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Sunday, 24 November 2019

It's time to retire metrics like GDP. They don't measure everything that matters

The way we assess economic performance and social progress is fundamentally wrong, and the climate crisis has brought these concerns to the fore writes Joseph Stiglitz in The Guardian 


‘And it should be clear that, in spite of the increases in GDP, in spite of the 2008 crisis being well behind us, everything is not fine.’ Photograph: Johannes Eisele/AFP/Getty Images


The world is facing three existential crises: a climate crisis, an inequality crisis and a crisis in democracy. Will we be able to prosper within our planetary boundaries? Can a modern economy deliver shared prosperity? And can democracies thrive if our economies fail to deliver shared prosperity? These are critical questions, yet the accepted ways by which we measure economic performance give absolutely no hint that we might be facing a problem. Each of these crises has reinforced the fact that we need better tools to assess economic performance and social progress.

The standard measure of economic performance is gross domestic product (GDP), which is the sum of the value of goods and services produced within a country over a given period. GDP was humming along nicely, rising year after year, until the 2008 global financial crisis hit. The global financial crisis was the ultimate illustration of the deficiencies in commonly used metrics. None of those metrics gave policymakers or markets adequate warning that something was amiss. Though a few astute economists had sounded the alarm, the standard measures seemed to suggest everything was fine. 

Since then, according to the GDP metric, the US has been growing slightly more slowly than in earlier years, but it’s nothing to worry about. Politicians, looking at these metrics, suggest slight reforms to the economic system and, they promise, all will be well.

In Europe, the impact of 2008 was more severe, especially in countries most affected by the euro crisis. But even there, apart from high unemployment numbers, standard metrics do not fully reflect the adverse impacts of the austerity measures, either the magnitude of people’s suffering or the impacts on long-term standards of living.
Nor do our standard GDP measures provide us with the guidance we need to address the inequality crisis. So what if GDP goes up, if most citizens are worse off? In the first three years of the so-called recovery from the financial crisis, about 91% of the gains went to the top 1%. No wonder that many people doubted the claims of politicians who were then saying the economy was well on the way to a robust recovery.

For a long time I have been concerned with this problem – the gap between what our metrics show and what they need to show. During the Clinton administration, when I served as a member and then chairman of the Council of Economic Advisers, I grew increasingly worried about how our main economic measures failed to take into account environmental degradation and resource depletion. If our economy seems to be growing but that growth is not sustainable because we are destroying the environment and using up scarce natural resources, our statistics should warn us. But because GDP didn’t include resource depletion and environmental degradation, we typically get an excessively rosy picture.
These concerns have now been brought to the fore with the climate crisis. It has been three decades since the threat of climate change was first widely recognized, and matters have grown worse faster than initially expected. There have been more extreme events, greater melting of glaciers and greater natural habitat destruction.

It is clear that something is fundamentally wrong with the way we assess economic performance and social progress. Even worse, our metrics frequently give the misleading impression that there is a trade-off between the two; that, for instance, changes that enhance people’s economic security, whether through improved pensions or a better welfare state, come at the expense of national economic performance.

Getting the measure right – or at least a lot better – is crucially important, especially in our metrics- and performance-oriented society. If we measure the wrong thing, we will do the wrong thing. If our measures tell us everything is fine when it really isn’t, we will be complacent.

And it should be clear that, in spite of the increases in GDP, in spite of the 2008 crisis being well behind us, everything is not fine. We see this in the political discontent rippling through so many advanced countries; we see it in the widespread support of demagogues, whose successes depend on exploiting economic discontent; and we see it in the environment around us, where fires rage and floods and droughts occur at ever-increasing intervals.

Fortunately, a variety of advances in methodology and technology have provided us with better measurement tools, and the international community has begun to embrace them. What we have accomplished so far has convinced me and many other economists of two things: first, that it is possible to construct much better measures of an economy’s health. Governments can and should go well beyond GDP. Second, that there is far more work to be done.

As Angel GurrĂ­a, secretary general of the Organisation for Economic Cooperation and Development, has written: “It is only by having better metrics that truly reflect people’s lives and aspirations that we will be able to design and implement ‘better policies for better lives’.”

Wednesday, 20 November 2019

Can Economics Be A Force For Good?


I’ll take Labour dithering over Conservative cruelty any day

We face a choice between a party in it for themselves and one seeking to solve our massive problems. It’s no contest writes George Monbiot in The Guardian


 
‘The first test of politics is this: are they in it for themselves, or for us?’ Rebecca Long-Bailey and Jeremy Corbyn with other members of Labour’s shadow cabinet. Photograph: Danny Lawson/EPA


Try to imagine Jeremy Corbyn in Tony Blair’s post-political role: flying around the world, enriching himself by striking deals with tyrants and oil companies. Try to picture John McDonnell setting up, like Blair’s righthand man, Peter Mandelson, a consultancy that gives reputational advice to controversial corporations. Try to picture Rebecca Long-Bailey being caught in a sting, like three of Blair’s former ministers, who offered undercover journalists political influence in exchange for cash.

