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Keeping up the stimulus

By Tristan Ewins - posted Tuesday, 20 October 2009

Last September I happened upon an interesting article in The Age: a critique by Professor Joseph Stiglitz on the question of what kind of measures we should use to measure social well-being. The most common measures referred to is the Gross Domestic Product (GDP). As Stiglitz noted, world leaders feel pressured to pursue growth in GDP, but this also “causes conflicts”.

There are environmental factors, and then there are issues of quality, rather than just quantity, of output. An important example is health care in the United States, where the sector comprises a greater proportion of US GDP but quality and outcomes are inferior. And GDP masks real inequality where concentration of wealth is not reflected in a single indicator of national wealth.

GDP as a measure of economic activity also fails to account for the existence and importance of domestic and voluntary labour: the impact of which is critical in building social bonds and enabling social reproduction, Canadian author Jim Stanford - in his book Economics for Everyone - asserts that these areas account for as much as 40 per cent of economic activity.


Such insights also sit well with post-materialist critiques of GDP. GDP as a measure obscures inequality. Again: it reflects quantity rather than quality. Do we really need to upgrade our cars every second year: or would we be better off allocating our resources, including our time and labour, elsewhere? What about time for family, social circles, or civic activism? And if the consequence of reshaping our priorities is that we need to increase tax as a proportion of GDP to keep up with the provision of infrastructure and social services, is this so bad? If the consequence is that free human development and social connectedness flourish, surely the trade-off can be worth our while.

In another article from The Age in August 2009, Stiglitz also puts the case for economic stimulus in these difficult economic times.

Some may suggest that the case for stimulus is at odds with the project of reshaping the economy for human need. Rather such people aim beyond economic measures which are concerned with only quantity rather than quality of human life.

The pace of such change, however, is slow. People need jobs. And tax receipts must be supported here and now to provide for infrastructure and services, social wage and welfare provision. Furthermore, the case needs to be won for a readjustment of economic priorities and in the meantime we must address immediate problems.

All this considered, Stiglitz contends that President Obama’s economic stimulus measures have not gone far enough. He observes that the aim of Obama’s policies was to “create some 3 million jobs more than would otherwise be the case”. Despite the effect of stimulus the unemployment rate in the US at the time this article was written was still about 9.6 per cent. This translates to 14.9 million US citizens officially unemployed, with a contractionary flow-on effect for the world economy.

There are many dimensions to the problem, but Stiglitz notes the emphasis in the US on tax cuts. Burdened with personal debt and in fear of job losses, Stiglitz holds that only a fraction of the US tax cuts have flowed on to consumer expenditure. This has frustrated attempts to buoy the US domestic economy. In the face of this conundrum further (better targeted) stimulus is required.


The crisis, if unaddressed, could lead to exponential economic deterioration and so Stiglitz insists that if we don’t spend now “we risk spending much more later”.

These circumstances must be addressed by the Obama Administration - but the lessons must be heeded in Australia and elsewhere as well.

Conservative Australian Opposition leader Malcolm Turnbull especially needs to face facts rather than “beating the drum” on government debt and inflation.

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About the Author

Tristan Ewins has a PhD and is a freelance writer, qualified teacher and social commentator based in Melbourne, Australia. He is also a long-time member of the Socialist Left of the Australian Labor Party (ALP). He blogs at Left Focus, ALP Socialist Left Forum and the Movement for a Democratic Mixed Economy.

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