Wednesday, November 23, 2011

The Last Hurrah!

I read someone's take on the press' ridicule of the 'Occupy Wall Street' protests, that the protestors didn't even know what they are protesting - the response was too the effect of 'it's called occupy Wall Street, I think it's pretty obvious what we're against.'

My travels in China made me inclined to call China 'The Last Hurrah' of neo-classical economics. In fact as a graduate of an Economics & Marketing degree I can tell you with some authority that we have known for years that GDP doesn't work. Sometime in the early 00's Clive Hamilton published his book 'Growth Fetish' thoroughly analysing the misguided obsession with GDP growth, the fetish still exists but I would propose that long before the last decade people clinically, empirically knew that money doesn't = happiness.

I believe 'the corporation' has a succinct moment explaining the pitfalls of consumerism. 'The whole system is based on a truth and a lie. The truth: if you take someone cold naked and miserable and hungry, and give them food, shelter and clothing they will go from being very miserable to very happy. The lie: If you give somebody twice as much stuff, they'll be twice as happy.'

This is neither the New York times nor the Washington Post, I don't have fact checkers, but I'm reasonably confident that worldwide one will probably observe most countries that have persued economic growth have also seen a growing disparity between rich and poor. The occupy wallstreet crowd refer to themselves as the 99% and the 1% refers to that disparity in America.

There is also simply speaking, a wider loss of confidence in the worldwide Economic institutions. Movements like occupy wall street are on the one hand, easy to ridicule because people are by and large economically illiterate, or put simply, the average joe on the street has no idea what they are talking about when it comes to economics. But this is true of Capitalisms many supporters as well. I hear mind-blowingly idiotic arguments from both camps. But just because you don't know shit about economics doesn't mean you are wrong.

For one thing, many of those who come out to defend right-wing capatilism - free markets, low taxes, small government, individual bargaining agreements, no social welfare etc. defend a system that represents almost none of these things. As Chomsky points out, many republicans like Newt Gingrich that bemoan social welfare are some of the biggest welfare advocates, only in the form of corporate welfare. The US operates it's 'free market' behind some of the most complex and comprehensive trade barriers around, even post NAFTA. Under Reagan the size of government (measured in staff and ultimately cost) actually increased, and goes on increasing.

Then there's the notion of 'free markets' and 'deregulation' that has yet to produce any results (unless you count The GFC as a result of deregulation). Time recently correlated 'ease of doing business' in terms of a number of regulations with economic growth. Turns out in China it is still incredibly hard to do business, with Bank Loan approval taking an average 311 days or something. Yet it's growth has vastly outstripped the US's.

Obviously there are more factors that come into play, and this is in essence what the protestors on the street are right about without even knowing it. China is a vast country, densely populated that is playing catch up. Nothing new and amazing and wonderful is coming out of China. They are building freeways, apartment blocks, supermarkets, shopping malls, train stations, power plants etc. (Obviously 'nothing' new is an exagerration) but the long and short is, that China's rise in the world is bringing it's people up to a standard of creature comforts they have simply been deprived of for the past 60 years, and that Australians, Europeans, Americans, Canadians etc. already have.

China is not wholly, nor even significantly partially a bold new vision of the future, but rather a collossal stampede to the present. It's public are consuming the truth and lie of capatilism in quick succession, and I have confidence that they will discover as the rest of the world seems to be discovering - that the consumer comforts we desire look good from afar but are far from good.

China's economic growth, is I hope the Last Hurrah of an antiquated way of thinking.

But I introduced a notion of right and wrong, and that is dangerous. Let me see if I can make some definitions that are simple - I warn you though, I'm not confident.

Economics is the science of deciding the best way to allocate resources that are limited to maximise happiness.

As yet, the time frame for that goal is undefined. I suggets over the long term, with limitations. (that is admittedly tricky)

Human satisfaction is as good a starting place as any to measure the performance of economic solutions (allocating resources).

SO, an economic system is 'right' if it allocates resources to maximise both happiness now, but more importantly the opportunites we have to be happy. It is wrong if it doesn't.

Perhaps, oversimplifying I would contend that GDP's perhaps only merit is that it kind of retrospectively proves that opportunity increased, if AND ONLY IF you accept that consumption is a good proxy for happiness.

If your economy grew this year, it means that the previous year set you up with more opportunities to grow. That's what I mean by retrospective, the problem is, that GDP growth is kind of like those Casino games of Solitaire, where you can appear to be making progress for a long time only to hit a dead end, and realise that you made a crucial error, unwittingly a long time ago and now that's it, you've lost.

More over, GDP is about as quick and dirty as my above reasoning as a measurement of wellbeing, an indicator of progress. It has numerous well known blindspots. It doesn't look at how economic growth is distributed amongst the public. The implication of that is that economic growth is good if you are feeding, clothing and sheltering more and more destitute people, but not great if it is all going to providing more food clothing and shelter to people who have plenty already while more and more go destitute.

It also just measures consumption, with no real time frame, so the only thing stopping a country from cutting down all it's forrests and pulping them, is the knowledge that if they do that now, the will get great GDP growth this year, and none from that sector next year. But in essence, itjust means that industries and the governments that regulate them dig incrementally increasing slices of irreplaceable resources out of the ground over time, instead of instantly. You still end up burning through your irreplaceable resources.

Furthermore consumption blatenlty ignores all the empirically proven, on large scale, worldwide, numerous times, conclusion that people's happiness doesn't increase with wealth, problems do. People in 'wealthy' nations can actually be less happy than others.

Why? And if our current system is so wrong, what is right? I will muse on these next post. My laundry is done.

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