|America's Long Recession
In the LA Times, Costanza begins:
The news media and the government are fixated on the fact that the U.S. economy may be headed into a recession -- defined as two or more successive quarters of declining gross domestic product. The situation is actually much worse. By some measures of economic performance, the United States has been in a recession since 1975 -- a recession in quality of life, or well-being.
The reason is that GDP is a very poor measure of economic well-being, neglecting goods and services outside the market, and including all sorts of "goods" that are actually "bads":
An oil spill, for example, increases GDP because someone has to clean it up, but it obviously detracts from well-being. More crime, more sickness, more war, more pollution, more fires, storms and pestilence are all potentially positives for the GDP because they can spur an increase in economic activity.
In fact, as we'll see shortly, GDP actually can be systematically perverse as a guide to policy.
There are, Costanza informs us, several alternative measures:
The shortcomings of GDP are well known, and several researchers have proposed alternatives that address them, including William Nordhaus' and James Tobin's Measure of Economic Welfare, developed in 1972; Herman Daly's and John Cobb's Index of Sustainable Economic Welfare, developed in 1989; and the Redefining Progress think tank's more recent variation, the Genuine Progress Indicator. Although these alternatives -- which, like GDP, are measured in monetary terms -- are not perfect and need more research and refinement, they are much better approximations to a measure of true national well-being.
The formula for calculating GPI, for instance, starts with personal consumption expenditures, a major component of GDP, but makes several crucial adjustments. First, it accounts for income distribution. It then adds positive contributions that GDP ignores, such as the value of household and volunteer work. Finally, it subtracts things that are well-being-reducing, such as the loss of leisure time and the costs of crime, commuting and pollution.
I referred to Rederining Progress and the Genuine Progress Indicator (GPI) in my early February diary, "Republicans Are BAD For The Economy". In their report, The Genuine Progress Indicator 2006 [PDF], they explain:
In fact, in a 1934 report to Congress GDP's chief architect, Simon Kuznets, cautioned that "[t]he welfare of a nation can scarcely be inferred from a measurement of national income" (Kuznets, 1934).
Despite these cautions, GDP maintains its prominent role as a catchall for our collective well being. Perhaps this is because there has been little consensus on a suitable replacement. Perhaps, more fundamentally, it is that there is even less consensus on how well being should really be measured and if quantitative measurements can be made at all. Nevertheless, efforts to find replacements are critical since GDP forms the basis for important public policy decisions--i.e. those predicted to increase GDP growth fare better while those shown to restrict GDP growth are often killed by political shortsightedness. Recently, GDP growth was a prominent justification for highly controversial tax cuts on capital gains while efforts to secure long overdue increases in the federal living wage have been thwarted by persistent gloom and doom forecasts with respect to effects on jobs and economic growth (Foertsch, 2006; Roth, 2005) [Emphasis added]....
GDP plummets as communities become more self reliant. If a community decided to decrease its reliance on imported food, energy, and fi nancial markets by expanding rooftop and community gardens, farmers' markets, local currencies, and solar energy and promote social cohesion by expanding the number of goods and services exchanged by friends and neighbors, GDP analysts would call for drastic measures to save the community from impending economic collapse. GDP grows when we deplete or degrade natural resources. Clearcutting and sprawl are good for economic growth since GDP assumes forests, farmland, and wetlands have relatively little economic value if left alone.
Indeed, all indications are that we vastly undervalue the economic worth of natural ecosystems, as I wrote about in an Earthday feature for Random Lengths News in 2005:
For decades pollsters, pundits and politicians have pitted environmental protection against economic growth, but a pathbreaking new report challenges this view by focusing on the economic value of services ecosystems provide, and stressing the economic costs of environmental degradation.
Ecosystem services are broken down into four categories: provisioning services, like supplying food, water and fiber; regulatory services, that control climate, water flow and quality, air quality, pests and disease; cultural services, that supply recreational, aesthetic and spiritual/religious benefits; and supporting services, such as photosynthesis, soil formation and nutrient cycling.
Things could get much worse in the next 50 years, but a projection of four different scenarios--two of them reactive and two pro-active--also showed that "significant changes in policies, institutions, and practices can mitigate some but not all of the negative consequences of growing," according the to report, known as the Millenium Ecosystem Assessment (MA). Contributors included 1,300 experts from 95 countries....
The MA found that 15 of 24 ecosystem services studied "are being degraded or used unsustainably, including fresh water, capture fisheries, air and water purification, and the regulation of regional and local climate, natural hazards, and pests." These changes are "increasing the likelihood of nonlinear changes in ecosystems (including accelerating, abrupt, and potentially irreversible changes)" such as "disease emergence, abrupt alterations in water quality, the creation of 'dead zones' in coastal waters, the collapse of fisheries, and shifts in regional climate."
