at the CIA):

1.    Luxembourg 66,821
2.    Norway 41,941
3.    United States 41,557
4.    Republic of Ireland 40,003
5.    Iceland 35,686
6.    Denmark 34,718
7.    San Marino 34,600
8.    Canada 34,444
9.    Switzerland 33,168
10.    Austria 32,962

One of the problems with GDP is that it does not take into account income inequality. The magnitude of this problem cannot be over stated. Imagine a tiny country that has 100 billionaires and 100,000 people living on $2 a day (as about half the world's population does). This imaginary country would be the richest in the world by GDP per capita.

Here is a list of the top 10 countries by income inequality (using the Gini coefficient for you economists). By the way, if you're looking for the US, it's number 74.

1.    Denmark
2.    Japan
3.    Sweden
4.    Belgium
5.    Czech Republic
6.    Norway
7.    Slovakia
8.    Bosnia and Herzegovina
9.    Uzbekistan
10.    Finland

74.USA

If we really wanted to know how we were doing as a country, we might use the United Nations Human Development index (HDI). The HDI measures the average achievements in a country in three basic dimensions of human development:

1.    A long and healthy life, as measured by life expectancy at birth.
2.    Knowledge, as measured by the adult literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary gross enrollment ratio (with one-third weight).
3.    A decent standard of living, as measured by gross domestic product (GDP) per capita at purchasing power parity (PPP) in USD.

Here is the link to the whole UN report; it's a very very long pdf document. And here is how we do in the HDI:

Another way is to use the Genuine Progress Indicator (GPI). This is like an extended version of the GDP that takes into account factors such as:

·    Cost of resource depletion
·    Cost of crime
·    Cost of ozone depletion
·    Cost of family breakdown
·    Cost of air, water, and noise pollution
·    Loss of farmland
·    Loss of wetlands.
·    Life span of consumer durables & public infrastructure.
·    Dependence on foreign assets.
·    Defensive expenditures.
·    And several others

This shows our growth by GPI and GDP:

Another possible method is to use survey that was prepared for the Economist's "World in 2005" publication. They wanted to find out,  "Where will be the best place to live in 2005?" Here are the factors they took into consideration:


·    Material well: being-gdp per person, at ppp in $. Health-Life expectancy at birth: years.
·    Political stability and security: Political stability and security ratings
·    Family life: Divorce rate (per 1,000 population), converted into index of 1 (lowest divorce rates) to 5 (highest).
·    Community life: Dummy variable taking value 1 if country has either high rate of church attendance or trade-union membership; zero otherwise.
·    Climate and geography: Latitude, to distinguish between warmer and colder climes.
·    Job security: Unemployment rate, %.
·    Political freedom: Average of indices of political and civil liberties. Scale of 1 (completely free) to 7 (unfree).
·    Gender equality: Ratio of average male and female earnings, latest available data.

Here is a link to the study; it's very interesting and well done. The top 10 countries are listed below; the US is 13th:

1.    Ireland
2.    Switzerland
3.    Norway
4.    Luxembourg
5.    Sweden
6.    Australia
7.    Iceland
8.    Italy
9.    Denmark
10.    Spain

      13. USA

Finally, my favorite method is Gross National Happiness (GNH), a contribution from the little Himalayan kingdom of Bhutan. GNH does not attempt to quantify happiness. It assumes that well-being is more relevant and important than consumption. GNH depends on a series of subjective judgments about moral values rather than quantitative data. Here's some background from GrossInterationalHappiness.org .

The term Gross National Happiness was first expressed by the King of Bhutan His Majesty Jigme Singye Wangchuck. It is rooted in the Buddhist notion that the ultimate purpose of life is inner happiness. Bhutan being a Buddhist country, Bhutan's King felt the responsibility to define development in terms of happiness of its people, rather than in terms of an abstract economic measurement such as GNP.


Bhutan's minister Dasho Meghraj Gurung put the Bhutanese philosophy succinctly: "The ideology of GNH connects Bhutan's development goals with the pursuit of happiness. This means that the ideology reflects Bhutan's vision on the purpose of human life, a vision that puts the individual's self-cultivation at the center of the nation's developmental goals, a primary priority for Bhutanese society as a whole as well as for the individual concerned".


