by David Boyle
It seemed to be working in Britain too. By 1941, the UK was outproducing Germany in its main military requirements. Despite the fact that the Nazis were using slave labour, and had all the resources of a totalitarian state at their disposal, Keynes’ and Kuznets’ economic tool had beaten the Nazi efficiency machine where it really mattered – in their productivity. Four years later, Galbraith dashed into Germany ahead of the advancing Allied troops to seize the relevant documents, interrogating Goering and Speer for weeks. He believed by the end that national accounts had been a secret ingredient in the war effort of equal importance to the Enigma Code or the Manhattan Project. Hitler’s production targets were far lower because he had not been able to use sophisticated national accounting.
In fact, Galbraith discovered, the Allied bombing campaign of inefficient German factories in 1944 was the only thing that managed to speed up Nazi production. Military planners are wedded to figures more than almost anyone else, and especially – for some reason – when it comes to aerial bombardment.
By then, Keynes was preparing for the final triumph of his life, the 1944 meeting at Bretton Woods in New Hampshire, to set up a world financial system after the war. He was as charming and as rude as ever at the conference, teasing the American delegation for their jargon (he called it ‘Cherokee’) negotiating sometimes from 9.30 am to 3.30 am, holding the 730 delegates from 44 United Nations countries spellbound. Although it was not primarily his version of the plan that was adopted for the IMF and other powerful institutions we still have today, Keynes was the hero and it was Keynes who moved the acceptance of the final act. When he finished, the whole assembly rose and cheered him as he walked towards the door, singing ‘For he’s a jolly good fellow’. ‘At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived,’ wrote the British embassy’s economic adviser:
The quick logic, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the ordinary limit of human achievement. Certainly, in our age, only the prime minister surpasses him … shot through with something that is not traditional, a unique unearthly quality of which one can only say that it is pure genius. The Americans sat entranced as the godlike visitor sang and the golden light played all around.
A year later, he was relaxing in Cambridge when he heard on the radio that the Americans had ended their ‘Lend-Lease’ agreement with Britain. Knowing that this meant potential financial disaster for the country, Keynes redoubled his efforts and led the exhausting negotiations in Washington to hammer out some kind of deal. Royal Navy ships that he passed on his way across the Atlantic cheered him as he went, knowing his mission meant the economic survival of Britain. The experience left him utterly exhausted. He died of a sudden heart attack at the age of only 62, at his country home at Tilton in Sussex, over Easter weekend 1946. ‘I lost my everything,’ wrote Lydia. His father, John Neville Keynes, struggled to his memorial service in Westminster Abbey at the age of 93.
IV
The first attempt at a set of national accounts was made in the 1690s by Sir William Petty, the great anatomist, chemist, musician, Surveyor-General of Ireland and inventor of the copying machine. He was trying to find out how much you could tax the nation – the same motivation which led to the Domesday Book. ‘Instead of using only comparative and superlative Words,’ he wrote, ‘I have taken the course … to express myself in Number, Wealth.’ The great thing was to count and to sum things up in numbers, he told Charles II. ‘By contemplating the universal posture of the nation, its power, its strength, trade, wealth and revenues … by summing up the difficulties on either side, and computing upon the whole … is what we mean by Political Arithmetic.’
Keynes and Kuznets were not actually the first. Nor were they the first to argue about what should be counted and what should be ignored. When the French kings used to do it, they only measured agriculture as national wealth. It took Adam Smith to include industry and factories, but even he refused to count entertainment, government spending and lawyers because they were ‘unproductive of any value’. Alfred Marshall, Keynes’ teacher and the founder of neo-classical economics, included both lawyers’ fees and car prices for the first time – it was money that counted, after all. Things without a price got left out. They still are.
Even so, Keynes and Kuznets between them ushered in a whole new world. Their bottom line figure for a whole nation meant suddenly that economists could start forecasting the changing pattern. A confusing new world of input-output ratios and linear programming was emerging, with economists – like white-coated scientists – wandering with clipboards through the corridors of power. ‘They are to be called wise who put things in their right order and control them well,’ wrote Colin Clark quoting St Thomas Aquinas on the first page of his 1940 book on the subject.
The first time the whole counting project was carried out in Britain, it was under the requirements of the Marshall Plan to rebuild Europe. Every country had to write a four-year recovery blueprint for 1948–52. By the 1960s, everyone was doing it. Harold Wilson set up the Department of Economic Affairs under his eccentric sidekick George Brown, and the first National Plan for Britain was published in 1965.
It was the same story in the USA. The new priesthood of number-crunchers no longer preached the gospel of thrift. It was now the duty of consumers to consume, and they measured their ability to do so. Galbraith came back from Europe and joined the staff of Fortune magazine. His first job was to prepare a blueprint for American transition to a postwar economy. And with one number that summed it all up, nation by nation, suddenly the economic priests discovered the number could move. If it went down it was recession. If it went up it was ‘progress’. ‘Progress is our most important product,’ said Ronald Reagan week in week out, as the host of the TV show General Electric Theatre. But could you really measure something as complex as progress in this way? Who said we should be pleased just because there was more money going through the economy? What about those life-enhancing but priceless aspects of life that never got counted?
