Friday, October 10, 2008

How to Fix the Economy: Get Out of Iraq

One of the major economic indicators that the government and Wall Street depend on, especially to tell us whether the country is in a recession or not, is the GDP (Gross Domestic Product). However, there are many who feel this indicator is inaccurate in reporting the real effect of the economy on people, especially people's happiness. The GPI (Genuine progress Indicator) was developed as one better and more accurate alternative, among others.

If you look at these two indicators, assuming that a steady decrease in the GDP for two consecutive quarters indicates a recession as Bush defines it, you'll find that even now, despite the terrible state of this economy with it's massive foreclosures and record unemployment, the GDP does not yet indicate we are in a recession, or even a downturn Looking at the GDP, we are steadily growing our economy at a healthy clip. Two things stand out for me in this distinction.

  1. The GDP includes Crime as a indicator of economic growth (as explained in World Changing online magazine)
  2. The GDP includes war and defense spending and it's industries

The GPI includes neither of these. Without defense spending, along with a few much lesser expenses like crime, we see the real picture of the downturn our economy is taking while boosting the military laden GDP, shown in this chart from Redefining Progress a public think tank.

Redefining Progress notes that the GPI has been flat since the 70s. Some charts, like The Progress Report, show a downturn in the GDI.

So what does defense have to do with it?

Defense spending goes into weapons that are expendable. When we go to war we take massive stocks of equipment and basically throw them away, or blow them up. What production or constructive result comes out of war that benefits U.S. citizens? Nothing. Certainly not anything that would warrant the massive expense of the Iraq war. Any of this equipment recovered after the war is pretty much beyond it's useful life. Time to order the new models. In fact, the defense industry is notorious for, not only overspending with inflated budgets, but also for having state of the art equipment. All of this expense is more or less for stuff we trash.

That doesn't even get into the extravagance we see in defense spending on contractors like Halliburton and Blackwater who exploit the government for outrageous sums, as documented in a film called Iraq For Sale, which depicts Iraq as a sort of cruise ship like luxury resort for contractors in the middle of the surrounding war.

CBC News examines the relevance of the U.S. GDP compared to Canada, which exposes the use of the term GDP for what it really is. a political tactic:

Even as a measure of economic output, however, GDP has its limitations. Take a look at the first quarter of 2008, when the Canadian economy contracted at an annualized 0.3 per cent that quarter and the U.S. economy grew by 0.9 per cent.

That leaves the impression that the Canadian economy was doing worse than the U.S. economy, which was struggling with rising unemployment, slumping auto sales, and one of the worst housing downturns in decades.

"Without resorting to hyperbole, this understates the relative performance of the Canadian economy by a country mile," said BMO Capital Markets economist Doug Porter in a report he titled "Does GDP Matter?" (He says yes, but not as much as usual.)

The article goes on to note numerous other better indicators like the GPI. It would seem then that the GDP is simply a tool of politicians and not an indicator of any substance.

We don't hear Bush, McCain or any of the other neocons talk about the fallacy of the GDP, or that war spending keeps it on the rise, while our balance sheet minus war spending looks a whole lot more like a recession. But we do hear Obama talking about getting out of Iraq and how this immense expanse is draining our economy. In the second debate at Nashville, Obama said:

....So one of the difficulties with Iraq is that it has put an enormous strain, first of all, on our troops, obviously, and they have performed heroically and honorably and we owe them an extraordinary debt of gratitude.

But it's also put an enormous strain on our budget. We've spent, so far, close to $700 billion and if we continue on the path that we're on, as Senator McCain is suggesting, it's going to go well over $1 trillion.

We're spending $10 billion a month in Iraq at a time when the Iraqis have a $79 billion surplus, $79 billion.

And we need that $10 billion a month here in the United States to put people back to work, to do all these wonderful things that Senator McCain suggested we should be doing, but has not yet explained how he would pay for.

If we want to fix this economy we have to get out of the Iraq war.

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