THE CULT OF GROWTH
1See Pankaj Mishra, Age of Anger, Farrar, Straus and Giroux, 2017; Ed Luce, The Retreat of Western Liberalism, Little, Brown, 2017.
2Borrowed from Diane Coyle, GDP: A Brief But Affectionate History, Princeton University Press, 2014, p. 124.
3I’ve always attributed this phrase to Bill Emmott, former editor of The Economist. Whether or not he invented it, he uses it frequently.
4 ‘Chinese Factory Worker Can’t Believe the Shit He Makes for Americans’, Onion, 15 June 2005: www.theonion.com
5‘The 30 Most Insane Things for Sale in Skymall’, Buzzfeed, 10 July 2013: www.buzzfeed.com
6Joseph Stiglitz, The Price of Inequality, W. W. Norton & Company, 2012, p. xii.
7Sarah F. Brosnan and Frans B. M. de Waal, ‘Monkeys Reject Unequal Pay’, Nature, Vol. 425, September 2003.
8David Card, Alexandre Mas, Enrico Moretti, and Emmanuel Saez, ‘Inequality at Work: The Effect of Peer Salaries on Job Satisfaction’, November 2011: www.princeton.edu
9‘The Cost of Living in Jane Austen’s England’: www.janeausten.co.uk
10Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi, Mis-measuring Our Lives: Why GDP Doesn’t Add Up, The New Press, 2010, p. ix.
11Walter Berglund, the lawyer and environmentalist in Jonathan Franzen’s novel Freedom, expresses similar ideas.
12In nominal terms Japan’s economy hardly budged from 1990 to 2017. In real per-capita terms it performed much in line with most Western economies by virtue of falling prices and a dwindling population.
13It is true that suicide rates were high.
CHAPTER 1 KUZNETS’ MONSTER
1These are the findings of economic historian Angus Maddison. Only with the Great Depression, triggered by the Industrial Revolution in Western Europe, did China and India’s share of the global economy fall sharply, reaching a nadir of around 9 per cent in 1950. Today it has risen to around 30 per cent. See ‘The Economic History of the Last 2000 Years in 1 Little Graph’: www.theatlantic.com
2Benjamin Mitra-Kahn, ‘Redefining the Economy: how the “economy” was invented 1620’, unpublished doctoral thesis, City University London, p. 18.
3Ibid. These ideas are all covered in Benjamin Mitra-Kahn’s brilliant thesis.
4There had been many earlier attempts to survey a country’s assets, including the Domesday Book of 1086. However, unlike Petty, who tried to incorporate flows of money into his calculations, earlier efforts had concentrated almost exclusively on assets, mainly land.
5Mitra-Kahn, ‘Redefining the Economy’, p. 4.
6Ibid., p. 24.
7The Kuznets curve posited the theory that, as an economy advances, inequality first rises before subsequently falling. The theory has come under significant criticism in an age of inequality, with some economists saying they see no statistical evidence for Kuznets’ theory.
8For a good description of Kuznets’ character and methods see Robert William Fogel, Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics, University of Chicago Press, 2013.
9Ehsan Masood, The Great Invention, Saqi Books, 2014, p. 15.
10Kuznets originally conceived of gross national product rather than gross domestic product. The latter calculates production inside a nation’s borders. Kuznets’ measure counted what was produced by US companies and individuals, whether at home or abroad.
11Dirk Philipsen, The Little Big Number: How GDP Came to Rule the World and What to Do About It, Princeton University Press, 2015, p. 99.
12Mitra-Kahn, ‘Redefining the Economy’, p. 14.
13Ibid., p. 27.
14James Lacey, Keep From All Thoughtful Men: How US Economists Won World War II, Naval Institute Press, 2011.
15Mitra-Kahn, ‘Redefining the Economy’, p. 210.
16Ibid., p. 237.
17Masood, The Great Invention, p. 31.
18Quoted in Mitra-Kahn, ‘Redefining the Economy’, p. 239–40.
CHAPTER 2 THE WAGES OF SIN
1The decision was taken in 1995 under Eurostat’s updated European System of National and Regional Accounts 95 (ESA95).
2That is because the amount each member country pays in the European Union is determined by the size of its economy, measured by gross national income, or GNI, a close cousin of GDP. Of course, this was before Britain took the decision in a referendum to leave the European Union altogether.
