||Patrick Bond debates GDP reform at University of Pretoria, 28 October
Beyond GDP in Africa: Innovative Ideas for a Regional Dashboard
Monday 27 October
Arrival of international guests
18:00 Informal dinner at the restaurant "Fumo" (for international guests)
Tuesday 28 October
8:30-9.00 Opening remarks
9:00- 9:30 Why its time to leave GDP behind
Robert Costanza, Australian National University and Alliance for Sustainability and Prosperity
9:30-10:00 Why Beyond GDP matters for Africa
Lorenzo Fioramonti, GovInn University of Pretoria
10:00-10.30 An update on the UN System of Environmental and Economic Accounting
Mandy Driver, South African National Biodiversity Institute
10:30-11:00 Coffee break
11:00-11:30 Overcoming extractive growth: natural capital accounting in Africa
Patrick Bond, School of Development Studies, University of KwaZulu Natal
11:30-12:00 Measuring decent work
Coffi Agossou, International Labour Organization
12:00-13:30 Lunch break
13:30 -14:00 Beyond GDP and the Sustainable Development Goals
Enrico Giovannini, Co]chair UN Expert Panel on Data Revolution and member of Stiglitz Sen-Fitoussi Commission
14:00-14:30 The Green Economy Index
Anton Nahman, Council for Scientific and Industrial Research
14:30-15:00 An example of local level dashboard: the GCRO Barometer
Darlington Mushongera, Gauteng CityRegion Observatory
15:00-15:30 Bhutan's Gross National Happiness Index: a review of processes and content
Lise Pretorius, GovInn University of Pretoria
15:30-15:45 Coffee break
15:45-16:15 Applications of the Genuine Progress Indicator in the US
Lew Daly, Demos
16:15-16:45 Measuring and valuing water: the state of water accounts in South Africa
Robert Parry, Stats SA
16:45-17:15 Monitoring decent work: practical applications
Edward Webster, Society Work and Development Institute, University of the Witwatersrand
17:15-18:30 Roundtable discussion with the representatives of statistical offices
18:30 Evening reception
Wednesday 29 October
9:15-9:30 Summary of the previous day
Jeremy Wakeford, SI University of Stellenbosch
9:30-10:45 Material flows analysis: the case of South Africa
Christelle Beyers, SI University of Stellenbosch
10:45-11:00 Introduction to working groups
11:00-12:00 Working groups identify 5 critical indicators for the regional dashboard
12:00-13:00 Working groups report to plenary
14:00-15:00 Closing discussion and preparation of final statement
15:00 End of workshop
18:00 Informal dinner at the Restaurant The Blue Crane (only for those who have
CCS Seminar: Gross Domestic Problem, 18 July 2013
Speaker: Lorenzo Fioramonti
Date: Thursday, 18 July, 2013
Venue: CCS Seminar Room, 602, 6th Floor, MTB Tower, Howard College, University of KwaZulu-Natal
For about 80 years, the mantra of Gross Domestic Product (GDP) was unquestioned, even though there were people within expert circles who actually raised objections since the very beginning. But nowadays, partly because of the global recession and partly because of climate change and the significance of environmental degradation for political and economic development, progressive civil society organisations with social, environmental and economic justice agendas are driving a critique of GDP. Some leading economists and politicians are following. Now the main question is: Are we going to be able to build the critical mass that will allow us to make the jump and build a different system or will we continue clinging on to a system that is represented by a number that has betrayed us?
