ECONOMIC CONTROVERSIES Innovative and thought-provoking, the Economic Controversies series strips back the often impenetrable facade of economic jargon to present bold new ways of looking at pressing issues, while explaining the hidden mechanics behind them Concise and accessible, the books bring a fresh, unorthodox approach to a variety of controversial subjects Also available in the Economic Controversies series: Robert R Locke and J.-C Spender, Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance Heikki Patomäki, The Great Eurozone Disaster: From Crisis to Global New Deal Yanis Varoufakis, The Global Minotaur: America, Europe and the Future of the Global Economy ABOUT THE AUTHOR LORENZO FIORAMONTI is Jean Monnet Chair in Regional Integration and Governance Studies and Associate Professor of Political Science at the University of Pretoria (South Africa), where he directs the Centre for the Study of Governance Innovation He is also Senior Fellow at the Centre for Social Investment of the University of Heidelberg and at the Hertie School of Governance (Germany) as well as Associate Fellow at the United Nations University He is the author of numerous books and articles about development policies, alternative economies and social progress indicators and the director of a short film documentary on GDP and climate change, which can be viewed at his blog, www.globalreboot.org GROSS DOMESTIC PROBLEM The politics behind the world’s most powerful number LORENZO FIORAMONTI Zed Books LONDON | NEW YORK To my wife, Janine, and my son, Damiano, who make my life worthwhile Gross Domestic Problem: The Politics behind the World’s Most Powerful Number was first published in 2013 by Zed Books Ltd, Cynthia Street, London N1 9JF, UK and Room 400, 175 Fifth Avenue, New York, NY 10010, USA This ebook edition was first published in 2013 www.zedbooks.co.uk Copyright © Lorenzo Fioramonti 2013 The right of Lorenzo Fioramonti to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act, 1988 Designed and typeset in Monotype Bulmer by illuminati, Grosmont Index: John Barker Cover design by www.reactor15.com All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of Zed Books Ltd A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data available ISBN 978 78032 275 Contents ACKNOWLEDGEMENTS INTRODUCTION The world’s most powerful number CHAPTER The history of GDP: from crisis to crisis CHAPTER The Frankenstein syndrome CHAPTER The global quest to dethrone GDP CHAPTER Change from below CONCLUSION Supremacy and resistance NOTES BIBLIOGRAPHY INDEX Acknowledgements The idea for this book came a few years ago, when I was invited by the Italian National Institute of Statistics (ISTAT) to participate in a meeting on alternative measures to the gross domestic product (GDP) It was a gathering of esteemed progressive economists and statisticians, which laid the groundwork for a fruitful partnership with civil society groups that continues to this day As the only political scientist involved in the proceedings, I immediately realized that something was missing While the discussion was all focused on how to improve statistical research, I felt that some analysis of the history and politics of GDP was also necessary to understand this number’s powerful grip on our societies So my first thanks go to ISTAT for inviting me, especially Tommaso Rondinella and the institute’s president Enrico Giovannini, who have dedicated their careers to rethinking GDP The research that went into this book would not have been possible without the support of the Centre for Social Investment (CSI) at the University of Heidelberg, Germany They offered me a generous fellowship, supported through a donation of the Compagnia di San Paolo, to conduct research on ‘whatever subject’ I fancied This fellowship was a real luxury, especially in today’s world, where academic freedom is ever more influenced by top-down imposed priorities and trapped into tight schedules of productivity My gratitude, then, goes to the CSI management and, especially, to Georg Mildenberger for reading and commenting on each and every page of the manuscript As always, I owe an intellectual debt to a long list of people, which – no matter