3‘I think you’ll find this annoyingly dull,’ said Gareth Powell of the UK Office for National Statistics when quizzed on the methodology. ‘They did most of the work in the office using already published data.’ Telephone interview with author, March 2016.
4For a detailed account of their calculations, see Joshua Abramsky and Steve Drew, ‘Changes to National Accounts: Inclusion of Illegal Drugs and Prostitution in the UK National Accounts’, UK Office for National Statistics, 29 May 2014.
5Their figures excluded male prostitutes, who amount to 42 per cent of all UK sex workers: www.theguardian.com
6See later in this chapter for more detail on value-added.
7David Lang, ‘Percentage of GDP is a Strange Benchmark for a Defence Budget’, Letter to Financial Times, 3 March 2015: www.ft.com
10‘Australia Carbon Laws Fail to Pass Senate’, Financial Times, 2 December 2009: www.ft.com
11Simon Briscoe, ‘Britons Highly Sceptical Over Data’, Financial Times, 29 December 2009.
12Kate Allen and Chris Giles, ‘Statisticians Face Hard Facts’, Financial Times, 5 September 2012.
13Estimate from Darren Morgan, interview with author, London, June 2016.
14Net domestic product would deduct the wear and tear of the machinery that makes the goods, something known as depreciation. Working out depreciation is not easy and so gross domestic product is the preferred measure.
15The production method is sometimes called the output method.
16This example is used by Ha-Joon Chang in Economics: The User’s Guide, Bloomsbury Press, New York, 2015, p. 212.
17It is often rendered C + I + G + (X - M) where C is household spending, I is business investment, G is government spending, X is exports of goods and services and M is imports of goods and services.
18Author interview with Umair Haque, London, June 2016.
19In the now more frequent case of deflation they do the same if prices fall.
CHAPTER 3 THE GOOD, THE BAD AND THE INVISIBLE
1Janice’s real name was not used in Steven Brill’s superb exposé, ‘The Bitter Pill: Why Medical Bills are Killing US’, Time Magazine, 20 February 2013: www.uta.edu
2These details are taken from ibid.
3Figures from World Health Organisation for 2014.
4World Health Organisation 2015.
5Bryan Harris, ‘South Korea Set to Take Japan’s Life Expectancy Crown’, Financial Times, 22 February 2017: www.ft.com
6Chris Conover, ‘5 Myths in Steven Brill’s Opus on Health Costs’, Forbes, 4 March 2014: www.forbes.com
7According to the Center for Responsive Politics, quoted in Steven Brill, ‘The Bitter Pill’.
8These numbers are taken from ibid.
9In fact Japan’s economy had not been performing quite as badly as commonly assumed. Nominal GDP had stalled, but adjusted for prices and a shrinking population, real per-capita growth in Japan was reasonable.
10Leo Lewis, ‘Japan, Women in the Workforce’, Financial Times, 6 July 2015: www.ft.com
11Sarah O’Connor, ‘America’s Jobs for the Boys Is Just Half the Employment Story’, Financial Times, 7 February 2017.
12This example was provided by Angus Deaton during a conversation with the author.
13Katrine Marçal, Who Cooked Adam Smith’s Dinner?: A Story About Women and Economics, Portobello, 2015.
14Ibid.
15Jonathan Franzen, The Corrections, HarperCollins, 2013, p. 288.
16David Pilling, ‘No Formula Can Better a Mother’s Milk’, Financial Times, 6 March 2013.
17Julie P. Smith, ‘Lost Milk? Counting the Economic Value of Breastmilk in GDP’: www.researchgate.net
19Benjamin Bridgman et al., ‘Accounting for Household Production in the National Accounts, 1965–2010’, Survey of Current Business, Vol. 92, May 2012.
20‘Household Satellite Account (Experimental) Methodology’, UK Office for National Statistics, April 2002.
21‘Unpaid Household Production’, UK Office for National Statistics, January 2004.
22The list includes Australia, Canada, Finland, Germany, Hungary, Mexico and Nepal.
CHAPTER 4 TOO MUCH OF A GOOD THING
1Adapted from John Kay, Other People’s Money, Public Affairs, 2015, p. 3. This is a brilliant book on financialisation.
