[Congressional Record Volume 141, Number 160 (Tuesday, October 17, 1995)]
[Senate]
[Pages S15185-S15187]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         GROSS DOMESTIC PRODUCT

  Mr. DORGAN. Mr. President, let me turn to another subject. One of the 
things that is interesting to me is why we are told daily in the 
newspapers that the GDP, the gross domestic product, in America is up, 
our economy is moving forward and we are doing so well. The economists, 
some politicians, say, gee, things are really moving along. We measure 
progress in America 

[[Page S 15186]]
by the gross domestic product. They say NAFTA and GATT--more jobs, more 
progress. We are better off because the GDP goes up. Experts worship 
it. Economists worship at the altar of the GDP.
  The Federal Reserve Board comes to the Congress in the last year and 
a half and says the economy is growing too fast based on the GDP. What 
we really need to do is create more unemployment and less economic 
growth. That is what we hear from some of these economists.
  Why, when Americans are working longer and harder just to keep up, 
why are we told that things are so good, that the GDP is a measure of 
enormous progress?
  Finally, there is a cover story in the recent issue of the Atlantic 
Monthly that provides some clue. It is called, ``If the Economy Is Up, 
Why Is America Down?'' I urge my colleagues to read this article 
because it helps explain the big gap between what the economists talk 
about in economic progress and what the American people feel or 
actually experience.
  Economists, this article says, view the economy through kind of a 
warped and myopic system, a counting system called the gross domestic 
product. The GDP was invented actually during the Second World War to 
guide the Nation's production through the Second World War. It is 
basically a tool of planning of industrial policy that was never really 
designed to serve as a guide to how well the economy is doing, but that 
is how the experts, economists, and politicians use it here in 
Washington.
  Essentially, the gross domestic product adds up everything Americans 
spend and declares that as the total good. The more money people have 
to spend, the better this weird accounting system says we are doing.
  As a result, all of the pain and all the misery, the social 
breakdown, shows up in the computer screens in Washington, DC, as 
economic gain. The hundreds of billions of dollars that Americans spend 
to cope with crime, the lawyers, the social breakdown costs is all 
GDP--car crashes, fender benders in front of the Capitol--gross 
domestic product increasing. Mr. President, $200 billion a year in 
repair bills and hospital bills, car accidents give this country a real 
boost.
  Americans lose some time with their children because wages are 
falling, so they work longer these days, and both parents often have to 
work. When the kids go into day care, that is more GDP. When the roads 
are so congested it takes more time to drive to work, the gas people 
burn in their car to sit and wait, that is more GDP.
  The lists goes on. Almost everything Americans experience as bad 
shows up in the gross domestic product as good. They do not take 
account--the economists--of the contribution of the family and the 
household as an example.
  It is a curious circumstance that the sectors of the economy which 
are crucial to economic well-being in this country, the social realm--
that is the economic functions performed by households, by the 
communities and all across the country, by people in their natural 
habitat--those do not count. Those are not part of the national 
accounting system. Most of the Nation's important work that goes on, 
from caring for children to older people volunteering their work in 
many different forms--that is the social glue in this country. Yet 
because no money changes hands, no one scores that. That is invisible 
to the conventional economists.
  GDP does not count at all in these circumstances, because it means 
the more our families and communities decline and a monetized service 
sector takes over, the more the GDP goes up and the more these 
economists think our country is doing better. They count the poisons in 
our air and water as double gain, once when the factory spews it out 
and also, then, again when we have to buy bottled water and air 
purifiers to deal with it. Then the Government has to spend billions to 
clean up the Superfund site, so it gets counted again.
  We are awash in this kind of phony accounting. It is like a gas gauge 
on a car that goes up as your car is running out of gas. That is the 
problem with the GDP measurement and, as the authors in the Atlantic 
article point out, by the curious standards of the GDP, the Nation's 
economic hero is a terminal cancer patient who is going through a 
divorce. They say the happiest event is an earthquake or a hurricane.
  I pointed out on the floor before that when hurricane Andrew came 
through and leveled Florida, the economists counted that as a one-half 
of 1 percent gain of the gross domestic product in our country. The 
same phony accounting labels lead to political double-talk when you are 
talking about GDP and what makes the economy tick. When politicians 
want to push tax breaks for big corporations or for top executives, 
they talk about growth, by which they mean GDP. When they want to earn 
political Brownie points, they blast Time Warner for gangsta rap, for 
example. Gangsta rap is GDP.
  Entertainment is one of the fastest growing parts of the economy and 
so is gambling and so is prison building. It is all GDP. So, when the 
politicians say they want more GDP, what are they calling for, more 
television programs with violence? That is GDP. Is there any 
distinction between what is good and what is bad, what advances our 
country's interests and what retards it?
  The family or business that uses this kind of a system to measure its 
progress would not last very long at all. They would be bankrupt in a 
month. Yet, America has been making economic policy by using this 
indicator of progress for 50 years, and we need to change.
  I do not agree with everything in the article that I referred to in 
the Atlantic. Some things I disagree with. But I think it is a useful 
thing for us in this country to begin exploring. Does the gross 
domestic product really measure anything, anything useful--a gross 
domestic product that leaves out the value of the care that someone 
gives for a sick parent, that includes the value of the cleanup from a 
hurricane but does not include the damage from a hurricane, does not 
include the damage from a car accident?
  You know, another economic all star with the GDP is someone with a 
cardiac problem. You talk about a heart attack, we are talking about 
real GDP. The whole system swings into action with a heart attack, and 
that advances the country's economic interests, right? Of course it 
does not. Of course it does not.
  I hope my colleagues will read not only the Atlantic article, but I 
am going to include in the Record an article written by Lars-Erik 
Nelson in the Daily News and an article in the Financial Times by 
Michael Prowse on this same issue.
  This is an important issue, and I hope we will begin to look at it in 
a thoughtful way and evaluate what do you measure to determine what 
advances American economic interests.
  Mr. President, I ask unanimous consent to have those articles printed 
in the Record, and I yield the floor.
  There being no objection, the articles were ordered to be printed in 
the Record, as follows:

