Confucius once said, “We are so busy doing the urgent that we don’t have time to do the important.” I haven’t been able to get that comment out of my mind as I watch the “Fiscal Cliff” shenanigans. Our faltering economy has been a central concern for the last several years. But the focus of that concern has been on the urgent, the short-term, the cliff a few feet away, with no serious attention paid to the very important fact that there are fundamental flaws in the underpinnings of our economic system. If we don’t address them we will face these urgent, volatile, short term crises over and over again, with more and more painful consequences.
Two of the biggest flaws in the status quo economic system are that we use incomplete accounting tools and measure the wrong things. The primary tool we use to assess the health of the economy is the Gross Domestic Product (GDP). If the GDP is going up the economy is seen to be doing well. If the GDP is going down the economy is seen to be unhealthy. But here’s the problem. The only thing GDP measures is how many dollars are flowing through the system; not whether those dollars are making us healthier, happier or more secure.
According to the GDP, the money spent to keep a child in the foster care system or jail registers as just as positive as the money spent to help stabilize a family so that the child can stay at home.
The funeral costs for the victims of mass shootings boost the GDP. So does the flurry of gun purchases as people react to growing fear and insecurity. The GDP registers both of those things as an economic gain. Nowhere does it account for the human capital – the potential and talent and social connections – that was lost.
We’ve been growing the GDP for decades but, more Americans are in poverty today than at any point since the Great Depression. The gap between our wealthiest citizens and the poor has never been greater.