What Is the Economy?

We routinely talk about “the economy” as if it were a self-evident concept. We say “the economy is growing” and “the economy is in bad shape,” without really discussing what it is exactly that we’re referring to. There are three measures we use more or less interchangeably when we discuss “the economy”: GDP, retail sales and employment.

The GDP includes, to generalize, everything produced and consumed within a country or exported to other countries. In this “everything in one pot” view, everything counts, regardless of its causes or its effects on society. You contract an illness and buy medical care, you’re in a wreck and pay for car repairs, you buy cigarettes or alcohol based on an addiction, factories are rebuilt after a war, shells and fighter planes are built to destroy those factories, a lumber company cuts down a forest down to the last tree, the government spends billions on a new boondoggle, a corporation charges you monopoly prices, there’s a gas discount and everyone’s filling up. Even though all these things are symptomatic of social problems, they are counted as part of “the economy.” The genocide in Iraq is a boon to “the economy” (although, in the long term, war spending has a persistent negative effect on GDP and employment, either through inflation, higher interest rates, or increased taxes). Mindless consumption is a boon to “the economy.”

The money in the big pot could be going to cancer treatments or casinos, violent video games or usurious credit-card rates. It could go towards the $9 billion or so that Americans spend on gas they burn while they sit in traffic, or the billion plus that goes to such drugs as Ritalin and Prozac that schools are stuffing into kids to keep them quiet in class. The money could be the $20 billion or so that Americans spend on divorce lawyers each year, or the $41 billion on pets, or the $5 billion on identity theft, or the billions more spent to repair property damage caused by environmental pollution. The money in the pot could betoken social and environmental breakdown- misery and distress of all kinds. It makes no difference. You don’t ask. All you want to know is the total amount, which is the GDP. So long as it is growing then everything is fine.
Jonathan Rowe, co-director of West Marin Commons

One might reply that this is a misguided criticism, since the GDP is precisely meant as a “kitchen sink” metric for all production. But the GDP is also often criticized for omitting to count many vast areas of trade, including housekeeping, production for self-consumption, black markets and underground economies (which in some societies are bigger than the white market), crime, and barter. The only logical conclusion is that the subject most conducive to growth is a person who is perpetually just sick enough to need medical care but not enough to stop working, morbidly obese from constant eating, always drives everywhere, hires maids instead of cleaning his own house, and does not interact with anyone but Wal-Mart workers.

Retail sales is another metric that gets trotted out in the mainstream media, especially around Christmas. The assumption here is that the more money people spend during the year, the better off “the economy” is. But this is counter-intuitive, as spending can be motivated by all sorts of reasons, including inflation, short-term biases, and outright fraud. People are tricked into buying goods by marketing campaigns and a panoply of retail tricks and lies. Retail sales do not take into account the quality of products or what they may do to our quality of life, and under that point I could repeat a lot of the things I said above. They also do not include the consequences of depending on big retail corporations for our livelihood, or the consequences of globalization on the third world.

Saving money is actually a very positive thing for the well-being of the individual, and yet increased savings (as we are seeing right now) wreak havoc on “the economy.” Unfortunately, people generally under-save and get in debt too easily for their own good, partially due to human psychology and partially due to the centralized banking system which causes scarcity of credit.

Measuring employment suffers from the same general flaws, as it does not take into account the nature of the jobs in question: not only the quality of the work environment, the wage, or the work structure (especially how hierarchical it is), but also what the work itself entails. It’s easy to see what a CEO, a commodities trader or a monopoly banker contribute to the corporatist system, but very difficult to see their contribution to the well-being of society. Even though they are “employed,” it’s hard to say that a soldier, a policeman or a bureaucrat, on the whole, contribute anything positive to society. Employment statistics, therefore, are at best very incomplete, and at worst completely misleading.

If these three metrics do not measure general well-being, or even how well the economy fulfills our needs, what do they measure? The GDP measures how much is produced and consumed. Retail sales measure how much is consumed, and how much surplus is generated. Employment measures how many people are participating to production. It is not the nature of production or consumption that is examined, but the concept of production and consumption themselves. The only possible conclusion we can arrive at, is that these metrics measure the health of the corporatist system, not well-being or the fulfillment of needs.

The underlying premise behind the use of these metrics is shared by all parties and ideologies on the mainstream political spectrum: growth is inherently good. Not all of these ideologies support the idea that growth should be completely unlimited and unchecked (Greenies, for instance, believe that growth should be tempered with environmental considerations), but they all judge growth as a primary objective. Not only that, but they believe that growth alone can solve socio-economic problems, the good old tried-and-true statist technique of “if we project enough force and throw enough money at a problem, it will eventually disappear.” If “the economy” keeps growing, goes the argument, then we’ll have more money to pump into health care, we’ll have more money to pump into education, we’ll have more money to pump into social programs, and everything will correct itself. A shining example of this insanity, Mosler’s Law, states that “there is no financial crisis so deep that a sufficiently large increase in public spending cannot deal with it.”

