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[00:00:00] Very strong numbers today that showed the economy grew strongly in the first quarter of this year, showing decisively that this plan is the right one to get our economy growing in all parts of the country. And it shows that when this conflict in the Middle East started, our economy was growing strongly. This was not a war that we started, it is not a war that we have joined, it's not one that
[00:00:24] this government agrees with. This is the Debunking Economics podcast with Steve Keen and Phil Dobbie. Well that's the UK Chancellor Rachel Reeves standing outside number 11 telling the press that UK GDP had grown by 0.6 percent in the first few months of 2026. And you can ignore the April number of course which was negative because that was the result of the war in the Gulf. So before that we can take
[00:00:50] that as a measurement of a government doing the right thing. So why is the government so unpopular? Why do people feel so much worse off? Is DDP actually the best measure of how the economy is doing? Or should we instead try and find out how happy people are? So this week we're looking at GDP and asking that perennial question as to whether
[00:01:15] GDP is a good measure for how well an economy is doing, first of all relative to other economies, but also over time as well because that's actually how it tends to be used, doesn't it? We look at GDP growth and then actually put the two together and say well how is the growth of one economy doing compared to another? So right now for example we could say surprisingly the United States is doing quite well in terms of GDP growth thanks to that stewardship of the US president.
[00:01:44] Whereas Europe it's not... There's never been anything like it. Whereas, well compared to Europe for example, which is a bit of a basket case. So I mean it raises so many questions. Is it actually because there's so many caveats associated with GDP, how it's derived, how you do measure it relative to others. I mean is it is a useful measure at all actually? I mean this is a question economists have been asking for a long time. It's a useful measure but it has to be supplemented by other measures.
[00:02:14] Yeah. And there's many, many reasons for it. I was always skeptical of it as a measure of well-being and this is what you know that's the focus of this discussion. Yeah. That it measures increase in output but it really measures the level of output but it doesn't measure the level of welfare. Yes. And the reason there isn't a one for one link between the two is that you have the distribution of income getting in the way of that. So if all the wealth go to one person and nothing
[00:02:42] goes to the remainder then that's not, that's nowhere near the same as everybody having the same, you know, a rising tide lifts all boats. It doesn't apply if only one boat isn't in the lock that gets raised and the rest are flat. So the distribution of income also matters. And of course there are things like forms of labor that don't get paid which are the volunteer work, housework and the sexism that's involved in that. All those issues are quite correct.
[00:03:08] And arguably, actually, the more you rely on volunteers, the, you know, the the worst economy is surely because you are... And also, and also the extent to which services are provided by the state rather than paid for by individuals. Yeah. Yeah. Because that's, that is a major difference between China and America, for example. Americans are so much wealthier because they pay a fortune in health care. They can't hop in, in, in, in trains to get around. They've got to, you know, etc., etc. The
[00:03:35] costs are imposed on the individual rather than on the, on the state. So if you measure the, the GDP includes the, the benefit of the, of the, the physical infrastructure the state creates. But when you, when you do a GDP per capita calculation, you don't see the fact that, China, for example, people that can get around in China without needing to pay a fortune for transport. They've got relatively free education, uh, relatively free health care, etc., etc. All
[00:04:02] those things are expensive in the states. When you do the GDP per capita in the states and you want to compare it to China, you have to knock out the things which Chinese people don't have to pay out of their wages. Compared to Europe, when a lot of those things are free, you've got public transport. Yeah, indeed, for the Europe, Europe has those things free as well. So, you know, cheap, cheap public transport is a common phenomenon in Europe. It means you don't necessarily need a car to get around. A car's a positive handicap in my old town of Amsterdam. So there are those sorts
[00:04:30] of things, but there's still the question of why, um, it's, you know, there's still one way in which GDP is ridiculously accurate as a measure of, um, of economic activity. And that's its relationship to the amount of energy we consume. Uh, because I, uh, you know, uh, one of the great failings of economics of all brands, not just neoclassical, uh, is that they don't include the role of energy in
[00:04:58] production. And then I had my little brainwave, uh, with that little quip that labor of that energy is a corpse and capital of that energy is a sculpture. And when you put that into, um, product models of production, you find that the model that the post Keynesian school of economics uses my, my school of thought, uh, which says that output is simply a number of machines and the number of goods you produce is the number of machines you have, uh, divided by a capital output ratio,
[00:05:28] which is something which was empirically derived some time back. When you take a look at the data, you find a ludicrously close relationship between global consumption of energy and global GDP, which is known as gross world products. I know when I'm about ludicrous, I mean ludicrous. If you look at the two series, uh, between 1960 and 2020, uh, they're basically the same series for the correlation coefficient for those that know what that means is 0.997, which is so close to one,