The first cracks in the idea of numbering whole nations were beginning to appear. Some of the biggest proponents of GNP were listing what couldn’t be counted. Like damage to the natural world: even in 1940, Colin Clark could write in the introduction to his book on the subject: ‘It is, unfortunately, as yet impossible to give even the most approximate numerical valuation of the extent of this destruction of natural fertility in different parts of the world …’
How right he was. The first meeting of the International Association for Research in Income and Wealth took place three years after Keynes’ death in his old college in Cambridge. Kuznets was there, and one of the key issues was what to count. National accounts were just supposed to measure final products. But what was education? It was free so it didn’t get measured. What about taking a walk? What about professional killers? Not included because they were illegal, yet money does change hands. Then there was the question of prices. Are they really a very good measure of what something is worth – especially today? What about housework – an argument which has continued ever since? Not included, but Kuznets reckoned it could make up a quarter of all national income. How could you measure ‘growth’ in developing countries where the most important products were prayer and monks? It was no idle question – the World Bank needed to be able to compare the ‘progress’ of countries in the developing world. They were busily measuring their success in Africa using GNP, even though most production there took place for free in the household. It was as if only big industry counted.
There were idle questions too: Kuznets worked out that the average rate of ‘growth’ since Adam and Eve 500,000 years ago had been about 0.004 per cent a decade. It was the economic equivalent of how many angels you could get onto the head of a pin.
It all seemed so simple when the object was just to win the war, but when it was to make society a better, hap
pier and richer place, then one measurement wasn’t very effective. ‘Though unable to measure them,’ warned Kuznets, as he listed the exclusions, ‘we must recognize that their omission renders national income merely one element in the evaluation of the net welfare assignable to the nation’s economic activity.’
Kuznets had been having doubts since his first report to Congress in 1934: ‘The welfare of a nation can scarcely be inferred from a measurement of national income as defined above,’ he warned. Nearly 30 years later, writing in New Republic, he went much further: ‘Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long run. Goals for “more” growth should specify more growth of what and for what.’
But it was too late. The future of Western nations was being bound to GNP and how fast it could grow. Did Keynes have doubts too? He was suspicious of measuring things, or of reducing economics to figures. To find a social system that worked economically as well as morally, he urged people to stop ‘counting the money cost at all’, telling the future to ‘diminish, rather than increase, the area of monetary comparisons’. But then he never liked counting much – his real source of new thinking was intuition and introspection. ‘He was not the first of the modern statisticians, but the last of the magicians of number,’ writes his biographer Robert Skidelsky. ‘For him numbers were akin to those mystic “signs” or “clues” by which the necromancers had tried to uncover the riddles of the universe.’
Theories weren’t calculated from piles of figures, said the necromancer. They begin as a ‘grey, fuzzy, woolly monster in one’s head’. Keynes was on the side of Pythagoras and Plato rather than the modern number-crunchers. He believed that science, art and magic were more similar than they were different. Yet here he was inventing the tools by which his followers would sum up a whole country with one number. So perhaps it shouldn’t be a surprise that the man he named as his successor devoted his career to a critique of ‘progress’ and ‘growth’.
When they corresponded during the war, E. F. Schumacher was still 30 years away from writing his bestseller Small is Beautiful, but Keynes recognized in him a fellow magician. ‘If my mantle is to fall on anyone,’ he told a friend in the Treasury just before he died, ‘it could only be Otto Clarke or Fritz Schumacher. Otto Clarke can do anything with figures, but Schumacher can make them sing.’
Despite the numbers, Keynes still believed the only purpose of economics was to increase ‘the pleasures of human intercourse and the enjoyment of beautiful objects’. And these things, like Keynes’ probabilities, weren’t really measurable. In April 1933, in front of almost the whole Irish government at University College Dublin, he delivered a famous and slightly shocking address called ‘National Self-Sufficiency’. Reading it seven decades later, it still echoes as a powerful indictment of anybody who thinks that counting money is the same as counting wealth:
We destroy the beauty of the countryside because the unappropriated splendours of nature have non-economic value. We are capable of shutting off the sun and stars because they pay no dividend … Today we suffer disillusion not because we are poorer … but because other values seem to have been sacrificed … and sacrificed unnecessarily. For our economic system is not, in fact, enabling us to exploit to the utmost the possibilities for economic wealth afforded by the progress of our technique … leading us to feel we might as well have used up the margin in more satisfying ways. But once we allow ourselves to be disobedient to the test of an accountant’s profit, we have begun to change our civilization.
Bizarre measurement No. 9
Open Window Unit
(The amount of sound absorbed in an open window measuring one square foot: now known as a Sabin.)
