How much of our GDP is actually a burden on life?
It’s easy to understand how more apples, oranges and iPhones make us better off. But not everything recorded by economists has what they call ‘utility.’
What is the value of having to certify documents at the local JP? Or the time and money spent figuring out absurdly complex tax and accounting rules?
Do you benefit from applying for licences and filling out customs declarations? Can you remember one jot from your health and safety training?
It seems to me that a lot of our GDP is actually making us poorer…
The Australian Financial Review’s economics editor John Kehoe is onto a similar idea. He recently wrote that our ‘Government spending blowout is the size of the mining boom’. And ‘the economic shock from higher government spending will have implications for inflation, productivity and interest rates’. Not in a good way, either.
But it is goosing our GDP. So it must be good, right?
Now, I don’t know about you, but I can see how more copper, iron ore and coal might make me better off. Heck, they’re key components in some of humanity’s most basic needs.
But how much of the government’s latest spending blowout will be of actual value to you and me?
My own answer to that question is ideologically extreme. The fact that the government is doing anything means you and I would’ve spent the money elsewhere. That’s practically the definition of government. It uses coercion to force us into things we wouldn’t otherwise choose to do.
So, government spending and regulation is, by definition, a waste of resources that should’ve been spent differently.
You’re probably more moderate. You might believe the government does some good things, some bad and wastes a lot of money. When Tarric Brooker points out that ‘Albo wins the crown for the highest level of non-market based jobs growth of any PM since records began’, you’re probably as worried as John Kehoe.
But what I want to focus on is how much of our GDP is generated from things the government requires us to do — things which have no value. Or worse, negative value, by making our life worse.
Anthropologist David Graeber wrote a book called Bullshit Jobs which is about the same idea. It points out the existence of meaningless jobs and analyses their societal harm.
Here’s a long-winded example from my own life…
The Canterbury Tales, German edition
My mum has an inactive bank account in Australia with some money in it. She’s long since lost all passwords and logins, not to mention living in Europe for the past 20 years.
A few months ago, she tried, once again, to gain access to the account. Her intention is to empty and close it.
She enlisted the help of my sister, giving her a Power of Attorney to sort things out Down Under.
What followed is a bizarre tale that generated a lot of GDP, but absolutely no value. Entertainment value aside, it’s wasted an immense amount of resources for absolutely no good reason and with zero result.
Here’s how…
First my sister flew to Germany, generating GDP. There, she sorted out a German Power of Attorney, which created more GDP.
But the Aussie bank rejected this. It requires an Australian Power of Attorney. Executing this in Germany is challenging, requiring a lot of GDP generating complications.
My sister organised an Australian lawyer to put together the Power of Attorney, generating GDP.
Now, this Aussie solicitor is a bit special, to say the least. I still laugh out loud every time I read her emails. Here’s the best bit:
‘As per our previous email, any Power of Attorney document will need to be witnessed by a Notary Public in Germany who has been appointed by the Archbishop of Canterbury to be valid in Australia.’
Yes, ‘a Notary Public in Germany who has been appointed by the Archbishop of Canterbury’.
My sister promptly spent time and resources, generating GDP, trying to find a Notary Public in Germany who has been appointed by the Archbishop of Canterbury.
As you can imagine, this proved to be rather difficult.
She eventually asked the Australian embassy for help, generating some GDP in the process. Here’s what the embassy wrote back, giving you some insight into how our taxpayer money is used up each day:
‘Rather than three steps (notary public, Archbishop of Canterbury (which we obviously don’t have in Germany), and then apostille), they can just have the signature witnessed by a relevant official here at the Consulate.’
Who would’ve thought they don’t have an Archbishop of Canterbury in Germany?
When my sister informed the lawyer about the elusive Archbishop’s German notaries, the reply she got was absolutely legendary:
‘We suspect they may have misunderstood as we are not suggesting that the Archbishop of Canterbury himself must witness as they have suggested to be the second step, but rather a notary who has been appointed by the Archbishop (to be valid in Australia).’
It makes me laugh, every time.
The entertainment value might even be worth the cost of employing these people.
But there’s a serious side to all this.
Our GDP is making us poorer
None of my sister’s many travails were beneficial. They didn’t create anything we wanted. There was no reason for it to be necessary in the first place, in an economic sense.
But it generated a lot of GDP. Lawyers, airlines, embassy staff, road trips, and all sorts of other spending.
What if the bank had just accepted the German Power of Attorney, as they said they would at the outset? All those resources could’ve been spent on something we actually want. Instead, it was wasted on complying with unnecessary bizarre rules and regulations.
Clearly, there is “good” and “bad” GDP. Expenditure that benefits us, and expenditure that is unnecessary and actually makes us worse off.
But here’s the thing. We cannot distinguish “good” GDP from “bad” at an aggregate level. We don’t know how much of our national GDP is “good” and “bad”.
How much of our economy is made up of purchases, jobs and processes that we would rather do without?
And yet we count it in the same way as GDP that gives us what we want.
It won’t surprise you that the Australian government is pursuing precisely the wrong sort of GDP. More regulation, more government spending, more control of our industries and consumer products.
It’s all more GDP. But they don’t seem to understand how this is just making us poorer. It is replacing good GDP with bad.
The long-term consequence is declining productivity. We make less of what we want using more resources. More of us work in jobs that drive each other nuts, hold up the hoops others have to jump through and waste each other’s time.
It’s no wonder we’re facing the consequences. And the per capita recession is just the start.
Next month, it’s my turn to try and sort out the bank mess when I visit my mum in Germany. I’ll let you know how I go…
Until next time,
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Nick Hubble,
Editor, Strategic Intelligence Australia
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