[00:05:57] it's just rounding error. Um, and, and that's what I didn't expect it to be that high. Uh, but then when you look in change, the real thing is, uh, because two trends are rising and statistically, you get a spurious correlation. When you look at the change in gross world product and the change in gross energy consumption, the correlation coefficient is 0.88. Now that's ludicrously high. So what it tells you, uh, fundamentally is what we call GDP or gross world product,
[00:06:24] what we're when we're talking about is fundamentally the energy turned into useful work. So you can't, so you can't have that saying we can't have growth without using more energy. We should, we should, we should, we must be the reason we're, which are then our, uh, ancestors is if we consume more energy than they do. So this, so that's the reason why. So this idea that what we've got to do is find ways of growing without consuming more energy is, is a bit of a pipe dream. It's nonsense. Yeah. We've spoken about that recently,
[00:06:50] but that's at a global scale. I mean, if we look at, um, on a, on a, uh, uh, individual country scale, there's a huge variation obviously in that. And what got me onto thinking this would be a good topic for this week is because I was looking at Europe's GDP, this, the numbers out this last week and, uh, Europe's GDP has been very gross, slow growth in the first quarter of this year. It's like 0.2% or 0.3%, depending on how you want to define the borders
[00:07:18] of Europe. But, uh, Ireland's GDP for Q1 is down 12%. And the reason for that 12%, yeah, in, in the one quarter. And the reason for that is because of big fall in revenue from the pharmaceutical sector. Whereas in Germany, GDP was actually up 0.3%. And yet Ireland's household consumption was up as well, even though GDP was so far down. And that got me thinking, you know, particularly
[00:07:48] when you aggregate it to an area like Europe, this is becoming a useless measure because you can look at it and think, oh. Well, the thing with the Irish is that it's a tax dodge. Yeah. Well, exactly. There's a huge gap between gross domestic product and gross national income in Ireland because they've made themselves a low tax base for American multinationals to export to the, to Europe. And therefore a huge amount of what comes in as GDP doesn't turn up as gross national income. It goes
[00:08:14] to American corporations. They can get a huge fall in the amount of recorded GDP for Ireland and not have it turn up in individual Irish people's incomes because it's a fall in the income being made and tax dodged by American corporations selling pharmaceuticals to Europe. Yeah. So there are and there's other distortions like that. Yeah, exactly. So making raises the question is gross national income actually a better measure than GDP. If you want to see how countries are doing relative to
[00:08:41] each other. Yeah. So what we like, if you want to think about a simple statistic that would make things better on this front, you would need to have not just GDP, but a measure of the skewness of GDP. Yeah. How much of the current GDP goes to the wealthy versus the poor? How much goes, how much of the change goes to the wealthy versus the poor? So it would be possible to produce a combined statistic that had both the value of the level and the distribution of the level. And that would be
[00:09:09] a dramatic improvement of what we currently do. But also, I mean, how much of that GDP is actually money that's staying in your own country and how much of it is being repatriated back to foreign owners as well? So Lichtenstein... That's where the Irish example is an outrageous example of the gap between the two. Exactly. Well, and Lichtenstein, highest GDP per capita in the world, $231,000 US dollars compared to, for example, $56,000 for the UK. And there isn't for that,
[00:09:37] obviously, because loads of people have got money sitting in funds that are sitting in Lichtenstein for tax reasons. And so, yeah, is the average person better off as a result of that? No. I mean, again, there are tax dodgy nations. Switzerland fits into that with the old gnomes of Zurich idea. Luxembourg, the same thing. Luxembourg is a country of what, 300,000 people. Lichtenstein, I don't know how small that is. It's probably the size of a suburb of New York
[00:10:05] or less. So you get some distortions coming out of that. And equally, people like places like the Cayman Islands, we've got a great looking GDP because it's all where little blokes, but blokes with first names like Rupert put their income to evade taxation elsewhere in the world, will actually make their income. So it's easily distorted as well. But the two things that we have to look at distribution, and one of the things about
[00:10:32] GDP, it's a single number. It doesn't tell you what the distribution is. And that, in many ways, suits the ideology of our current societies because people say, don't worry about the level. A rising tide lifts all boats. Well, this is not a rising tide. It's a set of locks. And more money, far more wealth is flowing into the rich lock than into the poor lock. And we've seen a dramatic shift in that over the last 50 years, which means that, largely speaking, working class and middle
[00:11:00] class people haven't benefited from the increase in GDP. It's all gone to the rich lock, not to the poor lock. So he desperately needs to have a measure of the distribution of income as well as the scale of it. But I think there's that. And I feel like there's many other factors at play as well. So for example, the GDP per capita in the UK is only 56,000 US dollars. It's 84,000 per capita in the United States.
