Friday, 12 August 2011
Thursday, 11 August 2011
How did the world get so fixated on GDP?
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GDP growth remains central to economic policy, yet life in flatlining Japan remains rather better than it does elsewhere
By James Meadway guardian.co.uk,
The economic news grows daily more grim. Across the developed world, once-optimistic forecasts for growth are being revised downwards. Financial markets, sensing trouble ahead, are in a tailspin. Debates over the future centre on a single metric – that of GDP.
Gross domestic product was not always with us. Created in the 1930s, and despite the warnings of its pioneer, it rapidly assumed centre stage in economic policymaking.
Growth could now be measured targeted through policy. For the right, it would be a simple gauge of national economic virility. For the left, it offered the more subtle appeal of an end to disputes over the distribution of wealth.
By focusing not on the size of the slices, but on the size of the pie, an interminable conflict between capital and labour could seemingly be resolved. The case was put most forcefully in the Labour politician Anthony Crosland's influential book The Future of Socialism. Growth would deliver the public goods – secure employment and a functioning welfare state.
That consensus has now held for 50 years or more. Yet mounting evidence suggests that GDP growth does not register many of the things people actually care about. It is a record of some aspects of economic life, but it fails to capture wider social needs and demands. Health, quality of life and inequality play no part in its measurement.
Rising, falling GDP
There is a growing consensus that rising GDP since the mid-1970s in the US and the UK has become disconnected from reported measures of wellbeing. We know that falling GDP produces misery, as unemployment rises and incomes collapse. But the reverse does not apply. Higher output does not necessarily mean happier people.
Even growth's blunt promise of material prosperity is failing. GDP in the UK increased by 11% from 2003 to 2008. Over the same period, median real incomes stagnated. The economy boomed, but few shared in its rewards. Living standards were maintained through unsustainable debt. As we crawl back into recession, the majority will find those rewards still harder to come by – even if a minority continue to grow fat.
And environmental damage has no impact on GDP's progress. A few years of apparent prosperity can be bought at immense future cost. The tiny Pacific island of Nauru once enjoyed the highest per capita living standards of anywhere in the world. Its plentiful supplies of phosphate rock, in demand for fertiliser, had been strip-mined since the 1900s. But as the phosphate dwindled, so did incomes. Nauru has been reduced to providing a detention centre in return for Australian aid money.
Environmental limits can and will bite. From declining fish stocks to the overwhelming threat of climate change, there are physical limits to our economic activities. GDP registers none of this.
Lessons from Japan
We need to change how we think about the economy. Japan has now laboured through nearly two decades of flatlining GDP. A miracle of growth transformed it from defeated power in 1945 to the world's second-largest economy. Then, in the 1990s, the growth stopped, never to convincingly return. Yet living standards in Japan are among the highest in the world. Unemployment is half that of the US; life expectancy five years longer. Average real incomes are the same as Germany's, and inequality lower. Japan's environmental impact, particularly through the import of raw materials, remains high. But it is not simply the economic basket case it is often presented as.
The old consensus needs breaking. We need to fixate less on growth alone.
The government recognises this much, aiming to create a national measure of wellbeing. But this accounting exercise is completely disconnected from economic practice. The coalition has a near-mystical belief in the power of the free market to deliver growth. It believes the national debt should be run down, clearing the way for a return to prosperity as the economy "rebalances". Purposeful government intervention is not needed.
The coalition's lack of success is a tribute to its lack of strategy. Rebalancing the economy away from debt-fuelled consumption and bloated financial services is a fine aim. It needs policies to match. Austerity does not just blight individual lives – Ireland has shown how it cripples whole economies as demand drains out of the system. So public spending, the bedrock of an economy in recession, must be held steady.
A genuine rebalancing, however, cannot come from maintaining status quo. The thinktank New Economics Foundation has begun an ambitious modelling exercise that seeks to show how a low-carbon economy can also deliver social justice.
Action, though, is needed now. Economic policy must be broadened towards meaningful goals – creating secure, well-paid jobs; minimising environmental damage. Where private investment is failing, with business expenditure sliding again last quarter, government should be prepared to step in.
A new industrial strategy could match social objectives with credible interventions, supporting the industries of the future. Or we will be left to chase a statistical chimera.
By James Meadway guardian.co.uk,
Mining on the Pacific island of Nauru shows how 'a few years of apparent prosperity can be bought at immense future cost'. Photograph: Torsten Blackwood/AFP/Getty Images
The economic news grows daily more grim. Across the developed world, once-optimistic forecasts for growth are being revised downwards. Financial markets, sensing trouble ahead, are in a tailspin. Debates over the future centre on a single metric – that of GDP.