And this is from a recent New York Times article on the subject:

''We have to think of human well-being in broader terms,'' said Lyonpo Jigmi Thinley, Bhutan's home minister and ex-prime minister. ''Material well-being is only one component. That doesn't ensure that you're at peace with your environment and in harmony with each other.''


It is a concept grounded in Buddhist doctrine, and even a decade ago it might have been dismissed by most economists and international policy experts as naive idealism.


Indeed, America's brief flirtation with a similar concept, encapsulated in E.F. Schumacher's 1973 bestseller ''Small Is Beautiful: Economics as if People Mattered,'' ended abruptly with the huge and continuing burst of consumer-driven economic growth that exploded first in industrialized countries and has been spreading in fast-growing developing countries like China.


Yet many experts say it was this very explosion of affluence that eventually led social scientists to realize that economic growth is not always synonymous with progress.


In the early stages of a climb out of poverty, for a household or a country, incomes and contentment grow in lockstep. But various studies show that beyond certain thresholds, roughly as annual per capita income passes $10,000 or $20,000, happiness does not keep up.


And some countries, studies found, were happier than they should be. In the World Values Survey, a project under way since 1995, Ronald Inglehart, a political scientist at the University of Michigan, found that Latin American countries, for example, registered far more subjective happiness than their economic status would suggest.


And, just to belabor the point, this is from a New York Times editorial :
An economic cynic may argue that a country with a gross national product as small as Bhutan's can well afford to worry about its gross national happiness, and that the best way to increase G.N.H. is by increasing G.N.P. But that is essentially an untested assertion, and there is plenty of evidence to suggest that it isn't necessarily true. Our sense of happiness is created by many things that are not easily measured in purely economic terms, including a sense of community and purpose, the amount and content of our leisure and even our sense of the environmental and ecological stability of the world around us.


To talk about gross national happiness may sound purely pie in the sky, partly because we have been taught to believe that happiness is essentially a personal emotion, not an attribute of a community or a country. But thinking of happiness as a quotient of cultural and environmental factors might help us understand the growing disconnect between America's prosperity and Americans' sense of well-being.

I propose that we switch to one of these latter methods for assessing how our country is doing. Instead of headlines that say "Economy (GDP) grows by 3.8%" I'd like to see the top story in the New York Times or Wall Street Journal headlined: "US moves up in UN Human Development Index". Or how about, "President Announces Gross National Happiness Goals Met"

I know some of you are going to say that banning the GDP is just plain silly. All right, I'll grant you that some do know how to use the GDP responsibly. So here's a compromise. Let's just put the GDP behind the counter; you can still look at it. But we'll only let those with a prescription actually use it. Jerome a Paris and others who know how to use the GDP safely can get a prescription. But we have to keep it out of the hands of the neo-cons. It's like giving a loaded shotgun to a bunch of chimpanzees. Sooner or later someone is going to get hurt. And it'll inevitably be us.

Poll
What is the best overall measure of national progress?
. GDP 10%
. GDP (PPP) per capita 10%
. UN Human Development Index 20%
. Genuine Progress Indicator 10%
. The Economist's method 10%
. Gross National Happiness 30%
. Other, I'll tell you in a comment. 10%

Votes: 10
Results | Other Polls
Display:
Please excuse the length of this. I may have gotten carried away.

Do not feel safe. The poet remembers.
Czeslaw Milosz
by Chris Kulczycki on Sat Oct 29th, 2005 at 04:04:51 PM EST
Thanks, this is great - it's actually pretty short for what is a huge subject! We started discussing it over here at ET a few weeks back, but none of us got around to actually go dig the various options (I'll go dig the links to these older diaries later).

Do you have a link for the GPI?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Oct 29th, 2005 at 05:14:06 PM EST
[ Parent ]
There does not seem to be a single good source for GPI on the web, though many sites have some discussion of it. This is the source I found most helpful, redefiningprogress.org.