how crowded – could never be exhaustive Among these I wish to mention Mario Pianta of the University of Urbino, Italy, who is also one of the promoters of the alternative economy web forum Sbilanciamoni.info; Helmut K Anheier, who is the dean of the Hertie School of Governance, Berlin, Germany; and my South African colleagues, in particular Maxi Schoeman, Mzukisi Qobo and Prince Mashele of the University of Pretoria Moreover, I would like to thank my editor, Ken Barlow, and the whole team at Zed Books for their support and magnificent assistance I completed the manuscript while sitting in my home office in Berlin, where I lived with my wife and son for most of 2012 It was the perfect location to work on a book about GDP, as the German capital provides a wealth of cultural resources amid an extremely laid-back atmosphere Despite the inevitable aberrations of any urban settlement, the proximity of nature and the abundance of public spaces, playgrounds and other areas for leisure free of charge make Berlin one of the few ‘big cities’ in the world where some type of alternative life is still possible Lorenzo Fioramonti Berlin, October 2012 INTRODUCTION The world’s most powerful number We are stealing the future, selling it in the present, and calling it GDP Paul Hawken What we measure affects what we do; and if our measurements are flawed, decisions may be distorted Commission on the Measurement of Economic Performance and Social Progress Roughly eighty years after the Great Depression of the 1930s, the world has known another catastrophic financial and economic collapse The Great Recession that began in 2008 has by no means been the only crisis that globalized capitalism has known in the past few years Yet it has been the largest in scale Exports have plummeted, jobs have been lost throughout the world and investment has fallen Home foreclosures have become a daily routine, especially in the United States and in Southern Europe, where personal and public debt has reached unprecedented levels Even an economic giant such as the European Union (the largest market on earth) has been taken on a financial roller coaster, spurring divisions among member states and rehashing old resentments across European peoples Over the past decades, not only social and economic inequalities but also the planet’s natural resources have been depleted at a pace that, for the first time in history, has raised concerns among environmental groups and policymakers alike Climate change, the epitome of all environmental degradation problems, has become part and parcel of the public debate the world over According to the UN-sponsored Intergovernmental Panel on Climate Change, the emissions of greenhouse gases in the atmosphere due to human activities have vertiginously multiplied since the Industrial Revolution, and in particular since the mid-1900s Unless major precautions are taken, the Panel forecasts serious risks for the global climate, with disastrous repercussions on those ecosystems that make biological and human life possible.1 Although media attention is almost exclusively focused on the world’s treacherous ‘road to economic recovery’, the turmoil triggered by the economic crisis and the preoccupations with climate degradation seem to suggest that a business-as-usual solution to the world’s problems is no longer feasible As part of this process, an important – albeit still marginal – debate on the sustainability of the current economic system based on infinite economic growth has commenced Such a critique is not only focusing on the inherent instability of market dynamics, but also on the more long-term impact that growth processes exert on the planet’s limited natural resources and societal well-being at large Does our quality of life improve when the economy grows by or per cent? Can we sacrifice our ecosystems to safeguard an economic framework marred by internal inconsistencies and imbalances? For the first time, the gross domestic product, which is the popular icon of economic growth, is being called into question Even a defender of economic conservatism such as The Economist hosted an online debate on the issue in 2010 and concluded that ‘GDP is a poor measure of