                 [From the Daily News, Sept. 29, 1995]

               A Funky Way of Looking at U.S. ``Growth''

       Washington--If the economy is growing as all the economists 
     tell us, why are Americans in such a foul mood? This is the 
     question that undermined Reaganomics, defeated President 
     George Bush and has President Clinton muttering about a 
     national funk.
       And now we have an answer, both simple and blindingly 
     clear. The people are not wrong. The economists are. What 
     they measure as growth in the Gross Domestic Product is 
     merely increased spending--not what that spending actually 
     buys.
       Under the currently accepted definition of growth, if you 
     sit stuck every day in a traffic jam, burning gasoline and 
     wasting your time, you are contributing to growth. If you 
     spend more and more money, $65 billion a year, to protect 
     your self against crime--locks, insurance policies, 
     replacement of stolen goods--that's growth.
       The GDP does not care whether the money is spent for useful 
     purposes or for decay. Spending on food and pornography rank 
     equally. Divorce is a major contributor to our ``economic 
     growth'' since it piles up lawyers' fees, the cost of a 
     second home and counseling.
       And the GDP assigns no value to intangibles like air 
     pollution or the loss of leisure time. If you're to busy to 
     cook or read stories for your children and so you buy them 
     prepared meals and leave them in front of a VCR that's 
     counted as pure economic growth.
       This flash of insight is spelled out in the October 
     Atlantic Monthly by Clifford Cobb. Ted Halstead and Jonathan 
     Rowe, ``By the curious standard of the GDP,'' they write, 
     ``the nation's economic hero is a terminal 

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     cancer patient who is going through a costly divorce. The happiest 
     event is an earthquake or a hurricane. The most desirable 
     habitat is a multi-billion-dollar Superfund site. All these 
     add to the GDP because they cause money to change hands.''
       The most bizarre example is the $32 billion diet industry. 
     ``[The GDP] counts the food that people wish they didn't eat 
     and then the billions they spend to lose the added pounds 
     that result.''
       Instead of GDP, the authors propose a different measure--a 
     Genuine Progress Indicator--that would total up the nation's 
     expenditures (including intangibles like the value of 
     parenting) and then subtract the obviously negative 
     components: costs of crimes, family breakdown, loss of 
     leisure time, commuting, automobile accidents, pollution and 
     environmental damage.
       Lo and behold, they come up with figures--debatable to be 
     sure--indicating that in terms of genuine progress we have 
     not come very far since 1960. We have an abundance of gadgets 
     but the costs--in family breakdown, safe neighborhoods, good 
     public schools, jobs that let a single earner raise a 
     family--have offset the technological gains.
       The ``growth'' myth has been a terrific weapon in 
     persuading Americans to accept a worse qualify of life NAFTA, 
     the Mexican trade agreement, is good for us because it will 
     add to ``growth''--never mind what it does to a community 
     that loses a factory. Cutting down old-growth forests adds to 
     growth. The gambling industry is growth. Gangster rap is 
     growth. ``Showgirls is growth. The millions spent on the O.J. 
     Simpson trial--it all adds to our economic ``growth''.
       What the three authors have figured out is that we spend so 
     much of our incomes not to add to our quality of life but 
     merely to insulate ourselves from a world that has grown less 
     civil. We work harder, spend more, have less time, and the 
     economists tell us we are growing. No wonder there's a funk.
                                                                    ____


                [From the Financial Times, Oct. 2, 1995]

