GDP growth as a measure of economic well-being tends to serve the interests of Big Business rather than than ordinary people, writes Anil Netto.
In mainstream economic thinking, there are a few fundamental assumptions that are rarely questioned – and they form the basis of economic theory. These assumptions have been so widely disseminated and taught that very few even think of alternatives.
The idea behind economist Adam Smith’s ‘Invisible Hand’ is that the individual self-interest of ordinary people drives not only themselves to beneficial behaviour but is capable of allocating resources efficiently in the market.
The problem is that self-interest is usually driven by greed and the quest for ever-increasing profits. For a corporation, this self interest means its primary objectives are profit maximisation and maximisation of shareholder wealth – no matter how much harm it causes society or the environment. In fact, a corporation will often do its utmost to achieve these objectives – sometimes over-riding all other considerations even if they cause harm.
The problem is the corporation is regarded as a separate legal entity under the law – thus absolving directors and shareholders from any personal responsibility for any harm caused.
What if the average large corporation was a person? How would its personality be described? Unlike a human person, a corporation does not suffer guilt for the harm it causes – whether it is retrenching workers, degrading the environment or depleting natural resources. An outstanding Canadian documentary on globalisation ‘The Corporation’, after showing corporations at work in various exploitative settings, described their personality as “inherently amoral, callous and deceitful” (according to one review), adding that they often ignore social and legal standards, without any trace of guilt. These are the traits of a clinical psychopath, the film noted.
Thus the idea that the government should stay out of the market and leave it to Big Business to drive the economy is reckless. You wouldn’t want the economy to be run by psychopaths with no social conscience, would you?
Closely related to profit maximisation is the notion of economic growth, which measures the growth rate in the total value of goods and services produced by a country from period to period.
A country with high economic growth is often envied. But that economic growth can mask a host of problems:
- rising income inequality (as those with Capital make ever-larger profits);
- the breakdown of the social fabric (including higher crime rates) triggered by the rising inequality;
- environmental devastation and depletion of natural resources; and
- not least in this day and age, higher greenhouse gas emissions, contributing to global warming.
It is not surprising that economic growth is the dominant measure used. More goods and services translates to greater consumerism and accumulation, and that is only good for the profits of the corporations (and the wealth of their shareholders). It promotes the notion of self-interest and greed. In the end, we see environmental degradation, resource depletion and social ills, even as the economy “grows”.
That is why ‘economic growth’ as a the main measure of economic well-being has to be challenged. There is no reason why this measure has to be often used unthinkingly by political leaders, the media and even civil society activists.
Why not have a measure that looks at a combination of income distribution, the quality of health care, education and housing, and the well-being of the environment? The idea is to come up with a measure that indicates how sustainable and just the economy is – and not how it serves the interests of the major corporations. The time has come to look at alternatives to promoting a more sustainable economy.
Aliran treasurer Anil Netto once worked in the corporate sector and observed first-hand the ‘psychopaths on the loose’.