improving living standards.’2 The Organisation for Economic Co-operation and Development (OECD), another bastion of economic traditionalism, has also been casting doubts on the dogma of GDP growth It recognizes that for a good portion of the 20th century there was an implicit assumption that economic growth was synonymous with progress: an assumption that a growing GDP meant life must be getting better But now the world recognizes that it isn’t quite as simple as that Despite high levels of economic growth in many countries, we are no more satisfied with our life (or happier) than we were 50 years ago [and] increased income has come at the expense of increased insecurity, longer working hours and greater complexity in our lives.3 For decades, the GDP mantra has dominated public debate and the media Countries are ranked according to GDP, the global definition of ‘power’ is based on GDP (e.g superpowers, emerging powers, etc.), access to global governance institutions is also granted on GDP performance (e.g the G8 or G20 members are selected according to their GDP) and development policies are driven by the GDP formula Currently, governments striving to come of out of the Great Recession largely design their policies and strategic choices following the diktat of GDP growth, and even global efforts to curb climate change and greenhouse gas emissions are being opposed by many countries because they may exert a negative impact on global GDP growth This book traces the history of GDP, discusses how its formula was developed and why it became so popular In doing so, it analyses the key political and economic interests supporting GDP and the type of society it contributed to building It also provides the first comprehensive review of the most important criticisms against GDP and the alternatives developed by experts, activists and civil society movements From a political perspective, the current critique of GDP is becoming a catalyst for people’s struggle to rethink our society and fight its long-standing inequalities and injustices What is GDP? The measurement of wealth has a long tradition in modern economic thought In the 1600s, the British political economist William Petty conducted the first ever survey of national wealth by systematically analysing the value of the land conquered by Oliver Cromwell in Ireland Throughout the years, Petty tried to devise a host of mathematical formulae to measure not only the value of property but also that of labour, with a view to creating an account system that could be of service to government (especially for taxation purposes) while strengthening economic growth in modern Britain For many reasons, including his sophisticated conceptualization and methodology, he was far ahead of his time Back then, indeed, mainstream political economy was largely influenced by mercantilism, which considered the overall endowment owned by the king as the best indicator of a country’s wealth Based on this principle, Jean Baptiste Colbert, the powerful finance minister under French King Louis XIV, designed a strong top-down ( dirigiste) institutional structure to ensure that commerce Edward Elgar) Wasshausen, D., and Moulton, B.R (2006) ‘The Role of Hedonic Methods in Measuring Real GDP in the United States’, paper presented at the 31st CEIES Seminar, ‘Are We Measuring Productivity Correctly?’, organized by Eurostat, Rome, 12–13 October White, A (2007) ‘A Global Projection of Subjective Well-being: A Challenge To Positive Psychology?’, Psychtalk 56: 17–20 Wilson, D., and Purushuthaman, R (2003) ‘Dreaming with BRICs: The Path to 2050’, Global Economics Paper no 99 (New York: Goldman Sachs) World Bank (1978) World Development Report (Washington, DC: World Bank) World Bank (1994) World Development Report (Oxford: Oxford University Press) World Bank (2006) Where is the Wealth of Nations? Measuring Capital for the 21st Century (Washington, DC: World Bank) World Commission on Environment and Development (1987) Our Common Future (Oxford: Oxford University Press) Wyckoff, A.W (1995) ‘The Impact of Computer Prices on International Comparisons of Labour Productivity’, Economics of Innovation and New Technology 3(3–4): 277–93 Yasuba, Y (1991) ‘Japan’s Post-war Growth in Historical Perspective’, Japan Forum (April): 57–70 Index Abramowitz, Moses, 59–61, 64–7, 85, 88 Aganbegyan, Abel, 39 air conditioner syndrome, 72 Alkire Foster method, ‘multidimensional poverty’ measure, 95 alternative currencies, 16; Europe, 141; types, 138 American Enterprise Institute, 108 Antoci, A., 72 Arab Spring, 100 Arendt, Hannah, 134 Argentina, 143: bartering, 121; 1890 depression, 141; local currencies, 122; 2001 ‘collapse’, 119–20 Atkinson Charitable Foundation, Canada, 93 ATTAC, 134 Australia, 109 Austria, 96 Bailey, Ronald, 76 balance of trade, Ban Ki-Moon, 47 Bardi, Ugo, 77–8 bartering, 120–2; markets, 138 Bartolini, S., 72 Baumol’s cost disease, 62 Beijing, 150 Bernanke, Ben, 51 Bhutan, 47, 95; ‘gross national happiness’, 93; people of, 96 Black Tuesday 1929, Blair, Tony, 11 Blank, Rebecca, 103 Bolsheviks, Leninist, 23 Boulding, Kenneth Ewart, 145, 154 Brazil, 42, 84, 96 Brezhnev, Leonid, 37; era of, 39 BRIC, acronym introduction, 42 Bristol ‘pounds’, 137 Brixton ‘pounds’, 137 Brookings Institution, 77 Brown, Lester, 143 Buenos Aires, 120 Bureau of the Census, 40 Bush, George W., 11, 44, 84; tax cuts, 10 ‘business cycle’, 28 Callenbach, Ernest, Ecotopia, 134 Cameron, David, 46, 114 Canada, 96; Canadian Index of Wellbeing, 93, 113; Kyoto withdrawal, 85 capital investment, 60; real value problem, 61 capital market, function of, 61 Caplan, Bryan, 100 Carlyle, Thomas, 13 Carson, Rachel, attacks on, 77 Centre for Bhutan Studies, 94–5 Charles II, king of England, 20 Chiang-Kai-shek government, China, 34 Chiemgauer, microcredit initiative, 140 children, 159; mortality rates, 91 China, 16, 42, 84, 93, 113; economic policies, 34; ‘green’ GDP, 14, 104–6; 17th National Congress of the Communist Party, 106; State Environmental Protection Administration, 105–6 Chomsky, Noam, 108 Chrétien, Jean, 11 CIA (US Central Intelligence Agency), 40, 96; USSR economy analysis, 36–9 Clark, Colin, 28 Clegg, Nick, 115 climate change/degradation 158; GDP relationship, Clinton, Bill, administration of, 43, 78, 84 Club of Rome, 74, 76; discrediting campaign against, 75, 79 coal reserves depletion, 79 Cobb, John, 88 Colb, Clifford, 31 Colbert, Jean-Baptiste, Cold War, 18, 33, 36; end of, 109; GDP competition, Columbia University, 24 Command economy, set prices, 36 Commission on the Measurement of Economic Performance and Social Progress, France, 46, 101, 111, 156 ‘commitment’, alternative currency type, 138 common lands enclosure, Great Britain, 71 communes, Middle Ages, Italy, 134 Communist Manifesto, 14 community gardens, 128 Competitive Enterprise Institute, 78 Condorcet, 13 Conferences on Research in Income and Wealth, NBER, 26–8 Congress of the USSR Communist Party 1961, 38 Conservative Party, UK, 114 consumerism, 48 ‘cooperation’, alternative currency type, 138 Copenhagen, Framework Conference on Climate Change, 84 corporations, subsidies for, 152 Costa Rica, army abolished, 70; life satisfaction, 93 consumption, as patriotic duty, 11 crisis, environmental–economic convergence, 14 Cromwell, Oliver, 4, 19–20 Cuba, health service, 108 Daley, William M., 44 Daly, Herman, 82, 88, 115 décroissance, 130–31 debt, debt-based system, 137 ‘decolonization of the imaginary’, 132 ‘dedicated’, alternative currency type, 138 defence spending issue, 71, 86 ‘degrowth’, 16, 130; as bourgeois luxury, 132; associations, 142; biannual conferences, 131; ‘clubs’ of; societies, 133 Deutsche Bank Prize in Financial Economics, 146 Deming, W.E., 150 Denmark, 96 Department of Commerce, USA, 6, 24–6, 32, 38, 44–5, 48, 87, 103; Bureau of Economic Analysis, 40, 64, 78 depreciation, GDP problem, 55 developing countries, output underestimated, 54 development model, GDP-led, 10 Dickens, Charles, 14 digital telephones, hedonic price index, 63 ‘disamenities of urbanization’, 86 doux commerce, 13 Down Survey, 19 duplications, GDP problem, 54–5, 70 Earth Policy Institute, Washington, 143 Easterlin, Richard A., 67; Paradox, 68 Easterly, William, 108 ecological democracy, 133 ecological footprints, 91–2 ecological movement, trade unions split, 152 economic measurement, 9; centralization impetus, 20; performance preoccupations, 22 economics: depreciation