[00:11:26] So is the average person in the US really 50% better off than the person in the UK? They might think so. And the answer is no. Yeah. Because you then, despite the fact that the UK has demolished a large part of its welfare state over the last 50 years ever since Reagan and Thatcher convinced us that deregulation was the route to growth, which by the way was a complete fallacy. The rate of economic growth
[00:11:51] per capita in both countries is 1% or more lower per annum in the neoliberal period than it was in the previous period. So it's been a failure and it's time people admitted that. But it's also because the welfare state exists, there are things you don't need to pay for in England, which would be monstrously expensive in America. I can give a personal example. Two years ago, I had, I think it was two years ago, I had a torn retina and I had to go to
[00:12:20] Moorfields Hospital, the premier eye hospital in the UK. Ironically, I was living walking distance from it at the time. I walked inside, I had nine consecutive laser surgeries on my both eyes, eight on one, one on the other. And that cost me the total sum of zero. Yeah. Where she'd be destitute in the United States. Yeah. I killed myself. I mean, I wouldn't be able to afford it. I'd be blind, you know. And this is the fate of,
[00:12:49] if you leave stuff to people's personal provisions, then the people who, if you're working class, you can't afford to keep your eyesight if you get a torn retina. And this is the sort of horror that Americans experience on a daily basis and think is normal. Yeah. The fact that they've got to pay, they've got to have a job which pays them insurance, which gives them medical cover. And if you don't have it, the costs are off the scale. So when you leave those things out of the comparison, then yes, it looks like Americans are better off than the
[00:13:19] Brits. But because there's still the remnant of a welfare state in the UK, whereas there has really hardly ever been anything resembling a welfare state in America, there's a warfare state, not a welfare state. Yeah. Particularly now. But does that mean people in the United States therefore say, well, I've got to earn more because I need to pay for this health care. Therefore, I need to get it. I've got to work harder. Therefore, I need a better job. I put in more hours and that
[00:13:46] therefore helps the growth of the economy, which would be an argument to say, well, yeah, if you look after people too much, you don't have that driving force, which helps the growth. Just being devil's advocate. No, that's a nice. Hey, listen, you should get an Austrian economic center. I think you can get a job in with a line like that. It sounds like a thoroughly miserable life. It sounds like a lot of hard work to me, which I'd be opposed to. That's why the slaves produced, the slaves made Rome because they were paid so little. They paid them more. Rome would never have been built. Well, they are. Yeah. I'm sorry. You've just reinforced my view.
[00:14:15] I think you rest your case on the wrong gavel. That's actually what's happening, isn't it? People are working hard. I mean, they've haven't got any holidays in the States and people are petrified. Yeah. This is one reason people in the States got a distorted picture of the rest of the world, because they never visit it. They've only got a week's holiday. They can't afford the flight alone to Europe and back would take out three days of their seven-day annual holiday.
[00:14:42] That's, of course, that's the fault. The longer you stay in a company, the more time you get, but it's still pretty damn trivial. So America's opinion of the rest of the world is designed by Hollywood. And it gets into the other factors that contribute to the standard of life as well. So that's a pretty bad standard of life when you haven't really got very much holiday. Yeah. So you could, you know, so that raises the question, GDP is high, but you know,
[00:15:07] at the expense of what in terms of happiness? Australian GDP per capita is 64,000. So in US dollars compared to that 53,000 for the UK. So GDP is 20% higher in Australia than it is in the UK. Are people in Australia 20% happier than they are in the UK? Well, this is where my argument falls down because the answer to that is probably yes. But are there any... Not more so.
[00:15:32] Not more so, exactly. Probably double. But the disadvantage is the average house price in Australia is twice what it is in the UK. So you're actually not that better. That's right. You can't afford to buy a house. Yeah. Yeah. And so this is, it's not just GDP that matters. It's also the income that you need to purchase shelter. And there's a colleague of mine, James Young, who does a lot of good work on
[00:15:57] Twitter. That's where he publishes most of his material. And he shows that what drives wage changes is actually house prices because people, the reason that people demand money wages increase is that they don't get it, they lose their house in that sense. So there's a way in which inflation is driven by asset. Consumer price inflation or wage price inflation is driven by asset price inflation. And that's the main thing we've experienced for the last 50 or 60 years, or certainly the last 50 years,
[00:16:24] under neoliberalism. Asset prices have risen, consumer incomes have not. So that then... In fact, in some ways, if you wanted to get a better measure of the welfare of the working class and middle class, you'd subtract house prices from the measure of GDP growth. Because as you say, the higher house prices get, the less middle class and working class people can afford them. So it's a negative to them.
