That's Not What the GDP Means

BOB GARFIELD: The most recent gross domestic product figures came out in late October, a couple of weeks before the election, and they were pretty good. The headlines blared yet another repudiation of a Donald Trump claim.

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FEMALE CORRESPONDENT: - the economy growing 2.9% last quarter, beating expectations. And up ‘til now, the Trump campaign has been all about how bad the economy is.

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BOB GARFIELD: If only his followers could see that latest report, perhaps they’d realize how great their finances were. One political headline even read, quote, “Strong economic news undercuts Trump’s doom and gloom message,” except, not necessarily because economic indicators like the GDP are not meant to and certainly do not reflect the finances, buying power, standard of living or prospects of individual citizens.

ZACHARY KARABELL: We create this one number and then there are 320 million people.

BOB GARFIELD: Zachary Karabell is the author of The Leading Indicators: A Short History of the Numbers That Rule Our World.

ZACHARY KARABELL: Primarily, GDP is our output. It’s our economic product collectively as a country. So there’s a GDP growth figure, i.e., how much the GDP grow, and then there’s an actual number, $17, 18 trillion for the United States. We then just take 328 million people and divide them into whatever that number is. That’s statistically true, but it’s also kind of meaningless. There's an old canard that if Bill Gates walks into a bar, everybody in that room is instantly, per capita, a multimillionaire. And that is why GDP can go up or down and that doesn't really tell you whether or not the prospects of vast numbers of individuals are going up or down with it.

BOB GARFIELD: Another big economic indicator, and often a misleading one, is the jobs report.

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MALE CORRESPONDENT: In front of supporters at a New Hampshire country club, Donald Trump’s slammed the government’s latest jobs report.

DONALD TRUMP: These numbers are an absolute disaster.

MALE CORRESPONDENT: The numbers show unemployment down and wages up but Trump calls them phony.

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ZACHARY KARABELL: So much like GDP, the unemployment rate and the jobs report are products of the Great Depression. In the early 1930s, there were clearly a lot of people suffering but we had no idea how many people were employed or unemployed, and we didn't even really know how to define what unemployment was. I mean, we think it’s obvious but it's not. Just not having a job doesn't mean, actually, statistically, that you’re unemployed. You have to not have a job and want to have a job, you have to not have a job and have looked for a job.

So anyway, we invented this category of life called unemployment and, like GDP, we created one national number. But that national number, like GDP, is a big average and tells you nothing about local realities, tells you nothing about class realities or education realities. Now, all of those things are released by the government and reams in reams of tables and charts. We just pay attention to this headline number.

BOB GARFIELD: Okay, you can have a job but it's at Arby's for $9 an hour, which is not the same as a job at some tech firm for $75 an hour.

ZACHARY KARABELL: Right, and for the jobs report, when it’s released, a job is a job is a job. We have other reports that deal with that, but when we talk about the unemployment rate and the jobs report, all jobs are equal. Frankly, many of the jobs that have been created over the past seven or eight years are mediocre jobs. I don’t mean that they’re occupied by mediocre people, I mean, the pay level – and then let’s not even get started on benefits, which are often nonexistent - simply doesn't get you there. So you can have a good unemployment report and a lot of legitimately unsatisfied, anxious people who are fully employed.

BOB GARFIELD: Another big issue in the election campaign was trade.

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DONALD TRUMP: And they’re killing us in trade. They’re killing us.

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BOB GARFIELD: And I guess the big indicator there is the trade deficit.

ZACHARY KARABELL: Yeah, I think trade statistics are probably the most antiquated of our numbers, relative to how things are actually traded in the world today. So all of our trade numbers assume that everything you buy, take an iPhone, has one country of origin. And in the case of an iPhone, it's made in China and sold in the United States, so every time an iPhone gets bought in the United States it adds $200 to the trade deficit with China, i.e., it shows up as a negative. We just don't have the tools, really, to measure the world of trade as it actually is, and so, we’re left with this optic of we’re sending all this money to these other countries and it's just neither so simple nor is that really accurate.

BOB GARFIELD: So much was made by Donald Trump about making America great again, harkening back to some possibly nonexistent halcyon times. But if he was talking about the postwar period, when our economic growth was so remarkable, when our standard of living so dramatically increased, my argument is that that was really a bubble economy, that it was just a moment in history when various trade barriers and tariff regimes still protected our markets, when our market was vastly bigger than anyplace else in the world, so we sold so much to ourselves, and our manufacturing economy was so sophisticated that the whole world was our customer. Globalism really didn't exist and it was a bubble that simply burst. There was no government policy that could do anything about it. Am I nuts?

ZACHARY KARABELL: No, and in addition, which you didn't mention, there was a period of time from the end of World War II through the 1960s, where the United States was 50% of all global manufacturing because everybody else who had been making stuff, like Japan and Western Europe, had been decimated by the war, factories destroyed, populations dislocated. So when you're that proportion of the entire planet's output, you’re going to do really well. The problem is we started to think of that as normal. That was abnormal. This is normal.

There has been a lot of prosperity created globally over the past 20 years. Admittedly, much of that has gone to hundreds of millions of emerging middle class elsewhere and not in the United States, and we have been challenged by those trends. However, simply rejecting those trends does not magically make us more prosperous. A) We’re not going to take jobs back from robots and B) we need to address cost-of-living and wages and we’re not going to get that by taking it from others. So, you know, we have a lot of challenges.

BOB GARFIELD: I want to play a famous piece of GDP tape, [LAUGHS] if there is such a thing. This is from just a few weeks before Robert F. Kennedy was assassinated in 1968. He was, at that point, the insurgent candidate who was seeking the Democratic nomination for the presidency. The Gross Domestic Product, he said, counted air pollution and jails and napalm and violent television programs, not, you know, just steel output. Yet –

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ROBERT F. KENNEDY: Yet the Gross National Product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

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ZACHARY KARABELL: It was a great speech and it was the beginning, I think, of a recognition that, look, there's a whole lot of our economic activity that we fail to capture and there are some things that we do that are positive for our lives that are negative for our numbers. So we have to be careful about how much we correlate GDP growth and happiness. There are people actually living stable, successful lives. And then there's the whole question about security, right? Are people secure in their economic outlook and in their future?

And certainly, one of the things this election has shown is that feeling of not just do I have enough, but will I have enough? Will there be enough for my children is an absolutely key component to how people feel about their country and their future. And none of our numbers can really get to that.

BOB GARFIELD: If during the course of the election campaign the media had access to better numbers, numbers that got more to our fears and anxieties and prospects than just a snapshot of the overall economy, do you think this could have had an effect on the rise of Trumpism and its narrative of economic doom?

ZACHARY KARABELL: So it’s not like the data isn't out there. I think the reality is we are aware in broad terms that there are a huge number of people for whom the outlook is negative and getting worse or certainly not getting better, and for a lot of people the outlook is good and getting better. The question is, could you have united those two realities, right? You could have tailored messages better, you could have spoken to both better, ‘cause clearly what you have now in our political life is one candidate that’s really good at speaking to one set of concerns or one economic reality and then another candidate that’s really good at speaking to another, and no one’s particularly good at speaking to both. You know, could we do that? We certainly could do that. Will we do that? I guess we'll find out.

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BOB GARFIELD: Zachary, thank you very much.

ZACHARY KARABELL: Thank you.

BOB GARFIELD: Zachary Karabell is the author of The Leading Indicators: A Short History of the Numbers That Rule Our World.

BROOKE GLADSTONE: Coming up, how unplugging the Electoral College would change election coverage.

BOB GARFIELD: This is On the Media.