Lorenzo Fioramonti (http://globalreboot.org/) is Associate Professor of International Political Economy at the University of Pretoria (South Africa), where he directs the Centre for the Study of Governance Innovation (www.governanceinnovation.org). He is also Senior Fellow at the Centre for Social Investment of the University of Heidelberg and at the Hertie School of Governance (Germany) and Associate Fellow at the United Nations University. Prof. Fioramonti is the first and only Jean Monnet Chair in Africa, a prestigious recognition awarded by the European Commission to distinguished academics. In 2012, Prof. Fioramonti received the UP Exceptional Young Researcher Award. His most recent book is Gross Domestic Problem: The Politics Behind the Worlds Most Powerful Number (Zed Books 2013), which deals with the political interests behind the Gross Domestic Product and the dogma of economic growth. In 2014, he will publish two new books How Numbers Rule the World: The Use and Abuse of Statistics in Reinforcing Market Supremacy (Zed Books 2014) and The Age of Participation: Civil Society and the Governance of the Commons (Bloomsbury Academics 2014). For a brief animation about the GDProblem, see http://www.youtube.com/watch?v=Kgu5MptLzDQ
PHOTOS FROM THE SEMINAR
Book Launch:"Gross Domestic Problem: The Politics Behind the World's Most Powerful Number"
(Zed Books, 2013): http://www.zedbooks.co.uk/paperback/gross-domestic-problem
Greenpeace International: "This book is long overdue. Finally the political interests behind GDP have been unveiled"
Vandana Shiva: "Fioramonti shows us that going beyond GDP is a survival imperative"
Interview with Reuters: http://www.reuters.com/article/2013/01/25/us-africa-investment-growth-idUSBRE90O0B420130125
Check the book's short animation movie here: www.youtube.com
PHOTOS FROM BOOKLAUNCH
THE STORY OF STUFF
The Story of Stuff is a short polemical animated documentary about the lifecycle of material goods. The documentary is critical of excessive consumerism and promotes sustainability.
Filmmaker Annie Leonard wrote and narrated the film, which was funded by Tides Foundation, Funders Workgroup for Sustainable Production and Consumption, Free Range Studios and other foundations. Free Range Studios also produced the documentary, which was first launched online on December 4, 2007.
The documentary is being used in elementary schools, arts programs, and economics classes as well as places of worship and corporate sustainability trainings. By February 2009, it had been seen in 228 countries and territories. According to the Los Angeles Times as of July 2010[update], the film had been translated into 15 languages and had been viewed by over 12 million people.
Economic Recovery by Statistical Manipulation
Jack Rasmus 31 July2013
Facing the prospect of a 2nd quarter GDP report showing economic growth less than 1% (some professional forecasting services predict as low as 0.5%), and a year to year growth of the US economy likely to come in at barely 1%--compared to a 2011-12 already tepid 1.7%--the Obama administration on Wednesday, July 31, will announce a major revision of how it calculates GDP which will bump up GDP numbers by as much as 3% according to some estimates. Thats one way to make it appear the US economy is finally recovering again, when all other fiscal-monetary policies since 2009 have actually failed to produce a sustained recovery.
Wednesdays GDP definition revisions is not the first time that politicians, failing in their policies, have simply rewritten the numbers to make the failure go away. But this time, the GDP revisions will be made going all the way back to 1929. So watch for the slowing US economy GDP numbers from last October 2012 onward to be significantly revised upward.
Instead of an actual, paltry 0.4% GDP growth rate in the fourth quarter of 2012, a weak 1.6% in the first quarter 2013, and the projected 0.5%-1% for the 2nd quarter 2013all the numbers will be revised higher in the coming GDP estimate for the 2nd quarter 2013. The true GDP growth rate of the most recent April-June 2013 period, projected as low as 0.5% by some professional macroeconmic forecasters, might not thus get reported.
President Bill Clinton played fast and loose with economic statistics as well at the end of his term, redefining who was uninsured in terms of health care coverage. The total of 50 million uninsured at the end of the 1990s, was reduced to 40 millionafter having risen by ten million during his eight years in office. Today, they still claim there are only 50 million without health insurance coverage, despite the ten million more becoming unemployed since the Great Recession began in 2007, tens of millions of population increase in the US, and millions more having left the labor force.
Similarly, under President Reagan in the 1980s a raft of government statistics were revised. Unemployment in particular was revised downward by various means to make it appear fewer were jobless in the wake of the 1981-82 recession. Changes were made to inflation data as well to make it appear lower than it was, and to how manufacturing was defined to make it appear that the mass exodus of manufacturing offshoring of jobs was not as great as it was in fact.