I find these scenarios impossible to imagine. Whatever you might think of Labour’s frontbenchers, you could surely no more picture them behaving this way than you could picture Boris Johnson abandoning his career to become a hospital cleaner.

The first test of politics is this: are they in it for themselves, or for us? I don’t mean to suggest that Blair and his frontbenchers were entirely selfish, but self-interest and the national interest became too easily entangled. Among the Conservatives there is no confusion: self-interest is the political doctrine. Unlike either group, Corbyn’s team passes.

This carries a cost. The game you are supposed to play in British politics is feathering your nest by feathering the nests of others. Those who refuse are denounced in the billionaire press as unfit for government.

I’ve never been a member of any political party, and have no party loyalties. I know the Labour party is imperfect. But what I see is a group of people genuinely seeking to solve our massive problems – environmental, political, economic, medical and social – rather than appeasing press barons and queueing at the notorious revolving door between politics and money-making.

My experience, as an author of the Land for the Many report that Labour commissioned, has been of a party boldly seeking new ideas for improving national life, and being prepared to weather a storm of lies for having the temerity to mention them. We are likely to see a lot more of this when it publishes its manifesto on Thursday.

Of course the first test is not the only test. Another is the ability to lead, and here Labour often fails. First, some context. Several hundred Labour members, out of 485,000, have been accused of antisemitism. That is several hundred too many: every instance is an outrage. However, as a fraction of 1%, it’s a far cry from public perceptions of the issue. According to a new book about the media’s treatment of the Labour party, Bad News for Labour, the average estimate by people surveyed is that 34% of Labour members have succumbed to this evil.

Part of the problem is that Corbyn has failed to get a grip on his party and respond with the decisive speed this deadly bigotry demands. Instead, senior figures sometimes appear to have done the opposite, obstructing the swift and uncompromising resolution of complaints. This is completely unacceptable. But it does not amount to a party riddled with antisemitism.

Corbyn’s dithering on this issue reflects a general diffidence about asserting power. It could be seen as the flipside of his lack of self-interest. Blair might be egocentric, but one result was that he immediately stamped out any tendency he believed would threaten his chances of election.

By contrast, Corbyn wasted precious months failing to articulate a clear position on Brexit. He repeatedly missed the open goals the government offered. He allowed infighting to dominate when the party’s energies should have been concentrated on the Tories. No one could definitively solve the conflicts within the Labour party, but a firmer leader could have prevented them from spiralling into open warfare.


FacebookTwitterPinterest ‘The Conservatives are entirely focused on wealth and power, and the protection of those who wield them.’ Boris Johnson at the CBI conference in London. Photograph: Leon Neal/Getty Images

Yes, drift in politics is a sin. But compare it with the alternative. Last week, I wrote about the government’s proposal to criminalise the lives of Romany Gypsies and Travellers, among the most persecuted minorities in European history. It was so determined to beat them up in public that it broke its own rules: “Consultation exercises should not generally be launched during local or national election periods.” This is what institutional racism looks like.

Of course, it does not cancel or excuse Labour’s failure decisively to crush antisemitism. Yet, by contrast to the justified outrage about Labour’s weakness on this issue, my article, a week after the consultation was published, was the first in the national press to criticise the government’s extraordinary assault on threatened minorities. There has been almost no take-up since.

A survey by YouGov for Hope Not Hate discovered that 54% of Conservative party members believe Islam is “generally a threat to the British way of life”. Islamophobia is a genuine majority sentiment within the party, whose leader has repeatedly made racist and Islamophobic statements. This week, I searched Google for mentions of Labour antisemitism by the BBC, and found 7,810 returns. But a search for BBC mentions of Conservative Islamophobia delivered only 1,420 results.

Labour has an urgent desire for a better world. But it is coupled with such a weak instinct for power or even self-preservation that you can’t help wondering how much of its programme it can deliver. The Conservatives are entirely focused on wealth and power, and the protection of those who wield them. On one side, there is a ferment of new ideas. On the other, the old agenda of stripping away public protections and promoting private business at the expense of public interests.

We have a choice of self-denying dither or determined cruelty. Neither set of traits will deliver an ideal government. But I know which one I favour.

Tuesday, 19 November 2019

From ‘severe’ to ‘very poor’

Jawed Naqvi in The Dawn

The Delhi Met Bureau may have actually made a deeply philosophical observation with its imagery applicable to several facets of life these days. Spurred by an unexpected breeze, the quality of air in Delhi ‘improved’ from ‘severe’ to ‘very poor’. Some improvement, you would say, but do tarry a little

This intriguing metaphor of improvement between severe and very poor certainly applies to extant political choices in a large number of locations.

