[OPE] Stiglitz on GDP (continued)

ope-admin@ricardo.ecn.wfu.edu

------------------------ Original Message ----------------------------

Subject: Stiglitz on GDP (continued)
From: "Jurriaan
Bendien" <adsl675281@tiscali.nl>
Date: Fri, February 8,
2008 6:40 pm
To: "OPE-L" <OPE-L@SUS.CSUCHICO.EDU>

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In a Foreign Affairs article, Prof. Stiglitz comments:

"Consider the following thought experiment: If you could
choose which country to live in but would be assigned an income randomly
from within that country's income distribution, would you choose the
country with the highest GDP per capita? No. More relevant to that
decision is median income (the income level that 50 percent of the
population is below and 50 percent is above). As the income distribution
becomes increasingly skewed, with an increasing share of the wealth and
income in the hands of those at the top, the median falls further and
further below the mean. That is why, even as per capita GDP has been
increasing in the United States, U.S. median household income has actually
been falling."
http://www.foreignaffairs.org/20051101fareviewessay84612/joseph-e-stiglitz/the-ethical-economist.html

But in that case, what we need is not wellbeing indicators,
but good indicators of real income and real wages for different classes of
the population, in order to show the real distribution of income and
assets.

Yet that is exactly what governments are not
interested in providing. In New Zealand for example, producing a quintile
index of real after-tax income was quietly axed by Len Cook (he later
became the British government statistician), and replaced with an
"employers' labour costs" index. The political reason was that
the top quintile kept rising, while the other quintiles stagnated or went
down (especially the lowest quintile went strongly down).

The
taxpayer pays for the production of the statistics. But the statistics are
typically biased to the interests of employers only. In civil society,
citizens have the right to know what the real incomes and assets of
different classes and groups in the population are. But most governments
refuse to publish them as standard tabulations comparable over time. It is
not that they cannot do it, or that they do not have that information, but
that anything that might put the government in a bad light is studiously
avoided. This removes a very important objective basis for policy. It is
of course nice if policymakers can ask each other "are you
well?" and answer "Yes I am well" or "No, I am not so
well", but that is not a policy which improves the wellbeing of those
whom they are supposed to serve. In fact it is not policy at all, it is
only the personal policy of the policy makers.

Standardised
"wellbeing" indicators make little sense, when the meaning of
wellbeing cannot be standardised for different cultures which attach
different values or importance to particular facets of wellbeing. But for
most important facets which we can objectively measure, international
measures are already available. So all that would be achieved would be
that governments are "obliged" to produce standard wellbeing
indicators.

But the governments of countries suffering the
lowest level of wellbeing are also the least likely to produce, or be
interested in producing, the standard wellbeing indicators which make them
look bad. Imagine requesting the government of the Congo to produce
standardized wellbeing indicators for the population. Most likely you
would get a polite "f**k off" as a reply. I can understand it if
spoiled American brats fret about the level of their wellbeing, but for
most ordinary people what matters most is what they are earning, what
their working conditions and living costs are, whether there are
sufficient amenities and services so that you can bring up a family, and
that sort of thing.

It is a funny thing that Stiglitz has
allied with Sarkozy, a lumpen-bourgeois who wants take money from the poor
and give it to the rich, under the guise of fanciful arguments about
"wellbeing" and suchlike. Sarkozy wants to "modernize"
French society, but he has no idea of how to do it, and so he gets cliques
of rich people to brainstorm about it, with rich helpings of public money.
What economist with conscience would be prepared to participate in this
nonsense? If I was Stiglitz, I would have nothing to do with it. I would
concentrate on describing and explaining the real pattern of international
trade. After all, Ricardo's "comparative advantage" and the
Hechsler-Ohlin theorem simply do not explain anything much about that
pattern. That is one reason why we got the "globalisation"
rhetorics in the first place.

"Globalisation" is a
concept that is used to refer to all kinds of things, just like GDP. But
that is just to say that a good theory is lacking. Why? Because the
implication of such a theory would be that in reality a gigantic transfer
of income from the poor to the rich has occurred across the last 25 years
or so, the greatest transfer of wealth in the whole history of the world,
far in excess of the growth in real production.

Rich people
who fund research are not interested in researchers who ask difficult
questions about the source of their wealth. They are interested in
justifications of their wealth, for example that "wellbeing"
improved. All theories which might have "dangerous implications"
are systematically weeded out - to the detriment of science, since if any
idea that "might imply" the "wrong" thing is rejected,
there is little left to say other than platitudes.

The policy
process therefore increasingly produces a language which seems to mean
something, but really doesn't, because it could mean anything you want it
to mean. This provides no real orientation, but apart from the policy
confusions that generates, it doesn't really matter, as long as people
obey. In fact that becomes the very purpose of the policy language: to
convey who must obey whom.

"When I use a word,"
Humpty Dumpty said in rather a scornful tone, "it means just what I
choose it to mean -- neither more nor less."
"The question
is," said Alice, "whether you can make words mean so many
different things."
"The question is," said Humpty
Dumpty, "which is to be master - - that's all."

It
would be nice to think that we could restore a sense of objectivity and
precision by recourse to numbers, as Stiglitz suggests. But precisely
because there is not even any agreement about what should be counted, this
venture is unlikely to succeed. It will only produce aggregations
convenient to what governments happen to require to justify policy, i.e. a
more nuanced language for saying nothing in particular that is of real
importance.

Jurriaan

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