Gallery

A little perspective on GDP growth or does policy matter?

These are odd times.  Not one policy seems to get floated these days which does not include in the tag line that it will be good for economic growth.  And it is not just tax cuts for the rich or corporations which get rationalized as such: everything from eating organic to getting a post secondary education are all said to be good for economic growth.  What all these claims have in common is that they are patently false if real GDP per capita growth rates is anything to go by(1).  What is more, in almost every advanced capitalist country the obligatory policy meme has been that policy X will be good for GDP growth.  The reality is that since the 1960s it would appear nothing has been particularly good for GDP growth from financial liberalization to the increasing consumption of soy “milk”*.  The hard facts are illustrated in this (below) graph of real GDP growth per capita:

I do not know about you but does anything strike you as patently obvious about the trend rate of growth for these advanced capitalist countries?  Anything, anything at all.  Well in case you missed what they all share in common, with perhaps the exception of the UK, is that it has been a toboggan run since the 60s. Sure the Netherlands gets a bump and then reverts to mean; and sure the UK runs horizontal for a time; and sure Japan descends from mount Fujimori making Whistler look like a bunny hill but the overall undeniable fact is that things have been going down hill since the 60s.  That is, despite all the fan fare behind deregulation, privatisation, free trade, corporate income tax cuts, bicycle helmets, tofu, gay liberation and the Prius; in terms of real GDP per capita growth things have been going down hill.

Look at Canada.  For all the bluster and loud pronouncements about which policy and what size of government was going to tank or reinvigorate the economy the reality is that the last five decades have been characterized by ever lower real GDP growth rates regardless of who was in power and what policies were pursued.  Does this mean policy does not matter?  Of course not.  Policy matters tremendously.  Good policies alleviate poverty which is good for public health and the quality of life of the poor; a strong system of unemployment insurance provides a bridging loan and helps match workers to jobs for which they are qualified(2); a good education, like a garden, improves the quality of life and the autonomy of citizens; exercise helps us keep our form and tax public health care less.

All true.  But do any of those things necessarily boost GDP growth per capita?  And if they don’t maybe we need to stop trying to justify them on those terms and justify them on their merits. If policies such as privatisation, free trade, tax cuts for the rich and corporation cannot be proven to increase GDP per capita growth, which they can’t, then let their boosters provide an alternate rationale.  I am all ears.

*Bean juice from a cow?

1. Of course if we make the right assumptions we can claim that in absence of all of these things GDP growth would have been worse.

2.Skill mismatching is rarely considered by those advocating shortening search times.

Advertisements

2 thoughts on “A little perspective on GDP growth or does policy matter?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s