Paul Krugman’s latest column may bring half a sigh of relief to dKos readers
who fear the economy may be improving – potentially boosting George W. Bush’s chances of winning reelection in ’04.
The left’s favorite economics columnist with a mainstream forum thinks it’s a bit premature for the GOP to pin its hopes on the GDP. We’re a long way, Krugman writes, from the 200,000 jobs a month that the Bush Administration needs the economy to create if it’s going to break even in job growth since January 2001.
But, let’s face it, even if the economy only produces 100,000 jobs a month in the coming year, we’re going to be deluged with chatter from the usual suspects about how the tax cuts are working, about how America is on the right track, about how we need to do yet more of what’s already being done.
As we often learn to our chagrin in politics, perceptions often matter more than reality. Comments like, "Yeah, but we’ve had a net loss in jobs since Bush took over" won’t make many inroads among fence-straddling voters if economic trends appear to be upward. The last time the GDP grew as fast as it did in the most recent quarter was in 1984, and that, to some extent, helped give Ronald Reagan a second term.
This situation perfectly illustrates why we progressives must popularize a more inclusive gauge of economic well-being than the traditional GDP approach. Not to mention our overall well-being.
I’m not arguing that GDP has no value. It does. And adjustments in the past decade have made it a better measure of what it measures. So what’s so bad about it? Mostly for what it
doesn’t measure. Even as a purely economic index, it fails.
For instance, take pollution. GDP measures as income a manufactured product which creates pollution as a byproduct. It then measures the clean-up as income. And it then measures health services to those sickened by the pollution as income.
GDP also leaves out things like income distribution, the intensity of poverty, economic security, crime costs, the economic value of civic and voluntary work, the economic value of unpaid housework and child care. It’s a measure that assigns zero value to leisure time, to the depletion of resources, to the benefits of saving, to trade imbalances, to deficits and debt.
The United States ranks No. 1 worldwide in GDP and per capita GDP, and this has been the case for more than half a century. So when it rises 7.2% (or whatever the adjusted figures show in a couple of months), we're talking a big deal.
But America doesn’t rank No. 1 when it comes to
infant mortality. We’re 34th.
We don’t rank No. 1 in
health care, either. We’re 37th.
Nor do we rank No. 1 in
literacy. We’re No. 6.
And we’re not No. 1 in
life expectancy. We’re 20th.
We
are No. 1 when it comes to putting in the hours at work. In 1980, the average American was at work 1,887 hours a year; in 1990, it was 1,942 hours; and in 2000 it was 1,978 hours. And we're No. 1 in overall productivity, though not in efficiency per hour.
(We’ve also got the toughest military machine on the planet, with
expenditures at 43% of the worldwide total, more than the combined total of the next 14 nations.)
Other gauges exist. But they get little media play. GDP can be explained in a sentence. Nuances required to understand other indexes don’t make for good sound bites.
In 1974, Richard Estes of the University of Pennsylvania School of Social Work developed one of the first alternatives, the
Weighted Index of Social Progress (WISP). Using data from the World Bank and the United Nations, Estes measures how well nations provide for their citizens’ needs based on 40 factors, from health care to military spending, from women’s status to education.
In 1990, the United States ranked 18th on that list. Now we rank 27th.
…Estes, who has researched world social development for 30 years, found the pace of social development to be "on hold" since 1980, putting the U.S. on the same level as Poland and Slovenia in the current "report card."
"Chronic poverty is the greatest threat to social progress in the United States," Estes said. "More than 33 million Americans - almost 12 million of them children - are poor." "Contrary to public perception," Estes said, "the majority of poor in the United States are members of established family households who work full-time and are white. No other economically advanced country tolerates such a level of poverty."
Something else that GDP doesn’t measure is
income inequality. The income of Americans in the bottom fifth of the population at the end of the 1990s averaged less than their predecessors at the beginning of the 1980s. Those in middle fifth averaged a mere 5% more than their predecessors for the same period. Those in the top fifth had incomes 40% higher than that of their predecessors two decades earlier. Some would argue that this isn’t a bad thing. Whether it is or not, it goes unaccounted for on the GDP gauge.
Other alternative measures include the Canadian
Genuine Progress Index. As with WISP, GPI is designed to evaluate well-being in a much broader way than GDP, taking into consideration elements that are usually excluded from economic analysis.
For example, GPI includes crime and family breakdown in its measurement:
Expenses arising from crime and divorce are counted as costs to society rather than as income. GDP would count legal fees, family counseling and medical expenses as income. GPI counts these as economic costs.
…as well as resource depletion and pollution:
If economic activity means the depletion of natural resources which jeopardizes the ability of tomorrow's generation to fulfill their own basic needs, GPI counts this as an economic cost. GDP sees this as purely current income.
There is also the United Nations
Human Development Index.
And there’s the
Index of Sustainable Economic Welfare developed in 1989 by Herman Daly and John Cobb, Jr. in their book
For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future.
None of the alternatives to GDP is unflawed. Moreover, adopting a new standard that includes social measures flies against the inclination of most economists, including many on the left.
Therefore, rather than adopting an existing
unGDP index, progressives – through the Center for the America Progress or some other think-tank – should develop their own alternative and hammer it into widespread use the same way the American Enterprise Institute, CATO, and Heritage Foundation have done on issues dear to their hearts. Then, without scuttling GDP measurements, they could, over time, make them irrelevant.