Leszek Kolakowski (1927-2009) - Tony Judt (NYRBooks, 2009)

http://www.nybooks.com/articles/2009/09/24/leszek-kolakowski-19272009/

http://rosiebell.typepad.com/files/kozalowski.pdf

The New York Review of Books | September 24, 2009

Leszek Kolakowski (1927-2009)

Tony Judt

I heard Leszek Kolakowski lecture only once. It was at Harvard in 1987 and lie was a guest at the seminar on political theory taught by the late Judith Shklar. Main Currents  of Marxism had recently been published in English and Kolakowski was at the height of his renown. So many students wanted to hear him speak that the lecture had been moved to a large public auditorium and guests were permitted to attend. I happened to be in Cambridge for a meeting and went along with some friends.

The seductively suggestive title of Kolakowski's talk was "The Devil in History." For a while there was silence as students, faculty, and visitors listened intently. Kolakowski's writ­ings were well known to many of those present and his penchant for irony and close reasoning was familiar. But even so, the audience was clearly having trouble following his argument. Try as they would, they could not decode the metaphor. An air of bewildered mystification started to fall across the auditorium. And then, about a third of the way through, my neighbor—Timothy Garton Ash—leaned across. "I've got it," he whispered. "He really is talking about the Devil." And so he was.

Leszek Kolakowski at the opening of the Académie Universelle des Cultures, Paris, January 29, 1993

It was a defining feature of Leszek Kolakowski's intellectual trajectory that he took evil extremely seriously. Among Marx's false premises, in his view, was the idea that all human shortcoming are rooted in social circumstances. Marx had "entirely overlooked the possibility that some sources of conflict and aggression may be inherent in the permanent characteristics of the species."¹Or, as he expressed it in his Harvard lecture: "Evil ... is not contingent but a stubborn and unredeemable fact." For Leszek Kolakowski, who lived through the Nazi occupation of Poland and the Soviet takeover that followed, "the Devil is part of our experience. Our generation has seen enough of it for the message to be taken extremely seriously."²

Most of the obituaries that followed Kolakowski's recent death at the age of eighty-one altogether missed this side of the man. That is hardly surprising. Despite the fact that much of the world still believes in a God and practices religion, Western intellectuals and public commentators today are ill at ease with the idea of revealed faith. Public discussion of the subject lurches uncomfortably between overconfident denial ("God" certainly does not exist, and anyway it's all His fault) and blind allegiance. That an intellectual and scholar of Kolakowski's caliber should have taken seriously not just religion and religious ideas but the very Devil himself is a mystery to many of his otherwise admiring readers and something they have preferred to ignore.

Kolakowski's perspective is further complicated by the skeptical distance that he maintained from the uncritical nostrums of official religion (not least his own, Catholicisrn) and by his unique standing as the only internationally renowned scholar of Marxism to claim equal preeminence as a student of the history of religious thought.³Kolakowski's expertise in the study of Christian sects and sectarian writings adds depth and piquancy to his influential account of Marxism as a religious canon, with major and minor scriptures, hierarchical structures of textual authority, and heretical dissenters.

Leszek Kolakowski shared with his Oxford colleague and fellow Central European Isaiah Berlin a disabused suspicion of all dogmatic certainties and a rueful insistence upon acknowledging the price of any significant political or ethical choice:

There are good reasons why freedom of economic activity should he limited for the sake of security, and why money should not automatically produce more money. But the limitation of freedom should be called precisely that, and should not be called a higher form of freedom.⁴

He had little patience for those who supposed, in the teeth of twentieth-century history, that radical political improvement could he secured at little moral or human cost—or that the costs, if significant, could be discounted against future benefits. On the one hand he was consistently resistant to all simplified theorems purporting to capture timeless human verities. On the other, he regarded certain self‑evident features of the human condition as too obvious to be ignored however inconvenient:

There is nothing surprising in the fact that we strongly resist the implications of many banal truths; this happens in all fields of knowledge simply because most truisms about human life are unpleasant.⁵

But the above considerations need not—and for Kolakowski did not—suggest a reactionary or quietist response. Marxism might be a world-historical category error. But it did not follow that socialism had been an unrnitigated disaster; nor need we conclude that we cannot or should not work to improve the condition of humanity:

Whatever has been done in Western Europe to bring about more justice, more security, more educational opportunities, more welfare and more state responsibility for the poor and helpless, could never have been achieved without the pressure of socialist ideologies and socialist movements, for all their naiveties and delusions.... Past experience speaks in part for the socialist idea and in part against it.

This carefully balanced appreciation of the complexities of social reality—the idea that "human fraternity is disastrous as a political program but indispensable as a guiding sign"—already places Kolakowski at a tangent to most intellectuals in his generation. In East and West alike, the more common tendency was to oscillate between excessive confidence in the infinite possibilities for human improvement and callow dismissal of the very notion of progress. Kolakowski sat athwart this characteristic twentieth-century chasm Human fraternity, in his thinking, remained regulative, rather than a constitutive, idea.⁶

The implication here is the sort of practical compromise we associate today with social democracy—or, in continental Western Europe, with its Christian Democratic confrère. Except, of course that social democracy today—uncomfortably burdened with the connotations of "socialism" and its twentieth-century past—is all too often the love that dare not speak its name. Leszek Kolakowski was no social democrat. But he was critically active in the real political history of his time, and more than once. In the early years of the Communist state Kolakowski (though still not yet thirty) was the leading Marxist philosopher in Poland. After 1956, he shaped and articulated dissenting thought in a region where all critical opinion was doomed sooner or later to exclusion.

As professor of the history of philosophy at Warsaw University he delivered a famous public lecture in 1966 excoriating the Communist Party for betraying the people—an act of political courage that cost him his Party card. Two years later he was duly exiled to the West. Thereafter, Kolakowski served as a reference and beacon for the youthful domestic dissenters who were to form the core of Poland's political opposition from the mid-1970s, who provided the intellectual energy behind the Solidarity movement and who took effective power in 1989.

Leszek Kolakowski was thus an entirely engaged intellectual, notwithstanding his contempt for the pretensions and vanities of "engagement." Intellectual engagement and "responsibility," much debated and idolized in continental European thought in the generation following World War II, struck Kolakowski a: fundamentally vacant concepts:

Why should intellectuals be specifically responsible, and differently responsible than other people, and for what?... A more feeling of responsibility is a formal virtue that by itself does not result in a specific obligation: it is possible to feel responsible for a good cause as well as for an evil one.

