Truth Be Told

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An alternative economic yardstick provides a sobering look at the booming '90s.

For many economists, the gross domestic product (GDP) of the United States is the benchmark of our nation's economic health. As a measurement of all the goods and services bought and sold, much attention is paid to this figure and what it means for American households and our quality of life. But getting a more meaningful idea of how the economy is truly affecting us requires a look at things outside the scope of the GDP, according to Redefining Progress, an Oakland, California-based nonprofit research and policy organization.

The group has devised a method of calculating the monetary effects of other economic, social, and environmental factors - things such as unpaid housework, loss of leisure time, and depletion of natural resources. This comprehensive well-being index, dubbed the Genuine Progress Indicator (GPI), is reported in dollar terms using government data, so progress or decline can be understood as easily as GDP. By looking only at GDP growth, Americans run the risk of overlooking the hidden costs of economic development, says Juliet Schor, a professor at Harvard and a proponent of using the GPI as a tool for measuring economic and social health. "The economic boom that we are in is, in part, built on unsustainable use of unmeasured resources."

After a downward trend for several years, the GPI index hit $2.3 trillion in 1999, up $144 billion (6.7 percent) from 1998. Much of the growth was a result of a significant jump in personal consumption, from $5.7 trillion in 1998 to $6 trillion in 1999. Sounds good - more spending means a better economy overall, right? Not according to Redefining Progress. The company's research shows that much of this consumption was actually driven by increased consumer debt, more hours spent commuting and working, and a depletion of natural resources, thus decreasing the GPI.

From 1997 to 1999, net borrowing by all households rose from $328 billion to $520 billion per year, an increase of 59 percent. In the early '80s, U.S. households had 70 cents of debt for every dollar they spent per year. That ratio rose to 90 cents in 1990, and today peaks at nearly 99 cents. As a consequence, the number of personal bankruptcies per capita doubled between 1989 and 1998. While the number of bankruptcies declined 9 percent in 1999 from the previous year, that was still nearly four times higher than the number of annual bankruptcies in the early '80s.

We all work more and play less today than in the past. In 1969, the average worker put in 53.5 hours per week on the job or doing chores around the house, and had 19.5 hours of leisure time. By 1999, the numbers had grown steadily further apart, to 57.5 hours spent working and 15.5 hours playing. One reason for this: In constant dollars, an hour of work in 1999 earned 8.1 percent less than in 1973 - meaning that we have to work longer to earn the same amount.

On the environmental front, loss of farmlands and wetlands decreased the GPI by $576 billion in 1999. These factors depressed the GPI by $551 billion in 1998 and $388 billion in 1990 - highlighting the fact that the amount of agricultural and wildlife areas lost to development is increasing. Additionally, air and water pollution further diminished the index, as it costs consumers more today to keep pollution out of their homes and bodies. For instance, in some areas of the country, polluted tap water may force consumers to buy bottled water.

The report also notes that much of the economic boom of the late '90s was powered by increased energy consumption, largely in the form of fossil fuels bought at bargain prices. Low energy costs increased the disposable income of many Americans. But the recent escalation of fuel prices may put a crimp on future spending. For marketers, forewarned is forearmed.

For a complete copy of the report, log on to www.rprogress.org.

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