Tag Archives: Barack Obama

Limits to Growth Part I: GDP

 

SONY DSCWith President Obama’s new green policy that seeks to limit carbon emissions there has been and will continue to be heated discussions about the impact this law will have one economic growth in the U.S.

Inspired by these debates the next several posts will discuss the limits of growth, steady state economics, and how we measure growth.

GDP (gross domestic product) is a measure of economic activity which is narrowly understood however this does not stop politicians and policy makers from making welfare decisions and comparisons based on this data.  The basic argument goes like this: GDP is a proxy measurement of how much people can consume and consumption is a proxy measurement of well-being.  We therefore use GDP per capita for comparing welfare between nations and an increase in GDP as an indicator of social progress within a society.  This is a compelling case and we are used to hearing this from figures in authority and the media but it is misleading to think that a higher GDP leads to better social welfare.

GDP is computed as the sum of all end-use goods and services made in an economy during a period of time weighted by their market prices.  Too illustrate if Pakistan began building war drones and hired many people for this skilled manufacturing their GDP would increase. However, would this necessarily make the people of Pakistan better off especially considering that many of those drones will be used on other Pakistanis in the northern region?  Simply put this proxy measure does not measure happiness or well-being it only measures what we can consume. From that definition its GDP is a pretty narrow measure of our daily lives and should be taken to be just that…limited. can-stock-photo_csp10758311

According to Richard Easterlin people do not become happier when they become richer and this has become known as the Easterlin Paradox.  There are many possibilities for why this is true including the idea that a threshold of affluence vs leisure time exists.  If you do not have time to enjoy the fruits of your labor will they truly make you happier? Has this new wealth increased your well-being? Or as Fred Hirsch suggests there could be a correlation between increasing affluence and increasing competition for “positional goods” that can be bought by anyone but not always everyone. This idea creates a consistent need to buy more and more.

Furthermore GDP does not take into account the limits of natural capital.  Since natural ecosystems provide resources like coal and oil and there are limits to them both in quantity and in negative impact these must be considered in the overall measurement.  This is called “greening GDP,” where we subtract the negative impacts from the total GDP. For instance the cost of the BP oil spill in man hours, clean up costs, oil revenues lost and negative effect on wildlife which in turn affects the lives of the locals would all be subtracted from the GDP of the U.S.

Even by measuring some negative outcomes of a consumer based economy as mentioned above GDP does not give us a clear look at well-being.  There have been several experiments that have attempted to tackle that issue such as the Gross National Happiness used in Bhutan. While this one is highly qualitative and has some issues it is a thoughtful approach by a government to measure their people’s well-being. Another is the Genuine Progress Indicator (GPI) which uses a long list of indicators to measure well-being ranging from air quality, crime, leisure time and personal wealth.  GPI also boils all those indicators into one neat number which economists love.

As an economist I’m not saying that we should abandon GDP altogether only that it should be taken as a small part of a larger picture.  A measure of a small piece in a large puzzle that is human well-being.  With that in mind, when politicians threaten to block legislation meant to protect the environment because it could hurt our GDP you should ask whether a high GDP is worth it.  In an economy where we have been taught to consume, GDP not only doesn’t reflect well-being…it could harm it.

 

 

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Syria: Military Intervention or Realist Chess Game?

I’m a little late to the party, but I feel the discussion on Obama’s strategy in Syria could use some revising. The death toll in Syria has reached 100,000 and 1.6 million refugees have fled the area. The Obama Administration has evidence of nerve gas used by Assad.  Obama has even stated the Administration will provide weapons to the opposition forces. But to what end?

Arguments abound in the media, both for and against, in predictable points of view for our involvement in Syria. Citing the awful death toll,  the hard drawn line of the use of chemical weapons, and, on the other hand, the dangers of military intervention in such a mission.  While these are all valid arguments, I feel they miss the larger point and therefore the real goal of the Obama White House.   

Obama has long been an adherent to Realism the political theory where states primary goal is the obtainment of resources, act on self interest through military build up, often leading to a security dilemma.   

On paper, Obama has a very clear goal — to support a rebel victory that results in Assad’s removal. He believes that opposition forces are the best way to go about achieving that goal.  He may also be attempting to balance the power in the region with Iran and drain Russia and Hezbollah of resources. In a classic Realism when your enemy gains, you accelerate supplies; when your enemy faces loses, ease back gain.    

If Syria has become a Realist chess board then Obama will have accept some rather dubious claims including that arming the opposition forces will:

1)   Halt the regime’s gains and give the forces a fighting chance

2)   Win influence over the groups and the people they defend

3)   Balance the power that Iran, Al Nursa or any Sunni forces may have gained

4)   Unite the more secular forces and drive out Al Qaeda backed groups

What’s wrong with these points? A few things…

· The Syrian Army uses attack helicopters and tanks to bombard towns from far away so small arms will not help the Syrian forces make gains nor improve defenses

·Interventions like this tend the prolong conflict  

·Research shows that external support generally fractures groups 

·No research has ever proven that a patron or country can reliably “buy” influence from a group or groups 

 

In order for Iran to lose this chess match, the rebels have to make political and military gains.  For Iran, a victory would just be avoiding an outright U.S. win.  If Obama’s gamble fails it will only reinforce just how weak U.S. influence in the region has become. And then, checkmate.    

Despite the tragedy that is the loss of life, culture and history of Syria, a greater one awaits the Syria population if this power game continues.  They will not be collateral damage. They will not even be pawns. They simply will be the board on which this game of power struggle continues.  

Many commentators, including David Brooks, have made comparisons to a Post 9-11 Iraq. This is folly. Instead, I recommend we view this situation as Afghanistan in the 1980s where President Reagan made the decision to arm opposition forces to combat the Soviet Union. A choice that birthed some the same forces we face in Syria today in the form of Al Nursa and Al Qaeda.

Limiting the discussion of whether or not to intervene not only misses the underlying issue but is short sighted.  Why limit your tools to only rooks and bishops that attack in straight predictable lines?  Predictable military strategies result in a lot of time being wasted attacking and defending positions instead of looking at all the players on the board and seeing what is happening.

Acknowledging where this great chess game is going and getting the players to sit down for diplomatic talks requires a more flexible strategy with more flexible players. If Obama wants to reach any end game in Syria he needs to release his knights. Jump over near by obstacles and get to the heart of the matter. U.S. foreign policy has been here before, a diplomatic response would go a long way improve relations with Gulf States and U.S. standing.