GDP - What Really Counts?
Taking Measure - with Nightcafe AI
“We need three things from the US: munitions, munitions, and munitions”.
Benjamin Netanyahu
And Israel is getting them, 13,000 rounds of tank shells, via an emergency order by the US Department of State bypassing the normal process by which the US Congress must approve the sales of arms overseas.
These exports register as sales for the US ordnance firms that manufacture them, and add to the GDP of the USA. But they also rain devastation on Gaza. GDP should measure the strength of an economy, the ability of a people to create economic well-being, not its capacity to shred limbs and extinguish lives. Thousands of these lives had barely begun, babies decomposed in hospital ICUs, children buried under rubble - the horror undiminished by the use of the new phrase for Palestinian children - “people under the age of eighteen.”
The loss of lives cannot be measured in money, nor can the miseries of dislocation, hunger and denial of medical care. But the cost of rebuilding the physical infrastructure of Gaza alone, “has got to be in the billions of dollars … in the tens of billions of dollars” said Richard Kozul-Wright, a director at UNCTAD**.This reconstruction will also add to the GDP of the world, which makes a lot of sense, except that if you add the cost of the shells, the tanks that delivered the shells, and the fuel that drove the tanks, to the cost of the roads that need to be relaid, the homes rebuilt, and the streetlights erected, you end up clocking a huge amount of global GDP, but a world that is much worse off than when the gruesome cycle began.
A significant proportion of US citizenry actually believes that war and the associated spending improve the economy. The Institute for Economics and Peace examined this position in a study of the macro-economic impact of wars in which the US was directly involved. The paper*** holds that, in the absence of war, taxes and inflation would have been lower, and consumption and investment higher. Sometimes, the paper clarifies, “the negative effects of not fighting these wars can far outweigh the costs of fighting. However, if there are other options, then it is prudent to exhaust them first, as once wars do start, the outcome, duration and economic consequences are hard to predict”. Indeed, and as the paper says in an opening caveat, it does not even enter into the much deeper debate of “the moral, political or philosophical justifications” for conflict.
Though there is no moral equivalence here, the other battle that occupies my mind these days is the battle against air pollution in north India. The toxic contributors of this pollution are all by-products of activities that add to GDP - construction, electricity generation, vehicular emissions, car tires whose treads are worn out on roads and enter our lungs. Epidemiologists believe air pollution causes between 2.5 and 5 million premature deaths a year. That loss of lives doesn’t enter the GDP calculus anywhere. But, in a ghoulish mimicry of war, the ill-health that results from this pollution will - the doctor consultations for chronic bronchitis, and the diagnostics to assess organ damage, the ICU charges, and the ventilators used in extreme cases of obstructive pulmonary disease. All these expenses will all be added to the health expenditure of our nation, which is viewed as an index of our well-being. But you can’t - or shouldn’t - put the same welfare value on this expenditure as you do on, say, childhood vaccination.
Or if you do, then you need to go back to the construction industry, the power plant, and the car user, and subtract from the monetary value of their activity, the environmental and health costs that they pass into the eco-system.
None of these are new arguments, and scholars of economics have long occupied themselves with thoughts of how to better align GDP with the welfare of a population.
We’re not going to see change in a hurry - GDP does broadly track other measures of human development, such as the Human Development Index, or HDI; with good reason, GDP has entrenched itself as the leading measure of economic well-being. Adjustments to allow for the external costs of increased production, whether tank shells or coal plants, are the subject of intense, and largely earnest, research and debate.
As a lay student of economics, I can add nothing to this work. But, as a concerned citizen of the world, I still think there is some value in questioning what really counts.
*https://www.voanews.com/a/unctad-report-billions-needed-to-rebuild-gaza-s-shattered-infrastructure-economy/7326099.html
** United Nations Conference on Trade and Development.
***https://www.economicsandpeace.org/wp-content/uploads/2015/06/The-Economic-Consequences-of-War-on-US-Economy_0.pdf