What's the Economy For, Anyway?: Why It's Time to Stop Chasing Growth and Start Pursuing Happiness

320 Pages·2011·1.87 MB·English

by  David K. Batker

Contents
Cover
Title Page
Dedication
Foreword
Introduction
1. The Grossest Domestic Product
2. The Pursuit of Happiness
3. Provisioning the Good Life
4. Unhealthy at Any Cost
5. Risky Business
6. The Time Squeeze
7. The Greatest Number
8. The Capacity Question
9. The Longest Run: Sustainability
10. Ancient History
11. When (or How) Good Went Bad
12. The Housing, Banking, Finance, Debt, Bankruptcy, Foreclosure, Unemployment, Currency … Hell-of-
a-Mess Crisis
13. Building a Twenty-first-Century Economy of Life, Liberty, and Happiness
Acknowledgments
Notes
Bibliography
A Note on the Authors
Praise for What’s the Economy For, Anyway?
Imprint
To Herman E. Daly, whose ideas provide the foundation for a
twenty-first-century economics.
In memory of Jonathan Rowe (1946–2011), a brilliant advocate
of new ways to measure progress.
Foreword
As cofounder of the Natural Resources Defense Council and the World
Resources Institute, as a civil servant, and more recently, as dean of the Yale
School of Forestry and Environmental Studies, I have watched the erosion of our
environment and particularly our growing climate crisis with deep concern. It
has become clear to me that these crises are exacerbated by the basic way we
have organized our economy and made a priority of its growth above all else.
Many potentially effective solutions to climate change are rejected because of
their perceived impact on the economy. We find ourselves today in a strange
place where in order to stave off a planetary catastrophe, saving the planet from
climate disruption, we must show that it will not hurt the economy.
In the climate context and otherwise, our quality of life is being steadily
sacrificed to a single goal—growth of the Gross Domestic Product, or GDP. It is
time that Americans thought more deeply about this goal and its limitations.
This book brings a fresh and needed perspective to our common efforts by
asking a simple but essential question: What is our economy for, anyway? It
answers that question in a manner originally suggested by Gifford Pinchot, first
chief of the U.S. Forest Service and a former Yale Forestry dean himself.
What’s the Economy For, Anyway? goes beyond a challenge to the mythology
of GDP and the primacy of economic growth, asking how our economy might be
organized if quality of life, justice, sustainability, and that right to the pursuit of
happiness enshrined in our Declaration of Independence were its goals. How
might our economy look then? How might we measure its successes and
failures? And how can we get from here to there?
The authors, one an economist and one a journalist, offer a critique of our
current unsustainable system, but theirs is not a message of gloom and doom.
With humor, solid evidence, common sense economic arguments and a truly
patriotic spirit, they suggest solutions that can help restore our country’s place in
the world.
This is a time of fear, of loss of confidence in the future, of denial in the face
of grave ecological danger, and of rapacious greed. But it is also a time of
intellectual ferment and ideas that can, if we encourage them, bring forth a
happier, healthier, fairer, and more sustainable future. This book provides a
valuable contribution to that much-needed ferment, and does so in an accessible
fashion, offering pragmatic solutions to our economic woes. It makes clear that
the dangers of climate change, peak oil, species extinction, the ever-widening
chasm between rich and poor, and the insecurity and pessimism that characterize
our era demand that we seek more of what matters, and not simply more.
James Gustave Speth, professor of law at Vermont Law
School, author of The Bridge at the Edge of the World, and
former dean of the Yale School of Forestry and
Environmental Studies
June 2011
Introduction
The economy. It’s nearly all anyone talks about these days besides reality shows,
and not without reason. Much of our time is spent on economic activity—
working, buying, selling, borrowing, lending, producing, consuming,
volunteering, and retiring. The economy is enormously complex—amazing,
really. Consider the items right around you—this book, for example. Knowledge
and technology were needed to produce it. Inputs of energy, materials, capital,
and labor have been marshaled and combined to make it. Elaborate systems from
forests to transportation to retail outlets helped too. The economy is really an
awe-inspiring human creation. It is also constantly being transformed, for better
or worse.
By any measure, the U.S. economy is not in perfect health. Recently, it shook
as if in an earthquake. Millions of Americans were thrown out of work,
businesses closed their doors, houses were foreclosed upon, students lost
scholarships, and services were cut drastically. The crisis raised one question to a
crescendo: How can we get the economy going again?
Contradictory answers abound: Reduce wages. Raise wages. Cut lavish
benefits. Provide more basic benefits. Regulate less. Regulate more. Increase
stimulus spending. Reduce the debt. Raise taxes. Lower them. The debate is
important because policy decisions actually do determine whether an economy
improves or gets worse. For example, while hundreds of American banks
collapsed following the recent financial crash, Canada experienced no banking
crisis at all because that country had different banking policies in place.
Yet these discussions of reviving the economy have all proceeded without
considering a more fundamental question: What’s the economy for, anyway?
What are our economic goals? What do Americans want from their economy?
More stuff ? Affordable college education? More leisure? Universal health
insurance? Lower taxes with fewer benefits? Fairness? A healthy and sustainable
environment? A secure retirement? Happiness …?
Surveys show Americans want more time for friends and family. Yet they are
actually spending more hours working and commuting to work than the previous
generation. An economy that requires longer work hours cannot deliver
increased leisure time for friends and family. Moreover, despite working more,
80 percent of Americans are earning less real income than they did ten years
ago. “You’re lucky you have a job” has replaced the vision of rising middle-class
prosperity.
People in other countries are beginning to notice what has been happening in
the United States. Consider a recent ruckus in Sweden.1 The famous Swedish
furniture company, IKEA, opened a factory in Danville, Virginia. Workers at the
factory earn eight dollars an hour. They work a lot of mandatory overtime, often
on short notice, which disrupts their family lives. They have few benefits and
what vacation days they receive are mostly chosen by the company.
