Message-ID: <MAPI.Id.0016.0077616c746572733030303830303038@MAPI.to.RFC822> Date: Thu, 17 Jul 1997 14:54:13 PDT From: Edward Walters <mailto:ewalters@MAIL.NETBAHN.NET> Subject: The Troubled American Economy - a discussion To: mailto:DEVEL-L@AMERICAN.EDU
Hi Karen,
I took your advice and read the Cochrane article in the latest Review of Agricultural Economics. He manages to
ake explicit many of the thoughts I have had on the current American political/economic system, and a lot of ideas that
adn’t occurred to me.
For those who haven’t had the chance to read the article let me make an attempt to summarize:
Despite rising GDP over the last several years, another index - the Genuine Progress Indicator (GPI), demonstrat
s that since the early 70’s, overall economic well being has declined for most Americans. The GPI not only measures out
ut, but takes into account contributions of the family and community, and environmental factors that the GDP ignores. I
fact, environmental damage is given a negative value in the GPI, whereas in conventional GDP accounting, the cost of th
se messes is positive since the expenditure for cleanup boosts demand for goods and services!
Cochrane points out that inequality (in terms of income) in the US has increased dramatically since 1968, and we
are rapidly becoming a two-tiered, typically third world, society, with a shrinking middle class squeezed between growin
poor and wealthy segments of society. He predicts a future of increasing class struggle between the haves and have not
.
Cochrane cites many factors in the slow down and decline of the American economy - global natural resource deple
ion, shrinking demand for goods and services linked to increasing poverty, inadequate education and health services, gr
wing immigration, a large trade deficit, and a large population of non-contributors (i.e. retirees) to the economy.
Cochrane believes the underlying causes of these trends is the philosophy of extreme individualism that has exis
ed in US society since its inception and has now been legitimized in mainstream conservatism.
I was interested in comparing Cochrane’s article with the writings of Kenneth Boulding and Herman Daly (“Beyond
rowth”). Daly talks of growth as being an outmoded and even dangerous goal in Economic planning and the confusion of Gr
wth with Development. He notes that in Micro-economics, one reaches an optimal level of production, but in Macro-econom
cs there is no such optimal level - the economy can keep on growing unfettered - the bigger, the better. He contrasts t
is with the multiple goals he proposes of population control, income redistribution, and ecologically compatible develop
ent.
I too think that current economic thinking is too mechanistic and too narrow. Economics needs to consider the l
rger social and environmental impacts, not simply as “externalities” but as a core part of the equation.
Cochrane has done an excellent job of identifying the current problem and its origins. However, I still think h
is focused on “growth”, as the ultimate goal of an economy. Even equitable growth is going to lead to a larger strain
n already depleted natural resources and ecosystems. I wish, he too, would have made the distinction between growth an
development.
Another factor in the creation of a two-class society that Cochrane doesn’t really touch on is the disenchantmen
with, and withdrawal from, the political system by the underclass. The system is seen as responsive only to large moni
d interests, so who represents the poor? Until corporate interests are made more responsible (i.e. not only maximizing
hort term profits, but acting in the longer term interests of their employees, society at large, and the environment) an
more authority is devolved to the local level will these currently disenfranchised groups return to the political scene
Cochrane has succeeded in raising tremendously important issues and I hope a larger debate will result from his
hought-provoking article. I trust I haven’t butchered his ideas too much in trying to summarize them.
Regards,
Eddie Walters
(My best to the Ag Econ department. I got my Masters in Ag Econ from VPI in ‘86. George Norton was my advisor)