[00:16:52] And this again is one thing that... I mean, a lot of my biology, biologist friends make this point, that with the GDP, you add up your assets and liabilities together as if they're positive. But in fact, you've got things which you're adding, just subtracting from your welfare as well as adding to it. And that's not included in the GDP figure. So it's a dubious measure. It needs to be supplemented. And we need to break away from worshipping it because since GDP is
[00:17:21] fundamentally energy use, we cannot continue consuming energy the rate we are. We're going to find that out. I think even this year is going to be the year we start to find out just how realistic that trap is. Rising GDP means rising energy use, and that is destroying the biosphere. And we're going to get a great demo of that later this year with El Nino. Yeah, it's a double whammy. Absolutely. We've got it right now with El Nino, who is Trump.
[00:17:45] What we needed, we need an L for Trump. El Loco. There you go. So El Loco is giving us a taste of what El Nino is going to do when it turns up. So just getting, finishing off on that point about house prices then, do you think then in Australia, people think, well, okay, I have to, because house prices are so expensive, I've got to work harder. And that's adding to growth, because people are saying I've got to
[00:18:11] work harder because I can't afford a house unless I do. Well, it becomes equally if you can't afford the house at all, then what do you do? And that's what the younger generation in Australia is now finding itself in that situation. Unless the bank of mum and dad can afford the prices, they can't afford a house at all. So eat, drink and be merry. They don't necessarily work harder. But I'm just wondering whether this inflation of asset prices forces people to say, well,
[00:18:35] I really need to work that much harder, harder than I would if house prices were a lot lower and there's a bit more of a sensible level. And you're back into the Austrian desert. Yeah, exactly. You're back to the Austrian desert island concept. We know all you have to do is motivate a man Friday harder and he'll do to produce twice as many coconuts. It's the production system to which you're slotted that determines whether you can do
[00:19:02] that in an advanced capitalist economy. And so the individuals, what you get out of that isn't individuals working more and producing more. They end up accepting shit conditions. Yeah. Because they know that if they don't get a second or third job, they can't hang on to the house. Yeah. And it ends up being not a cause of working harder, yeah, but accepting lower pay and not actually seeing any benefit from it. Well, that's a little bit of the US economy. And as you talk about the difference between the high income and the low income, there's
[00:19:31] obviously a much greater divide in the United States. And yeah, for that higher GDP per capita, we also know this is where you start to bring in purchasing parity. If you go from Europe or the UK or even Australia, Australia is more expensive than Europe by and large, but you go from any of those places to the United States and go into a supermarket to get your weekly shop, you will be shocked how much it's going to cost you. Yeah. So we can't get away from the distributional issues. And what GDP as a sole measure does is make
[00:19:59] people think that just increasing GDP is all that matters. And it's not. And now that we, because GDP is fundamentally energy usage and energy usage comes from fossil fuels and that's damaging the biosphere, we can't continue doing this. Now, I know there's plenty of so-called global warming skeptics out there. Well, you know, basically they won the argument and then with the people to say it's happening, now they've got to have an argument with nature as well and see what happens this year,
[00:20:27] in particular with the El Nino coming through and the destruction that's going to do. But we can't continue. Frankly, anybody who knows what they're talking about says we can't continue consuming the amount of energy we are when it's coming from fossil fuels at the moment. We have to make a huge shift. And therefore, we cannot continue growing GDP at the moment. We certainly can't make up for the poor missing out on past GDP growth by saying, oh, you'll get more of next year's GDP growth.
[00:20:56] Energy growth and consumption of energy, fossil fuels has to fall. And that fall, and I think we'll realise just how necessary that is. So the rising tide lift all boats, ship a lift is out the window. So the question, which we'll come back to after the break then, is, is there a better measure for governments if we say, well, we don't want GDP growth because we think GDP growth means more energy,
[00:21:23] more energy means we push ourselves closer towards a worsening climate, more global warming. Do we need to find another measure which is less focused, less bent on growth, but it's a better measure for us to say, well, how well are governments doing, how well are countries doing relative to each other? There's a couple of other factors along with, you know, just the what's included in that GDP measure, which is distortionary as well, which we want to cover as well. So we'll do all of that in the second half when we come back on the Debunking Economics podcast.
[00:21:53] This is the Debunking Economics podcast with Steve Keane and Phil Dobby. So Steve, talking about energy, of course, energy really does distort GDP as well, because if you are a country that exports a great deal of resources, then your GDP per capita is going to be so much greater because exports are a big influence on GDP. Yeah. And that's like, unless you are a,
[00:22:22] unless you're a modern monetary theorist, of course. Well, that's where the Middle East obviously comes in there. Saudi Arabia has got an enormous GDP because it exports an enormous amount of oil, and that then lets them bring in the workers from the mainly third world countries, also expats, wealthy Western expats. And the lifestyle is extremely good for those in the upper echelons of Saudi society and the expats, but the migrant workers don't necessarily get decent conditions out
[00:22:49] of that. So again, you come down to, you can't just talk about GDP in terms of the total sum, you've got to talk in terms of its distribution. And the element I would like to see added to GDP is a measure of skew and what statisticians call skew and kurtosis, which is the extent to which distribution is twisted. Because one thing that we tend to think in terms of all the time is the
[00:23:13] normal distribution. You know, if you're given an average IQ of 100, then there's, you know, 68% lie between 84 and 116 and another 95% lie between 70 and 132, that sort of thing. And that's how IQ and height and things like that are distributed normally. But what we've got is GDP is an enormously skewed distribution. GDP per capita is massively skewed towards the upper echelons of the system.
