19 August 2008

What is it all about?

From testimony delivered 12 March before the US Senate Committee on Commerce, Science, and Transportation, Subcommittee on Interstate Commerce by Jonathan Rowe,codirector of West Marin Commons, a community-organizing group, in California:
Every time you say that “the economy” is up, or that you want to “stimulate” it, you are urging more expenditure and motion without regard to what that expenditure is and what it might accomplish, and without regard to what it might crowd out or displace in the process. That term “the economy”: what it means, in practice, is the Gross Domestic Product–a big statistical pot that includes all the money spent in a given period of time. Our Phony Economy, "Harper's Magazine", June
In the absence of any clear, coherent, agreed goals, growth in Gross Domestic Product, or GDP per capita, has become the de facto objective of most governments. Thankfully more people are realizing that GDP or economic growth as conventionally measured, is not a meaningful end in itself - at least not to ordinary human beings in western economies. GDP probably was a useful indicator in the past, when it correlated strongly with social wellbeing, but we'd do better now to focus on different measures.

A government-backed Social Policy Bond regime would mean asking what it's all about right from the start. As a society we'd need some agreement on where taxpayer funds should be spent - or rather, on what they should be spent to achieve. In my view, we'd do best to target broad, basic levels of health and education; and lower levels of crime and pollution. We could also target the absence of social or environmental catastrophe: using the bonds as an insurance policy against calamity. Of course, the Social Policy Bond concept is versatile enough for any group of wealthy individuals, who could issue their own bonds for their own, hopefully philanthropic objectives. In this example (pdf) I discuss the possibility of issuing bonds targeting female literacy in Pakistan.

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