The Foreclosure Crisis has Upset the Traditional Yardsticks to Measure Growth

October 15th, 2009 | Tags: Foreclosure Crisis

foreclosure-crisis

One of the many casualties of the foreclosure crisis is the gauges so long being used by economists to measure socio-economic health; these traditional yardsticks have been upset. Too many jobs have vanished too quickly and so much of life savings have been lost that many are arguing that the economic yardsticks have been exposed to be insufficient. The foreclosures hit hard everywhere.

Economists Joseph E. Stiglitz and Amartya Sen (Nobel Prize winners) have started to press for the adopting of new measuring tools that will take into its ambit a wider concern for the welfare of human society then mere economic development.

According to them much of the present disaster is because of the misconceived notion that the policy makers failed to focus on cultivating growth; had they done so prosperity would have been maximized for all concerned.

Stiglitz commented before journalists in New York, “What you measure affects what you do. If you don’t measure the right thing, you don’t do the right thing.”

As per their report the world has been dominated for a long time by a lopsided stress on GDP (Gross Domestic Product) readings. It is the counting of the goods together with the services that is produced by the economy. With its total focus being on GDP many of the countries, especially America, failed to measure the social damage caused by loss of jobs and degrading impact of public health on the environment. The government permitted the financial institutions to borrow and gamble with massive amounts. It was like wringing out the juices from the present by enslaving the future. This was the foundation of the worst monetary catastrophe since 1930’s.

However the report stresses more on analyzing the causes than prescribing remedies. In general terms it explains why this relying on growth exclusively and keeping it alive as an economic philosophy may produce unhappiness. It proposes the earnings of certain types of citizens should be given more weight that the total gross production of the entire societies.

The report skirts the thorny points of measuring tons of pollution or measuring the loss due to a person because of aborted career prospect. Thus only the principles are laid out but how this can be done at the practical levels is left unsaid.

In 2008 French President Nicolas Sarkozy who was not happy with the current tools of assessing economic health, created the Commission on the Measurement of Economic Performance and Social Progress. The statistics agency of France is working on the suggestions and Sarkozy nurses plans to disclose the details at the G-20 summit.

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