This writer has been forewarning of this radical shift in GDP definition since earlier this year, in a series of analyses on US GDP numbers over the past year, July 2012-June 2013, in which the warning was raised the US economy was slowing significantlyfrom its already weak historical 2011-2012 annual growth rates of less than 2% to around half at 1% (see my blog entries at jackrasmus.com). The point was raised that the Obama administration may use the 5 year scheduled GDP revisions to boost the appearance of the slowing US economy.
The government agency, the Bureau of Economic Analysis, responsible for the GDP numbers will explain the GDP methodology changes this week, and this writer will provide a follow up analysis of the revisions. Some initial indications have appeared in the business press as to how and why the changes are being made in GDP.
One explanation is that Gross Domestic Income (GDI) has been running well ahead of GDP (Gross Domestic Product). GDP is supposed to measure the value of goods and services produced in the US, while GDI is a measure of the income generated in the US. They are supposed to be about equal, with some adjustments for capital consumption and foreign net income flows. The idea is whatever is produced in terms of goods and services generates a roughly equivalent income. However, it appears income (GDI) is rising faster than GDP output. The BEA revisions therefore appear aimed at raising GDP to the higher GDI levels.
But income is rising faster because investors, wealthy households (2%), and their corporations are increasing their income at an accelerating pace from financial securities investmentsthat dont show up in GDP calculations which consider only production of real goods and services and exclude financial securities income like stocks, bonds, and derivatives. So instead of adjusting GDI downward, the BEA will raise GDP. It appears from early press indications it will do this by reducing deductions from GDP due to research and development and by now counting some kinds of financial investments as GDP.
When GDP was developed back in the 1930s, economists purposely left out financial assets price appreciation in the determination of GDP. Such assets did not reflect real production of goods and services, it was determined. But today in the 21st century, massive gains in capital incomes increasingly come from financial asset appreciation. Even many non-financial corporations now accumulate up to 25% of their total profits from what are called portfolio investmentsi.e. financial asset speculation. Like profits from real production, that gets distributed to shareholders in the form of capital gains, dividends, stock buybacks, etc. That corporate profits and other forms of non-corporate business income also ends up in reported Gross Domestic Income, or GDI. As GDI rises in relation to GDP, the governments answer is to conveniently revise GDP upward to better track GDI. But that doesnt represent real economic growth and does represent a false recovery when measured in terms of new GDP revisions.
If GDP is revised upward, a host of other government data will have to revise up as well. That will likely include employment numbers as well. How reliable will be future jobs numbers, not just GDP numbers, is therefore a reasonable question.
Apart from making it appear the US economy is doing better than it in fact is, what are the motivations for the forthcoming redefinition of GDP, one should ask?
For one thing, it will make it appear that US federal spending as a share of GDP is less than it is and that US federal debt as a share of GDP is less than it is. That adds ammunition to the Obama administration as it heads into a major confrontation with the US House of Representatives, controlled by radical Republicans, over the coming 2014 budget and debt ceiling negotiations again in a couple of months. It also will assist the joint Obama-US House effort to cut corporate taxes by hundreds of billions of dollars more, as legislation for the same now moves rapidly through Congress in time for the budget-debt ceiling negotiations.
Revising GDP also enables the Federal Reserve to justify its plans to slow its $85 billion a month liquidity injections (quantitative easing, QE) into the banks and private investors. This tapering was raised as a possibility last June, and set off a firestorm of financial asset price declines in a matter of days, forcing the Fed to quickly retreat. But the Fed and global bankers know QE is starting to destabilize the global economy in serious ways and both, along with the Obama administration, are looking for ways to slow and taper its magnitudei.e. slow the $85 billion. Redefining GDP upward, along with upward revisions to jobs in coming months, will allow the Fed to revisit tapering after September, when the budget-debt ceiling-corporate tax cut deals are concluded between Obama and the US House Republicans. (see my lengthy article, Austerity American Style , on this).
