Testimony of Jonathan Rowe Before the United States
Senate Committee
on Commerce, Science and Transportation, Subcommittee
on Interstate
Commerce, on "Rethinking the Gross Domestic Product as
a Measurement
of National Strength," March 12, 2008
Mr. Chairman and Members of the Committee:
Let's suppose that the head of a federal agency came
before this
committee and reported with pride that agency
employees had burned
10% more calories in the workplace than they did the
year before. Not
only that ? they had spent 10% more money too.
I have a feeling you would want to know more. What
were these
employees doing when they burnt those calories? What
did they spend
that money on? Most important, what were the results?
Expenditure is
a means not an end; and to assess the health of an
agency, or system,
or whatever, you need to know what it has
accomplished, not just how
much motion it has generated and money it has spent.
The point seems obvious. Yet Congress does this very
thing every day,
and usually many times a day, when it talks about this
thing called
"the economy." The administration and the media do it
too. Every time
you say that the "economy" is up, or that you want to
"stimulate" it,
or get it going again, or whatever words you use, this
is what you
actually are saying. You are urging more expenditure
and motion
without regard to what that expenditure is and what it
might
accomplish ? and without regard to what it might crowd
out or
displace in the process.
That term "the economy": what it means, in practice,
is the Gross
Domestic Product or GDP. It's just a big statistical
pot that
includes all the money spent in a given period of
time. (I'm
simplifying but that's the gist.) If the pot is bigger
than it was
the previous quarter, or year, then you cheer. If it
isn't bigger, or
bigger enough, then you get Bernanke up here and ask
him what the
heck is going on.
The what of the economy makes no difference in these
councils. It
never seems to come up. The money in the big pot could
be going to
cancer treatments or casinos, violent video games or
usurious credit
card rates. It could go towards the $9 billionor so
that Americans
spend on gas they burn while they sit in traffic and
go nowhere; or
the billion plus that goes to drugs such as Ritalin
and Prozac that
schools are stuffing into kids to keep them quiet in
class.
The money could be the $20 billion or so that
Americans spend on
divorce lawyers each year; or the $5 billion on
identity theft; or
the billions more spent to repair property damage
caused by
environmental pollution. The money in the pot could
betoken social
and environmental breakdown ? misery and distress of
all kinds. It
makes no difference. You don't ask. All you want to
know is the total
amount, which is the GDP. So long as it is growing
then everything is
fine.
We aren't here today to talk about an obscure
technical measure. This
isn't stuff for the folks in the back room. We are
talking about what
you mean when you use that term "the economy." Few
words induce such
a reverential hush in these halls. Few words are so
laden with
authority and portent. When you say "the economy" is
up then no news
is brighter. When you argue that a proposal will help
the economy or
hurt it, then you have played the ultimate trump card
in your
polemical decks, bin Laden possibly excepted.
As I said it isn't just you. The President does it,
the media, the
reporters sitting at that table over there. They do it
too. How many
of them, or of you, asked during the recent debate
over the
"stimulus" package, exactly what it was that would be
stimulated. How
many of them say, when Bernanke comes up here to
report on the
nation's growth, "Hey wait a minute. What exactly are
we talking about
here?"
Doesn't it matter whether it is textbooks or porn
magazines,
childbirths or treatments for childhood asthma born of
bad air?
Doesn't it matter whether the expenditure comes from
living within
our means or from going into financial and ecological
debt? Don't we
need to know such things before we can say whether the
increase in
transactions in the pot ? what we call "growth" -- has
been good or
not?
This is not an argument against growth by the way. To
be reflexively
against growth is as numb-minded as to be reflexively
for it. Those
are theological positions. I am arguing for an
empirical one. Let's
find out what is growing, and the effects. Tell us
what this growth
is, in concrete terms. Then we can begin to say
whether it has been
good or not.
The failure to do this is insane, literally. It is an
insanity that
is embedded in the political debate, and in media
reportage; and it
leads to fallacy in many directions. We hear for
example that efforts
to address climate change will hurt "the economy." Do
they mean that
if we clean up the air we will spend less money
treating asthma in
young kids? That Americans will spend fewer billions
of dollars on
gasoline to sit in traffic jams? That they will spend
less on coastal
insurance if the sea level stops rising?
There is a basic fallacy here. The atmosphere is part
of the economy
too ? the real economy that is, though not the
artificial construct
portrayed in the GDP. It does real work, as we would
discover quickly
if it were to collapse. Yet the GDP does not include
this work. If we
burn more gas, the expenditure gets added to the GDP.
But there is no
corresponding subtraction for the toll this burning
takes on the
thermostatic and buffering functions that the
atmosphere provides.
(Nor is there a subtraction for the oil we take out of
the ground.)
Yet if we burn less gas, and thus maintain the crucial
functions of
the atmosphere, we say "the economy" has suffered,
even though the
real economy has been enhanced. With families it's the
same thing. By
the standard of the GDP, the worst families in America
are those that
actually function as families ? that cook their own
meals, take walks
after dinner and talk together instead of just farming
the kids out
to the commercial culture.
Cooking at home, talking with kids, talking instead of
driving,
involve less expenditure of money than do their
commercial
counterparts. Solid marriages involve less expenditure
for counseling
and divorce. Thus they are threats to the economy as
portrayed in the
GDP. By that standard, the best kids are the ones that
eat the most
junk food and exercise the least, because they will
run up the
biggest medical bills for obesity and diabetes.
This kind of thinking has been guiding the economic
policy minds of
this country for the last sixty years at least. Is it
surprising that
the family structure is shaky, real community is in
decline, and kids
have become Petri dishes of market-related dysfunction
and disease?
The nation has been driving by a instrument panel that
portrays such
things as growth and therefore good. It is not
accidental that the
two major protest movements of recent decades ?
environmental and
pro-family -- both deal with parts of the real economy
that the GDP
leaves out and that the commercial culture that
embodies it tends to
erode or destroy.
How did we get to this strange pass, in which up is
down and down is
up? How did it happen that the nation's economic hero
is a terminal
cancer patient going through a costly divorce? How is
it that
Congress talks about stimulating "the economy" when
much that
actually will be stimulated is the destruction of
things it says it
cares about on other days? How did the notion of
economy become so
totally uneconomic?
It's a long story, but for the present purpose it
probably starts in
Ireland in the 1640s. British troops just had
repressed another
uprising there, and the Cromwell government had
devised a final
solution to put its Irish problem to rest. The
government would
remove a significant portion of the populace ?
Catholics in
particular ? to a remote part of the island. Then it
would
redistribute their lands to British troops, thus
providing
compensation to them, and also an occupational
presence for the
benefit of the government in London.
The task of creating an inventory of the lands went to
an army
surgeon by the name of William Petty. Petty was a
quick study, and
also a man with an eye for the main chance. He
classified much land
as marginal that actually was quite good. Then he got
himself
appointed to the panel that made the distributions,
and bestowed much
of that land upon himself.
Petty's survey was the first known attempt in Western
history to
create a total inventory of a nation's wealth. It was
not done for
the well being of the Irish people, but rather to take
their lands
away from them. It was an instrument of government
policy; and this
has been true from that time to the present.
Governments have sought
to catalogue the national wealth for purposes of
taxation,
confiscation, planning and mobilization in times of
war. They have
not designed these catalogues to be measures of
national wellbeing or
of quality of life.
full:
http://commerce.senate.gov/public/_files/GDPtest1.pdf
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