Economic Globalization and Genuine Progress A Growing Disparity

Undoubtedly, economic globalization has gone well by many standards. The era of globalization has been accompanied by significant improvements in key indicators such as the human development index, life expectancy, cereal yields, and dissemination of critical information technologies. (See Figure 2-1.) Nonetheless, there is widespread recognition that globalization indicators are increasingly irrelevant and out of touch with the great environmental and humanitarian disasters unfolding on the planet, that they mask gross inequities in the distribution of resources, and that they fail to register over all declines in well-being that stem from loss of community, culture, and environment.3 It is beyond dispute, for example, that GDP fails as a true measure of societal welfare. While it measures the economic value of consumption, GDP says nothing about overall quality of life. In 1906, economist Irving Fischer coined the term "psychic income" to describe the true benefit of all socioeconomic activity. Goods and services are valued not for themselves, Fischer argued, but in proportion to the psychic enjoyment derived from them. Higher levels of consumption may or may not have anything to do with a higher quality of life if such consumption is detrimental to personal health, to others, or to the environment.4

GDP gives no indication of sustainability because it fails to account for depletion of either human or natural capital. It is oblivious to the extinction of local economic systems and knowledge; to disappearing forests, wetlands, or farmland; to the depletion of oil, minerals, or groundwater; to the deaths, displacements, and destruction caused by war and natural disasters. (See Box 2-1.) And it fails to register costs of pollution and the non-market benefits associated with volunteer work, parenting, and ecosystem services provided by nature. GDP is also flawed because it counts war spending as improving welfare even though theoretically, at best, all such spending really does is keep existing welfare from deteriorating.5

Per capita income and trade numbers are

A New Bottom Line for Progress

Box 2-1. Gross Domestic Product: Blind to Economic, Social, and Environmental Crises

The most tragic humanitarian and natural disasters of the past five years have been largely unnoticed by GDP accounts. (See figure.) In Sudan, for example, the per capita GDP has risen 23 percent in this decade, yet 600,000 people were acutely at risk of famine from a prolonged drought in 2001. And more than 400,000 people were killed there and some 2.5 million displaced by alleged genocide in Darfur between 2003 and 2007. Similarly, in Sri Lanka the tsunami that killed at least 36,000 people and devastated coastal infrastructure in 2004 did not affect the steady rise in the nation's GDP. In the 2003 to 2005 period, the United States spent over $1.4 trillion on defense ($188 billion on the war in Iraq) and suffered great losses from Hurricane Kat-rina, yet the GDP there continued to rise. Income inequality in 2005 reached its highest level since 1928, with the top 300,000 Americans earning the same as the bottom 150 million.

also increasingly suspect macroeconomic indicators. Rising per capita income says nothing about the distribution of that income—it may drop for the majority, rise for a handful at the top, and still show an overall gain. Indeed, while per capita income soared by 9 percent in the United States in 2005, the increase all went to the wealthiest 10 percent of the population. The bottom 90 percent experienced a 0.6-percent decline. Similarly, a nation may have rapidly growing trade vol umes but lose countless jobs that are exported to "more efficient" regions, become more vulnerable as its economy becomes more specialized, and lose a large degree of its economic self-determination as ownership and control over economic decisionmaking gets displaced to distant corporate offices.6 Traditional micro-economic indicators for businesses and institutions are becoming obsolete as well. A company's stock price might rise on news of successful downsizing, outsourcing, or mergers, but tens of thousands of people could be laid off despite obscene CEO salaries and an ever greater concentration of market power. In agriculture, global conglomerates have become very adept at improving the efficiency of food production when measured by output per dollar. At the same time, the amount of food per hectare has dropped relative to what used to be produced on smaller, supposedly less efficient farms—creating food deserts in some of the world's most productive agricultural regions.

And finally, at the personal level, measuring economic progress by the size of salaries, stock portfolios, or houses or by the number of SUVs, plasma televisions, computers, or

A New Bottom Line for Progress clothes someone owns fails to acknowledge the empty side of materialism. A rapidly emerging field called "hedonics" combines economics and psychology in an attempt to better understand what triggers "feelings of pleasure or pain, of interest and boredom, of joy and sorrow, and of satisfaction and dissatisfaction," as the authors of Well-being: The Foundation of Hedonic Psychology put it. An increasingly large and robust body of hedonics research confirms what people know intuitively: beyond a certain threshold, more material wealth is a poor substitute for community cohesion, healthy relationships, a sense of purpose, connection with nature, and other dimensions of human happiness. In his recent book Deep Economy, Bill McKibben provides an excellent overview of findings from this emerging field. One remarkable finding is that above an income of roughly $10,000 per person, the correlation between happiness and income no longer exists. (See also Chapter 4.)7

According to the World Bank, economic indicators serve three basic functions: they provide a measure of wealth, they help shape development policies, and they inform citizens on how their economies are being managed so that they can make appropriate political choices and thereby exert control over their governments. To accomplish all this, clearly some new indicators are needed.8

The Basic Survival Guide

The Basic Survival Guide

Disasters: Why No ones Really 100 Safe. This is common knowledgethat disaster is everywhere. Its in the streets, its inside your campuses, and it can even be found inside your home. The question is not whether we are safe because no one is really THAT secure anymore but whether we can do something to lessen the odds of ever becoming a victim.

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