Time wrote a very dumb thing about Charles Koch earlier in the month, which I didn’t remark on at the time but which is on my mind today because of one complaint about my piece on Trump and trade and GDP.
The Time piece, by Philip Eliott, was headlined: “Charles Koch Says U.S. Can Bomb Its Way to $100K Salaries.” Koch was in fact making precisely the opposite argument, of course, but the Koch brothers, with their pot-legalizing crusades and their advocacy of gay marriage and their peacenik tendencies confuse the hell out of unreflective media Democrats, whose line of thinking goes roughly: “Free Market = Right Wing Right Wing Right Wing I’m So Excited = Warmonger Warmonger Warmonger!” One of the distasteful side effects of the voguish pose of Ezra Kleinesque ahistorical empiricism is that many so-called progressives are so historically illiterate as to be unaware of the long history of Republican peacenikery, and characters such as the Kochs and the Pauls perplex them. There are not very many hit movies about nefarious right-wing peace-mongers.
The headline currently reads: “Charles Koch mocks common measure of prosperity,” and quotes the libertarian industrialist rehearsing an ancient complaint that GDP “counts poison gas the same as it counts penicillin.” What Koch is referencing here is the fact that the people who calculate GDP account for government spending at cost; which is to say, if the government spends $1 billion on cancer research or spends $1 billion on a massive fireworks display, that’s treated the same way. If the government piles $1 billion high on the White House lawn and sets fire to it, that’s the same as spending $1 billion on port-security technology. The real-world version is that if the government spends $1 billion on a completely useless education program that achieves no results whatsoever—or even one that makes people less intelligent, like reading the new New Republic—then that’s the same as spending $1 billion on effective education so far as GDP is concerned.
I don’t really know how else you’d calculate it, but it’s worth keeping in mind that GDP is a useful tool but a limited one.
Koch’s point—that war is a subtraction from the sum of human happiness even when it is necessary—is one worth keeping in mind, especially when some creaky New Deal fossil tries to convince you that we bayonetted our way out of the Great Depression, a deathless economic myth.
I was thinking of that because one of the commenters on my piece today pointed out that while manufacturing output has grown substantially in recent decades, it hasn’t grown as much as the rest of the economy. Which is to say, manufacturing today constitutes a smaller share of GDP than it did in, say, 1970, going from about 24 percent of GDP to about 13 percent. Manufacturing has grown a great deal—output is up nearly 70 percent since NAFTA was passed—but the rest of the economy has grown more quickly. Notably, there has been dramatic growth in the services sector of the economy, which grew from about half of GDP in the 1950s to around 70 percent today.
Services gets a bad rap, but of course many of the jobs that parents dream of their children grown up to have are in services: lawyers, doctors, bankers, etc. Services has grown for a few reasons: One, businesses have for years been outsourcing many non-core functions: Fewer businesses have their own payroll departments now, so there’s less in the “investment” bucket—you don’t have to build them offices or buy them computers—and more in the services bucket, with business services being one of the fastest-growing services sectors. There has been extraordinary growth in education, insurance, and health care, as anybody who has had a gander at a college tuition bill or their “reformed” health-care premiums can attest. Things like entertainment and utilities have held more or less steady, and retail services have shrunk a bit. And, of course, there’s a whole new services industry that has emerged—information technology—that has led to much growth on the services side.
One of the reasons that we can have more doctors and teachers and IT nerds is that even though we’re manufacturing much more, our factories have become much more efficient, so we need fewer people to work in them. Similarly, the manufacturing model of a generation ago was made possible in no small part because of the fact that we no longer needed most of our people to work on farms to produce enough food to eat. There was a real bloodbath in agricultural jobs—nearly all of them were lost, but, strangely enough, all those lost jobs left us feeling better off rather than worse off as we motored down to the Piggly Wiggly in our Buicks.
We sometimes turn our noses up at services, but we wouldn’t want to do without them.
It gets sticky when you visit a college campus or call your insurance company and you start to wonder whether the money we’re spending there constitutes a contribution to authentic human flourishing. As Koch would no doubt point out, this occurs most often in those segments most dominated by politics: education, health care, and government itself.
My advice is to not get so distracted by the reports and charts that you lose track of the paradise of the real.






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