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The Iona Blog

Why an obsession with GDP harms the family

Author: Tom O'Gorman
Date: 15th August 2011

A growing GDP is generally considered to be a very healthy and desirable thing for a country, but in fact as a measure of economic, much less social well-being, it is a very blunt instrument which for one thing ill-serves the family.

Here is a useful article by Robert W. Patterson of the Family in America journal in which he points out that most people want to see an economy that supports families, not one that is simply about growth.

He points out that as currently measured, “GDP captures a rather limited range of activities, counting only financial transactions in the “public” and “private” sectors of society, regardless of their impact on the family”.

So, for example, gambling and pornography corrode the social fabric, but are considered “pluses” for the GDP as they generate economic growth.

He says that the key flaw in the GDP figure is it that leaves out the the social sector of the economy.

The social sector consists of family, religious, voluntary and other activities where people “satisfy their profound need for emotional connections and personal relationships”.

“Here, people give gifts and transfer resources with little or no expectation of reciprocity,” he says.

For Patterson, far from being an adjunct to the economy, the social sector is the very reason for economic activity. And the most important work of the social sector, Patterson asserts, takes place within the enduring bonds of marriage and the family.

He says: “The GDP thus tells us nothing about an enormous and important sector of economy. While most economists treat the family as an adjunct to the market, there would be no social capital, no private sector, and no public sector without the family. There would be no economy without the social sector.

“In reality, the private and public sectors are adjuncts to the social sector. Yet the activities of marrying as well as bearing children, which Adam Smith considered among factors of lasting economic growth and true wealth in capitalist societies like the United States, are not counted in the GDP.

Even more perverse is the way that GDP treats divorce and family break-up in general.

According to Patterson, every time an intact family breaks up, a disaster for parents and especially to children “the GDP calculators, deeming that significant, suddenly turn on and count all the derivative activities of divorce as positive indicators of economic growth”.

“Believe it or not, every divorce, because it generates activity in the private and public sectors, boosts the GDP. That activity includes greater workloads for divorce lawyers as well as the divorce-court and child-support systems, heightened demand for second households, therapy for the children, as well as new or increased employment commitments for the mother outside the home.

“In fact, as a divorcing mother is often forced into the full-time labor force, she may spend relatively more money on clothes, commuting, daycare, and dining out. Even when eating at home, she may opt more for costlier prepared foods than cooking at home.

“At the same time, the divorced father will increase both energy and water consumption in setting up a second household. He may eat even less at home and frequent bars more often. The GDP rises in response to all these inputs, but the net effect is reduced happiness, the handicapping of the next generation, and a less promising economy down the road.”

Patterson argues that while both right and left seek to grow GDP, whatever the cost, politicians would do better to improve the lot of married couples by giving them preferential treatment.

He argues that US housing and mortgage policies from the New Deal era, including the National Housing Act of 1934, the Federal National Mortgage Association (Fannie Mae) in 1938, the Serviceman’s Readjustment Act of 1944, and the Federal Housing Act of 1949 recognised “that the nation needed to help young married couples with children to buy their first home”.

These policies, Patterson says, “infused the housing and mortgage industries with a human purpose: providing homes for American families and children, not treating real estate as a commodity to be traded like common stock”.

This family-centric vision not only transcended profits but also, by preventing the housing industry from expanding for its own sake, limited systemic risk. For an entire generation, this devotion to building not just houses, but homes, worked wonders.

The whole thesis is very thought-provoking, and well worth reading.




 

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