GDP killing the future of American capitalism
SAN LUIS OBISPO, Calif. (MarketWatch) — Are you happy? Is America happy? Yes? No? Maybe? The new 170-page United Nations World Happiness Report has the solution. But do nothing and it’ll just keep getting worse, as we’re headed to a point of no return.
Warning: The next generation of Americans is going to be an extremely unhappy bunch.
Why? Because economists use GDP to measure America’s happiness — and GDP is crashing. Yes, gross domestic product is a dumb, very misleading yardstick. GDP is one of the economics profession’s worst myths (the other, perpetual growth).
Economists believe that the total dollar value of all goods and services produced by 308 million people measures America’s happiness. Yes, money measures how happy we are. Economists say we’re happy campers when GDP is growing greater than 3%. But we’re unhappy campers when the annual rate is below 3%. Like now.
GDP is crashing, growth dropping to less than 1% by 2050
Yes, it’s going to get worse. America is going to be a very unhappy nation in the coming decades, fasten your seat belts. As Bond King Bill Gross put it in his recent newsletter: “Every investor will lose money.” Not just some. All losers. He blames it on The Fed’s cheap money. It’ll go on long after we dump Bernanke and his printing presses.
How bad will it get? Recently CNBC reported that Dr. Doom, Nouriel Roubini, warned a “big market crash” would hit after another raging bull blows a massive bubble, like we did in the 1990s dot-com bubble, with subprime mortgages in 2008. CNBC then quoted former Morgan Stanley global strategist David Roche’s warning that the next crash will be “worse than the last one.”
Ouch, another $10 trillion market crash? More long recessions wiping out pension billions? Millions more unemployed? More low growth below the 3% GDP happiness benchmark? Bad news, all true.
Why? Economists keep measuring America’s happiness in money, things, assets, in higher income, greater wealth, in dollars and stuff. GDP even includes the hundreds of billions spent on the Pentagon War Machine. Does that make you happy?
Sorry, folks, but America’s already in deep trouble. And we’re sinking deeper. Seriously, project ahead a few decades, till 2050 and beyond. You’re looking at a new generation of unhappy campers, like in the 1930’s Great Depression, frustrated angry grumps, getting grumpier as the decades pass, as our gross national product goes down, down, down.
Getting worse: Best days behind us, unhappy generation ahead
You do the math, check the history books, analyze macroeconomic trends, then you forecast trends for the next generation. This is not rocket science, just do the math:
From 1980 through 2050, measured by GDP the American economy really is heading down: “The trend for U.S. GDP growth till about 1980 was remarkable: 3.4% a year for a full hundred years.” A powerful engine of prosperity was driving the great American Dream. “But after 1980 the trend began to slip,” says Jeremy Grantham, the man behind the $100 billion GMO money-management team.
Worse, America is “not going back to the glory days of the U.S. GDP growth.”
Wake up: America had a century of high growth and prosperity. But then GDP growth dropped “by over 1.5% from its peak in the 1960s and nearly 1% from the average of the last 30 years.” All since the new mind-set of Reaganomics, out-of-control capitalism and Greenspan took over America a generation ago.
America’s prosperity ‘gone forever’ as growth crashes down to 1%
What’s ahead? America’s long average 3.4% GDP growth rate is dead. Grantham’s blunt: “The U.S. GDP growth rate that we have become accustomed to for over a hundred years ... is not just hiding behind temporary setbacks. It is gone forever.”
That’s no problem for pure capitalists, the richest 1%, the world’s 1,426 billionaires, stockholders in the Dow’s latest rally that’s more than doubled from the 6,547 bottom in March 2009 to today’s record over 15,000. Meanwhile GDP has been hurting the other 99%, as wages stagnated for this generation.
Unfortunately, America’s politicians and voters are in deep denial, clueless, playing a game of chicken with the economy, pushing austerity policies that the GOP and Tea Party love, while hating all the alternatives, anything that sounds like liberal Democrat Keynesian economics or would give Obama a win. They’d rather sink the economy.
