GDP Turns 80

Tasked with estimating the income of the U.S., in 1934 Simon Kuznets developed the prototype for Gross Domestic Product (GDP). First used to help increase production during WWII, GDP is now the single most important economic indicator. It is assumed that an increase in GDP benefits everyone; therefore, its growth should be the primary focus of policy.

This is despite Kuznet’s own warnings that, “the welfare of a nation can scarcely be inferred from a measurement of national income.” Later, in 1962, he criticized the scope of GDP’s use, saying, “Distinctions must be kept in mind between quantity and quality of growth.”

As GDP turns 80 this year, it is worth questioning why we measure our economy this way. It is a topic of great interest to me, and I wrote my Master’s thesis (available here) on the topic. But I’ll just make some summative points here.

Namely, GDP growth is wrongly assumed to translate into increased societal well-being. (And yes, well-being can be measured accurately, but I won’t go into those details here.)

Take a look at how GDP growth in the U.S. compares to American life satisfaction.

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This is really the crux of the problem. People are no more satisfied with their lives despite huge advancements in the GDP of the country. The same is true in Canada and other developed nations.

Understanding that well-being and GDP do not correlate (in developed nations), we come across two main issues. First, there is a measurement issue. At the end of the day, the point of economic activity is to improve people’s lives. We want to “grow” the economy because we want to improve the way we live. We want increased well-being. But if we focus on a faulty metric that has no bearing on well-being, we are not measuring real progress. Included in GDP are many things we would not consider “good.” The costs of cleaning up an oil spill, hiring lawyers for divorce proceedings, going to war, increasing debt, smoking cigarettes – these all cause GDP to rise. Whereas air quality, poetry, leisure time, and community are not reflected in GDP and are therefore worthless. Only that which can be obtained in the market is given any value.

A multitude of alternative measurements have already been developed, including the Genuine Progress Indicator (GPI). GPI, and other measurements like it, take into account a wide variety of indicators that influence well-being, including pollution levels, leisure time, governance, and so on. These alternative indices more accurately reflect meaningful societal progress. Developing a superior alternative to GDP is not the problem; the problem is the political will to use such a measurement.

The second issue is that the measurement of an economy affects the direction and priorities of an economy. The famous economists Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi note that, “What we measure affects what we do. If we have the wrong metrics, we will strive for the wrong things.” In other words, changing what we measure changes what we do. If a History teacher began to grade her students’ essays only on their spelling, you would no doubt create students highly proficient in spelling with a low knowledge of history. The nation of Bhutan recently switched from GDP to GNH – Gross National Happiness. And while we can debate how much “happier” the people of Bhutan are today, it has undoubtedly altered the direction of the Bhutanese economy.

People are no happier than they were fifty years ago because they are pursuing the wrong goals. Research can tell us the factors that contribute to well-being – marriage, social relationships, employment, perceived health, religion, quality of government, etc. – and the factors that detract from well-being, including the pursuit of money and material possessions. Unfortunately, societal pressures encourage people to pursue the latter goals, and people are no happier as a result.

Now, I can already hear people criticizing this as subjective. If someone want to buy a Ferrari and work 70 hours a week, who am I to say that that is wrong? People should be free to pursue their happiness as they see fit.

My response is this: not everything is subjective and value relative. Wine is superior to crack, and I can make a strong argument to back this up. Academia in the past few decades has stopped promoting what it sees as the good life, and has instead treated everything as equal. This is a mistake. And while policymakers should not dictate what they believe is good, they can and should – based on evidence – push and encourage society in a direction that leads people to a better life while still respecting individual rights and freedoms. Modern liberal societies already do this. For instance, smoking is heavily taxed, the arts are highly subsidized, and marriage is a legal contract. Governments – and, by extension, the electorate – are making value judgements about what is good. And while mistakes can be made, the principle is not wrong.

I am making claims about well-being because they are proven and objective, not simply subjective matters of opinion. Having a strong relationship with your family is not better than buying a new house just because I say so. Years of research have proven it to be true (you can read my paper for actual citations and proof). Studies have shown that the pursuit of money and material possessions simply do not make people any more satisfied with their lives. What, then, is the point of pursuing them with such ideological fervor?

We do not want a society like the one illustrated in Aldous Huxley’s Brave New World, where citizens are content but deprived of their autonomy. People’s satisfaction with their lives cannot be the ultimate and singular indicator of how society is doing. But still, there is something to be said for the importance of well-being, and the fact that it has gone down while GDP has gone up should give us some cause for concern. In a country where all of our basic needs (and then some) have been met, there is no longer a point in focusing efforts on GDP growth. We need to measure our economy differently in order to a) measure progress more accurately; and, b) focus societal goals on what actually improves people’s lives. Dumping GDP can get us there.