2Kimiko de Freytas-Tamura, ‘Secret to Iceland’s Tourism Boom? A Financial Crash and a Volcanic Eruption’, New York Times, 16 November 2016: www.nytimes.com
3Ibid.
4Richard Milne, ‘Olafur Hauksson, The Man Who Jailed Iceland’s Bankers, Financial Times, 9 December 2016.
5Michael Lewis, Boomerang, W. W. Norton & Company, 2011.
6Ibid.
7Ibid., p. 17.
8David Ibison and Gillian Tett, ‘Iceland Feels the Heat After Years of Growth’, Financial Times, 24 November 2007.
9Kate Burgess, Tom Braithwaite and Sarah O’Connor, ‘A Cruel Wind’, Financial Times, 11 October 2008.
10Ibid.
11Author Matt Taibbi’s delicious description of Goldman Sachs.
12Andrew Haldane, Simon Brennan and Vasileios Madouros, ‘What is the contribution of the financial sector: Miracle or mirage?’, Chapter 2 in The Future of Finance, The LSE Report, London School of Economics and Political Science, 2010.
13According to the Banker magazine, reported in ibid.
14China, like other Asian success stories before it, conducted what is known as financial repression by siphoning up savings and distributing them to favoured industries through the state-owned banking sector. For years China ran huge current account surpluses, investing the money in US treasuries and the sovereign debt of other Western countries.
15Kay, Other People’s Money, p. 1. It is worth noting that, in the upside-down world of banking, assets are not quite what you might expect. They are the money the bank has lent out to other people. They are assets because theoretically the banks can get them back one day. Liabilities, on the other hand, are the monies deposited with a bank, which one day it will have to give back.
16Andrew Haldane, ‘The $100 Billion Question’, 2010: www.bankofengland.co.uk
17Haldane, Brennan and Madouros, ‘What is the contribution of the financial sector’, p. 92.
18Diane Coyle, GDP: A Brief But Affectionate History, Princeton University Press, p. 99.
19Haldane, Brennan and Madouros, ‘What is the contribution of the financial sector’, p. 88.
20Coyle, GDP, p. 102.
CHAPTER 5 THE INTERNET STOLE MY GDP
1Sir Charles Bean, ‘Independent Review of UK Economic Statistics’, Cabinet Office, HM Treasury, March 2016.
2This does not appear in GDP. The ad fees are added to the revenue of the site supplying advertising space, but are deducted from the revenue of the advertising company as an expense. From an accounting perspective, they cancel each other out.
3Rwanda actually wants to ban the import of second-hand clothes so that it can build up its own clothing industry.
4The method the commission employed is called hedonic accounting, which seeks to take into account questions of quality.
5Brent Moulton, who as head researcher for the Bureau of Labor Statistics worked on the Boskin Commission, told me the exercise was very political. That was because many state benefits were linked to inflation. If inflation were lower, then benefits would be lower too.
6For a discussion see Bean, ‘Independent Review of UK Economic Statistics’.
7Net Benefit, The Economist, 9 March 2013: www.economist.com
8See Bean, ‘Independent Review of UK Economic Statistics’, p. 84.
9Interview with author, September 2013. See also David Pilling, ‘Lunch with the FT: Ha-Joon Chang’, 29 November 2013: www.ft.com
10Murad Ahmed, ‘Your Robot Doctor Will See You Now’, Financial Times, 13 January 2016: www.ft.com
11‘Why the Japanese Economy is Not Growing: Micro-barriers to Productivity Growth’, McKinsey Global Institute, July 2000.
12This hilarious example is taken from Rory Sutherland, ‘Life Lessons from an Ad Man’, TED Talk, July 2009: www.ted.com
13From a telephone interview with the former head of the Bureau of Economic Analysis, Steve Landefeld, or Mr GDP as I like to call him, February 2017.
14Adam Sherwin, ‘Welsh Town Moves Offshore to Avoid Tax on Local Business’, Independent, 10 November 2015.
15Brian Czech, Supply Shock, New Society Publishers, 2013, p. 26.
16If we did that though we would also have to acknowledge that much of the pollution we currently attribute to countries like China is actually pollution caused by Western companies who just happen to be operating in China.
17Gordon Mathews, Ghetto at the Center of the World: Chungking Mansions, University of Chicago Press, 2011, p. 109.
