To move, as I did in 1997, direct from Paris to Washington was to cross one of the sharpest cultural divides in the developed world. It was to move to bigness from small-scale refinement; to brash one-upmanship from (sometimes exaggerated) politesse; to adulterated food from the real thing. As US and British officials told it at the time, it was also to move from a stagnating basket-case of a continental European economy to the shining star of the Anglo-Saxon model: dynamic, productive and superior on every indicator you could name.
That my experience of the two countries did not quite tally with the official figures presented a conundrum that troubled me. If labour productivity in the US was so much higher than that of France, how come it took three times as long (with a queue three times shorter) to buy my lunchtime sandwich? Why were so many more staff doing so much less, in banks, restaurants, and – the one that particularly fascinated me – car parks? Why were the French capable of parking their own cars, while Americans paid someone else?
As the micro, so the macro. Why, if the US was doing so splendidly compared with France, was so much of the infrastructure – roads, railways and municipal offices – so neglected? How come there was so much money around, in theory (on the ballooning stock market and in those dot-com share options), when so little effort seemed to be put into making it? Was it just lack of state benefits that kept unemployment down? And why could the US have one of the worst perinatal mortality rates in the industrialised world without this affecting its economic standing?
The answer to all these questions, of course, is that it depends what you count and how you count it. The US topped so many economic rankings because, for the most part, it chose the indicators. Those indicators rated growth in gross domestic product and productivity as good and unemployment as bad, even if the jobs "created" did not need doing and a side-effect of non-existent benefits was violent crime that put as many young men in prison as were registered jobless in Europe.
One of the beneficial, and less noticed, consequences of the current crisis is that it has spawned new interest in ways of judging a country's economic soundness and overall success. There have long been quality-of-life indices that include the "live-ability" of cities, including standards of health, housing, schools and public transport. But only rarely are the results amalgamated with officially recognised indicators, such as growth rate, productivity and per capita income.
Thus the condition and standard of schools has not generally been considered germane to a country's international standing (except in a narrowly-drawn "education" league). The notion that, say, free time might have a value to be quantified alongside income was similarly rejected as uncountable, and so irrelevant. The possibility that a French worker might be more productive than an American – which has long been true, per hour worked – is still routinely dismissed as implausible. The relatively short working hours and long holidays enjoyed by the French allow Americans to brand them idle.
What has counted towards GDP growth and per capita income, however, turns out to have been just as fallible as what has not. In some respects, the late 1990s in the US were a limited rehearsal for what is happening now. The hedge fund company, Long-term Capital Management, was bailed out by the Federal Reserve Bank of New York. Its leading lights were described as the brightest of their business school generation; its investors were similarly gilded; it was judged – laughably in the light of Lehman Brothers – too big to fail. This did not apply to the energy company – or rather the energy servicing and speculation company – Enron, which failed in 2001, extinguishing with it most of the lights fuelled by California's deregulated energy sector. A single senior executive blew the whistle on a fortune she realised had been built on nothing but air.
It turns out that her informed observations – like my amateur doubts about the comparative health of the US and European economies in the late 1990s – have a name, "the economics of walking about". It was coined by Professor David Blanchflower, an outgoing member of the Bank of England's Monetary Policy Committee, who has argued that the Bank should have cut rates further and faster than it did.
The "economics of walking about" had an honourable history before it had a name. Madeleine Albright deduced, long before she became US Secretary of State, that the queues for stringy chickens on Russian street corners meant the Soviet system was doomed. Ditto another rule of thumb I heard recently: if the number of expensive cars in a foreign capital contradicts what you know about that country's GDP, corruption is likely to be an issue.
While the term may be new, however, you could argue that "walking about" is where economics came in. It is descriptive economics as practised by Adam Smith, and it lasted well into the 20th century, thanks to John Maynard Keynes and JK Galbraith – who, interestingly, is still chided for being more of a sociologist, or even journalist! It is relatively recently that economics graduated into a recognised academic discipline, accoutred with mathematical equations and computer models. Much good have such quests for scientific purity done it.
There was a time when we non-economists apologised for any public conclusion we might be tempted to draw from observation. Yet common sense deserves a place, even where ostensibly simple numbers are concerned. As recent disputes between the Government and the newly-independent Office for National Statistics have shown, the claim to unimpeachable accuracy can be misleading – not least because bare figures look so cut and dried. You have to ask not only what has been measured, but when, what adjustments have been made and why these figures are seeing the light of day now. A little late in the day, maybe, we are learning.
If a more critical approach had been taken to the definition of economic success, we might have escaped the diktat of GDP and growth as defined by the US. And then – oh futile dream! – we might have avoided the mess we are in.Reuse content