Each quarter the government comes out with its gross domestic product figures, and the world stops. Growth is what it's all about, right? Well, no - not according to a provocative study by Joseph E. Stiglitz and Amartya Sen, both Nobel prize-winning economists. They argue that the nurturing of growth does not necessarily make other areas of life better. "If you don't measure the right thing," Stiglitz said, "you don't do the right thing." From the NYT:
According to the report, much of the world has long been ruled by an unhealthy fixation on swelling the gross domestic product, or the quantity of goods and services the economy produces. With a singular obsession on making G.D.P. bigger, many societies -- not least, the United States -- failed to factor in the social costs of joblessness and the public health impacts of environmental degradation. They allowed banks to borrow and bet unfathomable amounts of money, juicing the present by mortgaging the future, thus laying the ground for the worst financial crisis since the 1930s.
By most assessments, the American economy is now growing again, perhaps even vigorously. Many experts expect a 3 percent annualized rate of expansion from July through September. As a technical matter, the recession appears to be over. Yet the unemployment rate sits at 9.7 percent and will probably climb higher and remain elevated for many months. In millions of households still grappling with joblessness and the tyranny of bills, signs of health served up by the traditional economic indicators seem disconnected from daily life.
Such thinking is bound to elicit shouts of socialism, especially in certain corners of Congress and talk radio, but Stiglitz and Sen are right, of course. The old "What's good for General Motors is good for the country" approach to public policy was always a misguided mantra. Maybe that's why Michael Moore is making an uncomfortable amount of good sense. From DealBook interview:
In your film you point out the deficiencies of capitalism. What economic system do you think is best and why?
Well, we haven't invented it yet. Here's what I don't think works: An economic system that was founded in the 16th century and another that was founded in the 19th century. I'm tired of this discussion of capitalism and socialism; we live in the 21st century, we need an economic system that has democracy as its underpinnings and an ethical code.
It seems that a lot of the anger over the bailout and the crisis has eased as the markets have recovered. Are you concerned that the government will not step up and reform the financial system?
First, the market recovery is a bit of an illusion because the other shoes haven't dropped yet like the massive credit card debt that can never be repaid and the commercial real-estate bubble. Of course they are not going to revamp the system. The banking industry and these financial institutions have been lobbying and spending millions of dollars in the last year to guarantee that no new regulations have been put in place.
Moore, however, is still too caught up in conspiracy theories instead of focusing on the Pogo School of economic thought - that all those crazy investment schemes were - and continue to be - the result of the sometimes foolhardy search for higher returns.
*The Fed has decided to hold interest rates at close to zero percent, likely through 2009. So much for interest income.