[00:23:41] So, and then if you have that really upper echelon rises, then that doesn't necessarily benefit the lower bit. This is where I say, rather than talking about a rising tide lifts all boats, we've got a bunch of locks we're all in and the witch lock is rising. But partly there's more water flowing in, but also a lot of what used to go to the poor now goes to the rich because of the change in basically bargaining power that occurred with the pretty much destruction of unions
[00:24:07] beginning in the 1970s under neoliberalism. So you do have to have a measure of the skew there. And then what I would say, the type of measure you need, and I think this is something that I think Nepal has implemented, you have a measure of what the bottom 90% gets. And that's the level you look at. Okay? If you forget about the top 10%, no, you don't forget about them. They won't let you forget about them. But your measure of wellbeing is not what the average of the entire country
[00:24:35] gets, but what the 90% gets. And that then says, what is the society doing for the majority versus what is it doing for the elite? That's an interesting idea, isn't it? That's a bit like call centres will measure, I've forgotten what the term they use, but they measure, you know, when you ask to rate eight out of 10 for a particular call and how quickly it was dealt with and how much it was first order resolution and all that sort of stuff. So they look at that,
[00:25:00] they assume they've got to be over eight to say that it's a good measure, if it's less than eight, then they start looking at what the reasons are for falling below eight so they can push it back up over eight again. So maybe that's, it's almost like the same thing, isn't it? What are the, you know, we've got a top line measure, what's contributing to it? If it falls below that measure, what do we need to change? And I don't know whether governments do that particularly. Well, they don't. Well, we know they don't. They just...
[00:25:26] I mean, statisticians measure what economists tell them to measure when it comes to economic data. And this is one of the great problems that neoclassical theory basically says don't, you don't need to worry about the distribution of income because factors get their marginal products. That's, that's the line that they use. So they say workers receive the marginal product of labour, machinery, capitalists receive the marginal product of capital. And then distribution is something which the system itself handles and you don't need to worry about it. That is,
[00:25:55] spelling it out, B-U-L-L-S-H-I-T. Well, it's also entirely based, it's also entirely based on a manufacturing based economy, isn't it? Fundamentally. It doesn't apply in terms of, yeah. So when we've talked about the, you know, the financial economy is doing very well, or the energy producing nations, it really doesn't apply in their case. So Luxembourg's an interesting one. So their GDP per capita is overinflated. It's one of the highest in the world. And that is because a lot of the people who work in Luxembourg actually live in France
[00:26:21] or Belgium or Germany and they're commuting day to day, adding to the GDP, but not adding to the, you know, to the consumption within that country because the consumption is happening back outside Luxembourg. So there's all sorts of distortions like that around. Yeah. I mean, the more important distortion is that you are seeing that it goes to everybody
[00:26:44] on a median basis. And people look at the GDP, my GDP per capita has risen, why do I feel poor? It's because the GDP going to the top 10% has risen. You haven't got much at all. So a top 90, the easiest way to get a more honest measure, which you could do comparisons between countries, is that sort of a 90-10, as we were saying. You measure GDP that is actually received by the
[00:27:11] bottom 90%. And then you get that, the rate of growth of that as well as the rate of growth of the headline figure. And you get a very good idea of whether you're getting income that's skewed towards the already powerful and wealthy or whether the majority of the population are receiving it. And then that would explain why you get massive differences in levels of happiness between different countries, because GDP will not tell you that. But it's even at the top levels. And that's, I mean, this is where we're getting to the nub
[00:27:37] of the issue. You know, what are the important measures? Even if you're a high-income earner in the United States and you were, say, earning 20% more than somebody doing an equivalent job in the UK, the stress levels in the United States might be through the roof because you're worrying about who's going to come and take your job. And if you lose your job, you lose your health cover. And you're, you know, you've got to pay your mortgage. Whereas in the UK, you've got the protections against losing your job. You've got a national health service to cover your health,
[00:28:06] so you don't lose that when you lose your job. You get four weeks holiday in the UK, you might only get all five, you might only get two or one in the United States. So you've got the whole burnout factor. So, you know, on paper, you might be better off in the United States, but you're not as well off as the person actually almost anywhere else in the world. Yeah. Doing the same job. I think Americans are starting to realise that. They never realise it by looking at Europe,
[00:28:33] because, I mean, Europe has been hampered by the so-called growth and stability pact. That's the actual name of the treaty that brought in the euro and limited government spending to three percent of GDP. One we mentioned, America is growing much faster than Europe right now. One of the reasons is despite all the nonsense about the debt ceiling in the States, Trump's war and
[00:28:56] the AI spending as well are massively boosting, fiat created money, boosting the economy and credit based money, boosting the economy. In Europe, they haven't got the AI worked out at all. So, they're not getting that credit based investment boost and the so-called growth and stability pact by creating, trying to crush economies to have a rate of government spending in excess of taxation,
[00:29:26] no more than three percent. That's cruelling fiat money growth as well. So, in many ways, Europe is a great example of what happens if you follow mainstream economic thinking. America is an example of what if you spout the mainstream economic thinking and then ignore it in your actual policy. But who's better off at the end of the day? So on paper, the United States is better off, but are the people happier? You know, if you're looking at what is a government doing for the people within your country, is the United States doing a better
[00:29:55] job than Germany or France or the UK, for example? Absolutely not. But I think a lot of what's... The whole period of neoliberalism from the 70s forward has been claiming that it's going to show society how to grow more rapidly. That was the argument that the neoliberal supporters put forward and that Reagan and Thatcher championed. It hasn't worked.
