Saturday, 17 September 2016

How not to be gross. The trouble with the GDP obsession

Gross Domestic Product, or GDP, even sounds slightly repellent. All the outputs a country spews out into the world, minus none of the defilements to human welfare and the natural world. Gross is a good description. Unearth all the fossil fuels in the ground, burn them and watch the GDP meter spike, while civilisation drowns. Fight a war and see GDP spiral as you repair the damage you’ve inflicted. Sit back in grim satisfaction as your products cause an obesity epidemic and the economy spreads depression like a virus. But as long the volume of goods and services shows a steady rise, you are outpacing the abyss.

But more than just being blind to suffering, the obsession with GDP actively seems to thrive on human misery. According to psychologist Oliver James, who gives it the moniker, ‘selfish capitalism’, “it is absolutely critical for everybody to go around feeling miserable, filling the emptiness with commodities, dealing with misery by trying to give themselves short-term boosts with hamburgers or drink.”

Divorce and separation, seemingly unbridled negatives for human happiness, are a positive boon for GDP statistics, James points out. They result in more homes rented out, more fridges and furniture bought, extra DVD players needed etc. A world comprising solely of single person households would be terrible on many fronts – it would be an environmental disaster and would spread the blight of our time, loneliness. But as far as GDP is concerned, this outcome would be an unadulterated blessing.

Small wonder there is mounting pressure for other measurements of the state of the economy and society to knock GDP off the statistical throne it has occupied since the Second World War. According the author Dirk Philipsen, there are more than a hundred alternatives, ranging from the ‘Happy Planet Index’, to the Genuine Progress Indicator to the ‘Beyond GDP’ initiative.

These indexes both measure things that GDP ignores, such as childcare and housework, and take account of huge negative impacts that are grist to the mill of GDP. They are thus a far more realistic or complete picture of the health of the societies we inhabit. The book, The Spirit Level, painstakingly demonstrated that rising GDP, a blunt measure of rising societal wealth, can harbour great damage to well-being, incubating trends such as rising mental illness and obesity or declining social mobility.

But before we rush to ditch GDP as an economic measure, it is necessary to recognise that it does record something meaningful in our current society.

As economist Michael Roberts points out, ‘GDP is not designed to measure benefits to people but productive gains for the capitalist mode of production.’ And in a ‘capitalist mode of production’, there is an undeniable, if regrettable, link between the productive gains of the economy’s major institutions and the welfare of most people. If the system doesn’t make its productive gains, the disappointment is swiftly transferred downwards.

The 2007-9 recession and its aftermath made this plain to see. Global output slumped by eight percentage points and GDP in the OECD area (34 wealthy countries around the world) contracted by six percentage points. Those are the bare figures. But these statistical falls were accompanied by real-world spikes in unemployment and homelessness and serious depletions of income and wealth. With GDP per person still lumbering below its 2007 level, exploitative work contracts and self-employment have mushroomed. GDP may be blind but there is a connection between it and human welfare.

But, because this connection undoubtedly exists, it is used by governments and international agencies to justify all kinds of policies to resuscitate GDP which harm people. Neutral-sounding ‘structural reforms’, such as raising the pension age, restricting collective bargaining agreements or clamping down on ‘generous’ welfare benefits, are hawked as ways to return the world economy to a path of growth.

Sure, there is anger about these policies. Left Keynesians and others protest there are other ways to revitalise GDP growth. But there is unanimity that sustainable GDP growth is a worthy aim. And at the back of our minds there exists a seedy toleration of the anti-social consequences of rising GDP because, without it, the abyss seems to beckon. This is why, despite a wish to be humane on the part of many people, there is a deep ethical rot at the heart of our economies.

But, far from accepting this miserable bargain, we need to face it down. The god of GDP growth, as one economist puts it, needs to be dethroned. We don’t need alternative measures that co-exist with GDP, we need economic alternatives to GDP. Public policy should no longer aim at maximising GDP. It should aim at maximising human welfare and if that depresses GDP, so be it.

This change can take many forms. People growing their own fruit and vegetables rather than relying on the sugar-addled products of the food industry would improve well-being but be bad for GDP. A health policy that aimed at curing, where possible, physical and mental illness rather than merely treating their symptoms with drugs would benefit human welfare but dampen GDP. And policies to keep fossil fuels in the ground forsake future economic growth in the hope of ameliorating the impact of climate change.

It is estimated that the global economy needs to grow by at least 3% a year in order to make sufficient profits for large corporations. This means compound growth; growth on top of the growth already attained. It is doubtful whether this rate is possible but unquestionably it is not desirable. “Imagined physically,” says the geographer, David Harvey, “the enormous expansion in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained”.

But should we collectively decide not to pursue the aim of maintaining the rate of capital accumulation, we need to be fully aware of what this implies. Not only do large corporations directly and indirectly (through supply chains) employ large swathes of the population, they also act as the destination for pension fund investments. The current and future wealth of millions of people depends on their success. Recognising this is not to justify the economic system but state a bare fact of social reality.

Corporations thus play a dual role in the economic system. Economic viability apparently depends on them but they are taking us in fundamentally anti-social, anti-ecological directions. This state can be characterised as one of economic bondage.

It might be argued that public investment should substitute for falling GDP. After all, the definition of GDP includes – in addition to consumer spending, business spending and investment and net exports – spending by the government. But, in order for growth to be maintained in this way the level of government involvement in the economy would have to rise more than anyone is advocating (Jeremy Corbyn included). This kind of economy would be akin to the Second World War economies of Britain and America. And of course without the huge stimulus of manufacturing weapons.

Twenty years ago there was unbridled optimism that the information economy was the future of capitalism. The number of new products was only limited by the boundaries of the human imagination. Steve Jobs could “anticipate technological desires you didn’t even know you had”. But digital capitalism has not turned out to be the saviour of corporate profitability and economic growth. “Info-tech,” says the author Paul Mason, “drives labour out of the production process, reduces the market price of commodities, destroys some profit models and produces a generation of consumers psychologically attuned to free stuff.”

We are currently living in a stagnant capitalist economy. Growth has levelled out at rate well below the average prior to the 2008 crash. Another slump is very likely, which will turn growth negative again, causing a depression. That’s the scenario, and all its human consequences, we have to imagine if we explicitly decide not to make the profits of multi-national corporations a priority.

Therefore, logically, not following the GDP compulsion anymore means constructing a post-capitalist economy. And in the short-term that entails safeguarding the incomes of millions of people. This implies the free (or at negligible cost) provision of many utilities and the use of a basic income as the primary source of people’s income, not as is commonly imagined, a fall back that gives people the confidence to make money elsewhere.

The most pressing task therefore is not just to illustrate how an alternative economic system is desirable, but to show how it would work. How it would provide and distribute income and wealth, substituting for the institutions that currently perform this function.