This simple observation seems rarely to have occurred to a generation of French existentialists and their Anglo-American admirers. It may be that one needed to have experienced firsthand the attraction of utterly evil goals (of left and right alike) to otherwise responsible intellectuals in order to understand to the full the costs as well as the benefits of ideological commitment and moral unilateralism.

As the above suggests, Leszek Kolakowski was no conventional "continental philosopher" in the sense usually ascribed to the phrase in contemporary academic usage and with particular reference to Heidegger, Sartre, and their epigones. But then nor did he have much in common with Anglo-American thought in the form that carne to dominate English-speaking universities after World War II—which no doubt accounts for his isolation and neglect during his decades in Oxford.⁷The sources of Kolakowski's particular perspective, beyond his lifelong interrogation of Catholic theology, are probably better sought in experience than in epistemology. As he himself observed in his magnum opus, "All kinds of circumstances contribute to the formation of a world-view, and ... all phenomena are due to an inexhaustible multiplicity of causes."⁸

In Kolakowski's own case, the multiplicity of causes includes not just atraumatic childhood during World War II and the catastrophic history of communism in the years that followed, but the very distinctive setting of Poland as it passed through these cataclysmic decades. For while it is not always clear exactly where Kolakowski's particular thinking is leading, it is perfectly evident that it never carne from "nowhere."

The most cosmopolitan of Europe's modern philosophers—at home in five major languages and their accompanying cultures—and in exile for over twenty years, Kolakowski was never "rootless." In contrast with, for example, Edward Said, he questioned whether it was even possible in good faith to disclaim all forms of communal loyalty. Neither in place nor ever completely out of place, Kolakowski was a lifelong critic of nativist sentiment; yet he was adulated in his native Poland and rightly so. A European in his bones, Kolakowski never ceased to interrogate with detached skepticism the naive illusions of pan-Europeanists. whose homogenizing aspirations reminded him of the dreary utopian dogmas of another age. Diversity, so long as it was not idolized as an objective in its own right, seemed to him a more prudent aspiration and one that could only be assured by the preservation of distinctive national identities.⁹

It would be easy to conclude that Leszek Kolakowski was unique. His distinctive mix of irony and moral seriousness, religious sensibility and epistemological skepticism, social engagement and political doubt was truly rare (it should also be said that he was strikingly charismatic—exercising much the same magnetism at any gathering as the late Bernard Williams, and for some of the same reasons¹⁰). But it does not seem unreasonable to recall that for just these reasons—charisma included—he also stood firmly in a very particular line of descent.

His sheer range of cultivation and reference; the allusive, disabused wit; the uncomplaining acceptance of academic provincialism in the fortunate Western lands where he found refuge; the experience and memory of Poland's twentieth century imprinted, as it were, on his mischievously expressive features: all of these identify the late Leszek Kolakowski as a true Central European intellectual—perhaps the last. For two generations of men and women, born between 1880 and 1930, the characteristically Central European experience of the twentieth century consisted of a multilingual education in the sophisticated urban heartland of European civilization, honed, capped, and side-shadowed by the experience of dictatorship, war, occupation, devastation, and genocide in that selfsame heartland.

No sane person could want to repeat such an experience merely in order to replicate the quality of thought and thinkers that such a sentimental education produced. There is something more than a little distasteful about expressions of nostalgia for the lost intellectual world of Communist Eastern Europe, shading uncomfortably dose to regret for the loss of other people's repression. But as Leszek Kolakowski would have been the first to point out, the relationship between Central Europe's twentieth-century history and its astonishing intellectual riches nevertheless existed; it cannot simply be dismissed.

What it produced was what Judith Shklar, in another context, once described as a "liberalism of fear": the uncompromising defense of reason and moderation born of firsthand experience of the consequences of ideological excess; the ever-present awareness of the possibility of catastrophe, at its worst when misunderstood as opportunity or renewal, of the temptations of totalizing thought in all its protean variety. In the wake of twentieth-century history, this was the Central European lesson. If we are very  fortunate, we shall not have to relearn it again for some time to come; when we do, we had better hope that there will be someone around to teach it. Until then, we would do well to reread Kolakowski.

^l“The Myth of Human Self-ldentity,” in The Socialist Idea: A Reappraisal, edited by Leszek Kolakowski and Stuart Hampshire (Basic Books, 1974), p. 32.

²“The Devil in History,” in My Correct Everything (St. Augustine's), p. 133.

³ For a representative instance of Kolakowski's approach to the history of religious thought, see, for example,God Owes Us Nothing: A Brief Remark on Pascal's Religion and on the Spirit of Jansenism (University of Chicago Press, 1995). It would not he too much to say that Kolakowski was a twentieth-century Pascalian, cautiously placing his bet on reason in place of faith.

⁴Leszek Kolakowski, Modernity on Endless Trial (University of Chicago Press, 1990), pp. 226-227.

⁵ Kolakowski and Hampshire, The Socialist Idea, p. 17.

⁶Kolakowski, Modernity on Endless Trial, p. 144.

⁷ Elsewhere, his achievements were copiously acknowledged. In 1983 he was awarded the Erasmus Prize. In 2004 he was the first recipient of the Kluge Prize of the Library of Congress, where he had been the Jefferson Lecturer twenty years previously. Three years later he was awarded the Jerusalem Prize.

⁸Leszek Kolakowski, Main Currents of Marxism, Volume III: The Breakdown (Clarendon Press/Oxford University Press, 1978), p. 339. I am grateful to Leon Wieseltier for reminding me of this reference.

⁹Kolakowski, Modernity on Endless Trial, p. 59. For Edward Said, see Out of Place: A Memoir (Vintage, 2000).

¹⁰At a party in his honor following the Cambridge lecture, I recall watching with bemused admiration and no little envy as virtually every young woman in the room migrated to the comer where a sixty-year-old philosopher, already wizened and supported by a cane, held court before their adoring eyes. One should never underestimate the magnetic attraction of sheer intelligence.

Venezuela: going to the brink? - Enrique Krauze (NYRB)

Hell of a Fiesta

Enrique Krauze

The New York Review of Books, March 8, 2018 Issue

In the spring of 2017, and all through the year, social media feeds in Venezuela were filled with images of deprivation and despair: long lines of people hoping to purchase food; women fighting over a stick of butter; mothers who could not find milk to buy; children picking through garbage in search of something to eat; empty shelves in pharmacies and stores; hospitals without stretchers, drugs, or minimum levels of hygiene; doctors operating on a patient by the light of a cell phone; women giving birth outside of hospitals. Venezuela’s economy, the economist Ricardo Hausmann wrote in a recent study, is suffering a collapse that is “unprecedented” in the Western world.¹ Between 2013 and 2017 the country’s national and per capita GDPs contracted more severely than those of the US did during the Great Depression and more than those of Russia, Cuba, and Albania did after the fall of communism.