The Fed has stated it will begin to reduce its QE when the economy shows more growth and unemployment numbers come down to 6.5%, from the current roughly 7.5% low-ball estimate. (Other government data show unemployment at more than 14%, but politicians and the press ignore that number). Revising GDP upward will thus provide the Fed with an argument to start tapering. Fed Chairman, Ben Bernanke, is quite aware of the usefulness of the projected revisions, moreover. In his recent testimony to Congress he specifically noted that the economy was growing better than (old) GDP numbers indicate if the higher Gross Domestic Income (GDI) is considered.
It is ironic somewhat that what we are about to witness with the GDP revisions is a recognition that the economic recovery since 2009 has been a recovery for corporate profits and capital incomes, stock and bond markets, derivatives and other forms of income from financial speculationall now at record levelswhile weekly earnings for the rest continue to decline for the past four years. What the GDP revisions reflect is an attempt to adjust upward GDP to reflect in various ways the gains on financial side of the economy, the gains in income for the few and their corporations.
When you cant get the economy going otherwise, just change the definitions and how you calculate it all. Manipulate the statisticsjust as Clinton did before and Reagan even before that.
Dr. Jack Rasmus is Professor of Political Economy at St. Marys College and the author of the 2012 book, Obamas Economy: Recovery for the Few, Pluto books, and host of the weekly radio show, Alternative Visions, on the Progressive Radio Network. His blog is jackrasmus.com, website: www.kyklosproductions.com
A Final Note on the GDP Revisions
Jack Rasmus 3 August 2013
On Wednesday, the Bureau of Economic Analysis, undertook a major revision of GDP statistics. The result was a major upward revision of GDP numbers for the 2nd quarter and for 2012. While the BEA revises numbers and its methods every five years, this time the revisions were extraordinary and particularly significant.
GDP for 2012, as I pointed out in my prior article, Economic Recovery by Statistical Manipulation, was raised by almost 33% as a result of the BEA revisions--from the 2.1% annual growth to 2.8%. Moreover, the consensus forecasts by economists for the recent 2nd quarter 2013, which averaged 0.9% according to the Reuters survey, came in at nearly twice that, at 1.7%, due to the revisions. This is not a normal upward revision, most of which made in previous years by the BEA had very little effect on GDP numbers.
Changes made by the BEA to the contribution of investment to GDP were especially important. As I noted in my previous article, nearly all other areas of economic sectors that make up GDP were flat or declining in the 2nd quarter. In other words, the massive upward revision to GDP in the 2nd quarter, as reported by the BEA, appears largely attributable to its revisions to how investment is defined. If how we define investment can have that big an impact on GDP, the changes should not be accepted without challenge.
My article has raised some hackles in some quarters, including among some segments of the liberal left that continues to be apologetic for the Obama administration despite its abysmal record economically, in terms of civil rights, wars, concessions to corporations, and so forth for the past five years.
Some among them claim I am arguing there is a conspiracy to falsely boost GDP by the Obama administration. But I nowhere raise the charge of conspiracy in my article. Notwithstanding that, those who charge me with such are rather naďve if they think that the BEA bureaucrats, before they reported such numbers, didnt check it out first with the Obama administration and get its ok. And that it is quite likely there was even more to it than mere reporting of things to come. Who knows for sure. But with whats going on with data these days in Washington, its not realistic to assume the BEA changes had nothing to do with politics. Perhaps not overtly, but tacitly and maybe even covertly.
Much of the increase in investment by the BEAs redefinition is associated with research and development expenditures by business. The BEA previously considered R&D an expense. Now its an investment. Where does the slippery slope of redefining expenses as investment stop? Obama has proposed in his 2014 budget to significantly increase tax credits to businesses for R&D expenses. That will significantly boost R&D investment. That spending in turn will boost GDP still further in months to come. Does anyone naively think the two developments are completely unrelated? Its not paranoid to raise the point. Nor is it conspiratorial. Its just politics, in this day and age when Washington is intent on providing benefit after policy benefit to its corporate friends.
