Why is a Recession Required?

On a big picture basis I have to admit I am confused by recessions.  It seems to me that all this obsession with growing our/their economies really isn’t getting much done.  We grow for a while, then some one some where does something breath-takingly dumb.  Then the growth goes negative and we enter a recession.  People lose their jobs, everyone gets worried and generally things go to hell for a while.  Then depending on the damage done it takes people a decade to regain the wealth they had prior to the recession.

Perhaps we should cut short this entire process of bubbles rising and falling and just accept lower growth.  We could all give up buying crap we don’t really want or need, live in smaller houses and cut back the work week to 32 hours.  Then we could all get more focused on building a better civilization rather than just an economy.

I suppose that is why I like the idea of the GPI (Genuie Progress Indicator), which is sort of like the GDP, but it also takes items off that impact of reduction of water quality, the cost of family breakdowns and the cost crime.  Unlike the GDP where you get robbed and it is a good thing (they have to replace your stuff) or if you dump chemicals and kill fish in a river it is a good thing (the costs of the clean up).  The GPI has some feedback to realize no one wants to be robbed or kill off entire rivers.  According to the GPI metric the US as a civilization peaked in approximately 1973 and has been going downhill since then. No wonder if things feel like they are getting worse, they are.

I was a little suprised to find that this has been looked at in Canada.  Back in 2003 NRTEE wrote a report on developing a new set of indicators.  Yet like many other good ideas I don’t believe this one went anywhere as I have yet to find a nice summary number like the GPI from the Government of Canada.

Yet despite the the sense of the idea, it won’t go anywhere for now.  We are a little focused on getting people back to work to worry about how to measure things despite the fact in the long run it might be more useful.  So what do you think of using the GPI?

4 thoughts on “Why is a Recession Required?”

  1. The GPI is great in a ‘we are the world’ sense and I think it would be fantastic if we started focusing on more cause and effect measurements.

    I also think I have resigned my thinking to the understanding that the world’s wealth belongs to the very small group that care very little about the effect of operations but make the majority of the decisions that control those factors. The cash generated protects them from the effects of those decisions, they can afford expensive proactive health care privately and can isolate themselves from pollution etc. Capitalism has been the most effective system in all of history and allowed humans to reach levels never seen previously by any other system, but it will also be the eventual demise of society.

    As for the necessity of a recession, well it’s necessary because the real money is made in timing markets, not buy and hold. The system in place benefits those who understand that 😉

  2. This was an awesome post – maybe you know the quote from Robert Kennedy below? GPI makes way more sense than GDP. Why can’t I find a single fella who thinks this way?!

    “The Gross National Product includes air pollution and advertising for cigarettes, and ambulance to clear our highways of carnage. It counts special locks for our doors, and jails for the people who break them. GNP includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads… And if GNP includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, or the intelligence of our public debate or the integrity of our public officials… GNP measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile; and it can tell us everything about America – except whether we are proud to be Americans.”

  3. Adam,

    “but it will also be the eventual demise of society.” There have never been truer words. I’m reading a book that is saying we are already screwed for climate change. Interesting read. I’ll post a review when I’m done.


    Thanks for the quote. An excellent summary.


  4. Great post! I think this is a much better way of looking at progress than a simple GDP.

    I’m with you – let’s all skip the boom/bust cycle, and just be happy with slower growth leading to a better tomorrow.

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