GDP – The Nation’s Economic Hero

By the curious standard of the GDP, “the nation’s economic hero” is a terminal cancer patient who is going through a costly divorce. The happiest event is an earthquake or a hurricane. The most desirable habitat is a multibillion-dollar Superfund site. All these add to the GDP, because they cause money to change hands. It is as if a business kept a balance sheet by merely adding up all “transactions,” without distinguishing between income and expenses, or between assets and liabilities.

The strange fact that jumps out from Bennett’s grim inventory of crime, divorce, mass-media addiction, and the rest is that much of it actually adds to the GDP. Growth can be social decline by another name. Divorce, for example, adds a small fortune in lawyers’ bills, the need for second households, transportation and counseling for kids, and so on. Divorce lawyers alone take in probably several billion dollars a year, and possibly a good deal more. Divorce also provides a major boost for the real-estate industry. “Unfortunately, divorce is a big part of our business. It means one [home] to sell and sometimes two to buy,”a realtor in suburban Chicago told the Chicago Tribune. Similarly, crime has given rise to a burgeoning crime-prevention and security industry with revenues of more than $65 billion a year. The car-locking device called The Club adds some $100 million a year to the GDP all by itself, without counting knock-offs. Even a gruesome event like the Oklahoma City bombing becomes an economic uptick by the strange reckonings of the GDP. “Analysts expect the share prices [of firms making anti-crime equipment] to gain during the next several months,” The Wall Street Journal reported a short time after the bombing, “as safety concerns translate into more contracts.”   by:  Clifford Cobb, a policy analyst, is the author of Responsive Schools, Renewed Communities (1992).   Ted Halstead is the founder and executive director of Redefining Progress, a nonprofit public-policy organization in San Francisco.  Jonathan Rowe has been an editor at The Washington Monthly and a staff writer for The Christian Science Monitor.

That is the economy for us. Next time you read in the paper (or see a graph) how the GDP has increased, don’t get too enthusiastic too quickly. Consider why it increased. Is it an “asset” or a “liability”?  National Debt is seen, in part, in relationship to GDP. If GDP goes up, typically National Debt is allowed to move up as well.

US GDP growth rate

GDP and the Bigger Picture of Life

We try to measure well-being in terms of economics and encounter some conflicting social issues not measured by GDP. Clifford Cobb, Ted Halstead and Jonathan Rowe point out that teenagers spend 5-10 minutes a day talking to dad and watch television three hours a day. Talking to their parents adds nothing to the GDP, but watchig MTV turns them into ardent GDP enhancing consumers. They write:

″The strange fact that jumps out from Bennett’s grim inventory of crime, divorce, mass-media addiction, and the rest is that much of it actually adds to the GDP. Growth can be social decline by another name. Divorce, for example, adds a small fortune in lawyers’ bills, the need for second households, transportation and counseling for kids, and so on. Divorce lawyers alone take in probably several billion dollars a year, and possibly a good deal more. Divorce also provides a major boost for the real-estate industry. “Unfortunately, divorce is a big part of our business. It means one [home] to sell and sometimes two to buy,”a realtor in suburban Chicago told the Chicago Tribune. Similarly, crime has given rise to a burgeoning crime-prevention and security industry with revenues of more than $65 billion a year. The car-locking device called The Club adds some $100 million a year to the GDP all by itself, without counting knock-offs.

Even those unwed teenage mothers are bringing new little consumers into the world (where they will quickly join the “kiddie market” and after that the “teen market,” which together influence more than $200 billion in GDP). So while social conservatives like Bennett are rightly deploring the nation’s social decline, their free-marketeer counterparts are looking at the same phenomena through the lens of the GDP and breaking out the champagne.

Add pollution to the balance sheet and we appear to be doing even better. In fact, pollution shows up twice as a gain: once when the chemical factory, say, produces it as a by-product, and again when the nation spends billions of dollars to clean up the toxic Superfund site that results. Furthermore, the extra costs that come as a consequence of that environmental depletion and degradation–such as medical bills arising from dirty air–also show up as growth in the GDP.

When we went to the Czech Republic in 2002, going to the store included bringing your own shopping bag. A very common sight was, and still is, to see shoppers pulling a fold-up cart on wheels or having a big shopping bag hanging over their shoulder. Should you forget, you needed to buy a shopping bag. There were no little plastic bags in which the cashier would automatically put your groceries! Plastic soft drink bottles were not thrown out. You would see them re-used for all kind of purposes. When the supermarkets gradually made their way into town, they started to offer the small plastic baggies for free, just like in California. The local grocers had to follow suit, creating the same plastic garbage as we already have in the USA.

Recently California passed a law where the use of the small plastic baggies will become illegal in, I believe 2016. The manufacturers lobbied for the later implementation so they won’t lose money and can look for alternatives. So, money is more important than reducing waste, as I read it.

 WHAT DO YOU THINK?