What Paul Krugman Doesn’t Talk About

I follow Krugman religiously. What he says, as a professional economist, as a Nobel winner, makes perfect sense to me, a somewhat well-read amateur. And again and again what he predicts turns out to be true. But Krugman is still a mainstream economist. He doesn’t deal with the signal issue of our time: life for seven-billion-and-counting people in a finite world.

In terms of economics, the unalterable finiteness of our world raises two profound questions: How can we efficiently use money as we come up against the impossibility of infinite “growth”? How can we best deal with the cost of keeping our fine little planet a habitable place for humans?

Capitalism has certain inherent rules that must be observed. Among those is the idea that capital must “work”. It must grow, produce profit, forever. But we have already reached a point where simply making it grow does not serve us, and infinite growth in a finite world is not possible.

Capital must grow, produce profit, forever.

The large international banking institutions found themselves awash in cash, and the capitalist imperative said it must be invested to grow. So for decades it was invested in the Third World. These countries were encouraged to take on major debt, and to “restructure” their economy to make it more modern. What they ended up with was a disastrous decline of welfare for ordinary citizens, unpayable debt, and huge capital projects they neither needed nor wanted. Dams are the classical boondoggle project. They most commonly displaced a lot of people, and provided neither water nor electricity to the people, nor money to the government. Instead, the benefits went to huge corporations in the first world, or military dictators and their henchmen. After decades of this false economy, Latin American nations got wise, and largely put a complete stop to such neoliberal meddling across the board. Things began to improve when they started doing their own thinking.

Although it’s an article of religious faith among Republicans that global climate change isn’t really happening, no such magical thinking occurs in the rest of the world. Whether Republicans believe it or not is irrelevant anyway, because it is happening in our daily world no matter what they think. But the real problem is that Republicans have completely prevented not only our country, but by extension the whole world, from even formulating a working plan to deal with the changing climate in all of its manifestations. Corporate powers go right along with this denial, thinking it will save them money, and since they are responsible for a significant part of the planetary degradation, worldwide conditions continue to deteriorate. For example, we are now sending millions of tons of coal to China, where air pollution from coal has been a serious problem for a long time. We delude ourselves by believing pollution in China won’t affect us, to say nothing of the immorality of selling atmospheric poison to them for profit. Meantime, the costs continue to escalate.

We as a nation have utterly failed to address global climate change, which is without question the most significant issue humans have ever had to deal with. After great change has occurred, requiring such things as relocating several hundred million people, or finding new food sources for hundreds of millions, will be much too late. In fact, many people, I among them, believe it is already too late, that the world’s fate is largely out of our hands now. Even so, we must do our best to minimize the suffering. But we’re essentially doing nothing.

The impossibility of infinite growth affects many other areas as well, of course. Population, fresh water, food production, energy sources, resource depletion, species extinction…all the things that have already made their presence known.

There is something else, something relatively small, that tends to give us a false sense of security. That is our failure to adopt a more realistic metric than the Gross Domestic Product to measure our economic progress.

What’s wrong with the GDP is that it puts the expensive devastation from hurricane Katrina in the same category as a bumper food crop. The budget-crushing cost of decades-long wars in the Middle East contribute the same as record employment. Record numbers of people in prison is equivalent to a productive year in automotive sales. The problem, of course, is that the cost of Katrina, the wars, and record imprisonments—and many, many other things—reduce our national wellbeing. They make us worse off, yet the GDP counts these huge costs as great benefits to the economy.

There have been a half dozen designs for new measures that provide a more realistic calculation of how well we are doing than the GDP provides. The Genuine Progress Indicator is the best, in my opinion. The GPI realistically deducts figures for crime and pollution and many other things that are counted as positive in the GDP. A glance at this chart comparing GDP with GPI since 1950 makes clear what we all feel: things are getting worse.

Yet neither the GPI nor any other measurement other than the fatally flawed GDP makes an appearance in our economic figuring, not by Krugman nor by anyone else. We could even use simple halfway measures like this one, but we don’t. And the result is that we grossly overestimate how well we are doing. We’re doing much worse than we think we are.

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2 CommentsLeave a comment

  1. On Climate Change. It always happens, always has, always will. It’s how the Earth works. Nothing we can do will stop it. Can we lessen our effects on it? Yes. But we can not stop it.Can we stop sending coal and oil to China? Yes. But that will drive up their cost of energy, and therefore our cost of everything too. Directly or indirectly, we will pay more, for everything.
    Oil and Coal Companies will not loose money. If you make a car get twice the MPG, the oil companies raise the cost per gallon to cover it. If you get rid of Oil Companies, you get rid of Plastics. Most of them anyway. You also get rid of Diesel, many cleaning products, and much more. You might be surprised by how many things are made from the ‘waste’ of making Gasoline.
    The GDP vs GPI? Not up on that enough to have an opinion on which is better, but the GDP is most definitely not an accurate indicator of how we are doing in the lifes of our people.

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  2. People like Everett are killing this world. If we never stand up for change, accountability, and demand new technology for a better world we deserve what we get. What ever happened to trying to leave the world a better place for our kids? The GOP would have you believe that that means making the rich richer at any cost to the environment our kids will depend on, that somehow that is the answer. Money is a game, it is not real anyway, resources are real.
    Trickle down my ass, how many years does it take for a Republican to quit beating his head against the wall before he realizes how much better he could feel if he quit???
    My cousin who lives in Slovenia says about Americans;”Your country is playing the biggest game of “Divide and Conquer’ with its own people and you can’t even see it . You are effecting the whole world.” She’s right.

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