                    Better Ways To Measure Progress

       It may be time to consider new yardsticks of economic and 
     social progress. Gross domestic product has grown robustly 
     for years in the US and many other countries. Yet, ordinary 
     families believe they are worse off than in the past. The 
     official data do not appear to measure economic life as it is 
     experienced by real people. They ignore the ``feel bad'' 
     aspect of growth.
       GDP has acquired an extraordinary aura of authority over 
     the years. Yet it is worth recalling that national accounts 
     in their present form were invented quite recently. They were 
     a response to the needs of the generation that endured the 
     Great Depression and fought in the second world war. The 
     priority then was to find ways of utilising spare resources, 
     first to combat unemployment and then to further the war 
     effort. A measure of ``final monetary demand'' was essential 
     if Keynesian policies were to succeed. GDP filled the bill 
     perfectly. And, in an age of slide rules, it was not 
     practicable to supplement it with more sophisticated measures 
     of economic well-being.
       Today's needs are different. Our ability to sustain the 
     growth of monetary demand is not in question. The focus of 
     attention is now on ecological and social concerns. After 
     decades of rapid industrial expansion, we worry that growth 
     may inflict irreparable damage on the natural environment. We 
     also worry that the social fabric of nations is being ripped 
     apart. Economic growth will not bring happiness if the 
     quality of life is simultaneously being destroyed by social 
     shortcomings, such as rampant crime, family breakdown, 
     inadequate education and so forth.
       The Roosevelt generation devised the statistical measures 
     it required to solve its problem. Should we not do the same? 
     This seems to be the thought underlying two recent attempts 
     to devise broader measures of economic well-being. A group at 
     the World Bank argues that economic health is best measured 
     by a broad yardstick of wealth or net worth, not by the 
     annual flow of monetary income. Instead of simply focusing on 
     ``produced assets''--the products of the market economy--it 
     draws attention to three other classes of assets: natural 
     capital (such as forests and mineral deposits); human 
     resources (the value represented by education) and social 
     capital (the value of human organisations and institutions).
       A Californian think-tank called Redefining Progress has a 
     somewhat similar philosophy. It is promoting a new measure of 
     economic health called the Genuine Progress Indicator (GPI), 
     which adjusts for many social and ecological factors ignored 
     in GDP figures. The group has persuaded 400 US economists to 
     sign an anti-GDP manifesto stating that ``new indicators of 
     progress are urgently needed to guide our society: ones that 
     include the presently unpriced value of natural and social 
     capital''. Luminaries backing the GPI initiative include Prof 
     Herbert Simon, a Nobel economics laureate, Alvin Toffler, the 
     futurologist, and Ted Turner, the media magnate.
       How economic well-being is measured makes a bigger 
     difference than you might suspect. Measured by per capita 
     GDP, the US is one of the world's richest nations. Yet it 
     ranks a poor 12th on the bank's per capita wealth measure, 
     behind countries such as Norway and Denmark. Per capita 
     GDP figures indicate that the US has been growing robustly 
     for decades. Per capita GPI, on the other hand, peaked in 
     1969 and has since fallen substantially.
       These large discrepancies are not altogether surprising if 
     you remember that the alternative measures are trying to 
     capture wealth not reflected in monetary transactions. The 
     bank team discovered, to its surprise, that the value of 
     human resources-accounts for about two-thirds of the typical 
     nations's total wealth. One reason is that people tend to 
     become more valuable over time: they learn as they generate 
     income and so become capable of generating more income. 
     Produced assets such as durable goods and factories, by 
     contrast, rapidly become obsolescent. Yet this principal 
     source of national wealth is ignored in conventional national 
     accounts.
       The rational for GPI is explored at length in the October 
     issue of the Atlantic Monthly magazine. The main reason why 
     it shows a decline in US economic welfare is because it 
     insists on fully accounting for the depletion of non-
     renewable natural resources, the cost of pollution and many 
     other forms of environmental degradation not captured in GDP 
     figures.
       But it also allows for many aspects of social welfare 
     ignored in official statistics, such as the economic value of 
     housework, volunteer labour and leisure time. It treats many 
     types of market transaction as negatives rather than 
     positives; for example the spending associated with crime, 
     family breakdown and commuting are regarded as costs not 
     benefits. It even adjusts for income distribution, deeming 
     greater inequality a negative for social and economic 
     progress.
       I have reservations about all ``macro'' indicators. Any 
     attempt to measure ``social welfare'' involves a host of 
     subjective judgments. A measure such as GDP that fails to 
     value natural capital or non-market labour can hardly be 
     construed as neutral or objective. The issue is not whether 
     we have macro indicators, but whether we have indicators that 
     are relevant to people's needs. We cannot live forever on the 
     Roosevelt generation's intellectual capital. We have to move 
     beyond GDP.

  The PRESIDING OFFICER (Mr. DeWine). The Senator from Wyoming is now 
recognized for up to 1 hour.

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