This is the same kind of argument that statists use when talking about government and corporatism, of the “we just need to put good people in charge” type. Putting better people or more money in a broken system won’t fix it. Solely producing more goods cannot change the balance of power in a society and cannot correct inefficiencies and immoralities caused by the very fabric of the economy that produces them. On the contrary, one can only expect it to make the problems worse, because it maintains the viability of the current capital-democratic system.

We must therefore question our belief in economic growth as a solution, as a necessity, as an inherent good, as a progressive factor. If it’s only useful to measure the cost of goods that are made and sold, then it has little relation to human life.

The real question is not “how much stuff is traded” but rather “how stuff is traded.” In the corporatist system, labour is traded under a highly hierarchical, authoritarian, central-planning oriented structure. The people at the top of this fictional legal structure reap the surplus, which they steal from their inferiors through the latter’s “voluntary” surrender of their freedom of labour, which concentrates wealth and therefore economic power. These imaginary structures then sell the produced goods, generally to individual customers who have very little economic power. They also generally get their raw materials from dispersed third-world entities, which have far less economic power than they do.

It should be easy, in fact it should be child’s play, for anyone to realize that such a system cannot serve anyone’s interests but those of the people at the top, and that its elite will necessarily try and succeed at subverting people’s desires for their own interests, in the same way that the elite in a democratic system always eventually succeeds at subverting moral values for its own power. Capital and guns have always been, throughout history, mutually dependent and mutually beneficial. Inequality of wealth or power cannot lead to anything but a loss of freedom in the long term, for the same reason that loss of freedom must lead to inequality of wealth or power in the long term.

Once again, I must emphasize that these are systemic features and do not depend on the bad intentions of any number of people. The vast majority of people have good intentions, and very few people (except very aberrated cases like serial killers) believe they are doing evil. We must therefore banish from our heads the image of the maniacal politician or executive rubbing his hands together, or tenting them à la Mr. Burns, saying “my eeee-vil plan is working perfectly.” The fact is that they are simply doing their jobs. That’s all that the system’s survival depends on, or the survival of any system whatsoever.

I already mentioned the concept of surplus. In the corporatist system, accumulating surplus is the goal of the vast majority of economic entities, and drives growth. In an economy where actual human needs, not hierarchies of wealth, direct action, the accumulation of surplus, and therefore growth, would no longer be priorities. We must see economic activity, not as an end in itself, but as the extension of how we see each other and what we consider to be proper ethics. Hierarchies betray a pessimistic, authoritarian and dogmatic view of human existence. Its consequences are to turn moral agents into tools of production and consumption (to spend beyond their means, to become trained consumers, and to produce more consumers). Efforts to counter this immorality must pass through counter-economic activities, personal de-growth based on our values, and a refusal to position our lives as part of a production/consumption framework.

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15 thoughts on “What Is the Economy?

  1. Db0 March 2 2010 at 6:52

    Very well said.

  2. twofold March 8 2011 at 3:29

    anyone interested in learning more about how suicidal the current economic system is should check out Money as Debt it’s on you tube and google video

  3. Argus September 25 2011 at 16:48

    You make many good points but in a few instances your social conditioning shows through—understandable if you’re American (propagandised since birth).
    The system has to be replaced with something objective (based on fact) and the most basic fact is ‘If we don’t sow, we don’t eat'; and build it from there. Any thoughts?

    • Francois Tremblay September 25 2011 at 16:53

      “You make many good points but in a few instances your social conditioning shows through—understandable if you’re American (propagandised since birth).”
      Can you give me an example? I was raised Canadian actually, but that probably doesn’t make much difference.

      “The system has to be replaced with something objective (based on fact) and the most basic fact is ‘If we don’t sow, we don’t eat’; and build it from there. Any thoughts?”
      I agree so far.

  4. Argus September 26 2011 at 1:17

    Example from experience, the almost rabid pavlovian response to criticisms of America. In this Americans are not alone, just extreme. Conditioned since birth? Indeed yes, from sea to shining sea and beyond.

    I’m about to invoke Godwin’s law, forgive me:
    The Nazis created religious ceremonies to ‘consecrate’ their flags and military standards— watch an American military funeral today and you see very much the same well-drilled idolatry.
    To me a flag is a rag, useful to some and occasionally pretty, but still just a rag. Try polishing your car in public with Old Glory and( if you live) you’ll get my point … and no, Abe Lincoln wasn’t a saint, he was an opportunistic thug.

    This is digression—the system needs to be changed. Given that nobody who’s clawed his way to the top would surrender same needed is a way to bring change in peacefully. This is what I’m working on and it can be done.

