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Economists Wreck the Economy

With the various economic troubles occurring in the Group of Seven countries, the former Soviet bloc and most countries in the South, and with economists all giving conflicting advice, it s time to ask if economics itself is the problem, writes international development analyst Hazel Henderson, from St Augustine, USA.
THE US economy is
•tailed. Japan's is
■Inking. Germany’s inflated with indigestion from swallowing former East Germany. France battles 10 per cent unemployment and Britain and Canada are wallowing in recession.
Television screens arc filled with legions of economic gurus — all with conflicting advice. They "adjust" their forecasts when proven wrong. Economist jokes proliferate. The latest "Economists can’t even get their hindsight right."
After World War II. macro economic management came lo dominate national govern ments’ policy-making, using the GNP and GDP as indica tors. Today, current economic theories and models continue to assume "free trade” is good for everyone, "investment" will trickle down to create Jobs, and only individuals competing to maximise self-interest are "rational".
We need a new index for genuine human development and quality of life to correct the GNP and its unreal assumptions. It's time to teach economists that "economies" are not derived from God but are simply sets of rules based on diverse goals and values
If the world's richest na Hons, the Group of Seven (G-7), are in trouble — not lo mention the former Soviet
bloc and moat countries in the Southern hemisphere — It's time to ask whether economics itself is the problem.
What's wrong with eco ■ nomics and why are Ms practitioners - left, right and cen ter-faillng? First, we must remember that economics is not a science It's a profession and economists are much like lawyers, only with less accountability Lawyers can be disbarred for malpractice, while economists can create social havoc and environmental damage with Impunity.
During World War 11, the Gross National Product (GNP) and Its domestic version, the Gross Domestic Product (GDP), mobilised the Allies' civilian economies for war production. After the war. macro-economic management came to dominate national governments policy-making, still using the GNP and DGP as indicators.
Economists over-promised
politicians that they could still manage and "fine-tune" societies for economic growth and full employment. The Central Bank of Sweden even lobbied the Nobel Committee and put up the money for a new Nobel Memorial Prize to confer "scientific" lustre on economics.
Today, current economic theories and models assume: 1) domestic national economics still exist and can be managed. 2) these economies still tend toward equilibrium. 3) markets can still allocate resources to satisfy the competing needs for consumer goods, movies, tanks, mass transit, research, retraining, maintaining and renewing Infrastructure. 4) "free trade" Is good for everyone. 5) "investment" will trickle down to create Jobs. 6) advertising-hyped mass consumption can continue to drive GNP growth. 7) GNP is the best measure of progress
although It short-changes other vital social goals and 8) nature can continue indefi nltely providing resources
dustrial pollution
Worse, economic textbooks still hold that caring, sharing, cooperative unpaid work Is "Irrational". Only individuals competing to maximize self-in tcrest are "rational." GNP-measured national accounts, skewed by all these outdated notions, steer economic policy
The GNP still over values military production, goods, and services and sets the value of educated citizens, children and the environment al zero. Only money transactions are Included tn the formula while ignoring the 50 per cent of all productive work that is un paid, such as volunteering, parenting children, caring for the elderly, sick and disabled, or do-It-yourself projects.
Investments in people, standard education and special
educational programmes. such as Head Start, and retraining bu Idtn^1"” r°“d’Prnp^c deemed "spending", because the GNP does not carry them on the books as capital aucte. It's like running the country as a business liquidation sale As result, the United States has a falling literacy rate, an uncom petltive work force, crumbling bridges and mass transit sy* terns, and the lowest "net worth" per capita of all G-7 countries.
Consumers, relied on lo support 65 per cent of the United States GNP are debt ridden and broke. Fiscal tools are rendered powerless by sky-high budget deficits. Monetary levers are stripping their gears in today's global capital markets where interest rates attract and repel "hot" money at electronic speeds. Sedate bilateral trade flows are
W««nd the plant, eve^*4
What’s needed are new •corecards to correct the GNP Theae neT^w^FT*^ ' the United Nations Hwaren Development Indra HDt) and my own Country Future* Indicator. |CF1) being eomM cred or adopted tn Western Europe. Canada. India. Venezuela and other rowntrie*
It s also time to retrain economists and license them to prescribe macro economte policy in reality "economtes" are not derived from God but are simply of rutc, based on diwrw and values
Economists abstract formulas for "growth (of what?), investment" (m what?), "efficiency" (for whom and over what time frame?) and "progress" (what kind?). arc al vague generalities. not seten tlflc principles
Now. more than ever, economists must public on all this or be overtaken by aD the new policy tools and
development and quality of We — IPS
HAZKL HRNDZRSON urved on the Advisory Hoard of the US Office of Technology Assessment. Her latest book is Paradigms tn Progress: Ufa