calculation, 8; growth indirect costs, 69; growth–poverty reduction ideology, 97; notion of welfare, 59; second law of thermodynamics, 130; social sciences dominance, 80; ‘the dismal science’, 14 The Economist, 2, 108 economists: career pressures, 147; faculties’ assembly line, 12; free-market, 76; environmental, 83; GDP era status, 150; ‘psychology of denial’, 147 ‘economunicipalism’, 133 Ecuador, ecological footprints, 92 education, 99 Egypt, high HDI rating, 100 Eigel, Chris, 70 Eisenhower, Dwight D., 33 Eisner, Robert, 86–8 elites, centralistic political, 152; ruling, 23 emerging’ markets, projected GDP growth, 42 energy, locally co-produced, 127; ‘Energy descent’ plan, Kinsale, 123 Engels, Friedrich, 14 Enron, 44 environment; accounting, 104; degradation, 157; depreciation issue, 88; monetized costs, 105 Environmental Quality in a Growing Economy, 145 equilibrium theory, 50 EU (European Union), 1, 14, 102, 141; ‘Beyond GDP’ initiative, 46; Commission, 15, 46; Equal initiative, 138; low carbon commitment, 155; Stability and Growth Pact, 10, 42 Europe: sovereign debt crisis, 45; EUROSTAT, 111 ‘expenditures approach’, GDP, fabricas recuperadas, Argentina, 121 financial derivatives, 111 Finland, ecological footprints, 92 Fitoussi, Jean-Paul, 46, 101–2 Food and Agriculture Organization, 91 food co-operatives, grassroots, 128 ‘food deserts’, 129 Forbes, 76 France, 130: Commission, see above; complementary GDP task forces, 102; local elections, 142; Party for Growth, 135 Frankfurt, 150 Friedman, Milton, 26 Froyen, Richard T., 24 fuel, global scramble, 158 G8/G20, 42 Gabon, capital production failure, 98 Galbraith, J.K., 32 Gandhi, Mohandas, 158 GDP (gross domestic product) ‘growth’ measurement paradigm, 97–8, 114, 148, 157; acronym introduction, 8; ahistorical, 66; alternatives, 14, 85, 126; campaigns against, 16; circular distribution, 58; ‘cleaned up’, 115; Club of Rome critique of, 75; ‘dark side’ of, 155; debate on, 2–3, 51; defence spending problematic, 70, 112, 159; ‘deflators’, 63; ‘dethroning’ attempts, 83; democracy impoverishing dogma, 159; economists self-importance link, 48; exclusions, 58; first critique of, 59; foreign companies income generated, 41; geopolitical status, 43; happiness noncorrelation, 66–8; household production, 56, 104; inherent limitations, 55; invention of, 6, 50; investment parameters, 87; ‘iron cage’ growth, 142; manipulable, 54; measurement types, 7; monetized world, 72; natural resources inverse correlation, 74; negative externalities masked, 73, 151; ‘new’ measurements, 116; propaganda device, 9–11, 153; proposed resources depletion, 103; public welfare link, 42; removal demand, 132; revisions, 110; satellite accounts, 110; ‘sceptics, 81, 146; short-termism of, 80; social construct, 156 ‘social’ limits, 71; statistics revision interest/‘laundry’, 53, 155; technocratic power, 12; US fetish of, 44; US inconsistencies, 46; war economy roots, 18, 153, 160 ‘genuine progress’, theories of, 14; Genuine Progress Index (GPI), 88; theoretical flaw, 89 geography, GDP politics dominated, 11 George C Marshall Institute, 78 Georgescu-Roegen, Nicholas, 130 Germany: alternative currencies, 139; complementary GDP task force, 102; GDP anomalies, 60; local currencies, 140; Nazi era national accounts lack, 18, 31 Gesell, Silvio, 141 Gilbert, Milton, 25, 32, 44 Giuliani, Rudy, 11 Global Footprint Network, 91–2 global governance, lexicon of, 42 GNP (gross national product) 8; early 1950s dominance, 32; GDP superseded, 41; introduction of, 26; market transactions measure, 36, 55; USA war-planning tool, 31; USSR adoption, 40; ‘war machine’, 33 gold, national accumulation of, Goldman Sachs, 42 Golub, Robert, 76 Google Zeitgeist Europe, 47 Gorbachev, Mikhail, 39 Goskomstat, Soviet statistical office, 39–40 governments: data manipulation, 45; GDP filtering, 57; GDP output valuation problems, 61–2; planning regular data need, 28; purchases GDP issue, 86; services measurement, 27 ‘grassroots postmodernism’, 133 Great Depression, 9, 17, 23–5, 35, 45, 58; local currencies, 137 Great Recession 2008–, 1, 3, 45, 49, 122, 132, 134, 154, 158 Greece, alternative currencies, 138, 139 ‘green’ accounting, 115 Green GDP, China, 107 Greenpeace, 117 