Saturday, 17 September 2016

How not to be gross. The trouble with the GDP obsession

Gross Domestic Product, or GDP, even sounds slightly repellent. All the outputs a country spews out into the world, minus none of the defilements to human welfare and the natural world. Gross is a good description. Unearth all the fossil fuels in the ground, burn them and watch the GDP meter spike, while civilisation drowns. Fight a war and see GDP spiral as you repair the damage you’ve inflicted. Sit back in grim satisfaction as your products cause an obesity epidemic and the economy spreads depression like a virus. But as long the volume of goods and services shows a steady rise, you are outpacing the abyss.

But more than just being blind to suffering, the obsession with GDP actively seems to thrive on human misery. According to psychologist Oliver James, who gives it the moniker, ‘selfish capitalism’, “it is absolutely critical for everybody to go around feeling miserable, filling the emptiness with commodities, dealing with misery by trying to give themselves short-term boosts with hamburgers or drink.”

Divorce and separation, seemingly unbridled negatives for human happiness, are a positive boon for GDP statistics, James points out. They result in more homes rented out, more fridges and furniture bought, extra DVD players needed etc. A world comprising solely of single person households would be terrible on many fronts – it would be an environmental disaster and would spread the blight of our time, loneliness. But as far as GDP is concerned, this outcome would be an unadulterated blessing.

Small wonder there is mounting pressure for other measurements of the state of the economy and society to knock GDP off the statistical throne it has occupied since the Second World War. According the author Dirk Philipsen, there are more than a hundred alternatives, ranging from the ‘Happy Planet Index’, to the Genuine Progress Indicator to the ‘Beyond GDP’ initiative.

These indexes both measure things that GDP ignores, such as childcare and housework, and take account of huge negative impacts that are grist to the mill of GDP. They are thus a far more realistic or complete picture of the health of the societies we inhabit. The book, The Spirit Level, painstakingly demonstrated that rising GDP, a blunt measure of rising societal wealth, can harbour great damage to well-being, incubating trends such as rising mental illness and obesity or declining social mobility.

But before we rush to ditch GDP as an economic measure, it is necessary to recognise that it does record something meaningful in our current society.

As economist Michael Roberts points out, ‘GDP is not designed to measure benefits to people but productive gains for the capitalist mode of production.’ And in a ‘capitalist mode of production’, there is an undeniable, if regrettable, link between the productive gains of the economy’s major institutions and the welfare of most people. If the system doesn’t make its productive gains, the disappointment is swiftly transferred downwards.

The 2007-9 recession and its aftermath made this plain to see. Global output slumped by eight percentage points and GDP in the OECD area (34 wealthy countries around the world) contracted by six percentage points. Those are the bare figures. But these statistical falls were accompanied by real-world spikes in unemployment and homelessness and serious depletions of income and wealth. With GDP per person still lumbering below its 2007 level, exploitative work contracts and self-employment have mushroomed. GDP may be blind but there is a connection between it and human welfare.

But, because this connection undoubtedly exists, it is used by governments and international agencies to justify all kinds of policies to resuscitate GDP which harm people. Neutral-sounding ‘structural reforms’, such as raising the pension age, restricting collective bargaining agreements or clamping down on ‘generous’ welfare benefits, are hawked as ways to return the world economy to a path of growth.

Sure, there is anger about these policies. Left Keynesians and others protest there are other ways to revitalise GDP growth. But there is unanimity that sustainable GDP growth is a worthy aim. And at the back of our minds there exists a seedy toleration of the anti-social consequences of rising GDP because, without it, the abyss seems to beckon. This is why, despite a wish to be humane on the part of many people, there is a deep ethical rot at the heart of our economies.

But, far from accepting this miserable bargain, we need to face it down. The god of GDP growth, as one economist puts it, needs to be dethroned. We don’t need alternative measures that co-exist with GDP, we need economic alternatives to GDP. Public policy should no longer aim at maximising GDP. It should aim at maximising human welfare and if that depresses GDP, so be it.