Do not feel safe. The poet remembers.
Czeslaw Milosz
by Chris Kulczycki on Sat Oct 29th, 2005 at 06:20:13 PM EST
[ Parent ]


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Oct 31st, 2005 at 05:59:51 AM EST
[ Parent ]
Thanks, it's a very important topic. Some people I know are working on it. I will try to find the links.

I think it deserves to be put in the "Debate" box on the front page.


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Oct 29th, 2005 at 06:00:01 PM EST
Will seriously consider this...may have to expand that box (it only holds two now...)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Mon Oct 31st, 2005 at 03:33:42 PM EST
[ Parent ]
Indeed: metrics matter. Human choices depend greatly on what people perceive as being better or worse. To seek change by changing the how people see progress rises above personalities, events, and parties to the level of cultural transformation. Recommended.

Words and ideas I offer here may be used freely and without attribution.
by technopolitical on Sun Oct 30th, 2005 at 12:59:43 AM EST
I know that the federal government's spending deficit is added directly to the GDP, but is the US's $60 billion monthly trade deficit also added to the GDP?

I'm not seeing much wealth being created here in California!

by capslock on Sun Oct 30th, 2005 at 01:40:28 AM EST
First, this is an excellent article.  Particularly when one realizes you are somewhat facetious about literally "banning GDP".  I have never considered it to be the one and only measure of perfomance.  And you point out many others that I think would be good, though they would need to be worked through, understood, accepted, and hopefully not used for partisan purposes, but in fact used to help us improve our world, our countries.  

Second, and you discuss this, spiritual teachings of all faiths tell us that our own personal happiness is within our own power.  As the great Hindu saint Kabir says in one of his most famous poems,

I laugh when I hear that the fish
  in the water is thirsty.
You wander restlessly from forest
  to forest while the Reality
  is within your own dwelling.
The truth is here!  Go where you will--
  to Benares or to Mathura;
  until you have found God
  in your own soul, the whole world
  will seem meaningless to you.

How to Know God
The Yoga Aphorisms of Patanjali

the saints of all faiths have shown us that we can as individuals find the happiness we would all like.  It's an individual, and spiritual journey.

by wchurchill on Sun Oct 30th, 2005 at 02:29:01 AM EST
I like Swamis Prabhavanda and Isherwood's translation and commentary of Patanjali's Yoga Sutras very much. They have a great way to make it more accessible for Westerners. It was the first translation I read.
by Fran (fran at eurotrib dot com) on Mon Oct 31st, 2005 at 03:09:33 AM EST
[ Parent ]
Me too.  I have read it a number of times, and I'm one of those who underlines and makes notes on every page.  The IChing, Tao, Bible, Bhagavad Gita are also books that I value, and read constantly.  Frankly I'm considering, wondering, if my time spent on secular things that I enjoy, like sports, politics which is mainly this website, work,,,etc.. is really the right thing for me now.  (also, since you mention it, the book "I am that" by Sri Nisargadatta Maharah is incredible).  We all have different dimensions, sides to our life.  I've often thought to myself how I unveil one side of myself on this blog--which is a small percentage of me--and I speculate that is true for others as well.
by wchurchill on Mon Oct 31st, 2005 at 04:34:49 AM EST
[ Parent ]
I used to have this conflict too. But my solution is to try too practice this "thinking" in everyday live. For me Gandhi is the example in the sense of being fully in this world without being of this world. He was fully involved in everyday live and in politics, but at the same time non-attached. I found that the internet is a place where I can practice Yoga. Thanks to Jérôme et al, here on ET I can do my daily dose of Karma Yoga. Karma Yoga in the sense of selfless action, by setting up the Breakfast thread. At the same time I can practice vairagya or non-attachment in two ways. First by doing it lovingly without expecting any fruits for it and then by staying non-attached when reading (bad)news. Please note, the key-word is practice.

I only read Sri Nisargadatta Maharaj's book "the nectar of immortality".