Greenspan, Alan, 43 gross domestic income (GDI), 46, Gross Domestic Happiness: Vermont success, 96; sufficiency cut-off, 95 ‘gross national happiness’, 94 groupthink, 146–8 Hacker, Jacob, 43 Halstead, Ted, 31 Harper, Stephen, 84 Harvard University, 24, 146 Hawken, Paul, 1, 141–2 Heal, Geoffrey, 103 health, 99 hedonic regressions, 63 Higgs, Robert, 49 Hirsch, Fred, 71 Hirschmann, Albert, 71 Hitler, Adolf, military production targets, 31; war economy, 10 Hobbes, Thomas, 23 Hoover, Herbert, 9, 25; Committee on Social Trends, 24 Hopkins, Rob, 123–4, 136 Horowitz, David, 108 household labour, 88; GDP ignored, 56 Hubbert, Marion King, 125 Human Development Index, UN, 98–9; US critique of, 100 Hungary, 35 Hurricane Katrina, 70 ICT products, price volatility, 62–3 illegal enterprises/incomes: GDP excluded, 57–8; net value exclusion, 27 IMF (International Monetary Fund), 12, 18, 43, 111, 119, 146, 150 ‘income approach’, GDP, Index of Sustainable Economic Welfare (ISEW), 88 India, 16, 42, 84, 93, 113 indignadas, 135 individual capabilities, emphasis on, 99 individual utility, social relations impact, 64 Industrial Revolution, 13 inequality, income widened, 43, 53, 87–9; rich/poor nation increase, 75 inflation, overestimated, 63 informal economy, GDP ignored, 12, 56 ‘input–output’ tables, 48 intangibles: capital, 98; ‘price-tagging, 116 intensity of labour, GDP ignored, 55 Intergovernmental Panel on Climate Change, 2, 76, 84 intermediate/final goods, blurred distinctions, 59 International Association of Official Statistics, 111 International Energy Agency, 91, 125 International Human Suffering Index (HSI), 90 Ireland: conquered land, 4; land expropriation, 19; national economic accounts attempt 1652, 18 Italy, 131 Japan, 109; ecological footprint, 92; per capita income, 67 Jigme Singye Wangchuck, Bhutan king, 94 job creation–GDP alleged link, 51 Johannesburg, Earth Summit 2002, 84 Johns Hopkins University, 24 Johnson, Lyndon Baines, 38; Council of Economic Advisers, 51 Judt, Tony, 147 Kahan, Herman, 76 Kahneman, Daniel, 47 Kennedy, John F., 32 Kennedy, Paul, 154 Kennedy, Robert, 81 Key National Indicator System, USA 2010, 93 Keynes, John Maynard, 28, 31, 79; theory, 27, 50 Khrushchev, Nikita, 37–8 Kim Jim Yong, 107, 109; neoliberal attack on, 108 Kinsale, Ireland, 123 Kissinger, Henry 84 Koenig & Strey, 70 Krueger, Alan, 47 Krugman, Paul, 148 Kuznets, Simon, 6–7, 23–35, 43–4, 50, 52–8, 60, 69, 80, 109, 111, 149; GDP warnings, 59 Kyoto Protocol: Canadian withdrawal, 85; US unsigned, 84 labour market: globalized, 152; productive, 5; productivity, 62; theories of value, Lacey, Jim, 29 LaFollette, Marion, 25 land, 4–5 Latin America, 92 Latouche, Serge, 133, 150 Legatum Institute, Prosperity Index, 91 Lehman Brothers, fall of, 147 Leipert, Christian, 60 leisure, 72; activities accounting for, 69; time, 87 LETS (local exchange trading systems), 138 Liberty Dollar, fraud, 143 Libya, high HDI rating, 100 The Limits to Growth, 74, 76, 130 Lindblom, Charles, 153, 160 local currencies, 137–8, 143; Argentina, 122; Germany, 140; interest-free, 141 London, 150; London School of Economics, 147 Low Carbon Communities Challenge, UK, 125 Maastricht Treaty, 42 macroeconomic policies, 26; guides need, 17 Malthus, Thomas, 75 Manhattan Project, 18 marginal utility, 60 market, the: economy early days, 13; European establishment of, 72; prices, 7, 60, 66 Marx, Karl, 6, 14, 34, 52; Marxism, 23, 153 McNamara, Robert, 96 Meade, James, 28, 50 Measure of Economic Welfare (MEW), 85–6 Menshevik movements, 23 mercantilism, Miami Herald, 12 Michalos, Alex, 113 military spending, 70, 159; computation, 112; constant global increase, 113; internal consumption balance, 29 military–industrial complex, 33, 69 Millennium Development Goals, 91 Millikan, Max, 36–7 MIT (Massachusetts Institute of Technology), 74 Mitchell, Wesley C., 24, 31 Mollohan, Alan, 79 monetization, paradoxes and distortions, 22, 90 money, concept reinterpreting, 136 Montesquieu, Charles-Louis, View of the Progress of Society in Europe, 13 Myrdal, Gunnar, 76 Nathan, Robert, 25, 28–9, 31 nation, as economic entity, 17, 21; -state overhead costs, 60 National Bureau of Statistics, China, 105–7 National Health Service, UK, 46 national