CHAPTER 6 WHAT’S WRONG WITH THE AVERAGE JOE
1African Americans were not actually plotted on the graph, but the rate of decline of their deaths was actually higher, at 2.6 per cent a year over the 1999–2013 period.
2Anne Case and Angus Deaton, ‘Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century’, PNAS, September 2015.
3IMF in current prices, accessed from knoema.com
4According to the US Bureau of Economic Analysis, GDP in constant 2009 prices was $16.5 trillion at the end of 2015 against $12.7 trillion at the end of 2000: www.multpl.com
5In 1970 the size of the US economy was $4.7 trillion, which had risen to $16.5 trillion by 2015 (US Bureau of Economic Analysis, GDP in constant 2009 prices). These figures do not account for population increase. In 2015 the US population was 321 million against 205 million in 1970, according to the US Census Bureau.
6Edward Luce, ‘The Life and Death of Trumpian America’, Financial Times, 9 October 2016.
7‘The Decline of the Labour Share of Income’, IMF World Economic Outlook, cited in a blog on Bruegel: bruegel.org. As the post points out, the share has recovered marginally since the global financial crisis.
8‘Mortality and Morbidity in 21st Century America’, Brookings Institution, 23 March 2017.
9Jeff Guo, ‘How Dare You Work on Whites’, 6 April 2017: www.washingtonpost.com
10‘For Most Workers, Real Wages Have Barely Budged for Decades’, Pew Research Center, 9 October 2014: www.pewresearch.org
11Edward Luce, ‘The New Class War in America’, Financial Times, 20 March 2016: www.ft.com
12Angus Deaton, The Great Escape, Princeton University Press, 2013.
13Ibid.
14Albert Hirschman, ‘The changing tolerance for income inequality in the course of economic development’, World Development, Vol. I Issue 12, December 1973. Angus Deaton alerted me to this idea: www.sciencedirect.com
15Angus Deaton in conversation with the author, July 2016.
16Martin Wolf, review of Branko Milanovic, Global Inequality: A New Approach for the Age of Globalisation, Harvard University Press, 2016, in Financial Times, 14 April 2016.
17Inequality of wealth (see Chapter 9) is almost always higher than inequality of income because advantages and disadvantages accumulate over time.
18Milanovic, Global Inequality.
19Milanovic calls this citizenship rent.
20Martin Wolf, review of Milanovic, Global Inequality, in Financial Times, 14 April 2016.
21See Edward Luce, The Retreat of Western Liberalism, Little, Brown, 2017.
22‘Income Inequality and Poverty Rising in Most OECD Countries’, 21 October 2008: www.oecd.org
23Denmark and Australia were examples of countries with high social mobility, the report said.
24The curve is based on the work of labour economist Miles Corak and was popularised by Alan Krueger, former chairman of the Council of Economic Advisers.
25Figure 1. Key indicators on the distribution of household disposable income and poverty, 2007, 2012 and 2014 or most recent year: www.oecd.org
26Larry Summers told me in a telephone interview, March 2017, ‘I think the statistics are wrong because I don’t think they take nearly enough account of quality improvements of various kinds. We need to make adjustments for quality increases.’
27Chrystia Freeland, ‘The Rise of the New Global Super-Rich’, TED Talk, 2013: www.ted.com
CHAPTER 7 ELEPHANTS AND RHUBARB
1‘Bright Lights, Big Cities, Measuring National and Subnational Economic Growth in Africa from Outer Space with an Application in Kenya and Rwanda’, Policy Research Working Paper WPS7461, World Bank Group, 2015.
2Jerven, Poor Numbers, Cornell University Press, 2013, pp. 17–20.
3Ibid., p. x.
4David Pilling, ‘In Africa, the numbers game matters’, Financial Times, 2 March 2016.
5Jerven, Poor Numbers.
6See ‘If the GDP Is Up, Why Is America Down? Atlantic, October 1995.
7GDP per capita in PPP terms, IMF for 2015. See knoema.com
8Jeffrey Gettleman, ‘As Grasslands Dwindle, Kenya’s Shepherds Seek Urban Pastures’, New York Times, 14 November 2016.
9The study found that ruminants contributed 319 billion shillings to the economy versus only 128 billion shillings in the official GDP statistics. ‘The Contribution of Livestock to the Kenyan Economy’, Intergovernmental Authority on Development Livestock Policy Initiative Working Paper 03-11, p. 6.