And thanks, I just learned a new English word from you -luddite.

by Fran (fran at eurotrib dot com) on Mon Oct 31st, 2005 at 11:10:29 AM EST
[ Parent ]
and thank you also for the nectar of immortality recommendation.  I just ordered it.
by wchurchill on Wed Nov 2nd, 2005 at 02:58:15 PM EST
[ Parent ]
i'm a luddite, as I'm sure you have already recognized, on this site.  I don't know how to see comments to old posts, other than paging down, and wondering if this response now has two responses as opposed to one,,,is my memory right,,,before.  so I'm struggling a little here, but really happy to see your note--wondering if I miss others.  thank you by the way for your work on presenting the top european news stories.  i start my day with google news and your comments.
by wchurchill on Mon Oct 31st, 2005 at 04:43:42 AM EST
[ Parent ]
I'm not so sure I agree with you on this. (What a surprize! :-) )

First off, it's not so bad if the U.S. falls behind Luxembourg or Switzerland or Norway or Ireland in these sorts of polls, because they represent those special cases you talked about: Norway with huge oil reserves and a small population, Ireland with a huge EU windfall, Luxembourg with her very specialized economy. And the other Scandanavian countries always do well in polls like this for some reason, but if you compare Minnesota (our most Scanadanavian state) to Sweden we don't look bad at all.

But the real problem is getting the masses to agree with you. Personally I'm a pretty greenish, low consumption, meditational, book-reading sort of person. But the vast majority of people, in America, in Europe, and in South Asia and Africa, want MORE STUFF. That's how they measure personal happiness. That's the sad fact, and until you figure out how to change it, the PPP per-capita GNP figure is the most accurate way to measure what people want.

Try running a political campaign on your happiness index and see what happens!

by asdf on Sun Oct 30th, 2005 at 10:53:55 AM EST
LOL!!
Try running a political campaign on your happiness index and see what happens!
That comment really caught me,,,I really did laugh out loud, a lot!
by wchurchill on Sun Oct 30th, 2005 at 02:24:52 PM EST
[ Parent ]
e PPP per-capita GNP figure is the most accurate way to measure what people want.

It doesn't measure that at all. You could have PPP per-capita GNP that looked really good if a very small group got all the benefits.

by Colman (colman at eurotrib.com) on Mon Oct 31st, 2005 at 11:29:55 AM EST
[ Parent ]
...would be a much better measure.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Oct 31st, 2005 at 11:30:50 AM EST
[ Parent ]
Much better. And largely unrelated to GNP.
by Colman (colman at eurotrib.com) on Mon Oct 31st, 2005 at 11:42:54 AM EST
[ Parent ]
You still need the GDP (both nominal and PPP) to give you an idea of how powerful the economy is internationally and domestically.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Oct 31st, 2005 at 11:59:52 AM EST
[ Parent ]
Sure, in context. But it doesn't measure anything people care about except in a "go us!" team supporting sort of way.
by Colman (colman at eurotrib.com) on Mon Oct 31st, 2005 at 12:18:19 PM EST
[ Parent ]
It does tell you how much raw power your economy has, which is something to keep in mind when making economic policy decisions. It's is a measure of how much you can you can do. Whether you put that power to good or bad ends is another matter.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Oct 31st, 2005 at 12:40:40 PM EST
[ Parent ]
I agree. I think if we really want to make some kind of a political statement out of it, we should be looking at the median income in PPP. More importantly, we should be looking at the deviations. If there are two people living in a country with a median income of 2 million dollars, it could still mean that one person makes a buck a year, and the other one makes 4 mil. The context is important.
Sure, people are materialistic and status-oriented. As a result, they associate happiness, peer respect, and accomplishment with how much stuff they acquire. There's nothing wrong with consumerism in my estimation. It would be silly to argue that European cultures are not consumer-driven. The larger issue here is, is that all we have out there? Is that what makes up the fabric of our societies?
Thanks!

Mikhail from SF
by Tsarrio (dj_tsar@yahoo.com) on Mon Oct 31st, 2005 at 12:38:23 PM EST
[ Parent ]
Does anybody know where we might find median PPP income figures? I haven't had any luck locating them.