Pancho CajasNicolás Maduro

This is a humanitarian crisis of immense proportions. By May 2017, Venezuela’s minimum monthly wage wasn’t enough to meet even 12 percent of a single person’s basic food needs.² A survey of 6,500 households by three prestigious universities showed that 74 percent of the population had lost on average nineteen pounds in 2016. Infant mortality in hospitals has risen by 100 percent. Diseases nearly eradicated in many countries, like malaria and diphtheria, have flourished; illnesses largely new to the area, like Chikungunya, Zika, and dengue, have spread. Caracas is now the most dangerous city on the planet. All this is happening in a country that has one of the largest oil reserves in the world.

None of the present crises seemed likely in 2007 and 2008, when I made a number of visits to Venezuela. Caracas was seen as the new Mecca for the European, Latin American, and American left. Progressive news organizations, magazines, and newspapers including The Guardian, The New Yorker, and the BBC reported favorably on Hugo Chávez, whose presidency lasted from 1999 until 2013. They mentioned the dangers of his cult of personality but yielded to it all the same. Chávez, as the writer Alma Guillermoprieto succinctly noted in these pages, was “indisputably fascinating, and often even endearing.”³

Despite ever-growing limitations on freedom of expression and the canceling of the license of RCTV (the principal independent radio and television service), some analysts, including the British writer Tariq Ali, kept proclaiming that Venezuela was the most democratic country in Latin America. Since they were indulgent of Cuba, they didn’t mind that Venezuela was drifting toward the authoritarian Cuban model. They rightly celebrated Chávez’s successes at reducing poverty, but they failed to see the damage his administration was meanwhile inflicting on the country’s entire productive infrastructure—most consequentially, on Venezuela’s state-owned petroleum company, Petróleos de Venezuela (PDVSA).

In 1998, as the development specialists Ramón Espinasa and Carlos Sucre note in their recent study of the Venezuelan oil industry,⁴ PDVSA employed 40,000 people and produced 3.4 million barrels of oil per day. By the first decade of the twenty-first century, it projected it would be producing 4.4 million barrels per day. It operated autonomously and by law deposited its profits in the country’s Central Bank. With Chávez’s election, all this changed. He ordered that PDVSA personnel be hired for their political credentials rather than their technical skills, and that oil be sold at highly discounted prices to Latin American countries sympathetic to his administration.

In December 2002, the employees of PDVSA went on strike. The government responded by stripping the company of its administrative autonomy, nullifying the exchange agreement that required PDVSA to sell all foreign currency resulting from the sale of oil to the Central Bank, and handling those resources discretionally itself, outside the budget approved by the Venezuelan National Assembly. Roughly 20,000 employees were dismissed, two thirds of them with technical and professional skills. In the years that followed, PDVSA became a super-ministry; it distributed food, built houses, and managed some of the 1,400 businesses that Chávez frenetically nationalized starting in 2007. During Chávez’s presidency, it came to employ three times as many people as it had before 1998. Its productivity, on the other hand, fell significantly; it produced 700,000 fewer barrels per day. This reduction was masked in part by the surge in oil prices that began in 2002 and peaked in 2008 at $147 per barrel.

Critics of Chávez—former guerrillas, opposition leaders, left-wing intellectuals, labor and religious leaders, artists, businessmen, students, academics, and former military officers—foresaw what was coming. One of those voices was Espinasa, who told me in 2008 that “the prices will fall; the government will not be able to halt its expenditures and production will not recover; the collapse is inevitable; the perfect storm is coming.” But oil revenues remained high for four years, and Chávez used these revenues to spend more than ever. Each year he left a public-sector deficit of around 10 percent of the GDP. Between 2014 and 2015—by which point oil prices had collapsed, Chávez had died, and Nicolás Maduro had succeeded him as president—those deficits reached 20 percent of the GDP.

The government justified such spending by wagering that the price of oil would simply continue to rise. In 2008 Alí Rodríguez Araque, one of Chávez’s main advisers and at that time minister of finance, told me that the price would go as high as $250 per barrel. In June 2014, when prices fell, the country would have been less badly damaged had the government saved at least part of the profits it had made during the boom, as PDVSA had previously been required by law to do. Studies have shown that these savings could have amounted to $233 billion. Not only did the government fail to do this; it sextupled its external debt to $172 billion, making Venezuela the most indebted nation in the world.

Between 1999 and 2017 PDVSA earned $635 billion in cash and produced an additional $406 billion worth of oil, which it used to subsidize the internal market (gasoline in Venezuela is virtually free) and reward countries seen as politically sympathetic to the regime. What happened to the rest of this money? Jorge Giordani, a former minister of planning who left the government in 2014, estimates that $300 billion was simply stolen. Another portion was wasted on unfinished pharaonic projects (rail lines, bridges started but left incomplete), purchases of Russian military equipment, opaque and unaccountable multibillion-dollar public entities such as the Venezuelan Economic and Social Development Bank and the Fund for National Development, costly and unproductive expropriations, wasteful imports to compensate for the lack of internal production, purely sumptuary imports (500,000 automobiles in 2006 alone), and excessive growth in public employment. From 1998 to 2013, consumption grew by 60 percent but production barely increased.

From this pattern a clear conclusion can be drawn: the tragedy of the Venezuelan economy is due not to the fall of oil prices in 2014 but to PDVSA’s historic collapse in production. The dismantling of that institution set a pattern of politicization and opaque and inefficient management for the rest of Venezuela’s economy, including the steel, farming, cattle, fishing, transport, construction, food, and fertilizer industries. In 2007, the country exported 85 percent of its cement; today it has to import cement from abroad.

It became common to call Chávez “the soul of the fiesta.” The people of Venezuela hung on his every declaration. In December 2007 he scheduled a referendum that proposed dozens of constitutional changes meant to consolidate the Venezuelan socialist state: unrestricted presidential terms, limitations on private property, a “new political geometry” (which in practice would become a form of gerrymandering), the consolidation of his personal guard as a kind of army parallel to the country’s military, suppression of the autonomy of the Central Bank, direct access for the president to the country’s international monetary reserves and the license to use them however he pleased, and the establishment of a “popular power” based on the creation of communes.

The referendum required a single “yes” or “no” vote for all the provisions together, but to Chávez’s surprise the negative votes prevailed. Students made important contributions to the mobilization against the initiative, but Venezuelans in general rejected the radical drift Chávez was proposing toward the Cuban model. “Enjoy your shitty victory,” Chávez said, promising to advance his project through decrees instead. Over the last decade, his government and that of his successor have fulfilled that promise.