Collapse of Fisheries: Newfoundland Cod Example
My article contiuned:
The MA also found that harmful effects "are being borne disproportionately by the poor... contributing to growing inequities and disparities across groups of people," which "are sometimes the principal factor causing poverty and social conflict."
"There's no marketplace on some of those services. We regard them as free, simply because there's no market," said Stanford biologist Harold A. Mooney, one of the MA's lead authors. As a result, Mooney told Random Lengths, "You could cut down the whole forest," without paying for the regulatory services lost.
Multiple reports and specialized presentations are available online at the Millenium Ecosystem Assessment website.
The fact that GDP plummets with increased self-reliance is connected with the mania for trade-based developed, in place of development aimed at building a self-sustaining economy. Of course trade will and should always play some role in any nation's economy, and some nations are ideally suited for relatively high levels of trade. But as Naomi Klein stressed in The Shock Doctrine, the earliest targets of the ideological hostility that gave rise to the Shock Doctrine were countries that followed a developmentalist capitalist path, not a socialist one--a path devoted to developing a countries internal economy, rather than relying on exports indefinitely as the foundations of its economy.
Developing a certain basic level of internal self-reliance has clear benefits for any nation. A nation utterly dependent on trade will inevitably bargain from a position of weakness, receiving less for what they produce than they would if they were less dependent. In the extreme, they can be forced to make political concessions contrary to their national welfare.
Thus, for a wide range of reasons, a more sensitive measure than GDP is necessary in order to make more prudent policy decisions. Where there are real costs involved that markets do not register, policymakers need to know what they are.
While the U.S. GDP has steadily increased since 1950 (with the occasional recession), GPI peaked about 1975 and has been relatively flat or declining ever since. That's consistent with life-satisfaction surveys, which also show flat or dropping scores over the last several decades.
The divergence is striking:
This is a very different picture of the economy from the one we normally read about, and it requires different policy responses. We are now in a period of what Daly -- a former World Bank economist now at the University of Maryland -- has called "uneconomic growth," in which further growth in economic activity (that is, GDP) is actually reducing national well-being.
How can we get out of this 33-year downturn in quality of life? Several policies have been suggested that might be thought of as a national quality-of-life stimulus package.
To start, the U.S. needs to make national well-being -- not increased GDP -- its primary policy goal, funding efforts to better measure and report it. There's already been some movement in this direction around the world. Bhutan, for example, recently made "gross national happiness" its explicit policy goal. Canada is developing an Index of Well-being, and the Australian Treasury considers increasing "real well-being," rather than mere GDP, its primary goal.
One can only imagine the eye-rolling from Timmeh and company that will great such a proposal here in America. But it's exactly what we need.
Black America's Perpetual Recession
Obviously, Black America suffers disproportionately from the long depression described above. Income inequality--one of the factors measured by GPI--affects Black America disproportionately. Negative externalities--such as exposure to pollution--also impact Black America much more severely than they affect America as a whole. But Black America also suffers a perpetual depression in conventional economic terms as well.
The Institute for Southern Studies was founded in 1970 by veterans of the civil rights movement, and has published its journal, Southern Exposure since 1973. It also has a blog, where Executive Director Chris Kromm recently wrote:
Black America is in a permanent recession
Pundits are working themselves into a dither about whether the U.S. is or isn't officially "in a recession." But for at least one segment of the country, the question is settled: African-Americans are deep in recession, and have been for a while.
In fact, black America is in what should be called a permanent recession.
In January, economist Algernon Austin at the Economic Policy Institute pointed out that even in good times, huge numbers of African-Americans are being left behind:
In the best of times, many African American communities are forced to tolerate levels of unemployment unseen in most white communities. The 2001 recession pushed the white annual unemployment rate up from a low of 3.5% in 2000 to a high of 5.2% in 2003. During the same period, the black unemployment rate shot up from 7.6% to 10.8%.
In the "one picture/one thousand words" department:
As we see, the black unemployment rate is routinely significantly higher than white unemployment rate--so much higher, in fact, that black unemployment at its lowest only briefly dipped below the highest levels for white unemployment since record-keeping began. White unemployment rose above 7.5% in the early 1980s, considered a period of wrenching hard times. But black unemployment only dipped below these record levels for a few years during Clinton's second term--a period of broad economic expansion that blacks remember fondly as a period of economic opportunity! Indeed, this experience is one of the chief reasons that Hillary Clinton initially mantained such broad black support against Barack Obama, until his victory in Iowa caucuses among white voters.
