The economy is a means to an end. It is not an end in itself.

Apr 11, 2019

Bill Clinton said ‘it’s the economy, stupid’. He was wrong, although in later years he spoke more wisely about ‘putting people first’.  

Our planet is imperilled by misdirected economic growth. By not curbing carbon emissions, we are putting the future of our grandchildren at risk. The economy, as important as it is, is only a means to an end. The end must surely be the wellbeing of all people who inhabit this planet. Who and what should the economy work for is the important question?

We are obsessed with economic growth as measured by gross domestic product and other economic indicators. We will hear this ad nauseam in the coming election. The traditional three indicators, GDP growth, unemployment and inflation, all look impressive but unless these are translated into meaningful outcomes for people’s wellbeing, they are close to useless.

GDP is an inadequate measure of wellbeing and progress.

Various attempts to address this inadequacy are described by Joseph Stiglitz in another article in today’s blog. He asserts that ‘GDP is not a good measure of wellbeing. It is too materialist. As we become so obsessed on the production of goods rather than health, education and the environment, our whole community becomes distorted. ‘

That distortion is rampant around the world.

An obvious shortcoming of the GDP as a useful measure is our financial sector. In 1975 our financial sector represented 4% of our GDP. It now represents almost 9% of our GDP. Economic growth as measured by the contribution of our finance sector to GDP may have increased, but community wellbeing has been badly served by the greed and incompetence of our financial sector.

From a GDP perspective, nuclear weapons and arms manufacture are counted alongside hospital beds and schools. We treat all production equally, even those things considered detrimental to human wellbeing such as gambling, financial speculation and advertising. Voluntary work, housework, caring for children ,the disabled or aged parents are not counted in the GDP.

The US has one of the strongest economies in the world measured by GDP but its fragility and inequality is all too obvious. Its life expectancy for example is declining. Economically poor Cuba has higher life expectancy and lower infant mortality than the US.

Corruption undermines community, but it is not measured as a negative in GDP. Just as importantly focussing on GDP and economic growth hides the rising inequality around the world which is giving rise to major social upheavals and threats from the extreme right. Australia is no exception to the growing social malaise resulting from inequality and low wages.

The late Robert Kennedy criticised our obsession with GDP. He pointed out that the US counted cigarette advertising and jails in its GDP but did not include the beauty of literature or the strength of families.

The World Happiness Report 2015 pointed out that the happiest countries, e.g. Switzerland, Iceland, Denmark, Norway and Canada, owed their happiness in part to GDP per capita, but more importantly to good health, generosity, social support, fairness, freedom to make choice and minimal corruption.

Our obsession with GDP and economic growth has distorted and diverted our attention from the health of our planet and our society.

Earlier generations decided that for good community health, we should not dump our sewerage and garbage in the street. We were prepared to pay a price in taxes and rates to limit this pollution. So with carbon pollution, the polluters must pay a price, a carbon pollution tax, if they pollute our atmosphere. If that means slower economic growth it is a price we must pay. In any event, we are likely to find that taxing carbon pollution will result in dramatic new opportunities through renewables.

A healthy economy is impossible without a healthy planet. This is a critical issue for our grandchildren. As a poster during the recent student strike for action on climate change put it ‘don’t mess with our planet or we’ll mess with your pension’.

The plight of the Murray-Darling basin is another example of the danger of placing the economy ahead of other important considerations and most importantly the health of the rivers themselves. We have put commercial interests, particularly irrigators, ahead of healthy rivers. Just as we need a healthy planet, only a healthy river system can serve legitimate economic interests.

What is the point of a ‘successful economy’ if it does not serve social purposes like equality of opportunity, valuing citizenship and stewardship, and particularly, the protection of our planet. We are more than individuals linked to market transactions.

Maggie Thatcher believed that the economy and markets were paramount. ‘There is no such thing as society’ she said. The UK is still paying the price for that travesty.

In his emphasis on the ‘social question’, John Curtin highlighted that society must be placed ahead of the economy –that society must set limits on the economy rather than the economy invading society. Curtin saw that there was no point in an economy that does not serve social ends.

Important as it is, the economy is only a means to an end. A healthy planet and a healthy society must always be placed ahead of the economy.

In the coming election we will see the continuing obsession by the media and many politicians with the economy as an end in itself. We must not be diverted from asserting that the health of our planet and society are paramount.

The media also peddles the myth that conservatives are better economic managers. I will be writing again about that myth.

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