Gross Domestic Problem

Oh dear, it's over a month since I last managed to post anything. It's been a very busy month, including attendance at two book launches, organised by the New Economics Foundation (nef). Following the first one, I arranged with a fellow nef supporter that we would try and organise a local study group in London, where I spend half my time. The idea is to make the study of sustainability issues a more communal activity. Our first meeting is next Wednesday but I've no idea as yet how many people will turn up. My feeling is that if we get four or five people who want to meet up on a regular basis, this will be a success.

The books, incidentally, were Gross Domestic Problem - the politics behind the world's most powerful number by Lorenzo Fioramonti and Cancel the Apocalypse by Andrew Simms.


I've only just got my copy of Cancel the Apocalypse so I can't say anything about it yet, except that Simms is always a good read so I'm looking forward to getting stuck in.

Gross domestic problem is a critique of what Fioramonti sees as our excessive reliance on GDP as almost the sole indicator of our economic well-being. I'm generally with him on that, with the proviso that I think some commentators and politicians put an even more excessive emphasis on the size of the public-sector deficit.

What I found particularly interesting, as a piece of economic history, was the story of the development of GDP during the Second World War and the notion that it was as important as the atomic bomb in bringing victory for the Allies. It enabled the stupendous mobilisation of American resources to the war effort. What I found particularly interesting was the idea that the US government took the view, backed by statistics that make up the measure of GDP, decided to allow the maintenance of high levels of private consumption in order to support the war effort.

This struck me as very counter-intuitive - surely the war effort and domestic consumption are in competition with each other. I suppose that is true in a severely resource-constrained economy, such as the British wartime economy. However, in the lead-up to its entry into the war, the US, with high levels of unemployment, had huge reserves of productive capacity as well as abundant domestic sources of energy and raw materials. Presumably the maintenance of domestic consumption served to preserve the productive infrastructure while the switch to war production, along with the enormous increase in production, took place. As Fioramonti said in response to my question about this, command economies are usually very inefficient whereas the US was able to maintain a predominantly market economy.

I have a feeling that there are lessons lurking here for our long-overdue transition to a low-carbon economy - or perhaps there is a danger of reading the wrong lesson. As we get further into an era of global resource constraint will we find ourselves in something like a British war economy or an American war economy?

Diane Coyle has written a fuller and more critical review of the book.