Is it the Economy?

During election season, the economy is always a hot topic for politicians. In the United States and most European countries, there has been a recent right-wing, nationalistic upsurge which has dedicated a large platform to the economy. With so much focus placed on economic policies and complicated jargon, we often forget what the economy actually represents. How do we measure it? What does it mean when newspapers and TV pundits say the economy is doing well? There are fundamental flaws in modern measurement methods, which distract many working class people from issues more relevant to them, such as wages and working conditions. Poor and working class families–classified as families in the bottom four income quintiles–need to analyze and understand these flaws in order to better fight against depression of wages, particularly if they are voters. 

Gross Domestic Product (GDP), a measure of total income and one of the main statistics used in measuring economic health, can easily overestimate the well-being of the majority. If a handful of people earn a lot of money while most see no rise in income, GDP can still increase. This has been the case for the last few decades in America and Western Europe. GDP increases can be attributed more to rising inequality than improvements in economic health. Nobel Award winning economist Thomas Piketty has proposed an alternative measurement of national income called “Distributional National Accounts (DNA)”, which takes income quintile into account when calculating total income. In other words, Piketty wants to make sure that when we measure income, we account for whose income has grown.

The unemployment measurement also has some surprising flaws, especially in what constitutes “employment.” Those considered “employed” include part time workers and discouraged workers–those who would like a job but gave up looking for one after unsuccessful attempts–are not accounted for by this metric. It seems exclusionary to judge an economy based on a standard that considers it acceptable for workers to labor part time, especially when some of those workers earn wages below the poverty line, or one that neglects people who have faced repeated structural difficulties in finding employment. This hasn’t even addressed the issue of wages–is it really acceptable for people to earn an annual salary below the poverty line and rely on government programs? When all of this is taken into account, unemployment does not seem like a good measure of how well an economy is doing either.

Both unemployment and GDP data imply that the American economy has recovered from the Great Recession of 2008. While the general consensus is that the 2008 Recession was caused by excessive borrowing from middle-class families, former United States secretary of labor Robert Reich has pushed back. “Consumers went deeply into debt in the years leading up to the 2007-2008 crash. You could say they were living beyond their means. But you might also conclude that their means didn’t keep up with what a growing economy should have been able to provide them. After all, most of the economic gains went to the top. Had the gains been distributed slightly more equitably, consumers wouldn’t have had to go into such debt.”

Since 2009, as the United States’ GDP has risen, unemployment has been at its lowest levels in decades, and wages have been high. All of that, however, is just a façade. The reality is that 40 percent of US households cannot find four hundred dollars in an emergency, 43 percent cannot afford basics to live, and more than 25 percent of adults skipped medical care last year. These are not statistics that signal a recovery. This is an example of how GDP and unemployment can be misleading and distracting to many people. If GDP and unemployment refer to the economy as “recovered,” many take the status quo for granted and do not strive for anything higher, such as better wages or working conditions, even if in reality the current economic state makes basic survival nearly untenable for many people.

"The focus of working and lower class voters should not be on whether GDP is rising or unemployment is low. Instead, their focus should be how to push back on market concentration and pressure the owners and shareholders of these massive companies to raise wages–a real raise of wages, in accordance with inflation."

The last major statistic that is commonly cited when talking about the economy is the most important: wages. There is a trend of major companies acting for their own benefit at the expense of consumers and especially workers. This has mostly manifested itself in the form of lowering wages, or not raising wages in accordance with inflation. What has been the main driver of this depression of wages? Harvard economist Jason Furman would name “market concentration.”

What Furman means by this is that there are essentially fewer and fewer companies. In the United States, it is easy to name the big ones: Walmart, Amazon, CVS, Walgreens. With less competition existing across markets, workers have less autonomy and companies have little incentive to make their workers happy.

The focus of working and lower class voters should not be on whether GDP is rising or unemployment is low. Instead, their focus should be how to push back on market concentration and pressure the owners and shareholders of these massive companies to raise wages–a real raise of wages, in accordance with inflation.

The concept of market concentration largely originated in the United States, and has become more global over the past two years. One of the biggest perpetrators of market concentration has been Jeff Bezos, the richest man in the world. Both Amazon’s acquisition of many of its competitors and the way it has monopolized other industries have allowed Bezos to essentially become an oligarch. To give a couple examples of his wealth: Jeff Bezos makes about 6.24 billion dollars in five minutes – the equivalent of the entire GDP of the country of Kyrgyzstan. His income for 2018 outpaced the GDP of 96 countries. Quartz reported that Bezos had enough money to buy the stock markets of Nigeria, Egypt, Luxembourg, and Iran. Following this report, workers did not just sit idly by. As a counterforce many Amazon workers across Europe have unionized and mobilized in unprecedented acts of solidarity and organization against their employer. In Spain, Poland, and Germany, workers have united across country lines to organize strikes against Amazon and demand not only higher wages, but also better working conditions.

Beyond wages, Amazon workers are increasingly fed up with the working conditions they endure everyday, especially part-time workers. Part-time workers are given available shifts three times a week. This practice means workers are constantly waiting for the shifts to be announced for the next couple of days. This creates a dependency on the company and a competitive work environment.

Instead of depending on flawed metrics and television pundit’s determinations about the economy, workers need to organize and address the real issue–the depression of wages. The dependence on GDP and unemployment in determining economic health is dangerous as it advertises a false status quo of a recovered economy post 2008. Bill Clinton famously said as his campaign slogan: “It’s the economy, stupid!” It has been a campaign cry for politicians everywhere since then. That idea needs to be rethought. It is not just the economy. It is real wages.

Photo: “Economy”

About the Author

Edward Uong '21 is a Staff Writer for the World Section of the Brown Political Review. Edward can be reached at edward_uong@brown.edu

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