So our out-of-touch politicians just keep driving America deeper into debt under the guise of austerity policies that aren’t working, that guarantee even to accelerate America’s GDP decline, while, as Grantham puts it, even “most business people (and the Fed) assume that economic growth will recover to its old rates.”
More wishful thinking, more denial, more clinging to those old capitalist myths of Perpetual Growth and GDP Equals Happiness. Wake up. America is declining. Our GDP growth “is likely to be only about 1.4% a year, and adjusted growth about 0.9%,” declining for decades.
Replace GDP with Gross National Happiness? No, capitalists hate GNH
Management guru Peter Drucker once said: “You can’t manage what you can’t measure.” Measure happiness? Will America ever dump GDP for GNH, Gross National Happiness?
Yes, it is a fascinating idea, goes back four decades ago to the King of Bhutan, a little Asian nation in the Himalayas. The young king decided there’s more to his nation than economic stuff. Since then, people everywhere have wanted to adopt Bhutan’s experience ... except capitalists.
France made a run at measuring happiness several years ago. Then French President Nicolas Sarkozy had Nobel economist Joseph Stiglitz head a Commission on the Measurement of Economic Performance and Social Progress. Sarkozy lost his reelection bid.
Last year Harvard Business Review editor Justin Fox, author of “The Myth of the Rational Market,” wrote, “GDP is embattled. Economists and national leaders are increasingly talking about measuring a country’s status with other metrics and even with a squishy-seeming concept like ‘happiness’.”
2 reasons capitalists won’t ditch GDP: politics and capitalism
But is happiness too intangible to measure? Maybe not. Consider the work of Jeffrey Sachs, the director of Columbia University’s Earth Institute, author of “Common Wealth: Economics for a Crowded Planet,” “The End of Poverty” and “The Price of Civilization.” Sachs is an adviser to UN Secretary-General Ban Ki-moon and recently had a big hand in the launch of the UN Sustainable Development Solutions Network (SDSN).
In the introduction to the new 170-page World Happiness Report, Sachs says future efforts of SDSN will target four “sustainable development goals” for countries worldwide: End extreme poverty; create a sustainable environment for future generations; happiness and equality for all social and economic groups; and “good governance, the ability of people to help shape their own lives and to reap the happiness that comes with political participation and freedom.”
So will America ever dump GDP to adopt GNH as the measure of America’s health? Not on your life: Drucker did not say you can “change” things if you can measure them. Just the opposite: You can manage it if you can measure it, it’s yours forever.
Capitalists also know that “managing” intangibles like happiness, equality and environmental sustainability would substantially increase their near-term costs, decrease current profits and reduce their wealth. Get it? Capitalists love GDP because it’s perfect for short-term thinkers, they can dump trillions in costs, like air and water pollution, onto future generations— clueless taxpayers — while pocketing higher profits for themselves today.
Plus, conservative politicians are in cahoots with capitalists and hate “happiness.” To them happiness is just another dumb buzzword for soft-headed liberal entitlements, freebie handouts to what Ayn Rand called “moochers, looters and parasites,” code for people who vote Democrat. No, GDP is here to stay, at least till after a global megacrash.
Capitalists love GDP. Why? Money measures their happiness
Yes, GDP is the love child of American capitalism: Stocks daily closing prices, quarterly earnings, annual bonuses for corporate executives, tax-free jets, off-shore banking, estate taxes. Yes, GDP is essential to the management and sustainability of capitalism by all the happy capitalists across Wall Street, Corporate America and Washington. America’s stuck with GDP forever.
Robert Kennedy was quoted in Fox’s HBR: “Our Gross National Product ... counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.”
GDP also includes hundreds of billions taxpayers spent on the Pentagon War Machine. Yes, capitalists love GDP. They can measure, manage, control it, making trillions.
So forget a new happiness index replacement. American capitalists will never willingly surrender GDP for a happy alternative favored by the French, the UN, by liberal Democrats, and certainly not one cooked up in some tiny Shangri-La in the Himalayan Mountains.
Bottom line: We’re stuck with GDP ... till after the next megacrash.