Dirk Philipsen argues we need to make economic questions political againby / July 21, 2015 / Leave a comment
Dirk Philipsen teaches economic history at Duke University in the United States. His latest book is “The Little Big Number: How GDP Came to Rule the World and What to Do About It“. It “tells the story of an invention—an invention that grew, in one single lifetime, from narrow tool to global rule.” Gross Domestic Product, or GDP, casts a spell over policymakers, Philipsen argues—especially when, as now, economic growth is either anaemic, non-existent or negative. GDP has become a totem or fetish: “national power” is ranked by it (think of the “global race” in which David Cameron tells us that the UK, or rather “UK plc”, has to be more competitive); political careers depend on it; even the quality of higher education is, as Philipsen observes, “judged by its role in growing GDP.”
But what if GDP itself is the problem? Should we at least follow its inventor, the economist Simon Kuznets and ask, “What are we growing? And why?” This is a question Philipsen tries to answer in his book. When I met him in London recently, Philipsen reminded me that Kuznetsk, “one of the creators of GDP, was the first critic of his own product.”
DP: [Kuznets] gave up on it because he thought that the way it began to be used after the Second World War was simply wrong and not useful. So there have been prominent critics of this metric literally from the beginning. Famous, of course, is Robert Kennedy who, in 1968, before he was killed, put this at the front and centre of his presidential campaign, and gave a speech in which he said that GDP measures in short everything except that which makes life worthwhile.
JD: It’s fair to say that you are a GDP sceptic. But you’re not alone in thinking that this metric should be re-examined if not abandoned. One thinks, for example, of the 2009 Commission on the Measurement of Economic Performance and Social Progress, in which the economists Joseph Stiglitz and Amarty Sen, among others, were involved. That seemed to suggest that a kind of threshold had been crossed in thinking about GDP. How optimistic are you about the programme that you’re defending here, which arguably builds on the work that Stiglitz, Sen and others have done?
I’m a historian so I find it extremely difficult to predict the future. one way to summarise what’s happened over the last 10 to 15 years is that there has been increasing awareness that GDP is a flawed measure. That understanding is not very widespread yet and it is not as deep as I think it ought to be. What you have is a wide range of initiatives by the EU, by the French, by the World Bank, all trying to come up with smarter ways to measure economic output and wellbeing.
One way to summarise all these attempts is that we now know a lot more about different aspects of social, economic and ecological wellbeing but [so far] none of these things has had much impact on policy making. So GDP is still the engine, still the code.
At bottom what I am asking for is a democratic conversation about purpose and direction. GDP is neither purpose or direction—it is just more. But what do we want more of?
So for you, in the venerable tradition of political economy, economic questions are also political questions?
We need to make economic questions political again and moral again. My critique of Thomas Piketty, for instance, is that not only does he not really tell you why inequality’s a problem, he doesn’t tell you what it’s inequality of [that we should be worrying about]. The GDP regime doesn’t change one bit if we reduce inequality. The train track is still moving in the same direction toward the same cliff.
In the book, you describe the postwar period, particularly in Europe and the United States, as the “golden age” of GDP. And that golden age coincided with the pre-eminence of Keynesian economics and Keynesian demand management as a tool of public policy. How, if at all, did things change when the postwar Keynesian consensus began to unravel?
I don’t think much has changed at all. [Neoliberalism] has certainly not questioned the pre-eminence of GDP.
Now, one objection to the position you’re defending here would be to wonder what implications this agenda has for the global poor, who have not had the chance to make the Faustian bargain you describe thus: “Wages and riches now, disease and death down the road.”
It’s not as if this process of growth and wealth creation was an unmitigated good and we’re now denying it to the poor. [We should acknowledge] the level of poverty that [has been] caused by this creation of wealth.
I think that we need to talk about development. We need to talk about quality rather than quantity—development rather than growth. Better rather than more. And once we define this a little better and a little smarter that will be absolutely a net plus for the global south and the world’s poor.
Dirk Philipsen’s “The Little Big Number: How GDP Came to Rule the World and What to Do About It” is published by Princeton University Press, £19.95