Economic Crisis?
Economic Crisis?
The economy has become the new crisis. Congress is working urgently to pass an economic stimulus package to renew confidence in the system. This allows a dialogue to open up around how economic grow
The economy has become the new crisis. Congress is working urgently to pass an economic stimulus package to renew confidence in the system. This allows a dialogue to open up around how economic growth continues to be strong (despite concerns over the future), yet people are increasingly unhappy. Last year there was a survey suggesting that three-quarters of Americans are unhappy with their current situation. The question is how in a period of unprecedented economic growth, people could be so seemingly unhappy. There has been only 5 quarters of recession in over 25 years. One potential explanation comes in the measurement of growth- Gross Domestic Product (GDP). GDP is the result of the great depression and the need to measure the output of the economy. This indicator is now the fundamental measure of wealth and economic well-being, even though that was never the intention. Some economists have developed an alternative measurement, the Genuine Progress Indicator (GPI), which is purported to be a truer measurement of well-being.
The GPI starts with personal consumption and then adds and subtracts to account for items not included in GDP. GDP does not include things like; value of parenting or housework, value of higher education, value of volunteer work, loss of leisure time, underemployment, resource depletion, impact of carbon dioxide emission, and income distribution. These items all influence the long-term health and well-being of citizens, yet is not accounted for in GDP. If you divide the total GDP and GPI by population, you get the per capita amounts, or amount per person. If you factor in these items, a vastly different picture emerges (see graph). GDP per person has continued to increase at a steady rate since 1950, while GPI per person has been stagnant for the last 20 years.
One explanation is that GDP does a good job of measuring how we feel about our pocketbook, while GPI measures how someone feels in his or her heart (or gut). The implication for the perceived discontent is that in the end, people are listening to their heart, and not their pocketbook. The other implication is that wealth does not necessarily equal financial wealth. Politicians are rushing to protect our pocketbook and prop up GDP, yet continue to ignore the restlessness in our hearts. Certainly many politicians talk about protection of natural resources, reducing carbon emissions and improving income distribution, yet the numbers suggest that it has only gotten worse; there appears to be a disconnect between policy and results. The thought of a recession sends fear into the eyes of most politicians and instant action to correct it, but the 20 years of stagnant growth of the GPI barely raises an eyebrow.
(Graph image will be uploaded later today)
The GPI starts with personal consumption and then adds and subtracts to account for items not included in GDP. GDP does not include things like; value of parenting or housework, value of higher education, value of volunteer work, loss of leisure time, underemployment, resource depletion, impact of carbon dioxide emission, and income distribution. These items all influence the long-term health and well-being of citizens, yet is not accounted for in GDP. If you divide the total GDP and GPI by population, you get the per capita amounts, or amount per person. If you factor in these items, a vastly different picture emerges (see graph). GDP per person has continued to increase at a steady rate since 1950, while GPI per person has been stagnant for the last 20 years.
One explanation is that GDP does a good job of measuring how we feel about our pocketbook, while GPI measures how someone feels in his or her heart (or gut). The implication for the perceived discontent is that in the end, people are listening to their heart, and not their pocketbook. The other implication is that wealth does not necessarily equal financial wealth. Politicians are rushing to protect our pocketbook and prop up GDP, yet continue to ignore the restlessness in our hearts. Certainly many politicians talk about protection of natural resources, reducing carbon emissions and improving income distribution, yet the numbers suggest that it has only gotten worse; there appears to be a disconnect between policy and results. The thought of a recession sends fear into the eyes of most politicians and instant action to correct it, but the 20 years of stagnant growth of the GPI barely raises an eyebrow.
(Graph image will be uploaded later today)
