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A New Chance to Fix GDP

by Alan Durning


Today, March 18, 2008 is the fortieth anniversary of one of Robert F. Kennedy's most famous speeches, given just months before his assassination.


In it, RFK performed a rhetorical evisceration of our national economic report card, Gross National Product. You can watch a great new video of his remarks, prepared by the Glaser Progress Foundation. He said:

"Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. . . . Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans."

His words have circulated in the writings of economic critics ever since. Yet Washington, DC has done essentially nothing to correct the flawed accounts, until now. There’s now a chance for action.

Last week, US Senator Byron Dorgan held hearings on GDP accounting and declared his intention to improve it. (GNP has given way to GDP in public discourse, but there are no important differences between them.) His timing couldn’t be better. Outside of Washington, economists and statisticians have been quietly elaborating methods for giving the nation a better tally of its prosperity. A National Academy of Sciences panel, for example, has laid out an exhaustive, sober, and detailed plan for issuing regular reports on several “satellite accounts” in tandem with the monetary tally of GDP. The present administration stopped the Department of Commerce from adopting the improved methods.

A new president, supported perhaps by Senator Dorgan and like-minded leaders, will have the opportunity to seize the challenge RFK threw down four decades ago. The implications could be broader than you’d imagine. For example, whether we’re in a recession or not depends entirely on what our system of national accounts includes and excludes.

Imagine the news stories that might follow if satellite accounts were published along with GDP figures: "GDP up; parents' time with kids plummets." "GDP flat; education surges." "GDP and resource depletion both soar."

A decade of such headlines might refocus our national attention. It might spur us to organize our society to win on measures more meaningful than gross production: things like the health of our families, the strength of our communities, and the integrity of our natural heritage.

A few hours of hearings on Capitol Hill might not seem like much. But it was at least a small watershed. In his testimony at the hearing, Dr. Steven Landefeld, who runs the Department of Commerce bureau that tracks GDP, mentioned that in his thirteen years in that role he has never before been asked before a Congressional committee to discuss his agency’s work. Not once. Until last week.

Somewhere, Robert F. Kennedy is smiling.

(Disclosure: The Glaser Progress Foundation has long been a generous supporter of Sightline Institute, but I would have posted this even if I’d never heard of them.)

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Comments

The statement "GNP has given way to GDP in public discourse, but there are no important differences between them," is hugely flawed.

Under GNP, profits made by a firm, no matter where that firm was located, were credited to that firm's home country's GNP. Under GDP, profits made by a firm are credited to the country in which the firm is located. Thus if a US corporation is locates its operations in the Philippines, under GNP, that operation's profit would be credited to the US - the firm's home country. Under GDP the profits are credited to the Philippines - even though the Philippines never see the money.

The change happened in the '80's and represents some economic sleight-of-hand that makes "development" projects appear beneficial by artificially inflating the host country's economic output. The typical reality is that the labor and environment of the host ("underdeveloped") country are exploited and degraded, and the profits subsequently repatriated to the "developed" country.

This chicanery is used to justify more of the same wrong-headed development initiatives, and ought to be exposed for the shameful regressive and exploitive policy it really is. The article above is right to go after GDP as a lousy indicator of authentic well-being, but the statement that GNP and GDP don't have any important differences is a tragic oversight.


Posted by: Josh Kearns on 31 Mar 08

Another initiative along these lines is State of the USA (http://stateoftheusa.org/). They're working to create a national set of indicators for the U.S. which would be released annually before the President's state of the union speech and would have to be reviewed by Congress in the same manner as economic indicators currently are.


Posted by: Evan Thomas Paul on 6 Apr 08



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