10Miles Morland, ‘Notes from Africa 2: Kioskenomics’, private note to his clients, June 2011.
11Telephone interview with author, February 2016.
12Jamil Anderlini and David Pilling, ‘China Tried to Undermine Economic Report Showing its Ascendancy’, Financial Times, 1 May 2015.
13Jerven, Poor Numbers, p 57.
14Remarks to author, February 2016.
15Based on author interview with officials from Liberia Institute of Statistics and Geo-information, Monrovia, March 2016.
CHAPTER 8 GROWTHMANSHIP
1World Data Atlas: knoema.com
2Akash Kapur, India Becoming, Riverhead Books, 2012.
3International Monetary Fund figures for 2015, adjusted for local prices. In dollar terms the difference is even starker: South Korea is eighteen times richer per capita.
4Jagdish Bhagwati and Arvind Panagariya, Why Growth Matters, Council on Foreign Relations, 2013, p. xviii.
5Partly based on various personal conversations with Jagdish Bhagwati, most recently in New York in March 2017.
6Cited in Bhagwati and Panagariya, Why Growth Matters, p. 23.
7That owed as much to China slowing down as to India accelerating. In fact India’s growth also slowed somewhat, and the headline number may be flattered by a 2015 rebasing of GDP.
8See Amartya Sen, Development as Freedom, Anchor Books, 2000, p. 8.
9Ibid., p. 3.
10James Lamont, ‘High Growth Fails to Feed India’s Hungry’, Financial Times, 22 December 2010.
11Jagdish Bhagwati disputes many of Sen’s figures on malnutrition. See Bhagwati and Panagariya, Why Growth Matters.
12‘Indian Tycoon Hosts £59m Wedding For Daughter Amid Cash Crunch’, Guardian, 16 November 2016: www.theguardian.com
13Amartya Sen, ‘Bangladesh Ahead of India in Social Indicators’, Daily Star, 13 February 2015: www.thedailystar.net
14David Pilling, ‘India’s Congress Party Has Done Itself Out of a Job’, Financial Times, 7 May 2014: www.ft.com
15Rajiv Kumar of the Centre for Policy Research, Delhi.
16Sam Roberts, ‘Hans Rosling, Swedish Doctor and Pop-Star Statistician Dies at 68’, New York Times, 9 February 2017.
17He objected because he said his observations were based merely on data.
18When I asked him about the other 20 per cent, he said, ‘That’s why we have public health. That’s the reason for my existence.’
19There is at least one country that breaks Rosling’s rule: Equatorial Guinea, where the elite has grown fat on oil money courtesy of Exxon Mobil, has a GDP per capita of $30,000 adjusted for local prices. But two-thirds of its population live in abject poverty, and the infant mortality rate, at 67 per 1,000, is higher than in Eritrea, a country 20 times poorer as measured by GDP.
20The World Bank defines lower-middle-income countries as those with a per-capita gross national income of between $1,026 and $4,035, calculated by the Atlas method, which tries to smooth out differences between countries caused by exchange-rate fluctuations. Upper-middle-income countries are defined as those with a GNI per capita of between $4,036 and $12,475.
21These numbers come from Rosling.
22‘Why Ethiopian Women Are Having Fewer Children Than Their Mothers’, BBC, 6 November 2015: www.bbc.com/news
CHAPTER 9 BLACK POWER, GREEN POWER
1Chris Buckley 储百亮 (ChuBailiang).
2Edward Wong, ‘Air Pollution Linked to 1.2 Million Premature Deaths in China’, New York Times, 1 April 2013: www.nytimes.com
3Javier Hernandez, ‘Greed, Injustice and Decadence: What 5 Scenes From a Hit TV Show Say About China’, New York Times, 27 May 2017.
4See Frank Dikötter, Mao’s Great Famine, Bloomsbury Publishing, 2010.
5Li Keqiang, who went on to become Chinese premier, warned in 2007 that Chinese GDP figures should not be taken too seriously. He recommended looking at three other numbers: electricity production, rail cargo and bank loans. See David Pilling, ‘Chinese Economic Facts and Fakes Can Be Hard to Tell Apart’, Financial Times, 16 September 2015.
