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Saturday, June 09, 2007

What's the Economy for, Anyway?

by John de Graaf

"If they can get you asking the wrong question, they don't have to worry about the answers" -- Thomas Pynchon, Gravity's Rainbow {1}

Suggest any alternative to the status quo these days - greater environmental protection, for example, or shorter working hours - and the first question reporters are likely to ask is, "But what will that do to the economy?" Immediately, advocates must try to prove that their suggestions will not adversely affect economic growth or the Dow Jones industrial average.

It's long past time for a new framing offensive, one that turns the obligatory question on its head and shifts the burden of proof to those who resist change. Imagine bumper stickers, posters, internet messages, a thousand inquiries visible everywhere, asking a different question:

"What's the economy for, anyway?"

It's time to demand that champions of the status quo defend their implicit answer to that question. Do they actually believe that the purpose of the economy is to achieve the grossest domestic product and allow the richest among us to multiply their treasures without limits?

For in practice, that really is their answer.

But what if we answer the question differently, perhaps as Gifford Pinchot, the first Chief of the US Forest Service, did a century ago? His answer was, "The greatest good for the greatest number over the long run".

In that light, economic success cannot be measured by Gross Domestic Product (GDP) or stock prices alone. It must take into account the other values that constitute the greatest good - health, happiness, knowledge, kindness - for the greatest number - equality, access to opportunity - over the long run - in a healthy democracy and sustainable environment.

Historical Background

It's time to set America back on course.

After increasing social equality and greatly improving health and other quality of life measures (including major increases in leisure time) from World War II until the mid-1970s, the United States abruptly changed its economic trajectory.

"It will be a hard pill for many Americans to swallow", Business Week predicted in October, 1974, "... the idea of doing with less so that big business can have more. Nothing that this nation or any other nation has done in modern history compares in difficulty with the selling job that must now be done to make people accept the new reality."

Emboldened by Richard Nixon's landslide 1972 victory, extreme conservatives moved to reduce the responsibilities (and increase the wealth) of wealthy Americans, while cutting back on public services for the poor and average working Americans.

These policies accelerated during the 1980s and early 1990s and are now enshrined in the "you're on your ownership" attitude of the present federal policies.

Meanwhile, Western European nations took a different course, maintaining their social contracts and at least modestly improving their safety nets for the poor. Their provision of more public goods - healthcare, education, transportation, common space, et cetera - supported by higher and more progressive taxation measures than in the United States - reduced the need (or desire) of individuals to maximize their own incomes.

So what happened?

First, in terms of productivity per worker hour, Western Europeans nearly closed the gap with the United States. They were producing, on average, 65 percent as much as Americans produced per hour in 1970. By 2000, their productivity was 95 percent that of Americans.

But on the other hand, their consumption of goods and services, measured in GDP per capita, remained where it was in 1970 - roughly seventy percent that of Americans.

There is a simple explanation for this seeming anomaly: European working hours, which in 1970 were slightly longer than those of Americans, dropped to about eighty percent of US hours.

We could say that Europeans traded major portions of their productivity increases for free time instead of money, while Americans - consciously or otherwise - put all their gains into increasing their per capita GDP.

Pose the question, "What did that do to the economy?" and the answer appears clear - Americans, with a much bigger GDP, are the obvious winners.

But ask instead, "What is the economy for anyway?" and a different answer emerges.

For most of the final quarter of the 20th century, Europeans improved their quality of life relative to Americans in almost every measure.


While American health has improved in absolute terms since the 1970s, the United States once ranked near the top in terms of overall health. It now rates below that of every other industrial country, despite spending by far the highest percentage of GDP on health care.


If one looks at equality a similar pattern emerges. America, which was about at the median among industrial countries in terms of economic equality in 1974, now has the widest gap between rich and poor.


Savings are a key indicator of security for many people. While American personal savings rates (ten percent) were slightly higher than those of Europeans in 1970, they have dropped to negative numbers (-1.6 percent last year), while EU citizens now save an average of twelve percent of their incomes.


European progress has also come at a lower cost to the environment. While EU nations were choosing more leisure time rather than working harder to close the consumer gap with Americans, they also took greater steps toward sustainability.