This change can take many forms. People growing their own fruit and vegetables rather than relying on the sugar-addled products of the food industry would improve well-being but be bad for GDP. A health policy that aimed at curing, where possible, physical and mental illness rather than merely treating their symptoms with drugs would benefit human welfare but dampen GDP. And policies to keep fossil fuels in the ground forsake future economic growth in the hope of ameliorating the impact of climate change.

It is estimated that the global economy needs to grow by at least 3% a year in order to make sufficient profits for large corporations. This means compound growth; growth on top of the growth already attained. It is doubtful whether this rate is possible but unquestionably it is not desirable. “Imagined physically,” says the geographer, David Harvey, “the enormous expansion in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained”.

But should we collectively decide not to pursue the aim of maintaining the rate of capital accumulation, we need to be fully aware of what this implies. Not only do large corporations directly and indirectly (through supply chains) employ large swathes of the population, they also act as the destination for pension fund investments. The current and future wealth of millions of people depends on their success. Recognising this is not to justify the economic system but state a bare fact of social reality.

Corporations thus play a dual role in the economic system. Economic viability apparently depends on them but they are taking us in fundamentally anti-social, anti-ecological directions. This state can be characterised as one of economic bondage.

It might be argued that public investment should substitute for falling GDP. After all, the definition of GDP includes – in addition to consumer spending, business spending and investment and net exports – spending by the government. But, in order for growth to be maintained in this way the level of government involvement in the economy would have to rise more than anyone is advocating (Jeremy Corbyn included). This kind of economy would be akin to the Second World War economies of Britain and America. And of course without the huge stimulus of manufacturing weapons.

Twenty years ago there was unbridled optimism that the information economy was the future of capitalism. The number of new products was only limited by the boundaries of the human imagination. Steve Jobs could “anticipate technological desires you didn’t even know you had”. But digital capitalism has not turned out to be the saviour of corporate profitability and economic growth. “Info-tech,” says the author Paul Mason, “drives labour out of the production process, reduces the market price of commodities, destroys some profit models and produces a generation of consumers psychologically attuned to free stuff.”

We are currently living in a stagnant capitalist economy. Growth has levelled out at rate well below the average prior to the 2008 crash. Another slump is very likely, which will turn growth negative again, causing a depression. That’s the scenario, and all its human consequences, we have to imagine if we explicitly decide not to make the profits of multi-national corporations a priority.

Therefore, logically, not following the GDP compulsion anymore means constructing a post-capitalist economy. And in the short-term that entails safeguarding the incomes of millions of people. This implies the free (or at negligible cost) provision of many utilities and the use of a basic income as the primary source of people’s income, not as is commonly imagined, a fall back that gives people the confidence to make money elsewhere.

The most pressing task therefore is not just to illustrate how an alternative economic system is desirable, but to show how it would work. How it would provide and distribute income and wealth, substituting for the institutions that currently perform this function.

Monday, 29 August 2016

EU Ref: What was it good for?

 This piece was originally published by the online magazine New Compass

As most of the world knows, the UK had a referendum on EU membership in June. What the rest of the world probably doesn’t know is how divisive the referendum and its aftermath were. It exposed deep divisions around class and race, revealed that half the country knows nothing about the life experiences of the other half, and holds them in contempt anyway and that a sizeable section of the population would like to repeat the exercise until they get the outcome they want. And towards the end of the campaign, an MP was assassinated by a Fascist.

But despite fomenting such profound fissures in British society, the referendum result (Leave won by 52% to 48%) has resolved nothing. Prominent Leave campaigners seem disappointed they won, the Conservative government is nowhere near triggering Article 50 (which begins the two-year process of Brexit) and calls for a second referendum regularly emanate from businessmen and politicians while others hold that Parliament should simply refuse to implement the result. The referendum has, at best, instituted a shaky truce which won’t last long.

The EU referendum was, in short, a terrible way to arrive at an important decision. It failed miserably to apply three vital principles of effective decision-making. The people making the decision did not have adequate information, were denied the chance for deliberation and critical reflection and lacked the power to implement the decision they arrived at.