Looking at the chart above, it looks to the naked eye as if the white and black unemployment rates go up and down together, but that the black rate is roughly twice that of the white rate, and indeed, if we graph the difference between the two rates, we see that this is generally so, as the difference between the rates closely tracks the black rate itself:
What this tells us is quite significant--generally speaking there are twice as many blacks as whites, percentagewise, looking for work, regardless of how tight the labor market is.
If one black worker in six is looking for work, then one white worker in twelve will be looking, too. If things improve, and one black worker in twelve is looking for work, then one white worker in twenty-four will be looking for work. If things improve even more, and one black worker in twenty-four is looking for work... well, that's never happened. The economy has never been that good.
Perhaps, you might think this is because blacks just aren't as good job prospects as whites--lower skill, or whatever. Not so much...
In April, 2005, Princeton University sent out a press release :
Many New York employers discriminate against minorities, ex-offenders
by Steven M. Schultz · Posted April 1, 2005; 10:56 a.m.
Black applicants without criminal records are no more likely to get a job than white applicants just out of prison, according to a Princeton University study of nearly 1,500 private employers in New York City.
The study, "Discrimination in Low Wage Labor Markets," was conducted by sociology professors Devah Pager and Bruce Western . It is the largest and most comprehensive project of its kind to date.
The study, which investigated discrimination against young male minorities and ex-offenders by employers, also showed:
• Young white high school graduates were about twice as likely to receive positive responses from New York employers as equally qualified black job seekers;
• Ex-offenders face serious barriers to employment; a criminal record reduced positive responses from employers by about 35 percent for white applicants and 57 percent for black applicants.
Even without criminal records, however, black applicants had low rates of positive responses, about the same as the response rate for white applicants with criminal records. Hispanics also faced discrimination by employers, but were preferred relative to blacks.
Note that these ratios--"about twice" and a reduction of 35% compared to 57%--are quite in line with blacks having twice the unemployment rate of whites.
This results are bad enough in themselves, but there's an additional level of discrimination involved, since blacks are incarcerated far more frequently than whites are, so that blacks and whites with similar behaviors are treated very differently, first by the criminal justice system, and then by employers--a topic I'll take up in a follow-up diary.
The press release continued:
"The results of this landmark study are deeply disturbing and highlight the need for strong enforcement of the New York City Human Rights Law," said Patricia Gatling, commissioner of the New York City Commission on Human Rights, which assisted in the study. In New York City it is illegal for employers to discriminate on the basis of race or a criminal record.
The researchers presented the results of their study at the Population Association of America's annual meeting in Philadelphia on March 31 and are preparing a paper for submission to an academic journal.
"A lot of people are skeptical that African Americans still face discrimination in the job market. But even in a diverse city like New York , the evidence of discrimination is unmistakable," Pager said.
Chris Kromm (remember him?) continues:
But the reality of inequality is too often left out of the equation. For example, USA Today ran a feature this week -- "Is your state in a recession?" -- which found that many parts of the country aren't in a recession, and are actually growing.
But is everyone benefiting? USA Today made no reference to another study released this week by the Urban League, which found inequality is stubbornly persistent:
Across a range of economic indicators including measures of employment, poverty, housing, income and wealth, blacks were much worse off than whites. If whites scored 100 percent on such measures, blacks scored just 56.8 percent, a figure unchanged from last year, the National Urban League said. [...]
Three times as many U.S. blacks as whites live below the poverty line, defined as an income of $20,000 for a family of four. The disparity between the races on unemployment narrowed slightly, but blacks were still twice as likely to be jobless.
Indeed, as we've just seen, the black unemployment rate has been roughly double the white rate for as long as the two figures have been tracked. The degree to which White America manages not to see Black America--which has never experienced a healthy economy--is truly remarkable. But, of course, White America has something else to look at instead: the bad faith paranoid fantasy of Black America. Coming soon to a diary near you....
I close with this map of air pollution cancer risk from the South Coast Air Quality Management District's recently-released MATES III [Multiple Air Toxics Exposure Study-III] Report:
Anyone passingly familiar with the Los Angeles area will see at a glance that the heaviest concentrations of cancer risk are generally associated with the regions with the highest concentrations of people of color--Black, Latino and Asian-American. Here's a mostly overlapping census map, showing where whites live, with the lowest density corresponding to the highest cancer risk in the map above:
This is a reminder of the double depression in which Black America lives.