More From Veterans Affairs

Since my previous post on Canada’s Shabby Treatment Of Its Veterans, not much has changed. In fact, veterans have seemed to have just gotten angrier.

And it’s with good reason. A group of veterans that came to Ottawa to lobby against office closures felt disrespected after a meeting with Veterans Affairs Minister Julian Fantino went off the rails. He showed up late, didn’t listen to them, and was generally rude. Let me emphasize that this is the Veterans Affairs Minister. And although Stephen Harper is trying to suggest that service is better under this government, Thomas Mulcair is right in saying that these vets are “not in Ottawa to shake hands.” They’re mad, which is pretty evident in watching any of the videos attached to these two news stories.

It seems to me that the government should be moved by this. Veterans Affairs exists to serve veterans. So if you’re completely pissing them off, maybe change course. Maybe listen to the people you are pretending to serve. Don’t stand up in the House of Commons and suggest that veterans are actually better off, because that is clearly not how veterans see it.

Amidst all of this has come another frustrating story. Just two days after the funeral of a Canadian veteran who committed suicide, the government sent a notice to the deceased’s husband, informing him that he owed almost $600. This because Veterans Affairs “overpaid” his wife’s benefits since she did not live the full month of December.

Canada’s Shabby Treatment Of Its Veterans

Let me be frank here. Saying you “support the troops” is not the same as actually supporting the troops. Sorry, but wearing a red tie to work or putting a bumper sticker on your car is not “support”. You know what is supportive? Criticizing this ridiculous government for its treatment of veterans.

If anyone cares enough to look into the issue, there are countless ways that the Harper Government™ is treating the country’s veterans like garbage. Here are some examples.

Canada has a Veteran’s Charter, which was overhauled in 2011. You would think that overhauling something would, you know, make it better. But it didn’t. Under the new Charter, severely disabled veterans will have their benefits cut off at 65. For many severely disabled veterans, this all but ensures their living in poverty. The Veterans Ombudsman, Guy Parent, also says that the new lump-sum payments that replaced pensions in the new Charter are inadequate. And compensation for pain and suffering is somehow less than what Canadian courts award for personal injury. Figure that one out. If I lost a leg in a car accident, I would receive more compensation in court than a soldier who lost a leg from a land-mine in Afghanistan would receive from the government.

Plus there’s all of the cuts. Nine Veterans Affairs offices are to be closed by February, and 25% of Veterans Affairs workforce are planned to be cut by 2015. More services are being moved online, which makes perfect sense for the 90-year-old veterans that stormed Juno Beach. What this means is that veterans can call Service Canada and talk to employees who have no particular knowledge about veterans’ programs. Or they can travel as far as 1,100 kilometres to the nearest remaining Veteran Affairs office.

Now, the cuts are of course defended because of the decreasing number of WWII and Korean veterans. But there are still 680,000 veterans (plus current military) in Canada that did not serve in WWII. Many veterans need one-on-one service, not over-the-phone bureaucracy. And if so many veterans are against the closures and protesting against it, shouldn’t that tell us something?

Then there’s the government’s attempt to scale back military pensions. Then there’s the critic of the Veteran’s Charter who had his personal information leaked by Veteran’s Affairs. Then there’s the plan to honour Afghanistan veterans that was scrapped. Then there’s the veterans who are booted from the military just before pension eligibility. Then there’s the fact that only 28% of money budgeted for the Last Post Fund (funding for funerals of impoverished veterans) actually gets spent. This followed the revelation that the fund rejected 67% of requests that it received. (Fun fact: Canada provides funerals for convicts that can’t afford it, but veterans have to rely on this fund.) Then there’s the smear campaigns against veterans who dare to criticize the Conservative Party.

But perhaps the most egregious example of the Conservative Party’s neglect is its flat-out rejection of the Canadian government’s long-standing promise to care for wounded soldiers. This is a promise that Prime Minister Robert Borden made in 1917, just before the Battle of Vimy Ridge. He stated:

You can go into this action feeling assured of this, and as the head of the government I give you this assurance: That you need not fear that the government and the country will fail to show just appreciation of your service to the country and Empire in what you are about to do and what you have already done.

The government and the country will consider it their first duty to see that a proper appreciation of your effort and of your courage is brought to the notice of people at home that no man, whether he goes back or whether he remains in Flanders, will have cause to reproach the government for having broken faith with the men who won and the men who died.

But Stephen Harper and his Conservative Party argue that this no longer applies. The government, in other words, is no longer bound to care for soldiers wounded in combat.

