Obama, Economics and The “Broken” Economy

Ok, there is far too much to talk about in the upcoming NYTimes magazine piece on Obama and Economics: “How Obama Reconciles Dueling Views on Economy”. So, I’ll try to keep the post to a few points ranging from trivial to hopefully interesting.

We’ll start with the trivial: Obama and I love the same RFK quote!

“Two things,” [Obama] said, as we were standing outside the first-class bathroom. “One, just because I think it really captures where I was going with the whole issue of balancing market sensibilities with moral sentiment. One of my favorite quotes is — you know that famous Robert F. Kennedy quote about the measure of our G.D.P.?”

I didn’t, I said.

“Well, I’ll send it to you, because it’s one of the most beautiful of his speeches,” Obama said.

In it, Kennedy argues that a country’s health can’t be measured simply by its economic output. That output, he said, “counts special locks for our doors and the jails for those who break them” but not “the health of our children, the quality of their education or the joy of their play.”

Here’s the full quote, below the cut, along with some other thoughts.

From this speech by Robert Kennedy in 1968:

Truly we have a great gross national product, almost 800 billion dollars, but can that be the criterion by which we judge this country? Is it enough? For the gross national product counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and jails for the people who break them. It counts Whitman’s rifle and Speck’s knife and television programs, which glorify violence in order to sell toys to our children. And the gross national product, the gross national product does not allow for the health of our children, the quality of their education, the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither wit nor courage, neither our wisdom nor our learning, neither our compassion nor our duty to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America, except why we are proud to be Americans.

Interestingly, the bit before that argues that the true unemployment rate is far higher than the measured one, especially for urban Black Americans, as they are no longer counted. RFK, kinda awesome.

Moving on in the Obama piece, actually back to the beginning, I am struck by the difficulty of framing a discussion about the economy itself. Here’s how the article begins:

As Barack Obama prepares to accept the Democratic nomination this week, it is clear that the economic policies of the next president are going to be hugely important. Ever since Wall Street bankers were called back from their vacations last summer to deal with the convulsions in the mortgage market, the economy has been lurching from one crisis to the next. The International Monetary Fund has described the situation as “the largest financial shock since the Great Depression.” The details are too technical for most of us to understand. (They’re too technical for many bankers to understand, which is part of the problem.) But the root cause is simple enough. In some fundamental ways, the American economy has stopped working.

What could it mean to say the “economy has stopped working”? Does this mean that goods and services are no longer being distributed? That products are no longer being created, or research projects started, or corn grown? Not quite. It means that we are no longer getting something that we want, and the term we have to express that is to accuse the economy of somehow malfunctioning (with the economy here being a machine-like beast of burden).
So the article continues:

The fact that the economy grows — that it produces more goods and services one year than it did in the previous one — no longer ensures that most families will benefit from its growth. For the first time on record, an economic expansion seems to have ended without family income having risen substantially. Most families are still making less, after accounting for inflation, than they were in 2000. For these workers, roughly the bottom 60 percent of the income ladder, economic growth has become a theoretical concept rather than the wellspring of better medical care, a new car, a nicer house — a better life than their parents had.

Not to sound all Senator Vinick, but the economy doesn’t produce goods and services – people working in coordination do. We have named the abstract aggregate of that semi-coordinated, always conflictual, set of producing and exchanging “the economy”, but I think that shortcut betrays us when we start invoking phrases like ‘the economy produces more goods than it did a year ago’.

Let’s re-translate the rest of that first sentence: “The fact that the economy grows” should be “The fact that people here exchange more things than before” (as economic growth is measured by GNP/GDP, which is a measure of exchanges and their values). “…no longer insures that most families will benefit from its growth” should be ‘no longer insures that most families will get more of the things exchanged than they used to.” But when was this rising tides lifts all boats crap ever guaranteed? When did producing more ever guarantee that most would benefit? In the past that may have obtained, but only because people fought, were beaten and died over the distribution of those gains. I’m reminded of the supposed economic principle of the mid 20th century (does anyone know this principle’s name? I can no longer recall) that rising productivity led automatically to rising wages, as if by magic or some freaky action at a distance. It turns out it was organizations like unions, and government policies that led to a correlation between rising productivity and rising wages, with nothing magical to it. When those systems fell apart in the 70s, so did the tight linkage between wage-growth and productivity-growth. Hence why most Americans are not doing better off than they were 10 years ago, even though ‘the economy’ keep growing.*

Last thing, and a topic of thought for me recently as I wade through my prelim study notes. What do most people think when they think of ‘the market’? Here’s Obama:

“The market is the best mechanism ever invented for efficiently allocating resources to maximize production,” Obama told me. “And I also think that there is a connection between the freedom of the marketplace and freedom more generally.” But, he continued, “there are certain things the market doesn’t automatically do.” In other words, free-market policy isn’t likely to dominate his agenda; his project would be fixing the market.

I am more than a little confused here. What exactly did we invent and when did we invent it? What sort of mechanism is ‘the market’? Is there really one market that is a mechanism? Recent work by sociologists like Callon, MacKenzie and Millo would suggest that there are lots of markets (“Laws of the Markets“), and that these markets are created by different actors in different times and places, often by performing theories about how the world should work (“the performativity of economics”, discussed here and lots of other places). So, those folks would argue that markets are invented, and invented by particular people. But I don’t think that understanding is particularly widely held (though perhaps I do Obama an injustice here, I doubt he spends much time reading cutting econ soc literature). So what is the more commonsensical interpretation? Is the market a mechanism, a machine, an animal, or some other sort of natural phenomenon? If the market is a machine we have to operate, then of course there are things it does not do automatically. But it’s just not clear to me how to read these sorts of sentences anymore.

Ok, that’s enough rambling for the moment. More on this later, I’m sure.

* In case you haven’t come across it yet, there’s a really neat blog by a sociologist trying to understand Marx’s Capital in as much depth as one human being can. Her most recent post is relevant here, and interesting, though I admit I sometimes lose myself when trying to follow the details of the arguments – my Marx is just not that solid.

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6 Comments

  1. Do you happen to know who wrote that RFK speech?

  2. I do not have the slightest idea. Is there any easy way to figure out such a thing?

  3. Even on their own terms, economists are not always careful in how they talk about GDP. Here’s Lawrence Summers, for example, in a recent piece intended for a wide audience, implying that a rising tide does indeed lift all boats (when presumably he must know better): “Today, in China and India…the living standards of some 40 percent of mankind are increasing 7 percent per year — that’s 100-fold or more over their 70-year lifespans.” Of course, despite impressive annual GDP growth and a new middle class in India, the substantial majority of Indians live not too differently than they did decades ago. (And this doesn’t even take into consideration the point about what is being measured.)
    The quote is from L. Summers, “The Economic Agenda,” Harvard Magazine, Sept/Oct 2008, p.29.

  4. One benign hypothesis (on your last topic): Obama’s talk about “the market (yes or no)” might also be a normal reaction to questions that are addressed to him in terms of “the market (yes or no)”. It seems that he is also sometimes accused of answering to the “are you going to put more market or less” question in terms like “come on, we’ll see on spot as we deal with the particulars at that precise moment” (which might be more in tune with constructivist economic sociology).

  5. A reasonable hypothesis, typewritten. Also, for some reason I feel like I haven’t heard the term “constructivist economic sociology” before. I really like it though, and may have to start calling myself that.

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