[00:30:21] Growth, as I said, per capita growth has been of the order of one percent per annum lower in the neoliberal period than the previous terrible Keynesian period that they thought they'd grow more rapidly than. This is the large part of why we're having discussions like this now, because of neoliberalism that actually... Not only had neoliberalism not so much worked, it's done no worse than the Keynesian period that preceded it. So I define the Keynesian inverted
[00:30:46] commas period starting in the end of World War II and going to about 1975, and then the neoliberal period from the 75 on. If neoliberalism would simply reproduce the growth rate that occurred during the Keynesian period, per capita income in America would be 40 percent higher. Now, and also the rest of the world. So most countries... The UK is not quite that extreme, but most countries are of that scale of
[00:31:11] change. So if we hadn't reduced the rate of economic growth by bringing in neoliberalism, then it would be possible to make these comparisons using GDP because GDP per capita would have grown 40 more than it actually has. So the reason people are so stressed at the moment is that we have been within a low growth regime ever since we converted to neoliberalism. And after 50 years of a low growth
[00:31:38] regime, you really see the impact. But even so, even if we had that high growth, is it really the useful measure? Because all the factors we've talked about, say if you're in a resource-rich economy, it's going to be higher. If you've got higher exports generally, or you're an economy which is diddling tax for finance reasons and you've got a relatively
[00:32:02] small population, all of those factors. And then, you know, and if you do have a higher growth, are you paying for it in higher prices through purchasing parity, which makes it all a bit meaningless in reality? I mean, given all of those factors, I'm still wondering, even if, as you're saying, it should have been measured better and policy had been smarter, we might have seen, it might have been a more representative measure of real growth.
[00:32:31] But would it really? I mean, there's so many factors that dissuade us or that minimise the, you know, the meaningfulness of GDP. I just wonder whether it's something that's worth ditching. Or as you say, at least comparing to gross national income. Yeah. It's never going to be ditched. How do we supplement it to make it more realistic? And I think like a 90% rule would be one way, measuring the statistical skew and kurtosis of the income distribution measure. And then
[00:33:00] that sort of breakdown would tell you whether society is doing well or not. And then how much of your income you actually need to access services, because in some countries, like this personal income now that I'm talking about, not gross domestic product, obviously. But people in China don't need to use their personal income to get healthcare, for example, or education on anything like the scale
[00:33:25] Americans do. So therefore, the per capita income in America, more of it goes to paying for stuff that is not necessary, not you don't need to pay for in a lot of Europe. So Germany, for example, has free university education and has. And so those sorts of things are hangovers from the welfare state. And equally, hangovers to what society was like before we let neoliberals take over. So a lot of European cities were moving in the direction of small, the small cities with active town squares,
[00:33:54] where you could walkable cities, that sort of thing. When you live in one of them, you realize just how comfortable and enjoyable that life is. Americans hop in, there's nothing America can do, or virtually nothing they can do without hopping in a car. You got to go somewhere to do something. And you did so far where you live, you got to drive there. And getting traffic jam and so on. Yeah. Yeah. Yeah. In Europe, you hop out of your small city, relatively small apartment and walk to a cafe
[00:34:23] in a square. And that's actually a much more enjoyable lifestyle. So it's very hard to reduce all that to a simple number that tells you how much domestic product has increased that year. Yeah. Yeah. You know, here I am in Sydney, where I can do all of those things. And it's got twice the level of sunshine that London's got. In Perth, I think it's even more than that. So, you know, I like a sunny day rather than just a wet day. You have a GSP measure, your gross sunshine product.