The result is that EU countries require only half the energy consumption per capita as that of Americans, while producing seventy percent as many goods and services. The average American has an ecological footprint (the productive land and water necessary to produce his or her lifestyle) of 24 acres; for Europeans, the average is twelve acres.

One can find similar results in many other areas of quality of life, including: levels of trust, crime, incarceration, family breakdown, literacy, happiness indicators, pre-school education, and even access to information technologies.

Tellingly, the Genuine Progress Indicator - an alternative to the GDP developed by Redefining Progress that measures 24 quality of life indices - shows a fairly consistent decline in well being in the United States since a peak in 1973 {2}. Similar indices for Europe show consistent improvement in most areas of life, even if increases are sometimes slow or spotty.

Meeting Our Needs

One model for judging the success of the economy is to see how well it allows citizens to meet their needs as outlined by psychologist Abraham Maslow. In his often-cited hierarchy of needs theory, Maslow suggested that humans must first adequately satisfy such basic needs as food, shelter, health and safety, and "belongingness" before moving on to what he called "higher" or "meta" needs.

In the early 1970s, Maslow suggested that as a society the United States had met nearly all its citizens' physiological and safety needs and was moving to satisfy higher needs as well. Ironically, by such a standard, we have lost ground rather than gaining it - we have more citizens living in poverty and a much greater overall sense of insecurity today than we did then, despite more than a sixty percent increase in real per capita GDP.

Most Americans know intrinsically that increases in GDP do not mean economic success if health outcomes and social connections continue to decline relative to other countries.

This is why we must raise the question "What is the economy for, anyway?" to a crescendo that cannot be ignored by the media or our political leaders. Only when we begin to ask the right question can we hope to find answers that can improve our quality of life.

We must then ask "What roles do the market, the state, non-governmental organizations, and our common wealth respectively have to play in achieving the greatest good for the greatest number over the long run?"

Inevitably, even sympathetic reporters and others will ask us, "Can we change the economy in the ways the Europeans have and still compete in the global economy?"

The answer, quite simply, is yes.

According to the World Economic Forum, the United States ranks second in world economic competitiveness. So it's possible to do things our way - reducing government, slashing taxes, cutting the safety net, and widening the divide between rich and poor - and be competitive.

But is it necessary? Consider that the other four most competitive nations are Finland (ranked first), Sweden, Denmark, and Norway. In fact, European nations make up most of the top ten. All these nations are far more globalized and far more subject to international competitive pressures than we are and have been for many years.

And all of them are far more egalitarian than the United States.

Finland has, in fact, the smallest gap between rich and poor of any nation. The Finnish social safety net is a generous one and workers enjoy a great deal of leisure time - an average of thirty days of paid vacation. The story is similar in other European countries.

Clearly, it is possible to have a more just and people-friendly economy and compete globally.

Imagine seeing our simple question: "What's the economy for, anyway?" everywhere - in print, posters, on bumper stickers, on websites - or hearing it asked over and over on TV, radio, and in forums and debates. It might be seen as a Trojan horse, seemingly innocent, but remarkably subversive.

The point of all this is not simply to change this or that specific policy, but to create a different thought context by which we might begin to change the entire trend toward privatization and inequality. The point is to show that current "common sense" about economics is "non-sense" if our goal is a better quality of life that is sustainable over the long run.

When we forget to ask, "What is the economy for, anyway?" we leave ourselves open to the GDP worship of so many of our leaders. When we ask the question over and over and demand answers, we open possibilities for a new and better world.


John de Graaf is the National Coordinator of the Take Back Your Time campaign {3}, co-author of Affluenza: The All-Consuming Epidemic {4}, and editor of Take Back Your Time: Fighting Overwork and Time Poverty in America {5}. He is also a filmmaker and recently co-produced The Motherhood Manifesto {6}.








Related articles:

The Parallel Universe Problem Is a Sustainable Economy Possible?

Social Justice vs. the Cheap Sweater - Unsustainable Consumption and the Global Economy by Juliet Schor

(c) New American Dream (Creative Commons License)

Bill Totten


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