The Real Crisis Isn’t New
With the collapse of the financial markets in September 2008, society marked a new chapter in history books. This new chapter covers what we know as the great economic crisis, as measured in flowing US dollars. Economies all around the world either contracted or slowed their growth as measured in gross domestic product (GDP). Lives were directly impacted everywhere as millions of jobs were shed, entire industries collapsed, and the ability to purchase goods and services significantly declined. Many will look back and say that lax government regulations on banks spurred the housing bubble that largely brought down the number we so much have trusted to measure how we’re doing: the GDP. But in reality, those of us who understand what was going on decades before this “economic crisis” know that the real crisis is nothing but old and persistent.
The problem with marking a new chapter in history because of the GDP measure is that it fails to capture reality in big ways. While there was more money flowing before and therefore people could at least purchase basic goods and services to live, the real value that measures our satisfaction with life was never increasing; in fact, in many cases, it was declining. GDP, a very old measure of economic performance, unfortunately does not measure quality of life as we assume. In the past, it was true that higher GDP coincided with higher quality of life, but that goes mainly for developing countries. Clearly, if a poor farmer goes from having to work tirelessly to grow food to living in an urban city with basic services met easily, there’s a big change in quality of life. But when you already have basic needs met, GDP doesn’t always coincide with higher quality of life, and that’s exactly why we’ve been wrong to think that the crisis is new.
Since the 1970’s, it’s been pretty clear that quality of life in the United States has remained flat or even worsened. We may have more purchasing power, but our satisfaction with our lives really hasn’t improved. Social problems, for instance, have increased in severity as more people suffer from modern diseases, more work has meant less leisure, and technology obsession has meant less time being outside, spending time with people we care about, and doing the things we actually want to do.
On top of all this, add to it our ever-increasing total debt to our children and grandchildren. While we think we’re better off, entire communities continue to deteriorate and many have been destroyed, perhaps forever. While we think we have made it pretty far, entire ecosystems will probably never be what they once were. And while GDP has grown, we’ve never really been able to reduce our gross economic debt at all, even during the “great” Clinton years. We have ignored to invest in people, decided that destroying vital ecosystems is more important than using the services they provide, and wasted money in special interest giveaways (wars, lax regulations on banking, insurance companies, food subsidies, etc.). All of this under a political framework that supposedly should work pretty well. The fact is that it hasn’t and it probably never will unless it’s drastically changed (Note: I strongly believe in the power of democracy AND markets!).
So, when we put together the real value that comes closer to measuring actual quality of life, we realize that we’ve been in a real crisis for more than three (as in 3) decades. The difference between the “financial crisis” and the “real crisis” I refer to here is that one couldn’t be hidden from people while the other could. The financial crisis couldn’t be hidden from people because they felt the impacts directly. They saw their own lives change for the worse. The “real crisis” was hidden from us because we always said GDP was growing, and since people had basic needs met and didn’t think their social deterioration was really a result of their society’s decisions (but rather personal or community decisions), not that many people could figure out that we were going right into a cliff, as we continue to do. The figure below, from an organization called Redefining Progress, shows the Genuine Progress Indicator (GPI) for the last several decades.
The differences between GDP and GPI are not complex. GDP measures the value of total final products and services (whether they’re purchased or not), including the use of dangerous weapons to kill innocent civilians, the destruction of mountains to extract coal, and even the care provided to those affected by the same epidemics we indirectly promote. It also includes corporate profits handed as giveaways, NASA missions to find life on other planets, and lobby money to make sure politicians continue to keep this “real crisis” from ending. GPI, on the other hand, is the GDP figure minus all the bad things I just mentioned and more, except for a few. GPI takes into account the cost of ecosystem services we destroy and the cost of social deterioration. An improvement would be to also deduct a portion of lobby money to keep the status quo, “life discovery” NASA missions, and the appropriate portion of corporate giveaways that do nothing to improve lives.
The central idea behind this measure (GPI) is sustainability, the fact that we are fools to measure quality of life simply by our valuation of the goods and services we produce ourselves, regardless of their actual impact on society. Sustainability is a wake-up call that reinforces the notion that to improve quality of life, we have to balance out several needs. Those include the need to preserve valuable ecological services, the need to enhance communities and social cohesion, and the need to have working institutions instead of decision bodies masked with “progress as measured by GDP” in the surface.
The biggest mistake we can do is to come out of this “financial crisis” thinking that restoring GDP growth is success. We have to first recognize that we’ve already put a huge ecological and economic burden on our children in the form of climate change, the loss of vital ecological services, and a staggering economic debt that nobody knows how it will be paid. Then, we have to decide to stop investing in things that don’t really matter for people’s well-being now and in the future and invest in people themselves, in restoring ecological services, and in preventing economic waste. It doesn’t just mean changes at the government level; it also means cultural changes in main street and beyond. The Obama administration is quietly making a change in that direction, but unless it decides to actually talk about it, the “real crisis” will stay with us and perhaps worsen for decades to come.