24 November 2008

Smoke and mirrors: the limitations

If the current inflation rate is really 6-9 percent instead of the 2-3 percent claimed by government and most U.S. money managers, then Washington's official estimates that the economy still grew at a rate of some 0.6 percent in the first quarter of 2008 become nonsense. Subtracting a 6-9 percent inflation rate from nominal GDP growth would identify an economy that was deteriorating and shrinking, not growing. Concerned foreign dollar-holders would become even more concerned. Kevin Phillips, Washington's Great 'No Inflation' Hoax

Marvellous. Even the numbers that policymakers target are a part of the commons that they have degraded. We are a long way now from government by the people for the people. Mr Phillips makes it clear that the erosion of accuracy in US growth, inflation and unemployment statistics has been mainly an opportunistic process, begun in the 1960s. Perhaps it was inevitable that large corporations and very wealthy individuals would use every available means to pervert the policymaking process. When the result is a serious possibility that taxpayers will now subsidise failing car manufacturers there is clearly something very wrong with the current ways in which we formulate policy.

Put simply, I think it's that ordinary people think it's all too complicated. Whether it's by expressing policy in terms of arcane legalisms, institutional structures, tedious processes or, as we now see, misleading numerical indicators, our disengagement from the world of policy is almost complete - to the great satisfaction of those who share the spoils. That is, the very rich, the larger corporations, and government agencies themselves.

Perhaps this is the time then to reorientate policy along Social Policy Bond lines: express policy goals in terms of outcomes that are comprehensible and meaningful to ordinary people. Economic growth, even when measured accurately, is not an end in itself. It is a means to various ends, including the eradication of poverty and the provision of public goods and services. Government would do better to target these goals directly than to try to fool us all with their smoke and mirror arrangements, whose credibility is fast disappearing.

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