Chávez wanted to create a federation with Cuba. He had since his youth been intoxicated by a heroic view of history. His favorite work of political theory was The Role of the Individual in History by Georgi Plekhanov, whose vision of the Great Man distinctly equipped to address “the great social needs of his time” Chávez dreamed of applying to Venezuela, and to himself. He would present himself as the heir of Simón Bolívar, erasing or rejecting all of the country’s history between the death of Bolívar and his own accession to power.

But it was Fidel Castro who became his “spiritual father.” Before Chávez was elected president, after a trip to Cuba, he emphasized his admiration for Castro’s relation to his people: “It’s as if Fidel is everything.” During the first year of his presidency, in a speech at the University of Havana, Chávez predicted that “Venezuela is heading toward the same sea as the Cuban people, a sea of happiness, of true social justice, of peace.” When Castro fell ill in 2006, Chávez accelerated his revolutionary project, against the counsel of his most experienced advisers.

For Cuba, which had since 1959 hungered for preferential access to Venezuelan oil, the Chávez connection offered significant economic advantages. At its height in 2013, according to the Cuban-American economist Carmelo Mesa-Lago, Venezuela contributed about 15 percent of Cuba’s GDP—more than the USSR did in the 1980s. About 40,000 Cubans, many of them doctors, were sent to Venezuela and assigned to attend to the poor, part of a widespread program of Chávez’s to import Cuban educational and medical personnel into the country in exchange for oil subsidies.

Critics of this “mission” system pointed to the abandonment of established health institutions (hundreds of hospitals and thousands of mobile clinics), the cost for Venezuela ($6 billion in 2013 alone), and the political nature of the operation, since Chávez received obedience in return for his munificence. By now the missions barely exist, but the Cuban intelligence services remain fully entrenched in Venezuela. The government has ceded the management of the national identification system to Cuban functionaries, as well as the control of businesses, customs, and notary publics.

To become a political heir to Castro, Chávez aspired to transform himself into the leader of “twenty-first century socialism,” to become “everything.” He wanted to remain in power until 2030, when he would celebrate his seventy-sixth birthday and the two hundredth anniversary of the death of Bolívar. It was a wager Chávez would lose. Diagnosed with cancer, he died in Caracas on March 5, 2013, after undergoing long and somewhat mysterious treatments in Havana. In Patria o Muerte, a recent novel by Alberto Barrera Tyszka set during the Comandante’s final agonies in Cuba, a poor woman explains to Madeleine, an American academic, why she feels grateful for Chávez:

He changed my way of thinking, of looking, of looking at myself. You ask what did he give me, concretely you say. As I have told you. It’s that we had nothing, that we were nothing. Or better said, we felt that we were nothing, that we had no value, we did not matter. And that is what Chávez changed. That’s what he gave us.

The Comandante was one of them. He spoke with them and for them. He appealed to the natural religiosity of a people drawn to faith, magic, and the folk religion of Santería. This appeal could be used to manipulate opinion and behavior. Chávez had always taken his identification with Bolívar to extremes, but in 2010 those extremes reached an especially morbid level: he opened Bolívar’s sarcophagus, ordered the painting of a portrait supposedly based on DNA evidence, and presented Bolívar not as the creole he was (of pure Spanish descent) but as a mestizo like Chávez.

The man entrusted with the responsibility for Chávez’s legacy has been Nicolás Maduro. He was called “The priest of Chavismo” by the Venezuelan journalist Roger Santodomingo, the author of De verde a Maduro, a brief biography—more accurately a piece of reportage—published in 2013 and based on a pair of interviews done some years earlier. Maduro, who was born in 1962, recalled, in detail, scenes of “police brutality” he had witnessed as a child. As a young man he tried being a rock musician and a baseball player, but he also maintained connections with left-wing organizations, thanks to which, in 1986, he spent some months in Cuba studying Marxist-Leninism. He was for a time a bus driver and a union leader.

Jerome Sessini/Magnum PhotosA supporter of Hugo Chávez waiting in line to view his coffin at the Military Academy, Fort Tiuna, Caracas, March 2013; photograph by Jerome Sessini from Magnum Manifesto, edited by Clément Chéroux with Clara Bouveresse and published by Thames and Hudson and Contrasto on the seventieth anniversary of Magnum Photos. An exhibition is on view at the Ara Pacis Museum, Rome, February 7–June 3, 2018.

Although in 1993 he visited Chávez in prison, he did not belong to the inner circle and was barely noticed when in 2000 he was elected as a deputy to the National Assembly. His dizzying ascent to power began in 2006, when Chávez named him minister of foreign relations. Surrounded by older men from whom he sought independence and by military officers of his own age whom he distrusted, Chávez needed the loyalty and support of younger men and came to recognize Maduro as unconditionally devoted to him. During Maduro’s time as a diplomat—in the years of the oil bonanza—he consolidated the regime’s alliances with politically sympathetic Latin American countries. But it was his intimacy with Chávez during the Comandante’s final illness that brought him the presidency.

Maduro had a messiah before Chávez, the famous Indian guru Sai Baba, accredited by his followers with magic powers. He and his wife spent some time at Sai Baba’s ashram in India. The connection with Sai Baba explains his frequent wearing of orange tunics, his Indian-style greeting with closed hands raised before his face, and his superstitious conviction of being protected by some superior power. Revelations about Sai Baba’s pedophilia and his closeness to the Ugandan dictator Idi Amin did not appear to disturb Maduro. Without renouncing his devotion to Sai Baba, Maduro transferred it to Chávez. During his tenure as minister of foreign relations he became Chávez’s vice-president, spokesperson, and faithful apostle.

“I am Chávez,” Maduro said shortly before his leader died. But although he spoke like Chávez, he was certainly not Chávez. After his death, Maduro declared publicly that “Chávez appeared to me in the form of a little bird.” Although some writers still treat Maduro as an astute leader and a pure revolutionary who has met with hard times, the regime is now very close to a full dictatorship. It has lost its quasi-religious aura. Maduro’s government has been forcing Venezuelans into submission or exile (an estimated 500,000 have fled in the last two years) while it counts on a rise in the price of oil. But not even that miracle would compensate for PDVSA’s decline in production, down to 1.7 million barrels per day, half of what it produced when Chávez was elected in 1998. Maduro nonetheless intends to continue his rule. Presidential elections are set for the end of April, with himself as the prime candidate. Few expect them to be free or fair. Key figures in the opposition have been banned from running, imprisoned, or forced into exile.