The referendum was presented as the epitome of democracy. What could be more democratic than asking the people what they think, after all? But other forms of democracy exist that grant sovereignty to ordinary people while avoiding the ephemeral thrill of choosing which section of the elite you like the best. Experiments, such as citizen juries, participatory budgeting, random selection and assembly democracy devolve genuine power and result in more trusted and better judgements:

Deliberation and critical reflection

The EU referendum was a thoroughly mediated experience which relegated the public to the role of passive onlooker. The jousting of the protagonists was presented daily on TV screens and through the print and online media. For most of the campaign, the mainstream media presented the referendum as largely an internal Conservative party contest and revelled in farcical spectacles such as a confrontation of ‘In’ and ‘Out’ flotillas on the River Thames.

Other forms of democracy, however, rest on enabling conversation and deliberation to happen. Participatory Budgeting, for example, involves the election of recallable delegates by assemblies to determine how all or most of a municipality’s budget is spent. According to one academic, “the key ingredient is deliberation, the quality of the exchange of ideas.” Citizen juries spend days deliberating issues such as obesity, transport, electoral systems or work and as a result their findings are trusted by the public.

Thinkers such as Erich Fromm have pointed to the way the jury system, a democratic way of arriving at life-altering decisions, arrives at generally objective and reliable decisions precisely because it involves prolonged deliberation. The participants know their decision will have an immediate and lasting effect and treat it seriously as a result. The EU referendum, by contrast, resembled a two month long edition of ‘Judge Judy’.


One Leave campaigner, the writer
Dreda Say Mitchell, described the political world which she temporarily gained entry to, as “largely one big boys’ club. And it’s for a very specific type of boy, at that.”

Referenda, like its kin Parliamentary government, merely amplifies the representation of people who have already carved out a media profile. The most vocal protagonists of the EU referendum – David Cameron, Boris Johnson, Nigel Farage and Michael Gove – all male and privately educated, illustrate the unrepresentativeness of representative government. The referendum made it plain to see how the upper middle classes dominate the terms of the debate in British politics.

By contrast, there is a growing use around the world of an ancient principle of democratic government – that of random selection. Aristotle thought democracy was characterised by selection by lot, so that citizens could ‘rule and be ruled in turn’, while elections were a sure sign of oligarchy. The modern form of selection by lot involves the creation of a mini-publics by randomly selecting willing participants with the aim of achieving demographic balance and the representation of all social groups. The new Icelandic Constitution of 2010 and the electoral system in British Colombia were both partly determined by randomly selected groups of citizens.

Aside from its inclusiveness, random selection or sortition has two other important effects. It detaches political influence from personal ambition as participants are not elected and only wield influence for a finite period. And it brings together people with divergent views and backgrounds, compelling them to take into account perspectives other than their own and those of people like them. In these senses, random selection represents the antithesis of the UK’s referendum experience.

Adequate information

The EU referendum excelled in generating a thick fog of misinformation. The Leave side peddled the fiction that Brexit would result in £350 billion in extra funds for the NHS every week and made immigration the centrepiece of their campaign, masking the fact
they weren’t in fact promising to reduce immigration. And, aside from aping Nazi propaganda, the Leave side’s posters deliberately conflated the migrant crisis with EU membership.

The Remain side, meanwhile, predicted economic Armageddon and warned a ‘punishment budget’ comprising spending cuts and tax rises would inexorably follow Brexit. Allegedly neutral economic experts from the Bank of England, OECD and IMF were cited to underline the recklessness of voting Leave and its calamitous effect on GDP. But these experts were anything but neutral. The OECD had advised Britain to
‘press on with austerity’ on the eve of the 2015 General Election, while the Bank of England ensured making rich people richer and inflating share prices were the crucial elements of the way the state responded to economic collapse in 2008.

Both sides in the campaign also indulged in the daily fantasy that the UK was still a manufacturing nation and that the result would either ruin or invigorate the country’s trade. Politicians made endless visits, garbed in high vis vests and hard hats, to whatever manufacturing firms they could locate. In truth, the UK has undergone
rampant deindustrialisation over the last 30 years and the country’s biggest export is financial services.

