By Donella Meadows
–March 3, 1988–
With that special, kindly sparkle in his eyes the President said in his news conference that there would be good economic tidings the next day. The tidings turned out to be the GNP figure for the last quarter of 1987, which had been revised upward to a growth rate of 4.5 percent. That is supposed to be cause for rejoicing, a rising stock market, and gratitude to the party in power.
No index of national progress — not Olympic medals, not the unemployment rate, not the SAT scores of high-schoolers — is watched more carefully than the GNP. Economists forecast it. Government statisticians revise and polish it. It is so important that not only Presidents but prime-time newscasters regularly alert us the day before a new GNP figure is going to be released.
So quick now, what does GNP stand for? What does it mean? Why should we be glad when it goes up? I wonder how many Americans know the answers to any of those questions, especially the last one.
GNP stands for Gross National Product. It means the dollar value of all the final goods and services purchased by the nation’s consumers and government and investors.
The GNP includes such a complicated mix of apples and oranges, consultants and computers, ATV’s and doctors’ fees, that it is just about impossible to think about. I find it easier to understand on the level of the transactions of our daily lives. Here are a few examples to illustrate the many kinds of economic activity the GNP represents and the ridiculousness of counting its every increase as good and decrease as bad.
Say that a couple gets divorced and pays a lawyer a hefty fee (GNP up, good). The kids now shuttle between his household and hers, requiring complete sets of bedroom furniture, toys, and clothes at both places (up, good). She finds cooking for herself too depressing and begins to live on junk food (GNP up, good). He starts spending his spare time fixing up the house instead of hiring someone else to do it (GNP down, bad).
A new lightbulb comes on the market that uses only half as much electricity; everyone’s electric bill goes down (GNP down, bad).
A town decreases its use of salt on the winter roads (down, bad), which causes cars to last two years longer before they rust out and have to be replaced (down, bad). However, more accidents cause an increase in repair bills for cars and people (up, good).
A community’s floats a $30 million bond for a trash incinerator, which doubles the cost of garbage disposal. New air quality regulations then require more expenditures for scrubbers. The community becomes embroiled in litigation about the disposal of the toxic ash from the plant (up, up, up, good, good, good).
The government decreases highway maintenance (down, bad). It builds more nuclear weapons (up, good). It gives a big raise to Congress (up, good). It eliminates half its paperwork (down, bad).
The GNP is obviously not a measure of progress. It is a measure of monetary flow, effort, expense. Wendell Berry has called it the “fever chart of our consumption”. It is indiscriminate. It lumps together joys and sorrows, triumphs and disasters, profundities and trivialities, everything that costs money and nothing that doesn’t.
The GNP measures environmental damage only if we pay to clean it up. It does not register the gardens we grow, the cooking, repairs and cleaning we do for ourselves. The GNP contains no information about justice. It does not tell us that the number of homeless families has increased and so has the number of families with second homes.
An increase in GNP is good only in the sense that when money is spent, someone gets it, and that someone is usually happy about it. Whether it is good in the larger, societal sense depends on who spent it, who got it, what it bought, and what parts of the transaction were not accounted for. Economists are well aware of the inadequacy of GNP as a measure of welfare; they point it out in every macroeconomics course. But many economists, like many Presidents, forget the caveats and turn into cheerleaders, urging the GNP up, helping to reinforce the national illusion that a bigger economy is a better one.
The problem with that illusion is that it has come to dominate economic policy. We assume no changes are needed when GNP growth is high; we call on extreme measures when it is low. With GNP as our only powerful indicator, we are in danger of producing GNP instead of what we really want –health, education, security, a clean environment, jobs with dignity. Surely those goals are more important than just to keep on swelling.
When we hear that the GNP has grown, instead of cheering, we should ask exactly what has grown, for whom, at what cost, and at whose expense. Even better, we should work to develop indicators of national progress that reflect more accurately our real values and our real welfare.
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P.S. An alert tax-preparer in Norwich VT has corrected my column of last week on taxes. For Fred the carpenter I omitted the personal exemption of $1900. His 1987 income tax, therefore, is $312, down from $425 in 1986. (I will pass the good news on to Fred.) The new income tax code is both more fair and more complicated than I thought it was, and I apologize for the error. My comments on the inequity of the social security tax still stand.
Copyright Sustainability Institute 1989