[00:34:51] Exactly. But all of those factors. I mean, I just wonder whether, you know, the one measure actually that's meaningful is almost like your core disposable income measure with some sort of purchase parity. So for the average household and obviously the variation of households, but how much money have you got left at the end of the month to spend on stuff that you choose after you have covered education and health care and, you know, and essential transport?
[00:35:19] Just what is your disposable income? Actually, it would be a better measure, wouldn't it? If you're trying to look at, you know, which country is better off? Yeah. The trouble is, I mean, we're unlikely to see those measures brought in because, again, it comes down to what's politically dominant at the moment and neoliberalism still dominates. And a large part of that is arguing, don't talk about the distribution of income, just talk about raising the total level. That is now unsustainable. And this is the point, I'll come back to the ecological issue,
[00:35:47] because fundamentally gross world products is gross energy consumption. And because that is coming from fossil fuels, which are damaging the biosphere and at the point where it's becoming critical now. We actually, according to my climate colleagues, climate science colleagues, by the way, we have now finally cracked the, I'm not sure what the level of how many years average it is, but the average temperature of the planet is now more than one and a half degrees
[00:36:13] over pre-industrial level. So we've already breached what's the limits, so cool for the Paris, Paris Accords. That is the level that climate scientists used to define as dangerous. And anything above that, they define as catastrophic. We're already in the dangerous range. So I've got a feeling that this year is going to be the year that we cease having an argument between people, climate change scientists and climate change deniers, and start having an argument between the climate and climate change deniers. And I know who I'm going to back in that one.
[00:36:43] Yeah, I think we all know what you're going to back in that one. So let's finish off on all of these measures then, because there are useful quantitative measures, aren't there, which we perhaps should be looking at more. So I just gave the example of, you know, disposable household income would be a good one. Household wealth and the disparity in wealth as well. So, you know, as you're getting towards your retirement, how much money have you got in your pot to see you through? Education levels, obviously, are very important. The level of attainment, but also the, you know,
[00:37:11] how many people are getting educated to a higher level. And then there's, you know, there's an interesting measure in the UK, the NEETs, which is a real problem. Young people aged 16 to 24, the NEETs are not in education, employment or training. And they're worried about in the UK, it's 14%, which seems relatively low. But there again, you know, 14% of young people are doing nothing. They're not getting trained, they're not in a job. And they're not in education. But we're managing to balance the budget. And that's far more important than having an educated
[00:37:42] and healthy workforce. Yeah, but that is a real forward measure, isn't it? How young people are doing, because that's your next generation. And you want them motivated and employed and healthy. And if they're none of those things, then... Minus in all those three. That's true. So, we're at the point where it's becoming obvious that neoliberalism has failed. Even if people don't know, that's what's caused the current state they're in, which is why we're having these discussions now. It's shown that focusing just on increasing aggregate
[00:38:12] output and believing that the market system without state intervention will enable it to grow faster. So, those two things are both errors. So, in the future... And yet, we need to look at more. Yeah. And yet, still, we need to look at those secondary measures more. And yet, still, you know, everyone is just focused on what that GDP number is. We're trained to just look at GDP and not drill down on the other stuff. Yeah. It's also possibly simplicity of the human mind. It's easy to keep one number in mind and how much that number is changing. Two numbers,
[00:38:42] where they might go against each other, that tends to be a bit of a challenge for most people. They still want to get some overall, you know, single... Just give me the single summary. That's what they want. So, this is partially... This isn't just the elite that'd like us to focus on GDP. Our minds push us in that simple direction. And so, I said, the easiest way to go about it would be have published GDP per capita for the bottom 90%. And that would then be... If that was used as a guide,
[00:39:12] then it ties in both the growth in GDP, which I think is going to cease happening, but also the distribution effect in one number. But how do you do that? How do you do that for GDP, which is a measure of the country's wealth and apply it to the bottom... You need the distributional information as well, but then you subtract the increase in GDP for the top 10% from the aggregate, the vehicle. But that would make sense for national income. It would work. It would make sense for national income rather than GDP, because you've got the whole
[00:39:40] distortionary effect of exports, which I don't know how you... Not as much as the distortionary effect of the top 10%. Okay. Or top 5%. So, yeah. Okay. And then, and interesting, what actually got me down this road, as we talk in the last two minutes of the podcast about the main reason I wanted to talk today, but I mean, you can go and have a look at it for yourself. In the UK, the Office of National Statistics has, since 2011, compiled the National Wellbeing Dashboard. Yep.
