An Economy Measured by how People are Doing
The Biden Administration has a new and better definition of what “the economy” is and should be.
“My life’s work has been centered on ensuring our families and work are properly valued within our economy.
I’m excited to bring that perspective as a CEA member. We have an opportunity to rethink how we invest in people, and we need to seize it as we rebuild our economy.” Heather Boushey, Member of President-elect Biden’s Council of Economic Advisors
This tweet from Heather Boushey signals an exciting new day ahead at the White House — a new and better definition of what the economy is and should be, playing out in new policies across the board, in agencies from Health and Human Services to Housing and Urban Development and others.
Bottom line: Businesses or people?
Too often, and for too long Americans have looked at the economy from the narrow perspective of how (big) businesses are doing. Commonly cited measures like GDP and the stock averages mainly tell us how active and profitable large businesses are — but not how regular people are doing. After all, businesses can be “successful” and investors can be happy while people are suffering — e.g. when businesses increase profits and cut costs by firing people, paying lower wages, taking shortcuts on health and safety …
And the Trump Administration has definitely reinforced this businesses-first (or businesses-only) perspective. A Thanksgiving-week Tweet from the President even referred to a Dow average of 30,000 as a “sacred number.” (Wow, did we hear that right?)
For lack of a commonly shared alternative to the business-centered perspective, many Americans fall into this trap, agreeing that if we take care of the “job-creators” at the top, the rest will take care of itself.
But we know this isn’t how things really work — both intuitively and through careful research (such as the work done by Heather Boushey’s organization, the Washington Center for Equitable Growth). Instead, this business-centered perspective leads to policies that let those at the top hoard an ever-growing portion of our national wealth, while the rest of us grow less and less healthy and secure.
A new common sense
What we need is a new shared understanding, that economic well-being should be measured by the basic question of how people are doing — can we make ends meet, do we feel some security, and so forth. Common sense, right? Instead of assuming we will benefit when businesses are profitable, we look directly at how people are doing.
The difference between how people are doing and how businesses are doing is why many experts have worked on alternative new economic measures — like the “better life index” promoted by the Organisation for Economic Co-operation and Development, which includes factors like people’s living conditions, savings, health, safety and happiness. (Imagine that — economic assessments that take into account whether people feel happy and economically secure!)
Naturally, businesses have to be robust in order to provide good wages and other people-centered benefits. But since businesses can profit while people suffer (bad), our ultimate yardsticks must focus on the things that matter to people most (good). Judging the economy by focusing only on businesses — with the expectation that we will automatically benefit from their success — is like judging a restaurant only by the kitchen equipment. Of course, good equipment is important, just like sustainable businesses are — but the ultimate yardstick is about the end results. Do we like the food that ends up on the table? Are hard-working Americans able to make ends meet, live a good life, and anticipate a secure future?
We can count on the new economic team at the White House to focus on a people-centered view, which has been at the center of their own work. Books like Jared Bernstein’s Crunch: Why Do I Feel So Squeezed? and Heather Boushey’s Finding Time: The Economics of Work-Life Conflict have explored a people-centered perspective on the economy and offered suggestions for moving towards a world where businesses AND people are doing well.
We wish them success in promoting a new, commonsense way of seeing and judging the economy — and we hope others will help by paying careful attention to how we think and talk about “a good economy.”