The Conservatives are so cemented in this morally bankrupt position that they tried to have a class-action lawsuit from veterans of the war in Afghanistan thrown out of court. This lawsuit claims that the government has a duty to care for veterans. When throwing out the lawsuit failed, the government instead launched an appeal. They argue that this promise to care for veterans should not bound the current government. 

I’m sorry, but if the government sends you to war, they cannot then decide to abandon you. There is a moral and social obligation. And whether or not the Conservatives are legally right is not at all the point. The point is that they don’t much care for treating veterans with dignity and respect.

It just doesn’t make sense. For a government that wasted so much money trying to commemorate the War of 1812, why does it dismiss the actual people involved in war? Why try to make Canadians care about a two-hundred-year-old war while not caring about Canadians in war? I know that this Conservative government has its priorities mixed up, but that’s taking it to a whole new level.

I am the furthest thing from a war supporter. But if your government put you into combat, that same government has a moral duty to take care of you when your body or mind gets injured. Unfortunately, 400 Canadian veterans die in poverty every year. Our government loves photo-ops and cheap talk. But the way it actually treats veterans in this country is an absolute travesty. Something a lot of “supporters” fail to admit.

the maids

Originally posted on travel hard:

The UN requires its staff to have a certain level of security in their homes. They won’t let you live somewhere in Harare if it doesn’t have a gate, electric fence, guard, and so on. So, partly because of this and partly because our dollar just goes farther, I live in a pretty nice place. It is a house of four people, and so long as one is okay with sharing the space with others, it is a good arrangement.

When it came time to make an offer on the monthly rent (everything is negotiable), I offered a number a bit lower than the asking price. I also said that I would not require the services of the maid, as I am able to cook and clean for myself just fine. I was ready to accept the place no matter what; I did not really need the monthly rent to be…

View original 557 more words

Government Shutdown

In Canada, Parliament shutting down is now the norm. And why shouldn’t it be? In this majority government, there is no real discussion of ideas anyway. So the Prime Minister just removes any appearance of debate and shuts the place down. But this is certainly not as bad as America’s shutdown, as government services in Canada – national parks, Employment Insurance, scientific research, and taxpayer-funded partisan advertisements for economic programs that no longer exist – still function normally.

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Oh, and regular Nickelback visits.

But the shutdown in America is a different, more scary animal. It will cost the economy billions of dollars and it is resulting in a pretty major headache. But at least it’s for a good reason. Errrrr, maybe not.

The whole shutdown is due to an inability of Republicans (read: small, vocal, insane minority of Republicans) to accept the Affordable Care Act (ACA), commonly known as Obamacare. The ACA, which passed the House, the Senate, and was signed into law by President Obama, is now the law of the land. It was debated, discussed, and voted on. Obama made massive concessions to Republicans in order to get it passed, and many Democrats voted against it because of that. As a result, the ACA is a watered-down version of healthcare reform. But, still, it is better than the existing healthcare system.

But the major point here being this: the bill went through the democratic process, and it is now law. Healthcare reform was one of the major issues in the 2008 election, which saw Obama cruise to victory, and the ACA was also one of the major issues in the 2012 election, where the populace again gave Obama an easy win.

Never mind that the ACA went through the democratic process. No. The Tea-Party wing of the GOP is so obsessed with overturning the ACA that they forced a shutdown of the United States government.

And talk about picking your battles. This is the first shutdown in 17 years, and it is because the government is trying to give people healthcare benefits. If that doesn’t make sense to you, it’s because it shouldn’t. Sure, there have been illegal wars and government-sanctioned torture programs, but let’s actually get mad because fewer people will go bankrupt due to healthcare costs. I mean, wow.

jags

The Tea Party claims to be super patriotic, but you really have to question their love of country. They couldn’t get their way in any legitimate or democratic means. So they are now holding the economy hostage in order to overturn a bill that has gone through the democratic process, and will provide more people who need it with healthcare. They want Obama to “negotiate”, but all they want is for their illegitimate demands to be met.

The GOP has no control over this faction, and it has now descended deep into absurdity and insanity. Every day is a new exercise in crazy, and everyone is dumber for having experienced it.

I trust that Obama will not give in to the Tea Party’s demands. He is not about to abandon healthcare reform just because a small group of weirdos have found a way to get weirder. And here’s the good news: people actually get it, and are blaming the GOP for this mess. Some polls suggest that Republican support is evaporating.

This pleases me, but not because I think the Democrats are doing a wonderful job and are full of bright ideas. Hopefully this can be a turning point for the GOP, and they can find a way to separate from the Tea Party. If the GOP returns to some normalcy, so too will the Democrats and so too will the country as a whole. But currently, a small, vocal, radical, and uninformed minority are driving the conversation, making us all worse off because of it.