Issue #10
June 2002
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Measures of Prosperity by Gerry Krownstein Who is the economy for? Most businesspeople, economists and politicians treat the economy as though it were a thing in itself. This encourages them to measure the economy in terms of some aggregate number, and determine the health or sickness of the economy by such aggregate measures. The results deceive policy-makers into adopting foolish policies injurious to many citizens and, in the long run, are even harmful to the class or group the policy-makers identify with and have contact with. Then they express great surprise that things haven't worked out as they anticipated, and search for some anomaly to explain the difference between the world as they conceived of it and the real world they now have to confront.
The economy is often used as a synonym for prosperity or bad times. When the economy is doing well, we have prosperity; when the economy is doing poorly, we have bad times. The policies we structure to get us out of bad times, or to ensure that good times continue, are dependant on the measures we use to describe the state of the economy. What if these measures are not just somewhat inaccurate, but are in fact downright wrong?
Some of the measures we use designate an economy as prosperous if sales are up and profits increase, even if workers are unemployed and wages are down. By these measures, exporting all our manufacturing to third-world countries would strengthen our economy, except for the inconvenient fact that few here would be able to afford the goods that cheap labor produced.
Other measures designate an economy as prosperous if average income goes up. These measures would allow us to deceive ourselves that everything is OK when fewer and fewer people make more and more money while most people make less.
In fact, if you look at the figures published as indicative or predictive of our economic health, you will find that just about all of them measure from the perspective of the owners and controllers of our economic wealth, and have relatively little to say about the lives of most of our citizens until the situation becomes so bad or so good that even these measures have some truth in them. Even unemployment statistics and welfare rolls tell half-truths: unemployment statistics don't measure how many people are out of work, they measure how many people are out of work and looking for a job. Those who are employed at a lower status and less money than before, or who have temporary jobs, or who work part-time are counted as employed. Those who have given up and are no longer looking are simply not counted at all. Similarly, the welfare rolls count those who are receiving benefits. Those who have lost their benefits or whose benefits have expired are counted the same as those who no longer receive welfare because they have found employment.
Measures of the economy should be relevant to how all of us are doing. Per capita income figures, which are measures of average income, should be replaced by (or at least supplemented by) median income. This would allow us to be aware of periods when a few people are getting much richer while many are getting a little poorer. Gross Domestic Product should be revised to eliminate the effects of transactions between units of a multinational corporation, rather than counting as product what is in effect transferring money from one pocket to another. Unemployment figures should be based on the total population, minus those under 18 or in school, those in hospitals or other care facilities, those in prisons, artists, and those voluntarily retired. Employment figures should distinguish between full-time and part-time employment, between permanent and temporary employment, and between jobs carrying health-care benefits, sick pay and vacations and those that don't. Part-time, temporary and non-benefit jobs should be counted on the underemployed side of the ledger.
Conservative economists justify economic developments that preferentially benefit the rich by saying a rising tide lifts all boats. This has not been true in the past, but can be made true if the minimum wage is made a living wage, based on local living costs, and then tied to average income, so that it is automatically adjusted as costs increase or as wealth increases. Or perhaps the minimum wage can be set company by company to a percentage of the total compensation of the CEO and/or Chairman of the Board.
Perhaps the greatest problem of our current economic yardsticks are those things they refuse to measure: investment in affordable housing, child care, medical care and education come to mind. Job relocations outside our national boundaries is another. Quality of jobs created (see underemployment, above) is another. Until our economic measurements reflect the realities of life for our citizens, they will continue to allow the powerful to believe that everything is OK when millions are suffering.
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