Two days before the US Presidential elections, the Obama White House trotted out the latest GDP stats in an overt attempt to shore up Hillary Clinton’s flagging numbers. For the third quarter of 2016, America’s GDP had grown 2.9% over the same period in the previous year – impressive, if not unprecedented. For the Hillary campaign, this was manna straight from heaven. ‘Look!’ crowed John Podesta, the Clinton campaign chair,’ this is clear repudiation of Trump’s claims that the economy is in ruins.’
Now, if only Trump supporters could see how well their bank accounts were doing, as a result of the GDP growth. The fact is that they didn’t. To them, GDP growth meant absolutely nothing, so total is the disconnect between GDP growth and individual financial health.
Last Saturday I was at NOVA, the riverside second-hand book store, when someone dropped off two shopping bags filled with books. They lay there on the floor, waiting for one of the volunteers to take them into the back room to be sorted and shelved. One book cover caught my eye – The leading indicators : a short history of the numbers that rule our world, by Zachary Karabell. I picked it up and went over to one of the comfy sofas that are strewn around the store, setting my mind on whiling away the rest of the afternoon on it. (By now the store’s sofas have permanent bony Bengali butt-shaped depressions on them, so often do I visit the joint).
On the subject of GDP, Karabell draws a quirky analogy – Just suppose Bill Gates walked into an inner city bar in America, a dark joint filled with shifty-eyed transients and laid-off factory workers – losers, drowning their sorrows in booze, not knowing where their next dollar was coming from. The moment Gates steps inside the bar, the folks inside will instantly become multi-millionaires, if you considered ‘per capita’ net worth of the population inside the bar.
Likewise, GDP neither reflects actual buying power, nor is it a barometer of standard of living and yet, over the eight decades since a Russian émigré in the US named Simon Kuznets first created a method of computing America’s income back in the 1930s, governments all over the world swear by the statistic now known as GDP. (There are reports that Roosevelt actually urged Kuznets on, in order to establish a benchmark, just to prove that his predecessor, Herbert Hoover, had been an incompetent idiot). Kuznets went on to win the Nobel Prize for Economics. No single number has become more central to society in the past century than GDP.
Simon Kuznets shook up the world nice and proper. The invention of the term ‘GDP’ was swiftly followed by another, this one a two-word phrase that became a rage within the media and think tanks of Washington DC – the economy. Until then there had been no such thing as ‘the economy’ and now American universities (and soon universities all over the developed world) began offering graduate programs in the study of this strange new thing called Economics.
The dam broke after that – a parade of other terms followed – inflation, consumer price index, cost-of-living index and many others. By the end of the Second World War, millions were being made on research into economics and by the time the developed world had recovered from the devastation of the war, a Nobel Prize in Economics had been established in 1968.
Another leading indicator – an equally misleading one – is the employment data that governments announce periodically. The US calls its employment number announcements the periodic ‘jobs report’ . As recently as a week before the elections, the Obama White House announced job growth figures that were at a historic high, again, with the goal of bolstering Hillary’s fortunes in the polls.
Like GDP, the jobs reports are also the products of the 1930s post-depression era. Before then, no one had really defined what unemployment was. There was no unemployment per se. If you didn’t have a job, either you were lazy or you were sick or dead, but there was always something you could do.
Around 1931, that changed. The American government created a category of folks known as the ‘unemployed’ – folks who did not have a job and were looking for one. A national statistic like the GDP was created, termed ‘employment growth’. Today, it tells you nothing about the realities on the ground – the race and class realities that favor white folks far more than the coloreds and the actual quality of jobs and salaries that are available. We just pay attention to this headline-making number – 4%, 5% – and we crow ‘look there is a jobs growth in the Obama Presidency’. You could have a job at Walmart, for minimum wage, $10/hr or you could have one at Google for $75/hr, but for the government, a job is a job is a job. All jobs are seen equally. This is true for the way most countries arrive at their own employment figures.
Most jobs that Obama claims to have created are mediocre to subsistence level jobs. There are no pension plans, no health benefits, no paid parental leave, nothing. You have to be on call and if you are lucky, you get called in to work 20, maybe 25 hours a week. That leaves you legitimately unsatisfied and deeply concerned about where your life is headed and how you’re going see your kids through college.
Then you have another number called the deficit. Trade deficit is a statistic whose gathering methods are probably the most antiquated of all. The main assumption is that everything you buy has one single country of origin. So, when Apple imports an Iphone from its Shenzen(China) supplier, Foxconn, it adds $200 to the trade deficit with China and that’s that. But that is simply not true in today’s globalized trade scenario.
In actual fact, roughly only $10 of the total cost of the Iphone is actually China’s output – which is essentially labor, since Foxconn, China, only assembles the product. The chips are from Taiwan, the plastics from Malaysia and the intellectual property from Apple’s Cupertino, California HQ. Other parts are produced in Thailand, Germany and South Korea. So, if the Iphone were to be disassembled and each component accounted for, it would present a vastly different picture of the deficit. There is no tool today to figure out what the real deficit vis-a-vis another country really is.
As to ‘the economy’, there is actually no ‘The Economy’, says Karabell. It is not a tangible, observable, naturally occurring phenomenon. Simon Kuznets, by creating GDP, made how we fare as a nation measurable, somewhat like the way Newton derived the Gravitational Constant ‘G’ – the only difference being that while ‘G’ is factual, GDP is hypothetical.
Kuznets had a predecessor – William the Conqueror, says Karabell in his book. The Norman chieftain who came over from France and defeated the Saxons to become King of England in 1066, produced a book of data called the ‘Domesday Book’, which recorded and updated from time to time how much land he possessed and how much farming was going on and how much cash that could generate, consequent to which how much he could spend on a standing military and battle ships to retain his hold on his territories – a kind of economic state of the union record. Karabell’s book is filled with such interesting tidbits like the above.
While Hillary, the policy wonk, was parroting policy and touting GDP growth, Trump was connecting with his ‘basket of deplorables’ on an emotional level. Unlike Hillary, Trump saw them as real people and unlike Hillary, Trump recognized that bar charts meant nothing to them, seeing in them a massive vote bank instead.
Connecting with his supporters required Trump to be coarse and vulgar and he wholeheartedly became that, since that is his character set. He immediately invited a sanctimonious rebuke from Michelle Obama that said, ‘when they go low, we go high’. Obviously going high didn’t help Hillary Clinton one bit.
Karabell’s book made me think of the time I walked past a neighborhood dog park recently. Have you watched folks walking their dogs at a dog park? Some look like they are in control, holding their dogs in a tight leash, while others scurry behind their dogs, trying to keep up while the dogs drag them around. It remains to be seen if Trump will turn out to be the guy at the dog park – the one in the latter category, pulled along helter skelter, deeper and deeper into an abyss of hate and bigotry – by the fear that his fan following will disappear if he becomes more liberal now. For the moment, he seems to be yelling to Michelle Obama, “No, Michelle, you had it all wrong – when they go low, you have to go even lower.”
Unfortunately, the days have grown short and as dusk falls, the riverside acquires a bleak chill this time of the year that seems to cut right to the bone. I wasn’t adequately dressed for the late evening.
I have developed this habit of glancing quickly through entire books in a very short time, pausing at places that I find interesting and then deciding whether it merits buying and taking home with me for a more detailed reading.
At NOVA, paperbacks are 25¢, therefore it doesn’t take much convincing to buy a book. I bought it, slipped it inside my jacket and went home.