Nevertheless, my criticssome New York left liberal types in particularinsist on defending the BEA and the administration. My insistence that the 33%-50% boost to GDP numbers is not a normal revision is dismissed as paranoid and conspiracy theory. They argue that the changes to investment by the BEA, producing the 33%-50% GDP increase, are reasonable. But are they?
These critics think that adding more than $500 billion to 2012 GDP is normal. They point out that the BEA revisions had little effect on long run GDP since the 1960s. Thats true. But the changes have had a big impact on GDP since the so-called end of the Great Recession in 2009, and especially in the latest 18 months. They are frontloaded, in other words, having their greatest effect on GDP during the recovery period since 2009, during which time it has become clear neither fiscal or monetary policies have done much to generate a sustained economic recovery. So that the 33%-50% boost to GDP in the last 18 months does result in making the failure at recovery appear significantly less so. To point that out is to engage in agitprop, Im told.
Critics also pooh pooh my point that gross domestic income, GDI, is rising faster than GDP, even though the likes of Bernanke, chair of the Federal Reserve, does not think the trend is unimportantas I quoted him in my original article. Something of import is going on here, between gross domestic income (GDI) and gross domestic product (GDP). The historical ratios between the two are changing in the last decade. But why so, we should ask? In reply to my critics, of course incomes from capital gains, dividends, etc. are not directly included in GDP calculations. But the BEA revisions, by increasing investment, do raise corporate profits (as Dean Baker has correctly pointed out, by more than $250 billion in 2012 alone). Corporate profits then get distributed to shareholders in the form of dividends and other capital gains. Raising investment by redefinition raises profits, which raises the distribution of those profits in the form of dividends, capital gains, etc. Ok, that direction of causation is clear.
But should we raise the possibility that the direction may be reversed as well? To explore that point: it is a fact that multinational corporations, for example, now earn on average 25% of their total profits from what is called portfolio investmenti.e. from financial speculation. Some like General Electric even more. Could it be that corporations are counting more of such profits in the totals reported to the BEA, that then gets reported in GDP-GDI calculations? Doing so might permit them to claim tax reductions on those portfolio profits, just as they do on production profits. So there could be a motive for counting profits from financial speculation as part of GDI, which might explain why BEA corporate profits (and GDI) are running ahead of GDP in recent years. Its a legitimate question to raise, and doing so is not to suggest conspiracy or reflect paranoia.
There are serious problems with GDP reporting if GDI is somehow rising faster than the value of those goods and services themselves. But critics of my view believe that to raise such questions is to insult their friends at the BEA who are all skilled and honest servants, as one of my left liberal critics puts it in a recent reply to my article.
There are many things wrong with GDP as a measure of how the US economy is doing. But when GDP is revised upward by a stroke of the pen by such a significant amount, we should not be overly defensive of those responsible, or of the politicians who either collude in the process or let it happen.
To say now, as the BEA is saying with its recent GDP revisions, that expenses constitute investment is a major shift of definition of GDP. It has resulted in a record upward revision of the numbers, and a slippery slope to further false upward revisions that will follow no doubt. Perhaps the expenses incurred in derivatives investing by multinational corporations will soon be considered investment in the next round of BEA revisions.
Government data should not be accepted on its face value. We should be challenging it, especially when changes to it are so significant as is the case of the recent GDP revisions. Doing so should not critiqued on a personal level, calling those who raise challenges paranoid and conspiracy theorists. Thats just juvenile. We should debating these issues, not polemicizing over them.
Jack Rasmus is the author of the 2012 book, Obamas Economy: Recovery for the Few, Pluto Press, and host of the weekly radio show, Alternative Visions, on the Progressive Radio Network. His website is www.kyklosproductions.com, and blog, jackrasmus.com. His twitter handle is #drjackrasmus.