Maduro’s presidency has given rise to one of the most impressive defenses of democracy in the twenty-first century. Between April and July 2017, hundreds of thousands took to the streets to protest the decision of the Venezuelan Supreme Court—which Maduro controls—to dissolve the National Assembly, the only independent power that still existed in Venezuela, in which a two-thirds majority opposed the government. The demonstrators’ confrontations with the Bolivarian National Guard led to over 120 deaths, thousands of injuries, and the imprisonment and torture of hundreds.⁵ On July 16, almost seven and a half million people—a quarter of the population and more than a third of the electorate—voted in an unofficial referendum held by the opposition to defend the National Assembly and reject the call by the Electoral Authority (also controlled by Maduro) to elect a new and illegal Constituent Assembly. Most of the candidates for the Constituent Assembly had been chosen by municipal governments and organizations loyal to Maduro.

The effort came to nothing. After an election that was clearly fraudulent (according to Smartmatic, the company that provided the software for it), the spurious Constituent Assembly was established. With the opposition divided, weakened, and discouraged, Maduro now has immense power, which he has been using to severely limit freedom of expression. After the protests it became dangerous to post images of the poverty and desperation to which much of the country has been brought. The Constituent Assembly—many of whose members have incited hate for twenty years—has approved a law that can impose up to twenty years of prison time on anyone who “foments, promotes, or incites hate.”

According to the public health activist Feliciano Reyna, much of the blame for Venezuela’s present crisis lies with Maduro. “What is happening is deliberate,” Reyna argues, pointing to the president’s refusal to accept an offer from thirteen countries to send food and medicine through national and international NGOs and the UN. The powerful politician Diosdado Cabello has said that Venezuela won’t accept the help because doing so would open the doors for an imperialist invasion. In his public appearances (during which, on occasion, he dances the salsa), Maduro has suggested that hunger could be alleviated by the breeding of rabbits.

One of his solutions to the crisis involved an especially ingenious combination of feeding people and manipulating them politically. About a third of Venezuela’s population depends on receiving imported boxes of food marked with CLAP, the initials of the local Committee for Supplies and Production, which carries out this distribution according to a system of identity cards. (A typical CLAP package, which is supposed to arrive every three weeks, contains small portions of pasta, rice, powdered milk, and canned tuna.) In the referendum on the new Constituent Assembly, the government came up with the idea of forcing recipients to renew these cards at polling booths, intimidating them with the prospect of losing their food cards, and even their homes, if they didn’t vote for the official candidates.

Instead of reversing the stubborn statism of Chávez’s Bolivarian Revolution, Maduro has concentrated on paying the external debt. To do so he has choked off imports of goods and services, which have dropped by 75 percent between 2012 and 2016. Most of this contraction has been in manufacturing, commerce, construction, and transport, but there has been pervasive damage to the private sector in general. Between 1998 and 2016, the number of private enterprises fell from 13,000 to 4,000. At the same time, Maduro has been printing more currency, leading to dramatic inflation. People now often have to choose between food and medicine.

The Maduro government and its supporters maintain that the crisis is the result of an economic war waged by the American Empire against the people of Venezuela. But the United States has always been the principal customer for Venezuelan oil—it has bought $477 billion worth since 1998—and has now become one of the few to pay in cash. The full responsibility lies with the Chávez and Maduro regimes themselves, which for fifteen years had a windfall of petroleum resources comparable only to those of the major Middle Eastern producers yet wasted that income recklessly. Maduro’s government is not an unfortunate heir of chavismo but its natural conclusion, the hangover after the fiesta. But it is also, in the words of Feliciano Reyna, “a militaristic project, aiming to control power, exorbitantly corrupt and inflicting extensive damage on the Venezuelan population.”

Throughout Venezuela’s history, which has been full of civil wars and long periods of tyranny, the armed forces have often intervened and made radical changes. It happened in 1945, when the military gave power to civilians and cleared the way for a brief experiment with democracy (1945–1948). This prefigured the democratic regime that came to power in 1958, lasted forty years, and led to more social, economic, and cultural achievements than mistakes before its collapse.

Now even a military intervention seems improbable. Miguel Henrique Otero, the editor of El Nacional, an independent newspaper with a long history that today only precariously survives, told me:

The military is divided into various groups. Many of them—on active duty or retired—manage public companies. Recently, an officer of the Guardia Nacional Boliviana, who was active in repressing the protests of 2017, has been named director of PDVSA. Others have connections with the narcos, and some hold governmental positions. In 2002 there were seventy generals in Venezuela, now there are 1,200. The common soldiers have gained little and are a reservoir of violence and desertion. The army does not at present seem to be showing signs of rebellion, and, if such sentiments do exist in the middle ranks of officers, those who harbor them live in fear of Cuban espionage.

Although the regime now appears to have everything under control, it may still end up defeated by the human and material cost of its failures. “If the economy remains as it is, we will die,” Ricardo Hausmann affirms. He is not exaggerating. Even if oil prices start rising again, as long as Venezuelan oil production does not recover the country will be doomed. It is already well on its way to hyperinflation, which almost no regime has survived. The Maduro government may well continue applying the Cuban method of control through scarcity, but it cannot rule out the possibility that the population’s increasing hunger and illness will lead to a social eruption of enormous proportions.

Is there an exit strategy? According to Hausmann, the regime needs to immediately allow food and medicine into Venezuela, negotiate a substantial reduction in the country’s huge debt, arrange for an adequate delay in paying off the rest, and with the remaining resources open the gates to imports that might revive the economy. Such an economic shift would have to be accompanied by equally dramatic political changes. Maduro’s government would have to guarantee free and fair elections, liberate political prisoners, and recognize the National Assembly as the only legitimate parliamentary body.

Maduro is bound to oppose such reforms. But Venezuela has fallen into so deep an abyss that positive moves along these lines would meet with almost universal support from democratic countries around the world. The United States might in the past have favored such solutions, but under Donald Trump it has fallen into its own sort of chavismo. And although supporters in Europe and Latin America have expressed solidarity with the opposition, Venezuelans, in effect, remain alone. In one of the country’s hellish hospitals, a woman told a reporter for El Nacional: “So rich a country. We had everything and they destroyed it. And the future.”