Gross domestic product was not always with us. Created in the 1930s, and despite the warnings of its pioneer, it rapidly assumed centre stage in economic policymaking.
Growth could now be measured targeted through policy. For the right, it would be a simple gauge of national economic virility. For the left, it offered the more subtle appeal of an end to disputes over the distribution of wealth.
By focusing not on the size of the slices, but on the size of the pie, an interminable conflict between capital and labour could seemingly be resolved. The case was put most forcefully in the Labour politician Anthony Crosland's influential book The Future of Socialism. Growth would deliver the public goods – secure employment and a functioning welfare state.
That consensus has now held for 50 years or more. Yet mounting evidence suggests that GDP growth does not register many of the things people actually care about. It is a record of some aspects of economic life, but it fails to capture wider social needs and demands. Health, quality of life and inequality play no part in its measurement.
Rising, falling GDP
There is a growing consensus that rising GDP since the mid-1970s in the US and the UK has become disconnected from reported measures of wellbeing. We know that falling GDP produces misery, as unemployment rises and incomes collapse. But the reverse does not apply. Higher output does not necessarily mean happier people.
Even growth's blunt promise of material prosperity is failing. GDP in the UK increased by 11% from 2003 to 2008. Over the same period, median real incomes stagnated. The economy boomed, but few shared in its rewards. Living standards were maintained through unsustainable debt. As we crawl back into recession, the majority will find those rewards still harder to come by – even if a minority continue to grow fat.
And environmental damage has no impact on GDP's progress. A few years of apparent prosperity can be bought at immense future cost. The tiny Pacific island of Nauru once enjoyed the highest per capita living standards of anywhere in the world. Its plentiful supplies of phosphate rock, in demand for fertiliser, had been strip-mined since the 1900s. But as the phosphate dwindled, so did incomes. Nauru has been reduced to providing a detention centre in return for Australian aid money.
Environmental limits can and will bite. From declining fish stocks to the overwhelming threat of climate change, there are physical limits to our economic activities. GDP registers none of this.
Lessons from Japan
We need to change how we think about the economy. Japan has now laboured through nearly two decades of flatlining GDP. A miracle of growth transformed it from defeated power in 1945 to the world's second-largest economy. Then, in the 1990s, the growth stopped, never to convincingly return. Yet living standards in Japan are among the highest in the world. Unemployment is half that of the US; life expectancy five years longer. Average real incomes are the same as Germany's, and inequality lower. Japan's environmental impact, particularly through the import of raw materials, remains high. But it is not simply the economic basket case it is often presented as.
The old consensus needs breaking. We need to fixate less on growth alone.
The government recognises this much, aiming to create a national measure of wellbeing. But this accounting exercise is completely disconnected from economic practice. The coalition has a near-mystical belief in the power of the free market to deliver growth. It believes the national debt should be run down, clearing the way for a return to prosperity as the economy "rebalances". Purposeful government intervention is not needed.
The coalition's lack of success is a tribute to its lack of strategy. Rebalancing the economy away from debt-fuelled consumption and bloated financial services is a fine aim. It needs policies to match. Austerity does not just blight individual lives – Ireland has shown how it cripples whole economies as demand drains out of the system. So public spending, the bedrock of an economy in recession, must be held steady.
A genuine rebalancing, however, cannot come from maintaining status quo. The thinktank New Economics Foundation has begun an ambitious modelling exercise that seeks to show how a low-carbon economy can also deliver social justice.
Action, though, is needed now. Economic policy must be broadened towards meaningful goals – creating secure, well-paid jobs; minimising environmental damage. Where private investment is failing, with business expenditure sliding again last quarter, government should be prepared to step in.
A new industrial strategy could match social objectives with credible interventions, supporting the industries of the future. Or we will be left to chase a statistical chimera.
Anarchy in UK - London Riots: Malaysian student mugged...
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Malaysian student mugged during riots to stay in UK
Ashraf Haziq, the Malaysian accountancy student who was filmed being mugged by rioters while sitting on the ground injured, says he wants to stay in the UK to finish his studies.