Other forms of democratic decision-making, however, are predicated upon understanding, not concealing, the issues at hand.
A Citizen’s Jury established in Mali in January 2006 heard evidence for and against the introduction of the GM technology before concluding that GM crops should not be grown in the country. In the US state of Oregon a randomly selected panel of citizens convenes to scrutinise ‘ballot initiatives’, referendum proposals which are then put to the state’s voters at election time. They take evidence from advocates and policy experts before compiling a ‘Citizens’ Statement’ about the proposals, essentially a piece of distilled information which can be used by voters to make their choice.

Both these democratic techniques embody the proper attitude towards experts. Experts are never neutral and should not be treated as such. There is disagreement within every field of expertise and practitioners, whatever their claim to superior knowledge, need to be interrogated by citizens and their viewpoints translated into understandable language. Every branch of specialised authority, especially finance and economics, relies on establishing an air of mystery about its workings and judgements. The task of a genuine democracy is to dispel this.

Taking back control

A natural and justified objection to the examples of alternative democracy presented here is that they are mere adjuncts to the existing system and have no real power. They can advise but little else. So I think we need to establish ways that ‘alt democracy’ can transform society, not just make it appear more consensual. Appropriating the language of the Leave campaign in Britain, here are two ways we can ‘take back control’.

The first is through the public control of information. Beyond the racism and xenophobia, the UK’s referendum result indicated there was something very wrong with status quo despite the official narrative of growing GDP and record levels of employment. But this was an intuitive sense of anxiety and directed at the wrong target.

We need to shine an unflinching light on our economic system and dominant institutions. The writer, Dan Hind, advocates a system of
‘public commissioning’ with the expressed intention of taking the power of forming opinion and social depiction out of the hands of the mainstream media and giving it to the public. Through an annual budget of £80m, thousands of journalists and researchers would be employed to undertake long-term research. The public would vote for the subjects it wanted to see investigated and each round of voting would be preceded by open meetings. “National institutions, the EU and institutions like the International Monetary Fund, the World Bank, and the Bank of International Settlements would all become available to sustained scrutiny,” says Hind. This approach was piloted in Croatia in 2013.

The second way is through the public establishing an influence over private investment and government stimulus. Illustrating how little has changed over the last eight years, the Bank of England responded to the Brexit vote by spending £170 billion on shoring up the wealth of rich people. It revived its Quantitative Easing (QE) programme, bought the debt of companies it liked, and re-embarked on a £100m programme to encourage banks to lend out their money. QE, which buys debt securities from pension funds, insurance companies and ‘high net worth’ individuals, has succeeded in pushing up the prices of assets such as shares and property. But for those without assets it is meaningless.

A real way to ‘to take back control’ or in fact to establish it in the first place, would be for the public to decide how economic stimulus is spent. Through country-wide assemblies the public could determine how many new council homes are built, develop transport projects, found co-operatives or establish medical research laboratories.

If this democratic method of assigning state stimulus money was established, we could become more ambitious. The American mathematician and author of After Capitalism, David Schweickart, has proposed ‘social control of investment’:  a tax on the capital assets of all enterprises to be dispersed throughout the country on a per person basis, enabling assemblies to decide how a proportion of investment is spent. Apart from establishing a breach in the divine right of central and private banks and corporations to decide where and how investment takes place, such a new democratic initiative would impede the inexorable growth of mega-cities, such as London. Mega-cities are ecological nightmares, sucking in people and capital, while starving other regions of investment. If GDP is calculated per capita, London and the South East are the only regions of the UK to have recovered at all from the crash of 2008. This is one form of inequality, highlighted by the referendum, which needs urgent rectification.

But instead of these democratic alternatives, the UK has indulged in the illusory freedom of plebiscite democracy, which assiduously stokes dissatisfaction while failing to deliver anything more than the chimera of empowerment. Real democracy looks very different.