—February 8, 2018; translated from the Spanish by Hank Heifetz

1. 1
   “Venezuela’s Unprecedented Collapse,” Project Syndicate, July 31, 2017, a brief résumé of the internal report Background and Recent Economic Trends (Harvard Center for International Development, 2017).  ↩
2. 2
   As of this writing, the minimum monthly wage is $5, enough to buy four pounds of meat and nothing else.  ↩
3. 3
   “Don’t Cry for Me, Venezuela,” The New York Review, October 6, 2005. ↩
4. 4
   Ramón Espinasa and Carlos Sucre, The Fall and Collapse of the Venezuelan Oil Sector, August 2017. See also Igor Hernández and Francisco Monaldi, Weathering Collapse: An Assessment of the Financial and Operational Situation of the Venezuelan Oil Industry, Center for International Development Working Paper no. 327, November 2016, Harvard University; available at growthlab.cid.harvard.edu. ↩
5. 5
   The International Criminal Court in The Hague announced on February 8 that preliminary probes would be made into alleged crimes by police and security forces in Venezuela. The crimes concern “frequently used excessive force to disperse and put down demonstrations,” as well as the abuse of some opposition members in detention. See Aryeh Neier, “A Glimmer of Justice,” in the online edition of this issue. ↩

Gordon on Economic Growth in the USA, 1870-2014 - book review by William Nordhaus

Why Growth Will Fall

William D. Nordhaus

AUGUST 18, 2016 ISSUE

The Rise and Fall of American Growth: The US Standard of Living Since the Civil War

by Robert J. Gordon

Princeton University Press, 762 pp., $39.95

Musée d’Orsay, Paris

Gustave Caillebotte: The Floor Planers, 1875

Robert Gordon has written a magnificent book on the economic history of the United States over the last one and a half centuries. His study focuses on what he calls the “special century” from 1870 to 1970—in which living standards increased more rapidly than at any time before or after. The book is without peer in providing a statistical analysis of the uneven pace of growth and technological change, in describing the technologies that led to the remarkable progress during the special century, and in concluding with a provocative hypothesis that the future is unlikely to bring anything approaching the economic gains of the earlier period.

The message of Rise and Fall is this. For most of human history, economic progress moved at a crawl. According to the economic historian Bradford DeLong, from the first rock tools used by humanoids three million years ago, to the earliest cities ten thousand years ago, through the Middle Ages, to the beginning of the Industrial Revolution around 1800, living standards doubled (with a growth of 0.00002 percent per year). Another doubling took place over the subsequent period to 1870. Then, according to standard calculations, the world economy took off.

Gordon focuses on growth in the United States. Living standards, as measured by GDP per capita or real wages, accelerated after 1870. The growth rate looks like an inverted U. Productivity growth rose from the late nineteenth century and peaked in the 1950s, but has slowed to a crawl since 1970. In designating 1870–1970 as the special century, Gordon emphasizes that the period since 1970 has been less special. He argues that the pace of innovation has slowed since 1970 (a point that will surprise many people), and furthermore that the gains from technological improvement have been shared less broadly (a point that is widely appreciated and true).

A central aspect of Gordon’s thesis is that the conventional measures of economic growth omit some of the largest gains in living standards and therefore underestimate economic progress. A point that is little appreciated is that the standard measures of economic progress do not include gains in health and life expectancy. Nor do they include the impact of revolutionary technological improvements such as the introduction of electricity or telephones or automobiles. Most of the book is devoted to describing many of history’s crucial technological revolutions, which in Gordon’s view took place in the special century. Moreover, he argues that the innovations of today are much narrower and contribute much less to improvements in living standards than did the innovations of the special century.

Rise and Fall represents the results of a lifetime of research by one of America’s leading macroeconomists. Gordon absorbed the current thinking on economic growth as a graduate student at MIT from 1964 to 1967 (where we were classmates), studying the cutting-edge theories and empirical work of such brilliant economists as Paul Samuelson, Robert Solow, Dale Jorgenson, and Zvi Griliches. He soon settled in at Northwestern University, where his research increasingly focused on long-term growth trends and problems of measuring real income and output.

Gordon’s book is both physically and intellectually weighty. While handsomely produced, at nearly eight hundred pages it weighs as much as a small dog. I found the Kindle version more convenient. Here is a guide to the principal points.

The first chapter summarizes the major arguments succinctly and should be studied carefully. Here is the basic thesis:

The century of revolution in the United States after the Civil War was economic, not political, freeing households from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation, and early death. Only one hundred years later, daily life had changed beyond recognition. Manual outdoor jobs were replaced by work in air-conditioned environments, housework was increasingly performed by electric appliances, darkness was replaced by light, and isolation was replaced not just by travel, but also by color television images bringing the world into the living room…. The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could happen only once.

The series of “only once” economic revolutions behind this short summary makes up the next fourteen chapters of the book. Most of the innovations are familiar, but Gordon tells their histories vividly. More important, in many cases, he explains quantitatively the way these economic revolutions boosted the living standards of the statistically average American. Among the most illuminating chapters are those on housing, transportation, health, and computers.

The last two chapters are about the fall in Rise and Fall. This book differs from the Spenglerian “decline of the West” genre in an important respect. As the mathematicians might say, Gordon moves up a derivative. In other words, he is not predicting that living standards in the US will decline; rather he views it as likely that the growth rate of living standards will decline from its very rapid pace in the special century.

Gordon sees two sources for his pessimistic outlook. The first is that the long list of “only once” social and economic changes cannot be repeated. A second source is what he calls “headwinds.” These are structural changes in the economy that reduce actual output below the country’s technological potential and provide another reason for slow growth in living standards in the decades ahead.

The central subject in Rise and Fall is the rapid growth of output in the 1870–1970 period, followed by a period of slower growth. We must clarify that “growth” in Gordon’s view involves intensive rather than extensive expansion. Intensive growth is that of output per unit of input, also called productivity, while extensive growth refers to total output. A standard productivity measure that encompasses all inputs is called “total factor productivity” or TFP.1

What are the underlying trends? Figure 1 on this page shows the growth in total factor productivity by decade since 1890. I show two estimates to provide an idea of how robust Gordon’s conclusions are. The one labeled “Gordon” is from his Figure 16.5. The alternative measure, which I have constructed for this review, combines other sources, with private GDP for the first half of the period covered and business output for the second half.2 (The data were provided by Gordon. A shortcoming of his book is the absence of an online appendix, and in this respect it is behind best practice.)

The main result of both measures is to confirm that there was a marked slowdown in productivity growth when we compare the earlier period (1890–1970) to the latest period (1970–2014). Both series give a slowdown of 0.6 percentage points per year in productivity growth. The alternative estimate is that the growth in productivity slowed from 1.7 percent per year in the earlier period to 1.0 percent per year in the second period.

The alternative series shows a smoother increase from the 1890–1920 period to the 1920–1970 period, and then a sharp drop after 1970. Gordon makes much of the robust productivity growth during the Great Depression and World War II, but this is not apparent in the alternative series.

