Coast Chronicles: Some thoughts on our economy

Published 9:20 am Monday, July 25, 2022

Inflation

When we think of our lives in economic terms, we’re generally worried about how to pay this month’s bills. But how the economy works nationally, in the grand scheme of things, is also of concern. And I’ll bet it’s on our minds lately as we suffer through the highest inflation many of us have ever experienced.

We probably all understand how supply and demand works. When things are in demand and in limited supply their prices go up; and conversely, when there is too much of something and not enough demand or need for it, the price goes down. That concept holds true for almost anything — whether it’s baby formula, gasoline, or eggs. It’s why we’re in the midst of inflation right now: for a variety of reasons, there’s less of the stuff we want or need, and, consequently, it costs more.

But I also want to talk about the overarching idea our capitalistic economy is built on — growth and consumerism. When economists talk about our economy and its future, they key it into an annual percentage increase in Gross Domestic Product, or G.D.P. This supposedly tracks the health of our economy, and the idea that continued growth is good for everyone.

Measuring the G.D.P.

The Conference Board says, “We forecast that 2022 Real G.D.P. growth will come in at 1.7% year-over-year and that 2023 growth will slow to 0.5% year-over year” (www.conference-board.org/research/us-forecast). This is not a great prognosis. Just for comparison, our GDP annual growth rate in the United States averaged 3.14% from 1948 until 2022. In 1950 we hit an all-time G.D.P. high of 13.4%; and the record low was -9.1% in the second quarter of 2020.

How does our G.D.P. get measured? It’s “the monetary value of final goods and services that are bought by the final user, produced in a country in a given period of time.” (Generally speaking, the only things not included in G.D.P. are goods produced outside of our borders, or goods used to produce other goods; sales of used goods; or under-the-table sales of goods or services.)

For instance, let’s say Apple designs and manufactures a new iPhone. Those phone purchases increase the G.D.P. and benefit folks who can afford to buy them. On the other hand, let’s say you’re driving home from Portland on Highway 26 and you hit a patch of fog resulting in a pile-up of five cars. Several people are injured and transported to the hospital, and four cars are towed to the repair shop.

Both the ambulance and health care costs; and the towing, labor, and car repairs are all included in the G.D.P. That’s a heap of bad luck and misery that goes directly into “improving” our country’s G.D.P. So I think we can begin to see the problems with using increased G.D.P. as a measurement of economic benefit.

What about ‘externality costs’?We’re encouraged every day to buy stuff in order to support our economy. After Sept. 11, remember how President George W. Bush told us to “go out and go shopping for your families”? He didn’t want that terrorist attack to slow our economic growth. And some thought the covid-shutdown would negatively affect our G.D.P. — but, in fact, we all jumped into stockpile spending and online shopping sprees to keep ourselves occupied. Amazon’s profits shot up!

Our economy has been built on this kind of continued growth. But many are beginning to challenge that. Noted economist Herman Daly, says, “Growth is the be-all and end-all of mainstream economic and political thinking. Without a continually rising G.D.P., we’re told, we risk social instability, declining standards of living and pretty much any hope of progress. But what about the counterintuitive possibility that our current pursuit of growth, rabid as it is and causing such great ecological harm, might be incurring more costs than gains?”

In business parlance, there’s a tricky thing called an “externality” — the real cost (or impact) of a product or service that is not included in its market price. It’s a cost not covered by the person or business that created the expense. A blatant example would be that cigarette makers/sellers don’t cover the health costs of people who buy cigs and get lung cancer. (In some cases, this is beginning to change.) Gun makers don’t pay for the damage guns do. (Not yet, anyway.)

Another example is discarded computers, which are considered hazardous waste. Healthcare costs resulting from cigarette use, gun violence, or the costs of disposing of unwanted computers are “external costs” or “externalities.” Many economist are beginning to ask whether these externality costs — to individuals, to cities/counties/states, to the environment — should be deducted from the G.D.P. in order to get a truer picture of economic health.

Costs of growth on the Peninsula

It’s no doubt that our recent home-buying surge on the Peninsula has benefited sellers, agents, and the tax revenues of our county. But what are the costs of that growth? Has anyone looked at the complete equation?

One thing I’ve noticed is the increased number of lots being cleared and leveled for building. Again, leveling a lot increases the G.D.P. and “improves” our economy. Right? I beg to differ. Lot-clearing “externalities” fall heavily on one sector — the environment. When a tree is cut down, we lose all the environmental services it provides: cooling properties, water and air purification, habitat, aesthetic considerations, carbon sequestration, etc. We take these environmental services for granted and rarely acknowledge the cost of replacing them, if they are replaceable.

Will growth in our tax revenues pay for other infrastructure services that an increased Peninsula population will necessitate: road repair, post office services, healthcare facilities, policing, fire protection, etc.? Further, do we have enough water to support more people?

Peninsula governance

Additionally, I argue as I have in the past, there’s another even less obvious negative impact of Peninsula growth: our governance structure is not sufficient to the number and complexity of the social and economic problems we already have, let alone ones looming in the future.

There are only two municipalities on the Peninsula — Long Beach and Ilwaco. Yet the population boom and the concomitant revenue boost is happening on the north end. Thus we northenders must appeal to our county commissioners for problem solving on any social or community issue. And we have only a one-third say even in that forum.

One need look no further than the fireworks mess to understand how ill-served we are on the north end where the majority of the negative impact of fireworks takes place. We’ve been held hostage on fireworks by Long Beach city council members and businesses. Something needs to change.

Growth does not equal happiness

There is nothing that correlates G.D.P. to well being. As mentioned, more economists are talking about the failure of “the growth model.” Daniel Cohen writes in the New York Times, “John Maynard Keynes [English economist, 1883-1946 who established much of the governmental economic policy still in effect] writing about the economic crisis of the 1930s, said ‘We should wring all we can out of the economic growth model, set aside greed and fear and learn to enjoy ourselves and above all consume without restraint and worry.’” Keynes thought as our productivity increased, we’d end up working three hours a day and turn to more important tasks, like art, culture and religion. How has that worked out for you?

Cohen goes on to say, “Our perpetual quest for material wealth remains our primary goal despite the fact that we are six times richer than we were in the ‘30s.” Yes, having enough money for the basics makes life easier. But, generally, once we reach a higher salary goal, we find it’s never enough — our desires always outpace our income.

We’re the smallest in a set of Russian dolls — living inside, really trapped inside our municipal, county, state, national and global economies. But let’s remember that the root of that word is oikos ‘house’ + nemein ‘manage’. We manage our personal homes for safety and happiness, and we also need to demand that the larger economies work for us. And — while we’re at it — what changes do we need to make to our Peninsula “economic home?”