We would all agree that we want a "healthy" economy. But, what constitutes healthy? It certainly isn't the economy we have today, where hundreds of millions of people around the globe struggle to survive, even in "good times" when government statistics tell us we should be thrilled and happy because the economy is "growing". Now, there is a counter vision about how to assess whether an economy should be labeled as "good" or "bad".
It comes from Nobel prize-winning economists, Joseph E. Stiglitz and Amartya Sen. You may have read that they were charged by French President Nicholas Sarkozy to come up with different tools and measurements about how to look at the economy. Sarkozy created something called theCommission on the Measurement of Economic Performance and Social Progress.
The report says:
According to the report, much of the world has long been ruled by an unhealthy fixation on swelling the gross domestic product, or the quantity of goods and services the economy produces. With a singular obsession on making G.D.P. bigger, many societies — not least, the United States — failed to factor in the social costs of joblessness and the public health impacts of environmental degradation. They allowed banks to borrow and bet unfathomable amounts of money, juicing the present by mortgaging the future, thus laying the ground for the worst financial crisis since the 1930s.
You can read the full report here.
Amen. I am one of those people who have harped on this for some time. [Self-promotion alert]. In my new book, "The Audacity of Greed", I have this in the conclusion:
In an essay I wrote in the mid-1990s titled "The Edifice Complex," I argued that we live in the culture of the "Boundless Bull," a term coined by Herman E. Daly, formerly a senior economist at the World Bank and now a Professor of Public Policy at the University of Maryland. Daly helped develop the concept of "unequal growth," which occurs when "increases in production come at an expense in resources and well-being that is worth more than the items made."
Daly, at one time a free trader, explained back in 1990 how the Merrill Lynch bull was the metaphor for the U.S. economy. Of course, he didn’t mean it in the context in which we now think of Merrill Lynch, as a humiliated, broken firm that was sold off to Bank of America in 2008 because of the recklessness, greed and incompetence of its leaders. No, Daly saw something else back then:
"If you want to know what is wrong with the American
economy it is not enough to go to graduate school, read
books, and study statistical trends—you also have to watch
TV. Not the Sunday morning talking-head shows or even
documentaries, and especially not the network news, but
the really serious stuff—the commercials...One such ad
opens with a bull trotting along a beach. He is a very powerful
animal—nothing is likely to stop him. And since the
beach is empty as far as the eye can see, there is nothing that
could even slow him down. A chorus in the background
intones: ‘to...know...no...boundaries...’ The bull trots off
into the sunset...Finally we see the bull silhouetted against
a burgundy sunset, standing in solitary majesty atop a
mesa overlooking a great empty southwestern d e s e r t . . . "
The message is clear: Merrill Lynch wants to put you into
an individualistic, macho, world without limits—the U.S.
economy.
Daly went on to write about how the bull represented unlimited optimism (and rising stock prices), which was based on the vision of an "empty world where strong, solitary individuals have free reign" and sell you growth, which requires "empty space to grow into." The message was that "In a world with no boundaries the poor can get richer while the rich get richer even faster. Our politicians find the boundless bull cult irresistible."
The reason our political leaders find the boundless bull so irresistible is because it represents the culture that they—and consequently all of us—have been socialized from birth to applaud and celebrate. In the quintessentially American view of the world, we endure every economic downturn by waiting breathlessly for expansion.
Promising renewed growth is the bi-partisan cornerstone of every major national political campaign, most recently articulated by Barack Obama’s pledge to "change" America by laying "a new foundation for growth."
Our problem, however, is that as a global society, there will be no room to grow if we continue to consume resources like a parasite and fail to look at how wealth is distributed throughout the world. The globe has too many people, more than a billion of whom, according to conservative estimates, are unemployed or chronically underemployed and living in conditions below basic sustainable levels. We won’t be able to shake the economic problems currently gripping us until we shift our cultural appetite for endless, often unhealthy growth.
If we return for a moment to Herman Daly, we learn that our problem is that we fail to distinguish between a growing economy that gets bigger, versus a developing economy that gets better. "An economy can therefore develop without growing, or grow without developing...The advantage of defining growth in terms of change in physical scale of the economy is that it forces us to think about the effects of a change in scale and directs attention to the concept of an ecologically sustainable scale, or perhaps even of an optimal scale."
Daly sums up his argument by saying that in this case, "the apt image for the U.S. economy...is not the boundless bull on the empty beach, but the proverbial bull in the china shop. The boundless bull is too big and clumsy relative to its delicate environment. Why must it keep growing when it is already destroying more than its extra mass is worth?" Daly believes it is because "we fail to distinguish growth from development" and "refuse to fight poverty by redistribution and sharing, or by controlling our own numbers, leaving ‘economic’ growth as the only acceptable cure for poverty. But once we are beyond the optimal scale and growth makes us poorer rather
than richer, even that reason becomes absurd."
This is why the work of Stiglitz and Sen is so important and why we must spread the basic concepts they promote.