The idea of GDP is simple: the summation of what is produced within the UK avoiding any double counting. It is used to assess how well the economy is doing overall. For the government of the day, growth is good because it suggests we will all be better off. Though GDP is a very imprecise measure, it is one that most people broadly accept.
The economy used to be measured by gross national product (GNP). That measured what UK-owned assets produced, irrespective of where they were in the world. But GNP fell out of favour as UK owned assets were sold to foreign investors with the result that the economy, by that measure, appeared to be in decline. Successive Chancellors tried to make out the sale of UK owned assets was good, because it showed UK was ‘open for business’. But it didn’t really wash. So, since the 1980s, GDP has been the standard measure.
GDP is calculated by simply adding the product of various sectors together as if they were all of equal worth. But in truth some sectors benefit the common good and others are predatory on the common good. But if GDP is growing the government of the day takes credit for successful economic management, irrespective of the fact that it is the predatory components that have grown at the expense of the good sectors.
Continue reading The Great GDP Deception
The Corporate Reform Collective are launching their Manifesto for the incoming government at Westminster on Monday 2nd March at 6.30 p.m.
To support this initiative and join the debate at this People’s Parliament session contact:
The Corporate Reform Manifesto is available at https://gordonpearson.co.uk/corporate-reform-manifesto
This is backed up in greater detail with explanations and illustrations of how the abuses are carried out through complex corporate structures and how they can be controlled in their newly published book Fighting Corporate Abuse – Beyond Predatory Capitalism
PB 9780745335162 £17.99 | $31 216pp
by the Corporate Reform Collective
Buy the book today for £16 http://bit.ly/CorporateReform
The members of the Corporate Reform Collective are: Tom Hadden (Emeritus Professor, Queen’s University Belfast), Paddy Ireland (Professor of Law at the University of Bristol Law School), Glenn Morgan (Professor of International Management at Cardiff Business School), Martin Parker (Professor of Organisation and Culture at the School of Management, University of Leicester), Gordon Pearson (author of Strategic Thinking, Integrity in Organizations, The Rise and Fall of Management and The Road to Co-operation), Sol Picciotto (Senior Adviser to the Tax Justice Network), Prem Sikka (Professor of Accounting at the Essex Business School) and Hugh Willmott (Research Professor in Organisational Studies at Cardiff University).
Despite their much vaunted economic expertise, the leading national and global institutions failed to prevent the financial and economic crisis they’re now arguing over how to clear up. The IMF’s Independent Evaluation Office (IEO) reported last month on why the IMF, as one such institution, failed to identify the risks and give clear warnings. The prime causes of that failure were identified as ‘analytical weaknesses’, which were actually shared by all relevant institutions. These analytical weaknesses included a tendency, among IMF economists, to be dominated by neoclassical free market dogma, and so to believe ‘market discipline and self-regulation’ would be sufficient to avoid financial disaster, and to trust the new mathematically based techniques for spreading financial risk, and to conflate the financial and industrial sectors, thus ignoring the influence of finance over the real economy. ‘Perhaps the more worrisome was the overreliance by many economists on models as the only valid tool to analyze economic circumstances that are too complex for modelling.’ (Paragraph 46).
Continue reading The Ignorance of Economics
Neo-classical microeconomic theory, especially in its more recent fundamentalist manifestations, has done immense damage to the real economy while nurturing the parasitic financial sector, as recounted from time to time elsewhere on this site.
Various alternative approaches have identified and addressed problems created by that theory. Welfare economics, the economics of social balance, and what is referred to as behavioural economics, have all sought to modify how the neo-classical maximising model operates. However they have not provided a clear and simple alternative to neo-classical mathematics. So the neo-classical model prevails and will survive all such challenges. Utility maximising economic man and the profit (or shareholder wealth) maximising firm, operating within an assumed to be efficient market, will continue to be accepted as the solution to maximising economic growth and social welfare. The obvious inequity of distribution between rich and poor, both within and between nations, will continue to be regretted as necessary to the utilitarian result. Moreover, it is argued, care for the environment could be more readily financed by a successful economy, rather than by one which is struggling to survive.
Continue reading Bury the Dogma
The Revolt was precipitated by the government’s heavy-handed attempts to increase taxes and cut public services, in order to repay the debt which had been incurred by the speculative losses of the bankers, who continued to pay themselves massive bonuses. The government actions affected some of the poor more than others and the wealthy, including the bankers, not at all.
Continue reading The Peasants’ Revolt: A Translation for Christmas 2010
So far as the recent American elections were concerned, Tomasky may have been right that the free market shareholder primacy ideology was the only big coherent picture then on offer; more socially oriented policies lacked coherence. But the next big theme is in sight and may well shift free market shareholder primacy, with its excesses of greed and self-interest, into the long grass of history. The straws in the wind which suggest such a change are many and various: population growth, resource depletion especially water and oil, climate change, pollution, growing inequality between rich and poor, and above all, the ever widening recognition by ordinary people that finite earth and self-interest maximising man are on course for a massive and decidedly unpleasant collision.
Continue reading The Next Big Theme
The Economist, an increasingly dogmatic apologist for the free market ideology, invited for its current issue, six academic economists to identify how they thought the financial crisis had changed the subject of economics. The answer is not a lot. So far as methods of teaching and research are concerned, nothing has changed, or is likely to change any time soon.
Continue reading How has the crisis changed economics?