income, 6; statistics development, 149; Soviet concept, 34 natural assets/resources: depreciation issue, 88–9; monetized, 90, 101, 118; systemic statistical neglect, 74 natural good services; prices illusion, 117 neoclassical growth theory, 51–2 ‘net’ domestic product, New Deal, 27; philosophy of, New Economics Foundation (NEF), 114, 135; Happy Planet Index, 92; The Great Transition, 136 Nigeria, capital production failure, 98 non-market production, 68, 86; GDP ignored, 56–7, 109 Nordhaus, William D., 17, 51–2, 60, 68–9, 73, 76–7, 85, 88 Noren, James H., 36 nuclear energy, 75 numbers, apparent neutrality, 22 Obama, Barack, 47, 93, 107; administration ‘experts’, 148 Occupy Wall Street network, 135 October Revolution 1917, 23 OECD (Organisation for Economic Co-operation and Development), 2, 46, 104, 111; Growing Unequal, 53; How’s Life?, 102 Office of Soviet Analysis, 40 official casinos, GNP included, 57 oil: crisis 1973, 75; ‘peak theory’, 125 Okonjo-Iweala, Ngozi, 108 Okun, Arthur, 51 Oswald, Andrew J., 66 Overseas Development Council, 90 Ovolos, Greek virtual currency, 139 Oxford University, 95 Paine, Thomas, 13 Pan Yue, 105–7 Peccei, Aurelio, 74 pension depending, computation, 111 Percy, Walker, 52 permaculture, 123; associations, 134 Petty, William, 4–5, 19, 20–23, 149 Physical Quality of Life Index (PQLI), 90 Physiocrats, Pierson, Paul, 43 Polanyi, Karl, 72 policy planning, cost–benefit analysis, 22 Poovey, Mary, 20 Population Crisis Committee, 90 Portugal, 104 prices, non-market influences, 62 Princeton University, 47 private investment decisions, 61 producers–consumers categories split, 48 profits exported, GDP unmeasured, 41 public sector, downsizing, 45 public spaces, 159 rational behaviour, assumption of, 148 Reagan, Ronald, 52 Regiogeld, alternative money, 139–41 resource-dependent economies, 98 Ricardo, David, Rio de Janeiro, Earth Summit, 1992, 84; Rio + summit, 85, 117, 128 ‘road to economic recovery’, exclusive focus on, Robèrt, Karl-Henrik, 119 Robertson, William, 13 Rogoff, Kenneth, 146 Roosevelt, Franklin D., 25, 44; 1932 victory, 9; Victory Program, 29–30 Rowe, Jonathan, 31 Russia, 42, 113 Samuelson, Paul A., 17 ‘sandwich model’, 143 Sarbanes, Paul, 44 Sarbanes–Oxley Act, 44 Sarkozy, Nicolas, 15, 46, 101, 103 satellite accounts, 115 Schor, Juliet, 79 Schumacher, E.F., 118, 142, 157 Schumpeter, Joseph, 52 Scotland, ecological footprint, 92 Second World War, 18, 27; industrial production statistics, 10 securitization, subprime mortgages, 157 self-production: localized system, 121; self-consumption, 127 Sen, Amartya, 15, 46, 99, 101–2 September 11th attacks, 11 services: government infrastructure, 61–2; USSR sector growth, 40, government infrastructure, 61 Shadow Government Statistics Alternate GDP, 64–5 Shell Oil Company, 125 Shelley, Mary, 80 Silent Spring (Carson), 77 Simon, Julian, 76 Singapore, 150 Smith, Adam, 5, 52 ‘social marginal utility’, 65 Social Watch, Basic Capabilities Index, 90–91 socialist bloc, different metrics, 34 SOL, France alternative currency experiment, 138 South Africa, 84 South Korea, 98 Southeast Asia, 157 Southern Europe, home foreclosures, ‘spaceman’ economy, 145–6 Spain, 104 speculative gains, 58 SPIRI, Swedish research institute, 113 Standard & Poor’s, 120 Stanford University, 59 The State of the USA, 93 Stathakis, George, 139 statistical agencies, cooperation need, 103 Sterntaler, Bavaria, 140 Stiglitz, Joseph, 15, 46, 101–3 Stockholm+ conference, 85 Stone, Richard, 28, 50 Strayer, Joseph, 37 structural adjustment policies, 43 subsistence farming, 56 sufficiency, HDI emphasis, 98 sustainability, 142; global debate, 85; net saving measure, 97; ‘weak’, 117 Sweden, 96 Switzerland, 96; ecological footprints, 92 System of Balances of the National Economy, 35, 109 System of National Accounts SNA, 35; arms industry adjustment, 113; invention of, 23; 1993 update, 111; UN exported, 40 taxation, 28; collection 20–21 technological innovation, underestimated, 12 Thailand, 96 think-tanks, corporate financed, 78 Three Gorges Dam, China, 107 time: balanced use of, 95; ‘time banks’, 138 Tobin, James, 44, 51–2, 60, 68–9, 73, 85, 88 Tokyo, 72 ‘total incomes system of accounts’ (TISA), 86–8 Totnes, UK, 123; photovoltaic