6Paul A. Samuelson, Economics, McGraw-Hill Book Company, 1948, p. 10.
7Lorenzo Fioramonti, Gross Domestic Problem, Zed Books, 2013, p. 151.
8Leo Lewis, Tom Mitchell and Yuan Yang, ‘Is China’s Economy Turning Japanese?’, Financial Times, 28 May 2017.
9Jonathan Watts, ‘China’s Green Economist Stirring a Shift Away from GDP’, Guardian, 16 September 2011: www.theguardian.com
10Ibid.
11Geoff Dyer, ‘Chinese Algae Spreads to Tourist Resorts’, Financial Times, 12 July 2008: www.ft.com
12Jonathan Watts, When a Billion Chinese Jump, Simon & Schuster, 2010, Chapter 11.
13Jared Diamond has argued that the Rwandan genocide of 1994 had a Malthusian element of overpopulation.
14Pilita Clark, ‘The Big Green Bang: How Renewable Energy Became Unstoppable’, Financial Times, 18 May 2017.
15Aibing Guo, ‘China Says It’s Going to Use More Coal, With Capacity Set to Grow 19%’, Bloomberg, 7 November 2016: www.bloomberg.com
16Yuan Yang, ‘China’s Air Pollution Lifts in Coastal Cities, But Drifts Inland’, Financial Times, 20 April 2016.
17Yuan Yang, ‘China Carbon Dioxide Levels May Be Falling, Says LSE Study’, Financial Times, 7 March 2016.
18Gabriel Wildau, ‘Small Chinese Cities Steer away from GDP as Measure of Success’, Financial Times, 13 August 2014.
19Arthur Beesley et al., ‘China and EU Offer Sharp Contrast with US on Climate Change’, Financial Times, 1 June 2017.
CHAPTER 10 WEALTH
1This is something Martin Wolf of the Financial Times told me. Personal conversation, September 2016, London.
2For companies there’s even a third set of accounts, called the cash-flow statement, which measures the actual cash position of the company – the liquidity at its disposal – and is thus different again from the profit and loss accounts.
3Many advanced economies do measure what is known as produced capital, the stock of physical assets such as roads, buildings and ports.
4Partha Dasgupta, ‘Getting India Wrong’, Prospect Magazine, August 2013.
5This example comes from a conversation with Partha Dasgupta, September 2016.
6Partha Dasgupta, ‘The Nature of Economic Development and the Economic Development of Nature’, Economic and Political Weekly, Vol. 48 Issue 51, 21 December 2013.
7This account is taken from Jared Diamond’s article ‘Easter’s End’ in Discover Magazine, August 1995: courses.biology.utah.edu
8Ibid.
9Author interview with Partha Dasgupta.
CHAPTER 11 A MODERN DOMESDAY
2Dieter Helm, Natural Capital, Yale University Press, 2015, p. 96.
3Robert Costanza et al., ‘The Value of the World’s Ecosystem Services and Natural Capital’, Nature, May 1997: www.nature.com
4Partly based on a discussion with Partha Dasgupta, September 2016.
5See ftp://131.252.97.79/Transfer/ES_Pubs/ESVal/es_val_critiques/responseToPearce_byCostanza.pdf.
6Helm, Natural Capital, p. 8.
7Former Norwegian prime minister Gro Harlem Brundtland was given no less a task by the United Nations than convincing the world’s governments to commit to a form of growth that did not destroy the planet. In 1987 the commission released its report, ‘Our Common Future’.
8The same law could be applied to other forms of capital, including infrastructure and even institutions.
9See Helm, Natural Capital, pp. 99–118.
10In practice such theories run into the problem of the ‘tragedy of the commons’, whereby everyone extracts as much as possible of a resource because the alternative is that someone else will.
11Agnes Kalibata, president of the Alliance for a Green Revolution in Africa, says climate change is the single biggest challenge for Africa’s impoverished farmers, who are almost entirely dependent on rain-fed agriculture in an era when rainfall has never been so unpredictable. Interview with author, Nairobi, April 2017.
12William Davies, The Happiness Industry, Verso, 2015, p. 65.
13Andrew Simms, ‘It’s the Economy That Needs to Be Integrated into the Environment – Not the Other Way Around’, Guardian, 14 June 2016: www.theguardian.com
14This is the brilliant idea of Andrew Simms in ibid.