Take Pakistan, where the PPP is compelled to swear by Z.A. Bhutto as a great liberal even though he heaped misery on a minority community in a moment of communally inspired political opportunism. And Nawaz Sharif is the preferred symbol of the nation’s hopes for a democratic recovery having conjured images of a Taliban-style amirul momineen replacing the country’s elected prime minister.

As for Imran Khan, he continues to flirt with some kind of liberation theology given his abiding faith in the Muslim clergy. As for the generals, they trump everyone by merging the options into a seemingly irreversible order of things.

Transpose the irony of self-limiting choices on American politics. Is it not true that Obama was to Libya what Bush was to Iraq and Clinton was to Yugoslavia? To the American voters, however, these former icons define all that they can choose from. The slightest difference in demeanour and style becomes the critical inflection. Elizabeth Warren, or whoever gets to lead the Democratic challenge against Donald Trump next year, thus needs to fight not just Trump but the ghost of his predecessors to progress from choosing between severe and very poor.

In this regard, the choices for Indians have been even more notably stifling. It seems as though the ‘Good’ has been removed as an option from a Clint Eastwood movie, leaving only the ‘Bad’ and the ‘Ugly’ to battle it out. Among other regressions, Nehru’s Congress is talking to the Shiv Sena in Maharashtra where they could come together along with the Nationalist Congress Party (NCP) of former chief minister Sharad Pawar.

Following recent state elections, which the BJP-Shiv Sena had fought together, the BJP’s numbers in the new assembly dwindled. In Haryana too, in Delhi’s neighbourhood, Modi’s party lost seats, but it co-opted the services of a discredited legislator to cobble a wafer-thin majority. The BJP had earlier sought the man’s arrest for alleged rape but it is now beholden to him for critical support. The Congress has no role in the ugliness of the moment and needs to just watch the BJP choke on its own muck.

It is significant that in Maharashtra and Haryana Modi’s appeal didn’t work. And this happened despite the Congress grappling with its own severe crisis as it limps on under an interim president in Sonia Gandhi. It has the numbers with the NCP to wean Shiv Sena away from the BJP by offering it greater share in the power structure. But should it morally do so?

The Shiv Sena has run on fascist principles with a pernicious anti-Muslim and anti-Dalit ideology. The outfit shored up by militant middle-caste Marathas was actually set up by the Congress, as a cat’s-paw against the influence of Brahmin-led communist unions that greatly troubled Mumbai’s business captains. The strike-breaking Sena conjured different enemies in stages and is currently positioned as anti-Muslim and anti-Dalit. Its volunteers confessed to taking part in the demolition of the Babri Masjid in 1992.

What’s significant about this Congress-NCP-Shiv Sena project, though it is still on the anvil, is that it follows the supreme court’s judgement on the Ayodhya dispute, which rather controversially assigned the piece of land where the Hindu mob razed the 16th-century mosque against the supreme court’s orders to the very mob with a mandate to build a temple to Lord Ram there.

Many Hindus worship Ram as the god-prince of Ayodhya, but only the BJP and its linked groups seem to know the precise spot where he came into the world. There was a time when the Congress government under Manmohan Singh told the apex court tartly that though Ram was worshipped across the country — and Muslim poets including Iqbal had written paeans to him — there was no scientific evidence he actually existed. Be that as it may, the Congress is now fully on board with the temple project, which is not surprising at all.

Ever since the communists parted ways with the Congress party in the wake of Indira Gandhi’s emergency rule, the Congress has veered closer to the Hindu right. This was a leading factor in Mrs Gandhi’s hurried calculations that led her to misjudge the mood in Punjab where she weighed in against the alienated Sikh community with military might.

The consequence was disastrous for India even though in the short run Rajiv Gandhi did win an unprecedented landslide, seen as a sympathy vote over his mother’s assassination by her Sikh bodyguards. Thousands of Sikhs were slaughtered in Delhi by mobs that were encouraged by the Congress party’s backroom cosiness with the Hindu right.

As for Maharashtra, there is nothing new or even surprising about the Congress and the NCP coming close to the Shiv Sena even if they pretend to be wary of its pronounced fascist tag. One needs only to flick off the dust from the Justice Shri Krishna Commission report on the 1992-93 anti-Muslim violence in Mumbai in the wake of the Ayodhya outrage. The commission cited direct evidence to illustrate complicity between the Shiv Sena, sections of the police and the Congress government of the day who were together named by the report, the reason why they jointly buried it. Not unlike the Delhi Met, William Shakespeare’s witches may have been pointing to a similarly deep universal reality as they sang in unison: “Fair is foul and foul is fair. Hover through the fog and filthy air.”