panels, 125; pound, 136; Sustainable Construction Company, 124; transition town, 123–4, 126 Townsend, Joe, 76 Toynbee, Arnold, 13 trade unions, 152–3 traditional societies, capitalist markets opened, 72; GDP obstacle, 71 ‘transition’: idea of, 125; initiatives, 133, 142; politics avoidance, 129–30 Transition Initiatives Primer, 124 Transition Network, 127; ‘festival of transition’, 128 Transition Town Totnes (TTT), 123–4, 136 Transition US, 128 Trinidad and Tobago, capital production failure, 98 Tudor Trust, 124 Tunisia, high HDI rating, 100 UAE (United Arab Emirates), ecological footprint, 92 UK (United Kingdom), 96, 155; Centre for Well Being, 114; complementary GDP task force, 102; Department of Energy and Climate Change, 125; Liberal Democrats, 115; Office for National Statistics, 46; projected world power, 21; Sustainable Development Commission, 135 ul Haq, Mahbub, 99 UN (United Nations): Conference on the Human Environment (Stockholm Conference), 83; Development Programme ‘sustainable’ HDI idea, 100; Environment Programme, 84; High Level Meeting on ‘Happiness and Wellbeing’, 96; national accounts standards, 32; Statistical Commission, 111; Statistics Division, 91; System of National Accounts (UNSNA), 109–10; UNESCO, 96, 131 unemployment ‘protective punishment’, 153 University of British Columbia, 91 University of Greece, 139 University of Kansas, 81 University of Leicester, 96 University of Pennsylvania, 24 University of Southern California, 67 University of Surrey, 135 University of Sussex, 77 USA (United States of America), 96, 154, 157; Bureau of Labour Statistics, 63; business political influence, 44; complementary GDP task force, 102; Congress, 38, 103; defence budget, 18, 33; Department of Commerce, see above; Department of Health and Human Sciences, 47; Energy Information Administration, 125; Federal Reserve Board, 43; home foreclosures, 1; House Appropriations Committee, 79; housing market collapse, 45; industrial lobbies, 84; National Academy of Sciences, 93; National Bureau of Economic Research (NBER), 24–8, 31; Planning Committee of the War Production Board, 28; reports of GDP upside bias, 64; Senate, 63; stock market crash, 9; transition philosophy, 128; university Economics departments, 26; USSR proxy war, 10; USSR view of GNP, 35; war production, 29; World War II consumption increase, 31–2 USSR (Union of Soviet Socialist Republics): Central Statistical Office, 35; CIA economy analysis, 38; fall of, 154; glasnost, 39; measures of material product, 36; statistical methodology change, 40; sustainability gauging, 37; US discredited statistics, 153 ‘value of the people’, 21 ‘value-added approach’, GDP, Venezuela, capital production failure, 98 Via Campesina, 134 Victor, Peter, 132 ‘victory gardens’, Second World War, 128 Volcker, Paul A., 48 Wackernagel, Mathis, 91 Wales, ecological footprint, 92 Wang Jinnan, 107 War Production Board, USA, 29 Warsaw pact, 37 Washington, 150 well-being, 83, 89; ‘humanized’ statistics, 114; measures of ‘subjective’, 47; resource consumption non-correlated, 92 Western nations, male suicide increase, 68 World Health Organization, 96 ‘willingness to pay’ principle, 116 wishful thinking, economists, 147 work: burden amplified, 159; work–life balance, 159 World Bank, 18, 43, 83, 96, 104, 107–9, 111, 150; basic development indicators, 97; Wealth Accounting and Valuation of Ecosystem Services, 116; Where is the Wealth of Nations?, 98 World Commission on Environment and Development, 84 World Energy Outlook 2010, 125 World Meteorological Organization, 84 World Resources Institute, 74 York University, 131 Your Better Life Index, 102 ... can be viewed at his blog, www.globalreboot.org GROSS DOMESTIC PROBLEM The politics behind the world’s most powerful number LORENZO FIORAMONTI Zed Books LONDON | NEW YORK To my wife,... wife, Janine, and my son, Damiano, who make my life worthwhile Gross Domestic Problem: The Politics behind the World’s Most Powerful Number was first published in 2013 by Zed Books Ltd, Cynthia... the profound rivalry between the two ‘blocs’ just as much as the arms race This magical number was invented in the 1930s to help America come out of the Great Depression The then president, the