Haziq, 20, from Kuala Lumpur, said he felt sorry for his attackers. He was left with a broken jaw in a now notorious attack in Barking, east London on Monday - but said he still felt 'great' about Britain
Go to http://www.guardian.co.uk/uk/
Haziq, 20, from Kuala Lumpur, said he felt sorry for his attackers. He was left with a broken jaw in a now notorious attack in Barking, east London on Monday - but said he still felt 'great' about Britain
Go to http://www.guardian.co.uk/uk/
British riots: Millions feel for Asyraf
By RAHIMY RAHIM rahimyr@thestar.com.my
PETALING JAYA: The scene of rioters in London assaulting and robbing Malaysian student Mohd Asyraf Haziq Rossli has touched the hearts of millions around the world after a video clip of it went viral on the Internet.The clip has become an iconic symbol of the senseless violence in Britain, with even its Prime Minister David Cameron singling out the incident.
The video titled “London Riots-scum steal from injured boy” was ranked seventh most viewed video on YouTube this week with more than 2.9 million viewers worldwide.
Facebook fan pages were also created with “Support for student Mohd Asyraf Haziq, robbed while bleeding heavily,” given 249 likes while “Get Well Soon Asyraf Haziq,” got 990 likes until yesterday.
Mugged in London: Umno Information chief Datuk Ahmad Maslan pointing out the still images of Mohd Asyraf being robbed while the latter’s mother, father and younger brother look on yesterday. Jamie Cowen, a former worker of Britain-based Save the Children, has launched an Internet campaign to help Mohd Asyraf.
Based on Cowen's Twitter account, the campaign has so far raised some 4,000 (about RM19,350) with contributions still pouring in.
“Over 1,200 people have donated,” he said, adding that among the donors was a British bicycle firm pledging Mohd Asyraf a new one since his was stolen.
Among other donations were two first-class tickets by a British railway company for Mohd Asyraf to travel anywhere and free dental service from dentist Martin Nakisa in Britain.
The website “Let's Do Something Nice For Ashraf” (www.somethingniceforashraf.tumblr.com) also received thousands of supporters within hours of its launch on Wednesday.
In a video shot by his friend, Mohd Asyraf said from his bed in the Royal London Hospital that he was cycling with another student to visit a friend when a gang of about 20 headed towards him.
“I think some had knives. The youngest looked like he was of primary school age. They came in a group, they didn't attack at first. They wanted the bicycle.
“And then there was someone who put a hand in my pocket to take my phone. He pulled the bicycle and I don't know what happened. I fell and my mouth was bleeding. So, maybe I got hit,” Mohd Asyraf said in Malay.
“The people fled the scene. Others then approached me and said they wanted to help, but instead those behind me just took stuff from my backpack,” he added.
Asyraf’s parents leaving for England today
KUALA LUMPUR: The parents of the Malaysian student attacked and robbed by rioters in London will fly to England today.Umno Information chief Datuk Ahmad Maslan said it would sponsor three flight tickets worth about RM20,000 for Mohd Asyraf Haziq Rossli’s parents and his younger brother.
“The London Umno Club will meet them at the airport and will arrange accommodation and food expenses during the stay,” he said after meeting the family at Putra World Trade Centre yesterday.
Mohd Asyraf’s mother Maznah Abu Mansoor, 47, said she was relieved that Umno had stepped forward to help.
“Before this, we were on our own, asking for help from friends and family,” said the teacher.
She added that Wisma Putra had contacted her at 5am yesterday to say that her son’s jaw corrective surgery had been successful and that he was doing well.
He left the hospital yesterday.
Maznah said she had also accepted Mohd Asyraf’s wish to continue studying there although she was shocked by the assault.
“We were stunned when we watched the YouTube video and saw him bleeding,” said Maznah, who will be in London with her husband, ex-army officer Rossli Harun, 49, and her youngest son Muhammad Fitri, eight, for at least a week.
In Kota Kinabalu, Foreign Minister Datuk Anifah Aman said Kaplan University, where Mohd Asyraf is studying, had also offered to fly his parents to London, adding that the offer was made when its officials met Malaysian officials on Wednesday.
In Kajang, Home Minister Datuk Seri Hishammuddin Hussein said there were lessons to be learnt from the riots, adding that Malaysians should be grateful.
He said it was important to ensure there were no such riots due to the country’s multi-racial and multi-religious society.
“It is an issue which we should not take lightly,” Hishammuddin said, adding that it was up to the public to decide if their perception of the police, who came under fire for Bersih 2.0, had changed due to events in Britain.
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Anarchy in the UK - London Riots Sparked by Police Beating, Poverty, Ethnic differences...
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