Just in time for the release of new GDP numbers at the end of this month, Alan Durning has penned a piece on why these figures are as bogus as Enron’s balance sheets—and why there needs to be a new program to dethrone GDP once and for all.
Read the full piece on Tidepool.org, Sightline’s online news service.
Here’s an excerpt:
Estimated twelve times a year by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA), GDP is not a profit-and-loss statement for the nation, as many assume. It is a tally of finished goods and services. GDP math counts all spending as good, whether it’s on weddings or divorces, college tuition or Botox injections, prenatal care or cyberporn.
Consequently, everyone from President Richard Nixon to Nobel Prize-winning economist Simon Kuznets (who helped devise it in the 1930s), has denounced the GDP (and its sibling, GNP) as a measure of progress. Still, the public, led on by the media, continues to treat BEA’s GDP figures as society’s report card—and we’ve organized our national economy to get “A’s.” GDP announcements send waves through the nation, nudging investment decisions, changing interest rates, and making or breaking political careers.
To improve GDP accounting, the National Research Council panel, chaired by Katharine Abraham of the University of Maryland, proposed that BEA build a set of “satellite accounts” that assign a dollar value to such unpaid activities as housework, studying, and parenting. They also propose that satellite accounts subtract from GDP some of the environmental costs of production.
These outrigger accounts would put the main financial accounts into perspective as never before. For one thing, the satellite accounts would be huge. One study estimated that Australians produce goods and services in their own homes for their own consumption—by cooking, cleaning, doing repairs and yard work—worth nearly half as much as GDP. And housework is just one of five new accounts the Abraham panel proposes!
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