Today’s Solutions: July 20, 2024

‘The gross domestic product measures neither our wit nor our courage, neither our wisdom nor our learning, neither of our compassion nor our devotion to country; it measures everything, in short, except that which makes life worthwhile.’ — Robert Kennedy

Jurriaan Kamp | October 2003 issue
Economic growth brings progress, and progress means happiness. That is the message of Western capitalism. Progress is measured by the gross national product (GNP), national income: the sum total of what a country’s inhabitants earn.
The problem with GNP is that it makes no distinctions between activities: everything counts. It’s like a calculator that can only add. No distinction is made between cost and earnings or between productive and destructive activities. Anything that happens in the marketplace is considered to be progress. At the same time, everything that cannot be expressed in money – regardless of how important it may be for our general well-being – is neglected. Families, communities and nature, for example, do not figure into the national income equation, even though the quality of those elements is important in determining how we experience our lives.
Brazil’s national income, for example, would increase tremendously if the entire Amazon forest were chopped down. Worse still: if the Brazilians were to grind all those trees into wood chips and take their profits to the casino, they would become richer – according to GNP measurements. If herring, as a species, is being threatened by intensive fishing, it is still considered a source of income by the national bookkeepers. If a country’s crime rate rises and more money is spent on fighting crime, the economy gets a boost. The more lawyers occupied with the increasing number of divorces, the higher the national income. An earthquake or a devastating hurricane can be an economic blessing. Environmental pollution counts double. If a chemical plant produces a polluting product, that counts. If that product ends up in the wrong place and has to be cleaned up, it counts once again.
Then there is that curious treadmill we call consumption. We eat too much – which counts – and become too fat. Then we spend millions on diet products to get rid of that excess fat – and that, too, counts. The by-pass patient is a metaphor for the country’s progress: eat whatever you like, pay for the consequences, add it up and the economy has grown a little more.
There are also important activities that do not count. If a loving mother takes care of her children, her contribution to the economy is nil. If she reads them a story, nothing happens. But if parents bring their kids to a day care centre or let them watch television, the national income rises. All the volunteer work, without which, for example, the world of amateur sports would collapse, does not count. It is not good for the economy if children take care of their aged parents. An old people’s home, on the other hand, does contribute to ‘progress’.
Because of the strange way in which the national income is calculated, economic growth, so desired and applauded, often goes hand in hand with social decay. Apparently, the national income tells us little about a country’s true welfare.
The man who devised the system also expressed his doubts. In 1932, a young economist called Simon Kuznets was assigned to compose standards for the national bookkeeping. A measuring instrument was needed to help prevent a new economic depression. In his first report to Congress, in 1934, Kuznets warned about the new system’s limitations. He later wrote: ‘If growth is the goal, we should have a clear statement of what should grow and in which direction.’ But this important aside was lost. Politicians hijacked a lame adding machine and used it to impress their voters.
Since then, progressive economists have been working on better methods to calculate the national income. Their alternative measurements do count things such as household work and volunteer work. Money spent on crime prevention or on repairing damage caused by criminal activity, however, is subtracted from the national income. Hospital bills and the invoice from the carpenter that repaired a broken down door are booked on the debit side. Costs made to undo pollution are subtracted as well. And a country that uses its oil and natural gas resources is required to enter that consumption into the books.
Using these methods, economists went on to recalculate the economic growth in Europe and the United States since World War II. And what did they find? According to several new calculations there has been no progress since roughly 1970. The quality of life in the West has not improved – despite the fact that, according to accepted standards, the national income in those countries has doubled since that time. In other words: the economic growth in much of the developed world has, in fact, been pointless. There has been more money, but it has not improved our lives. There are more cars, but also more traffic jams and exhaust fumes. Higher salaries bring more stress and less time.
The new views on national income correspond with most people’s perceptions. After all, how many of us truly believe that the quality of our lives has doubled in the past thirty years?

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