The workers are mad. When Danville granted IKEA big tax breaks to move
there, the people it hired expected wages and benefits like those provided to
IKEA’s Swedish employees. In Sweden, IKEA pays a minimum wage equivalent
to U.S. nineteen dollars an hour. Workers receive at least five weeks of paid
vacation and all overtime work is voluntary.
But while workers in the Danville plant complained, public officials there did
not. They considered the poor salaries and meager benefits a fair trade for the
jobs produced. Yet in Sweden, the story made the front page of Stockholm
dailies. Many Swedes consider IKEA’s treatment of its U.S. workers a betrayal
of the company’s reputation as a good corporate citizen. They argue that IKEA is
treating American workers the way American companies treat workers in
Mexico. “For us, it’s a huge problem,” declared one Swedish labor leader.
IKEA spokeswoman Ingrid Steen called the situation in Virginia “sad,”
acknowledging the huge difference in pay, benefits, and working conditions
between what IKEA provides Swedish and U.S. workers. But, she added, “That’s
related to the standard of living and general conditions in the different
countries.” Ouch! Evidently, the United States is IKEA’s destination for low-
wage outsourcing, a third-world nation in its eyes.
Will Swedish do-gooders boycott IKEA for exploiting American workers? If
so, perhaps American pundits will respond, “Maybe so, but Swedes pay high
taxes.” And indeed they do. Yet even after taxes, IKEA workers in Sweden have
larger take-home paychecks than their Virginia counterparts, and they get full
health care, free college educations, and other benefits in the bargain.
American businesses say they couldn’t possibly offer what the Swedes do and
compete in the global economy. Yet according to the World Economic Forum,
Sweden ranks second in the world in competitiveness, higher than the United
States. What’s wrong with this picture?
What kind of economy would Americans actually prefer? There are many
aspects to this question, but consider one recent study. In a large-sample survey,
Americans were offered three imaginary countries, and asked in which of them
they would choose to live if they had the choice.2 In country A, the top 20
percent of the population own 20 percent of the total wealth (complete equality).
In country B, the top 20 percent own 35 percent, and in Country C, the top 20
percent of the population own 80 percent of the wealth. Four fifths of Americans
polled chose Country B. Nearly as many Republicans as Democrats made that
choice. More Americans actually chose Country A than chose Country C.
Country A is fictional. No nation in the world has, or ever had, complete
equality. But Country B represents the situation in a real country—Sweden—and
Country C represents that in another real country—the United States. When
offered a choice between the two based on wealth distribution, Americans of all
political persuasions overwhelmingly chose Sweden over the United States!
A generation ago, Swedes didn’t earn more than Americans did, and they
certainly didn’t talk about the United States as a third-world country. That was
before the massive shift in wealth from the middle class to the richest
Americans. Greater financial inequality is one outcome the U.S. economy has
certainly delivered. While the productivity of American workers rose
dramatically in the last decade, their median incomes actually fell. But somebody
must be better off. And indeed, American corporations chalked up their largest
quarterly profits in history recently while, as we reveal later in this book, the
incomes of the richest Americans skyrocketed.
America has seen worse: the Great Depression. Out of that period, we adopted
a new economics (macroeconomics) and with it, new economic goals (full
employment), new measures (Gross National Product), new policies (including
banking regulations), and new institutions such as Social Security. From the
wreckage of the Great Depression and World War II, the United States reduced
poverty, created the strongest educational system in the world, and built the
largest middle class in world history. Life expectancy and health outcomes in the
United States became the envy of most of the world, and our high-wage
economy provided the highest-paying middle class jobs and a secure retirement
for all workers.
Building a successful twentieth-century economy required changes in
economic goals and policies to better reflect America’s ideals and fulfill
Americans’ demands for a more just and prosperous economy. Yet today dozens
of countries perform better than the United States in terms of health, education,
economic security, and a host of other measures.
We’re not in the twentieth century anymore. The world is running low on oil.
The climate is changing, with potentially disastrous consequences. Useful water
is less available, while floods are increasingly prolific. Unlike in the 1930s,
when roads and indoor plumbing were scarce and forests, water, and wetlands
were abundant, now roads are abundant and natural systems and their services,
such as flood protection, are increasingly scarce and more valuable. Yet neither
our economy nor our measures of economic progress reflect these realities. To be
successful in the twenty-first century, economies must become sustainable. They
must be built to prosper within the physical limits of the earth and local natural
systems. Making that possible will require vast changes to our economy,
including our energy, transportation, food, and manufacturing infrastructures.
Impressively, Americans have developed solutions to virtually every
environmental and economic problem. But only by shifting investment,
improving and carefully targeting economic incentives, and actually reflecting
true costs and benefits in our markets can these solutions actually be
implemented and a better, more sustainable economy realized.
About thirty years ago, the United States took a different economic track from
most other industrialized nations, reviving a nineteenth-century economic
philosophy called laissez-faire, the view that government policies hinder
economic development. This ideological turn included deregulating markets,
cutting taxes for the rich, and reducing government services. In the aftermath of
the financial crisis, it is time to reflect on what those changes actually delivered,
and to ask again what Americans want out of their economy and how their goals
can be achieved. That’s what this book tries to do.
Economic progress in America has always come through the efforts of people,
working individually and together. Individual action devoted to improving
personal capacity, paying attention to purchasing decisions, and rewarding work
is critically important. But many improvements, social and economic, also
require working together. Women did not get the vote through individual action.