John de Graaf, "What's The Economy For, Anyway?"

June 8, 2007 - 7:56pm -- autonomedia

"What's The Economy
For, Anyway?"

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.

Health

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.

Equality

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

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.

Sustainability

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}.