Productivity growth slowed sharply after 1970, with little variability from decade to decade. The slowdown has been puzzling scholars for four decades. My own view is that it is a decline from one thousand cuts. Important ones are rising energy prices, growing regulatory burdens, a structural shift from high- to low-productivity growth sectors (such as from manufacturing to services), as well as the source that Gordon emphasizes, the decline of fundamentally important inventions.

So Gordon’s basic hypothesis looks rock solid: there has been a substantial slowdown in productivity growth since the end of the special century in 1970.

It is commonplace to complain that gross domestic product does a poor job of representing true economic welfare because it omits harmful elements such as pollutionn.3 This is true. However, most readers will be surprised to learn that the major shortcoming of conventional measures is that they underestimategrowth. Moreover, according to Gordon, the understatement was arguably much larger in the special century than before or after.

Why do conventional measures understate actual improvements in living standards? Gordon gives two principal reasons. First, the growth of real income is systematically understated because of flawed price indexes. The price indexes used to convert current dollars of output into inflation-corrected or “real” output overestimate price increases and consequently understate real output growth. Second, GDP omits many aspects of economic activity that are not captured in market transactions. The common omissions are environmental degradation, leisure time, nonmarket work, and improvements in health.

We can begin with the price-index problem. For this, I take an example familiar to most people, lighting. If you were to examine the US economic accounts, you would not find a component that measures the price of lighting or the real output of lighting. Instead, you would find elements such as the price of fuel (whale oil or electricity) and the price of lighting devices (oil lamps or lightbulbs). For each of these prices, we today have carefully designed techniques for collecting prices and spending. So, you might think, by combining correctly the prices of the lighting devices and the fuels (the input prices), we might accurately track the price of producing a certain amount of light (the output price).

Or so we thought until the actual estimates were made. It turns out for lighting that the output price fell much more sharply than the input prices. We can take the example of standard incandescent lightbulbs and LEDbulbs to illustrate. Assume that we need 800 lumens to light a space (a candle produces about thirteen lumens). Suppose that we light the space for 50,000 hours. This would require about 50 incandescent bulbs and 60 watts x 50,000 hours or 3,000 kilowatt-hours (kwh) of electricity. At the current US average electricity price of ten cents per kwh, the cost of incandescent lighting over the period would be about $350 ($50 for the bulbs and $300 for the electricity). Now assume that a new technology, LED bulbs, becomes available. You can get the same illumination with one $5 six-watt LED bulb lasting 50,000 hours. When you calculate the life-cycle costs, the 800 lumens x 50,000 hours cost only $35 ($5 for the bulb + $30 for the electricity).

So the price of lighting declined by 90 percent. And—the critical point for Gordon’s story—with the introduction of LED bulbs, every $100 of expenditures on lighting produced ten times the real output. This is not an isolated example. This same quantum jump came with each improvement in lighting technologies: from oil lamps, to kerosene lamps, to incandescent, to compact fluorescent, to LED lighting. A more detailed look at the history of lighting indicates indeed that conventional measures have understated the growth in the output of lighting by a huge margin.

How do conventional measures of prices or real output treat this major change in prices and real output? They simply ignore it. More precisely, the LED bulb is “linked” to price and output indexes when it is introduced. This means that the amount or efficiency of lighting per dollar is assumed to be unchanged.

Gordon emphasizes that this tiny but revealing story about lighting is told time and again during the special century. The major inventions that revolutionized American living standards were seldom captured in the standard indexes. Examples include running water, toilets, telephones, air travel, phonographs, television, air conditioning, central heating, antibiotics, automobiles, financial instruments, and better working conditions. These tectonic shifts in technology and living standards would generally go unrecorded in “real GDP” growth and in the growth of “real wages.”

The second source of mismeasurement concerns activities that are outside the purview of standard output measures. On close examination, many of these have little effect on the growth of real output when included. For example, if you included a correction for carbon dioxide emissions, it would reduce the level of output, but such a correction would not reduce real output growth at all over the last decade.

However, one specific measurement of error makes an enormous difference—the omission of improvements in health status. Gordon has a fascinating chapter on the sharp “only once” improvements in health and life expectancy. While some of his views on the sources of improvements in health are not persuasive, his final conclusion on the importance for living standards seems justified:

A consistent theme of this book is that the major inventions and their subsequent complementary innovations increased the quality of life far more than their contributions to market-produced GDP…. But no improvement matches the welfare benefits of the decline in mortality and increase in life expectancy….

His statement refers to a strange aspect of output measurement. Suppose we lived on average fifty years, and the average consumption of housing, food, etc. rose by 10 percent. Then our measures of living standards (real GDP or real income) would rise by 10 percent. However, assume that we had the same consumption every year, but had less illness because of antibiotics, or less pain because of anesthetics, or lived twenty years longer. Then there would be no measured gain in living standards. This seems strange, but that is the way our methods for measuring output and income are designed.

There have been several studies attempting to incorporate the benefits of improved health into measures of living standards.4 These show two important points. First, including health status increases sharply the improvement in living standards over the last century. And second, this health-status bonus was larger during the special century than before or after.

In recent years, trends in average living standards interacted with rising income inequality to produce stagnant wages in the lower and middle income groups. Table 1 shows the basic trends over recent decades. The first row shows the results of the last part of the special century. The last two rows show the period of slower growth.

The column labeled “average” shows the growth in per capita, inflation-corrected, post-tax income. This shows an income slowdown that parallels the productivity slowdown, with a decline of 1.4 percentage points from the first to the third subperiod. The slowdown in the growth of real income was largely due to the slowdown in productivity growth from the special century to the more recent period.

The last three columns show how the growth was divided between the bottom fifth, the middle fifth, and the top 1 percent of the income distribution. The first subperiod was one of shared prosperity; indeed, the bottom groups fared slightly better than the top. However, in the most recent years, particularly since 2000, the decline in average income growth was further exacerbated for the lowest income groups by a declining share of the total. So, for the bottom fifth, the growth in real income declined from 3 percent at the end of the special century to essentially zero in the last fifteen years. Of this catastrophic decline, about half was due to the slower overall growth, while half was due to rising inequality. Gordon has an extensive review of the sources of rising inequality, but his emphasis on the role of declining productivity growth is an important and durable part of the story of stagnant incomes.

The last chapter of the book suggests that the US faces major “headwinds” that will continue to drag down living standards relative to underlying productivity growth. In Gordon’s account, these headwinds are rising inequality, poor-quality education, the aging population, and rising government debt. Gordon forecasts that average growth in real income per person over the next quarter-century will be 0.7 percent per year—even lower than the 1.3 percent per year in the 2000–2015 period. If inequality continues to grow, this might lead to declining incomes of the bottom part of the distribution—and therefore to true Spenglerian decline. I emphasize that these forecasts are highly speculative and contingent on many economic, fiscal, and demographic forces.