Do not feel safe. The poet remembers.
Czeslaw Milosz
by Chris Kulczycki on Mon Oct 31st, 2005 at 04:12:53 PM EST
[ Parent ]
You can reconstruct the median PPP income by putting together three more easily accessible data: median nominal income, nominal GDP, and PPP GDP (the last twocan be either gross or per capita). The ratio of nominal GDP to PPP GDP gives you the conversion factor from nominal income to PPP income.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Oct 31st, 2005 at 04:30:46 PM EST
[ Parent ]
..or just use Economist Intelligence Services :) lol

Mikhail from SF
by Tsarrio (dj_tsar@yahoo.com) on Mon Oct 31st, 2005 at 05:35:18 PM EST
[ Parent ]
LOL indeed...

I didn't think their data were freely available, though. The country briefings are freely available, but those do not include median income.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Oct 31st, 2005 at 05:56:59 PM EST
[ Parent ]
an excellent suggestion.  I wonder what the difference between the US and EU would be on this, I suspect that with the EU15 Median PPP would be higher than in the US.  

I've always wondered whether a media PPP figure is available, or even possible (seems like a huge amount of work, even if you break it out into income categories and weight it.)

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Oct 31st, 2005 at 10:29:10 PM EST
[ Parent ]
Well, here's a picture from an article on the subject.
http://www.globalpolicy.org/socecon/inequal/2001/0426winlose.htm

There's also a bunch of stuff at http://www.nationmaster.com/graph-T/eco_gdp_ppp_cap that generally shows that the US and the traditional EU countries are about par, while the newer members of the EU are lower.

by asdf on Wed Nov 2nd, 2005 at 10:07:30 AM EST
[ Parent ]
The graph you show and the data you link are average/mean figures. We are interested in the median, i.e., the income figure that 50% have more than and 50% have less than. One would expect it to be substantially lower than the average income.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Nov 2nd, 2005 at 10:16:04 AM EST
[ Parent ]
That's true, but it's a separate point. GNP doesn't pretend to measure wealth distribution, it's a broad measure of the strength of an economy.

I would like to see a proposal for a set of statistics that SHOULD be used.

by asdf on Mon Oct 31st, 2005 at 12:41:01 PM EST
[ Parent ]
Your point was:

But the vast majority of people, in America, in Europe, and in South Asia and Africa, want MORE STUFF. That's how they measure personal happiness. That's the sad fact, and until you figure out how to change it, the PPP per-capita GNP figure is the most accurate way to measure what people want.

GNP has very little to do with the power of "the people" to buy stuff. That is the point. It's a crap way of measuring what you suggested: Migeru suggested that, if you want to measure the ability of people to buy stuff then median income, PPP adjusted, is a good metric.

by Colman (colman at eurotrib.com) on Mon Oct 31st, 2005 at 12:56:03 PM EST
[ Parent ]
For developed countries.

For developing countries, the HDI is a far better measure, since it measures actual outcomes - nutrition, water, education etc - which are correlated to GDP but not by as much as is often thought.

by tyronen on Wed Nov 2nd, 2005 at 02:59:48 PM EST
[ Parent ]
But how do we come to want more things? How do we come to equate wanting things with happiness?

This is taught to us each and every day with every commercial and fad and fashion that assaults us on a daily basis.

I am not a luddite. I want my computer and internet link. And I really am happier now that I'm able to watch old classic movies on DVD from the 1930-40s.

But it is this blind dashing to get more...the impulse buying...that is the problem of so many of our other problems...pollution, environmental degradation, social isolation, declining literacy and reasoning standards, and overextended consumer debt (in some places).

An economy does not have to be pushed by greater consumption. Why can't it be pushed by better quality consumption?