15George Monbiot, ‘Can You Put a Price on the Beauty of the Natural World?’, Guardian, 22 April 2014: www.theguardian.com
16See the Global Footprint Network website: www.footprintnetwork.org.
18Interview with author, March 2017.
19These ideas are based on a discussion with Martin Wolf, my esteemed colleague at the Financial Times, September 2016.
20Glenn-Marie Lange et al., ‘The Changing Wealth of Nations’, World Bank, December 2011, p. xii: www.worldbank.org
21Angus Maddison, a pioneer in calculating GDP over time, was professor at the University of Groningen from 1978 to 1997, and a founder of the Groningen Growth and Development Centre.
22Oil, natural gas, hard coal, soft coal, bauxite, copper, gold, iron ore, lead, nickel, phosphate, tin, silver and zinc.
23The bank’s most recent methodology makes some attempt to factor in the hunting, fishing and recreational value of forest land.
24These figures are from Lange et al., ‘The Changing Wealth of Nations’, p. 7, for which the latest data on comprehensive wealth are from 2005. The bank publishes more regular numbers for related wealth measures, such as adjusted net savings.
25Table 1.1, p. 7 documents.worldbank.org
26The account of Viken comes from ‘Discover How Norway Saved its Vanishing Forests’, BBC, 4 November 2015: www.bbc.co.uk
27‘State of Forest Genetic Resource in Norway’, p. iii: www.skogoglandskap.no/filearchive
28Its formal name, changed in 2006, is actually the Government Pension Fund Global, a slightly confusing name given that it is not really a pension fund but a sovereign wealth fund.
CHAPTER 12 THE LORD OF HAPPINESS
1In 1975 pounds.
2‘Jeremy Bentham Makes Surprise Visit to UCL Council’, UCL News, 10 July 2013: www.ucl.ac.uk
3Jeremy Bentham, An Introduction to the Principles of Morals and Legislation, 1789: http://socserv.mcmaster.ca/econ/ugcm/3ll3/bentham/morals.pdf
4William Davies, The Happiness Industry, Verso, 2015, p. 10.
5Ibid., p. 61.
6Ibid., p. 17.
7This is based on a lecture by Jeffrey Sachs, director of the Earth Institute of Columbia University, at the London School of Economics, December 2016.
8George Ward, ‘Is Happiness a Predictor of Election Results?’, Centre for Economic Performance, April 2015: cep.lse.ac.uk
9World Happiness Report, 2012: world.happiness.report/download
10Ibid.
11IMF data for 2015, with GDP per capita expressed in purchasing-power parity terms.
12Ibid.
13Results cover 90,000 people in 46 countries. Richard Layard, Happiness, Penguin Books, 2005, p. 65.
14Ibid., p. 64.
15Ibid., p. 79.
16BBC, 7 January 2017: www.bbc.co.uk
17Author interview with Richard Layard.
18Layard, Happiness, p. 233.
19Ibid., p. 154.
20Layard cites research from Robert Sampson and Byron Groves of Harvard University, ‘Community Structure and Crime (1989)’: dash.harvard.edu
21Paul Ormerod, ‘Against Happiness’, Prospect Magazine, 29 April 2007: www.prospectmagazine.co.uk
22Richard Layard, ‘Paul Ormerod is Splitting Hairs’, Prospect Magazine, June 2007.
23Cited in World Happiness Report, 2012, p. 111.
24Gardiner Harris, ‘Index of Happiness? Bhutan’s New Leader Prefers More Concrete Goals’, New York Times, 4 October 2013.
25Ibid.
26According to 2016 IMF figures, it has a GDP of just over $8,227 in purchasing-power parity terms, which adjust for local prices.
27All figures from Unesco: http://uis.unesco.org
28Bill Frelick, ‘Bhutan’s Ethnic Cleansing’, New Statesman, 1 February 2008: www.newstatesman.com
CHAPTER 13 GDP 2.0
1Tobin became most famous for his proposed tax on foreign exchange transactions to reduce risky and what he considered useless speculation.
2‘Against the Human Development Index’: econlog.econlib.org
3Minus net investment is when the value of new investments is less than the value of depreciation.
4Interview with the author, February 2017.
5From a conversation with Steve Landefeld, February 2017.