  5. Benoit Lessard November 13 2011 at 23:36

    All economist agree that real GDP isnt a perfect mesure of the “economy” but as a general rule when GDP go up standard of living go up, you may not like it but its going to be very hard for you to criticize this point. In wartime real GDP mean very little since a lot of the production is going into war effort wich doesnt imporve standard of living, but as a general rule there is a direct correlation between GDP per capita and health,hapiness life expectancy etc

    –“Increased savings (as we are seeing right now) wreak havoc on “the economy.” Empirical evidence suggest the opposite. Usually country with high saving rate lead to higher investment wich lead to higher GDP. China roll on a high saving rate and so did Japan before their huge economic growth, when their housing bubble exploded investment/savings stopped so hard that it took them more than 20 years to recover.

    The problem is incertitude cripple financial market so the savings goes into Gold and safe values rather than investment that will benefit us all. When currency crumble it only encourage people to protect their ass rather than creating new assets.

    “Inequality of wealth or power cannot lead to anything but a loss of freedom in the long term, for the same reason that loss of freedom must lead to inequality of wealth or power in the long term.” Once again empirical suggest the opposite, more freedom = more inequality. Just look at any country that had their economy changed drastically.

    “partially due to the centralized banking system which causes scarcity of credit.” This one is really funny ! Do yourself a favor get any TTC course about economy you will like it.

    • Francois Tremblay November 14 2011 at 1:18

      Ah bien merci du commentaire. Tout à fait épatant; vous m’avez vaincu, quoi! Votre savoir économique (quelle expression contradictoire) est manifestement assez profond pour noyer mes maigres arguments philosophiques! J’admets la défaite!

      Bravo, monsieur Lessard, bravo!

    • Rob79 August 20 2012 at 5:56

      ‘All economist agree that real GDP isnt a perfect mesure of the “economy” but as a general rule when GDP go up standard of living’ – and by whose yardstick is that standard of living valued? and who decides ‘what a good standard of living’ is? Funny you mention life expectancy, since Cuba has the quite a higher one than the US I believe.

      ‘The problem is incertitude cripple financial market so the savings goes into Gold and safe values rather than investment that will benefit us all. When currency crumble it only encourage people to protect their ass rather than creating new assets.’ Capitalism at it’s best…or worst. China’s reason for it’s current success is becoming the most ruthless capitalist nation without the need of a democracy. Are you suggesting…?

      ‘more freedom = more inequality. Just look at any country that had their economy changed drastically.’ Well, if you take a look at things from a historical perspective, since, a way before, the industrial revolution (incidentally the french revolution happened shortly after), you had empires whose sole concern was far from an objective view of economy. This has hardly changed much since then and while you point out the perhaps cruel and greedy nature of humans – ‘it only encourage people to protect their ass rather than creating new assets’, the powers to be felt the need to protect us from ourselves without themselves needing to protect their own inhibition. Power and money have always and still are co-related, and empirical evidence suggests they always decided the faith of nations, including ‘the economy’. Hell, they even shape culture and tell the vast majority how to and what to think and desire. It’s called the world of marketing, and that is why billions are pumped into propaganda machines. Again, empirical evidence point out that it works.

      This is not an about the economy anymore, this is social engineering.

  6. Benoit Lessard November 15 2011 at 6:52

    Souvent un bon livre en opposition avec nos ideaux agrandit notre champ de vision et nous donne des outils pour pouvoir critiquer les positions “ennemies” et en bonus nous donne l’occasion de sortir de bonne citations. Voici ma suggestion. Applied economics de Thomas Sowell.

    Ultra -liberalisme, anti-pacifisme, contre le salaire minimum etc…

    Le probleme avec ma generation et les plus jeunes c’est que nous voulons changer le monde mais ne sommes pas pret a faire l’acquisition des outils pour le faire.

    “The study of history is a powerful antidote to contemporary arrogance. It is humbling to discover how many of our glib assumptions, which seem to us novel and plausible, have been tested before, not once but many times and in innumerable guises; and discovered to be, at great human cost, wholly false.” –Paul Johnson

  7. [...] No wonder nobody understands the economy these days. [...]

  8. Kyera Allen April 27 2012 at 13:22

    Fuck the economy!!!!!!!!!!

  9. Argus April 27 2012 at 14:08

    Kyera:

    Too late. Been done already, by experts …

  10. [...] A woman is an abstraction that produces children for the good of society, for the good of “the economy,” or for the good of the State. It really does not matter at all how many women’s lives [...]

  11. [...] not much different from the humongous amount of “research” done every year on the GDP (“the economy”). The GDP is used to reinforce both optimistic beliefs about social progress and nationalistic [...]

  12. [...] constantly concerned with some useless metric of how fast we’re going (compare with the GDP or consumer spending), and we start panicking when the train starts going slower, despite the fact that going slower is [...]

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