Take chocolate consumption for example. Now, I used to eat a lot of chocolate, most of it very bad. I didn't really know that it was bad...it seemed ok to me. Then one of my friends brings me a box of French chocolates (yes, I nearly died when I later found out how much they cost), but they were just simply so different from the junk I was eating before. So what happens? My chocolate consumption plummets. I buy good chocolate (even if it hurts to pay for it), but I eat maybe 10% of what I used to. But I really enjoy it more. That doesn't mean that I won't buy the occasional bag of M&Ms; I love em. But consumption can decline with quality consumption.

by gradinski chai on Mon Oct 31st, 2005 at 02:57:29 AM EST
I guess that is what we learned, it is what commercials and adds suggest - on could say we are being programmed to wanting more and to equating having with being happy. However, over time I have learned the more I can let go of possessions the happier I am. Though, amazingly, it is sometimes a struggle to reduce possessions and even more so to keep them down. I experience a continues inflow of things I do not need. Most of them I have now under control - though books still seem to have their own dynamic of growth .
by Fran (fran at eurotrib dot com) on Mon Oct 31st, 2005 at 03:15:51 AM EST
[ Parent ]
Yes, the problem is the programming by commercials. They have become the most central educational experience in many young people's lives. Some societies have realized this and have wisely limited the exposure that children can have to commercials. Most societies have not done so.

The repugnance of consumerism is not something that only greens and the left should be concerned with. I think that even some more traditional conservatives understand the impact that mass capitalism and consumerism have on individual's lives. Money and consumption, as I think someone said upthread, does become the only moral compass as ads become so pervasive (everywhere from trams to TV to public toilets) they drown out all other instruction.

Many religious fundamentalists see this consumerist amoralizing and react to it through anti-globalization policies. This contemporary luddite reaction is as unlikely to prevail as the original actions. However, they will continue and probably become more violent since consumerism makes so many products for destruction available to so many.

Most Christian fundamentalists in the US have yet to make the connection between consumerism and what they see as the decline of morals. They have (for a variety of reasons) woven free market economics into their interpretations of the Bible.

It is a testament to human intelligence and free will that even some people are able to escape the onslaught.  

by gradinski chai on Mon Oct 31st, 2005 at 05:28:32 AM EST
[ Parent ]
One of the differences between the US and most other economies is the amount spent in the military/police sector.
This chart illustrates this:

http://www.warresisters.org/piechart.htm

With so much of the federal budget devoted to militarism the amount available for social services and infrastructure is limited.

One result of this is the common belief in the US that taxes are too high and that social services are the cause. Since people only get visible value from about half their taxes they rightly feel this way. They are not getting a good bargain.

Whether the US can continue to use militarism (hard and soft) to extort wealth from the rest of the world remains to be seen. Even the Romans ran out of options, eventually.


Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Mon Oct 31st, 2005 at 09:31:07 AM EST
Charts like this that leave out social security are pretty misleading...
by asdf on Mon Oct 31st, 2005 at 10:21:18 AM EST
[ Parent ]
First of all there is another chart slightly below that one which treats the budget as you suggest.

Secondly, there is a slight of hand being perpetrated that they are trying to emphasize. Things like Social Security and Medicare are not government programs. They are mandatory insurance programs that the government administers. They were added to the budget during the Viet Nam war so LBJ could disguise the true size of the military spending.

The government acts as a collection and dispersal agent for these funds. The funds are collected for a segregated purpose and spent for the same purpose when needed. Social security and medicare could be spun off into a government owned corporation like the post office and then it would be obvious that the money is not part of the "budget".

Your remarks just show how successful the policy of obscuring the true uses of federal funds has been.

And as the original posting shows distructive spending gets counted just the same as social programs in the "GDP".


Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Mon Oct 31st, 2005 at 10:41:37 AM EST
[ Parent ]
You are aware, I'm certain, of the long-standing dispute about whether social security is a trust fund run by the government or an intergenerational wealth transfer program. The dispute has been going on since the 1930s...

But in any case there is hardly any difference between a mandatory insurance policy run by a government and a tax.

by asdf on Mon Oct 31st, 2005 at 12:36:02 PM EST
[ Parent ]
have long been used to finance general government spending; and since social security defecits, projected to start in 2018 or so, are by law required to be paid from general revenues, it seems that futher weakens the argument.
by wchurchill on Wed Nov 2nd, 2005 at 02:47:53 PM EST
[ Parent ]


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