* * *
Length of time ‘disposable’ nappies take to decompose in rubbish tips: about 500 years
Number of guns brought to school each day in the USA: 135,000
Chapter 9
The New Indicators
If the chief of your local police department were to announce today that ‘activity’ on the city streets had increased by 15 per cent, people would not be interested. They would demand specifics. Exactly what increased? Tree planting or burglaries? Volunteerism or muggings? Car wrecks or neighbourly acts of kindness.
Atlantic Monthly, October 1995
London is too full of fogs and … serious people … Whether the fogs produce the serious people, or whether the serious people produce the fogs, I don’t know.
Oscar Wilde, Lady Windermere’s Fan
I
Dickens seems to have foreseen our crisis in counting. Once again in the apparently naive character of Sissy Jupe in Hard Times, he set the hard questions about national wealth. Here we are in this nation with fifty million pounds, says the teacher – ‘Girl number twenty, isn’t this a prosperous nation, and a’n’t you in a thriving state?’
But once again, Sissy doesn’t know the answer: ‘ “I thought I couldn’t know whether it was a prosperous nation or not, and whether I was in a thriving state or not, unless I knew who had got the money, and whether any of it was mine. But that had nothing to do with it. It was not in the figures at all,” said Sissy, wiping her eyes.
‘“That was a great mistake of yours,” observed Louisa.’
A century after the publication of Hard Times, it still seemed a mistake. Armed with GNP, the politicians thought they could see a new era of prosperity stretching before them – all because they could ‘count’ a nation’s wealth in one figure and see how much it was growing. A new phrase entered the political lexicon, ‘economic growth’. The idea was introduced during the Conservative Party conference in 1954 to a British public exhausted by wartime rationing and postwar austerity. If Britain can ‘grow’ by 3 per cent a year, then living standards could double by 1980, said the Chancellor of the Exchequer R. A. Butler. He repeated the message over and over again during the 1955 general election. ‘It’s not pie in the sky but a sober picture,’ he told the crowds that used to go to political rallies in those days. ‘Moreover we don’t have to wait until 1980. Progress will come year by year if we concentrate on production and investment. The government will help with great new schemes. We will build roads and railways, develop atomic power and help with the re-equipment and modernization of the whole of industry.’
And so it was that a radical method of measuring which arose out of the battle to rescue the world from depression, and then from Hitler, was embraced by the establishment. And once they had embraced it, they never let it go. It seemed the perfect scorecard. Measure national success by the amount of money changing hands, and before you could say ‘Profumo’, we had ‘never had it so good’.
The mantra of growth has been repeated with growing conviction ever since, and with a kind of manic frustration as real life failed to comply with the figures. Because this counting crisis has been the sad story of the postwar world. The growth has been gigantic, the technological innovations astonishing, and the living standards – if you measure them in terms of money – have shot up. But real life for most of us has also been less healthy, more stressful and more polluted.
Whatever the technocrats said, you simply couldn’t count ‘progress’ like that. Yet governments fell over themselves to compete for growth, sacrificing their wildlife, nature or people’s sanity – and sometimes even their populations – to make way for great dams or motorway projects. Enormous investment flowed as a prize to the countries where the growth was high. And within that, policy-makers battled for supremacy over who had the most mobile phones or computers per head. Anyone who questioned whether it was a good idea to flatten this wetland for a road or that neighbourhood for a tower block were told, fatuously, that you ‘can’t stand in the way of progress’. It was an irritating inversion of the meaning of the word.
And life wasn’t actually better, as we all knew in our heart of hearts. In the 45 years since Butler painted his hopeful future of growth, there is more
ill-health and less creativity, fewer people in sports teams, less amateur dramatics, less learning musical instruments or painting. There are more people with asthma, depression and cancer. There is more crime, more people in prisons. But the key measure of success used by politicians and economists recognized none of these things as important. By narrowing the definition of what constituted ‘wealth’, we ended up narrowing all our lives.
The work we all do bringing up children didn’t get counted and planned for; but work flipping hamburgers in McDonald’s did. The first was ignored. The second was built into government policy for single mothers. Only money counted, it was like Jeremy Bentham’s calculation, but far narrower. And if the whole of public policy was devoted to improving this one bottom line figure, it was a kind of self-fulfilling prophecy. Things that money couldn’t buy were driven out. ‘A country that cut down all its trees, sold them as wood chips and gambled the money away playing tiddly-winks, would appear from its national accounts to have got richer in terms of GNP per person,’ wrote one economist in 1989. Some of them almost did.
Yet economics was by now firmly wedded to this simplistic measuring system. ‘Economic growth is the grand objective,’ said Keynes’ biographer Sir Roy Harrod. ‘It is the aim of economic policy as a whole.’ And overwhelmingly the establishment agreed with him – people whose wealth was considerable but whose lifestyles were probably increasingly exhausting. It was the tyranny of the bottom line all over again.