What of the future of economic growth? Here Gordon is a leading proponent of the view emphasizing the likelihood of “secular stagnation.” There are actually two variants of the stagnation. The first, emphasized by Lawrence Summers, is “demand-side”: a global savings glut along with low inflation is leading to weak aggregate demand in the high-income regions. This syndrome is consistent with zero or negative interest rates in Europe and Japan.

Gordon’s view of stagnation is “supply-side”—referring to a slackening in the growth of productivity rather than persistent weakness caused by the business cycle and high unemployment. His pessimism does not involve the neo-Malthusianism of groups like the Club of Rome, which foretold resource exhaustion, or concerns of those like Nicholas Stern, who sees future climate-driven catastrophes. Rather, Gordon’s concept of stagnation comes from his view about the slow future pace of technological change. He recognizes the perils of forecasting technological futures. But in the end he sees the slow growth of decades since 1970 shown in Figure 1—not those of the special century—as the norm for the years to come. He does not argue that returning to rapid growth is impossible. Instead, he thinks that we have exhausted the major society-changing “only once” inventions, and he sees no prospect that we will find a similar set of inventions of such breadth and depth in the near future.

In discussing the future, Gordon dissects the arguments of the technological optimists who see a growing part in the economy for robots and artificial intelligence. An extreme pole of technological futurism is a theory called “the Singularity.” As computer scientists look into their crystal ball, they foresee artificial intelligence moving toward superintelligence, which denotes intellect that is much smarter than the best human brains in practically every field, including not just games like Go but also scientific creativity, general wisdom, and social skills. At the point where computers have achieved superintelligence, we have reached the Singularity, where humans become economically superfluous. Superintelligent computers are the last human invention, as imagined by the mathematician Irving Good:

Let an ultraintelligent machine be defined as a machine that can far surpass all the intellectual activities of any man however clever. Since the design of machines is one of these intellectual activities, an ultraintelligent machine could design even better machines; there would then unquestionably be an “intelligence explosion,” and the intelligence of man would be left far behind. Thus the first ultraintelligent machine is the last invention that man need ever make.

Gordon has no sympathy for these futuristic views. Moreover, the economic data (such as those shown in the figure and table) show no trace of a coming Singularity. If anything, growth has slowed even more since the financial crisis of 2008. But as we observe that games like chess or Go are won by a computer, it seems prudent to keep an eye on the evolution of superintelligence.

To summarize, Rise and Fall is a magnificent book on American economic history of the last century and a half. This review can touch only the major themes and has necessarily skimmed over many of the fascinating discussions of individual sectors and historical episodes. If you want to understand our history and the economic dilemmas faced by the nation today, you can spend many a fruitful hour reading Gordon’s landmark study.

Notes:

1. 1
   Productivity comes in several varieties. The simplest to measure is labor productivity, or output per hour worked. However, this does not account for improvements in education, or for changes in the access of the average worker to a larger stock of more productive capital. Total factor productivity (TFP) is a more complicated concept to measure than labor productivity because it involves measuring the contribution of capital and education, as well as determining how to weigh the different inputs, but today these are standard procedures.
   
   A final detail is whether productivity relates to business output, to private output, or to total GDP (the latter also includes government output). Accurate measures are usually confined to business output because government output in such areas as education and military forces is difficult to measure and therefore these areas customarily are measured as inputs (teachers) rather than outputs (learning). Gordon generally uses the more comprehensive GDP because it is available for longer periods. It must be reemphasized that all productivity figures refer to measured output and omit the unmeasured contributions of important new and improved products discussed in Gordon’s main text. ↩
2. 2
   The alternative is a splicing of the following sources: data for the early part is total factor productivity for the private economy (private GDP), 1890–1950, from Historical Statistics of the United States, Millennial Edition(Cambridge University Press, Vol. 3, Series Cg270, Cg278). The data are based on an early study by John Kendrick in Productivity Trends in the United States (Princeton University Press, 1967). These data are used for the TFP growth rates for 1890–1900 to 1940–1950. For the period 1948–2014, I use total factor productivity for the US private business sector from the US Bureau of Labor Statistics. These are available at www.bls.gov/mfp/#tables, “Historical multifactor productivity measures (SIC 1948–1987 linked to NAICS 1987–2014).” These data are used for the TFP growth rates for 1950–1960 to 2000–2014. Note that for the two periods of overlap (1950–1960 and 1960–1970), the early (Kendrick) series and the BLS series are virtually identical. From 1948 to 1970, the private GDP TFP growth rate averaged 2.13 percent per year while the BLS series averaged 2.03 percent per year.  ↩
3. 3
   Economic statisticians have developed techniques for incorporating external effects like pollution into the measurement of national output. The method is straightforward. You would begin with a measure of the physical emissions, such as annual carbon dioxide (CO2) emissions or sulfur dioxide emissions. These would be parallel to the production of new houses, currently included in the accounts. You then multiply the quantity by a “shadow price,” which would measure the social cost of the emissions. Again, the parallel here would be multiplying the quantity of new houses by the price of the houses. Since the emissions price is a damage, or negative price, the price times quantity of emissions would be subtracted from total output.
   
   As an example, total CO2 emissions for the United States in 2015 were 5,270 million tons. The US government estimates that the social cost of emissions is $37 per ton (all in 2009 dollars). So the total subtraction is $37 x 5,270 = $195 billion. This would be a debit from the $16,200 billion of total output in that year, or slightly more than 1 percent of output. (These data are from the Bureau of Economic Analysis and the Energy Information Administration.)
   
   Note, however, that CO2 emissions declined over the decade from 2005 to 2015, from 5,993 billion to 5,270 billion tons per year. So the subtraction from GDP to correct for CO2 emissions was smaller in 2015 than in 2005. Growth of corrected GDP was therefore a tiny bit higher after correcting for CO2 emissions than before the correction. To be precise, after correction, the real growth rates over the 2005–2015 period would be 1.394 percent per year using the corrected figures instead of 1.385 per year using the official figures.So correcting for CO2 emissions would lower the estimate of output, but would raise by a tiny amount the estimate of growth. ↩
4. 4
   Studies on the impact of adding health to the national economic accounts include an early example from William Nordhaus, “The Health of Nations,” in Measuring the Gains from Medical Research: An Economic Approach, edited by Kevin Murphy and Robert Topel (University of Chicago Press, 2010).  ↩