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July 17, 2015

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Our number’s up if we continue to view GDP as gauge of our success

AFTER getting a warning from on high in light of the new law on environmental protection, the city of Linyi in Shandong Province early this year launched an environmental cleanup blitz.

In this effort, it shut down 57 polluting enterprises and told 400 enterprises to meet emission standards before a deadline.

A cleanup of this proportion cannot but be painful — and costly.

Four months after the initiatives were taken, while the city had yet to see visible improvement in its environment, local officials were already in hot water as they tried to deal with the consequences of factory closures and reduced output.

The blitz led to 60,000 layoffs and raised doubts about the solvency of debts to a tune of 100 billion yuan (US$16 billion).

So will local officials hold out for a greener city, or will they end up yielding to the more demanding dictates of growth and social harmony? It’s a dilemma that reveals the essence of modern life.

The Linyi quandary shows again how the aspiration to grow has become an extortion scheme in which we all pay a high price.

Here it is pertinent to cite Albert Einstein, who observed that “the significant problems we face cannot be solved by the same level of thinking that created them.” This is quoted at the beginning of Dirk Philipsen’s “The Little Big Number: How GDP Came to Rule the World and What to Do About it.”

Questioning this deeply internalized metric is not generally practiced by mainstream economists for, as the author claims, this metric stands in no need of rationalization. In questioning the logic of this invention, one risks losing cultural sanction, for modern political philosophy is predicated on the belief that growth is good.

We believe that growth gives rise to progress and prosperity, while lack of it leads to depression and misery. We might wonder how we have come to live in thrall to GDP.

Essentially referring to the totality of goods and services produced, GDP fails to take into account costs and losses sustained in the production process.

Wastefulness as a virtue

As in the Linyi case, local officials routinely get promotions and kudos for racking up this mysterious number of GDP, but until recently were not held accountable for the misery they inflicted on the people in the process, in the form of poisoned air, water and soil. As pollution is the inevitable consequence of production, to give indiscriminate sanction to this single metric is tantamount to giving incentives to polluting practice. Brought up in homage to this metric, some of our officials may react with dismay to discover that pollution has suddenly been factored in.

Our faith in this number also leads to deeper problems.

In the words of two skeptical economists, growth represents “the beckoning buoy toward which all humanity must sail.”

Philipsen asks: “But if our standards of living depend on continued growth, how to make sense of the fact that many of us experience a loss of purpose and foresee declining prospects for our children as we push the planet to its limits?”

Since GDP is a tally of goods and services produced or consumed, we cannot but hold as exemplary any citizen who contributes significantly to the production or consumption of goods and services.

Little wonder that, in the eyes of many people, our role model today should be someone who stays in a big house complete with modern amenities, travels in a gas-guzzling car and is highly responsive to the advertisement exhorting them to purchase ever more items they are said to want, ideally on borrowed money (thus also creating business for banks).

In light of our governing assumption about economic fundamentalism, this citizen is certainly contributing more to our collective well-being, by contributing more than their share to GDP, the measure of our blissfulness.

It becomes easier to see why for such a society to thrive, in our drive to turn our country into a nation of pristine consumers, we must by necessity jettison our time-honored precepts about frugality, living within our means, and the nonsense about plain dress and plain food.

Today wastefulness is more a virtue than a sin. The new awakening entails heavy costs as we are losing our sense of community and purpose.

We become blind to the fact that inequality is rising, resources are being depleted and our green places turned into parking lots. But why bother when our GDP is soaring?

Such is the rule of this number that we believe nothing too sacred to be prostituted in answering the siren call of growth.

In the past, our newspapers would grow indignant at the practice of encroaching on neighborhood green spaces to create parking space. But as the number of cars grows steadily, we are witnessing a paradigm shift. Last week, instead of questioning the rationality of general private car ownership in one of the most crowded cities in the world and the need for limiting the number of cars, an evening newspaper philosophized about the inevitability of turning some city green space over to parking lots.

We owe a lot to this metal box for fueling the phenomenal growth of China’s economy over the past decade, often known as a miracle that is now the envy of the world. And the value of this piece of machinery will be inestimable in driving future growth, as per capita car ownership is already a gauge of our happiness and success.

Elusive solutions

A number like GDP reduces our life into something neat and palpable. Independent, subjective judgment not directly illuminated and guided by growth is not nearly so reliable. It’s certainly not scientific.

“Measures like grades or degrees or income provide easy and convenient placeholders for a complex reality,” argues Philipsen.

In tracing how this simple construct conceived of in times of dire need had risen to global predominance, the author uncovers a submerged history dating back to the 1600s, climaxing with the Great Depression and World War II, when the first version of GDP arrived at the forefront of politics.

As the book states, GDP has mutated from a useful descriptive tool to prescriptive be-all and end-all, a collective goal at once momentous and nearly invisible.

There is a need to learn from the past, end our enslavement and embark on a sustainable course. It’s more difficult to say how.

But the author was certain of one thing: “The confusion between promise and reality has become untenable; increasingly, throughout modern societies, people are becoming disenchanted, yearning for new guideposts that actually reflect values that affirm life and smart development.”

If we consider future generations equal to our own, replacing the GDP regime is the ethical imperative of our times, as we have seen clearly that more is not better.

Yes, writing a recipe is more tricky than giving a diagnosis.

Still, the author does explore paths towards responses and initiatives that will likely continue to evolve.




 

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