6‘Canadian Index of Well-being, Executive Summary’, 2016: uwaterloo.ca
CHAPTER 14 THE GROWTH CONCLUSION
1Author telephone interview with Joseph Stiglitz, April 2017.
2Partly based on a conversation with Jagdish Bhagwati, New York, March 2017.
3In an interview with the author, Larry Summers said GDP tended to track other things we might be interested in, including environmental protection and health, thus limiting the need to come up with different measurements. In other words, in his opinion GDP is not a bad proxy for well-being. ‘When some other welfare measure grows fast, that tends to be the period when GDP grows fast, and vice versa. When you do it across countries, I think the correlation between growth in alternative welfare measures and growth in GDP ends up being relatively high, not relatively low. So that all makes me a little less bowled over with the efficacy of these kinds of alternative calculations.’
4Jonathan Soble, ‘Japan, Short on Babies, Reaches a Worrisome Milestone’, New York Times, 2 June 2017: www.nytimes.com
5Hans Rosling projected the world’s population would peak at about 11 billion in 2100, when he estimated there would be 1 billion people in the Americas, 1 billion in Europe, 4 billion in Africa and 5 billion in Asia. Lecture at Davos, Switzerland, January 2014.
6Most though not all economists see a clear trend of increased inequality in the majority of rich countries.
7Sometimes it is expressed on a scale of 0 to 1.
9The coefficient can be calculated before or after government redistribution, including tax and benefits.
10Data Source: DeNavas-Walts C., B.D. Proctor and J.C. Smith. September 2013 US Census Bureau, Current Population Reports, P60–245, Income, Poverty and Health Insurance Coverage in the United States: 2012 (Table A-2).
11Table 1: Key indicators on the distribution of household disposable income and poverty, 2007, 2012, 2014 or most recent year: www.oecd.org
12Interview with author, Washington, March 2017.
13Calculating net domestic product requires a number of assumptions, most important of which is over how many years does an asset depreciate. You might decide, for example, that the value of a building falls to zero over twenty years. So even though the building is still standing in twenty years’ time, in national accounting terms it would be valued at nothing. If different nations apply different assumptions to different assets, comparing national domestic products internationally becomes difficult. But it does provide a rough guide of how well or badly an individual nation is doing in maintaining its assets and therefore how sustainable its growth is likely to be.
14Telephone conversation with the author, April 2017.
15As Stiglitz points out, CO2 might not be the best measure in all situations. In China for example you could make a case that immediate health issues associated with chronic air pollution are more pressing. In that case it might be better for Beijing to measure fine particulate emissions.
16So-called U6, the broadest measure of unemployment, includes ‘discouraged workers’ who want work but have stopped looking because job prospects are so dim, and part-time workers who would rather work full time. See Bureau of Labor Statistics, Table A-15: www.bls.gov/news.release
17Partly based on conversation with Joseph Stiglitz, April 2017.
18See OECD Better Life Index: www.oecdbetterlifeindex.org
19Stiglitz says that hourly wages in the US have stagnated over sixty years. For people to maintain their standard of living, they’ve worked longer and longer hours per household. In Europe hours worked per household have come down over the same period. If his numbers are right, Europeans have traded some income for leisure, while Americans have prioritised making money, even if they have no time to enjoy it.
20Kenneth Boulding, quoted in Lorenzo Fioramonti, Gross Domestic Problem, Zed Books, 2013, pp. 145–6.
21Faye Dunaway announced La La Land as Best Picture, but the card should have read Moonlight, the real winner. ‘Moonlight, La La Land and What An Epic Oscars Fail Really Says’, New York Times, 27 February 2017.
22Telephone interview with author, February 2017. Incidentally, Oulton wrote a terrifically spiky defence of GDP in ‘Hooray For GDP! GDP as a Measure of Well-being’: voxeu.org
23According to officials at the Bureau of Economic Statistics.
24The official spoke anonymously out of concern for retribution even after all this time.
25Joe Earle, Cahal Moran and Zach Ward-Perkins, The Econocracy: The Perils of Leaving Economics to the Experts, Manchester University Press, 2016.
26Ibid.
27Kenneth Boulding, quoted in ‘An A–Z of Business Quotations’, The Economist, 20 July 2012.
28Earle et al., The Econocracy.
29Author interview with Joe Earle, July 2016.