[00:40:08] And it looks at things like, well, imagine life satisfaction. How are people feeling? Are they feeling like what they're doing with their life is worthwhile? One in 25 people think... Like planning a podcast, for example. Yeah, exactly. One in 25 people in the UK, actually quite a small percentage, which is one in 25, think that what they're doing is not worthwhile, which means that... Only one in 25. Yeah, yeah. That's right, isn't it? Yeah. 8.1% say they have a low level of happiness. Everyone else is sort of getting...
[00:40:37] Well, you know, you could say... As happy as the British can be, yeah. Yeah, exactly. That's right. You do it the other way and say, are you happy? And you get a very low percentage of that as well, because melancholy... But they are happy when they're melancholy. So it's a difficult measure, that one, isn't it, really? The almost 25%, almost one in four, though, said they are suffering high anxiety. And that should be close to one in four. That would be an interesting comparison around the world, but that's quite high for the UK, isn't it?
[00:41:04] Two-thirds of adults are hopeful about their future. One in five adults in Britain feel very or somewhat unfairly treated by society. Almost one in 16 feel lonely. And six in 10 adults in Britain agree or strongly agree that people from different backgrounds get on well together with people in their local area. There's one for Nigel Farage to have a look at. And two-thirds
[00:41:32] of adults in Great Britain said that, in general, they trust most other people. I mean, these are... Yeah, some of these you might say, well, these are a little bit esoteric. But some of those measures... But the main one is, are you happy? Is your life fulfilled? It's like Maslow's hierarchy of needs, isn't it? Once you've got your basic shelter covered, you know, how close are you to self-actualisation? Have you... Do you feel like your life has got purpose? Surely that is any way better measure than, you know, any form of GDP.
[00:41:59] Yeah, the trouble is, I mean, there's an extent to which I want to hang on to the GDP measure, by the way, because it measures the monetary economy. And that's one thing which we economists should be masters of and are not because of the nonsense they write, the mainstream beliefs about banking and money creation and so on. But it's a monetary system. I want to be able to cover the monetary flows through it and how that converts into the production of physical goods and services. So I want to hang on to the GDP measure. But to get something which people can
[00:42:27] actually process, we need a modified number. I don't think grading extra numbers will help, because as I've said, people just fall down to one simple... But if you make a simple number, GDP growth for the bottom 90 or bottom 95%. And then at that point, you take out maybe 99. I mean, something which... We are the 99%. So how are the 99% doing? If they're doing not very well, then you've got a society which is dysfunctional. That would be a better measure. And it would be
[00:42:55] statistically relatively easy to do it versus having to take surveys and ask people how happy they are, et cetera, et cetera. Yeah, well, you always... But there's always going to be surveys asking people how happy they are. But GDP is a composite number, of course. It's, you know, it's four or five different factors that are combined together. As you say, to measure monetary flows, you could come up with a composite number to say, you know, to do with the, you know,
[00:43:23] like a happiness index. Just come up with a number and make it comparative. So there might be five or six different factors within that in terms of, you know, levels of anxiety, how much, you know, together with figures like how much wealth, you know, are you holding? You know, how secure is your future? What's your education level like? You could combine all of those into almost like another GDP equivalent number for a worldwide comparison. So you could say, well, okay, yes,
[00:43:49] the US is doing well in terms of GDP per capita, but in terms of the happiness quota, they are well down on the pecking order. And that might... And then that becomes a number that governments rely on, then governments will start changing their policies. So it's not just based on growth. No, they won't. Okay. Having dealt with enough politicians, they're even simpler than the public and they want a simple number they can brag about, but force them to brag about,
[00:44:18] like let's call it GDP 99. Okay. We have GDP 100, GDP 99 and GDP 90. And the one we worry about is GDP 99, that's just how's the bottom 99% doing? And then if that's... If you get the GDP 99 doing far less well than the GDP 1% or 0,1, then you get a point, well, we've got issues in our distribution of income, we've got to fix them. So something which... If you're GDP 99 or GDP 90, I think those
[00:44:48] are my two nominations. But we've already got measures of inequality, don't we? Which no one seems to pay any attention to. Well, that's why build it into the GDP number. That way, at least it might turn up as something that turns up in politics. Yeah. And that would show... That would be unfavorable to countries that do have... That rely on that GDP growth from high export earnings, for example, which are not being passed through to the general population. And also the ones with massive risk of distributions of income like America. Yeah. Yeah. Yeah. All right. Yeah. Well, it's Elon Musk and the rest. All right.
[00:45:17] Yeah. Good. Well, yeah. Useful. We will... We'll talk again next week. Thanks, Steve. Okay, nice. Speak to you then. The Debunking Economics Podcast. If you've enjoyed listening to Debunking Economics, even if you haven't, you might also enjoy The Y Curve. Each week, Roger Hearing and I talk to a guest about a topic that is very much in the news that week. It's lively, it's fun, it's informative. What more could
[00:45:45] you want? So search The Y Curve in your favourite podcast app or go to ycurve.com to listen.