What is The Economy?

The Economy does not take place.

In 1991, Jean Baudrillard provoked outrage when he proclaimed, “The Gulf War did not take place.”11Jean Baudrillard, The Gulf War Did Not Take Place, trans. Paul Patton (Bloomington: Indiana University Press, 1991). The outrage was based on a willful misunderstanding of what Baudrillard meant. He was not claiming that the violence visited upon Iraq by the U.S. military had not happened. Rather, he argued that the object of “The Gulf War” referred to by military spokespersons, government officials, reporters, and pundits—and known by the publics of Europe and North America—was not synonymous with the actual events in the region. Western powers mediated and systemically distorted information such that what was offered to viewers was not an accurate representation of a war effort. Instead “The Gulf War” constituted a novel entity manufactured out of images of military violence.

The same non-representation applies to The Economy. Political rhetoric, government policy, economic theory, and statistical calculations all transform economic events, rendering The Economy as a new object. To say “The Economy does not take place” is not to deny the existence of buying and selling, jobs and wages, goods and services. Rather, it is to assert that The Economy does not unify or determine all of the entities and processes widely deemed to be economic.

In 1992, while campaigning for U.S. President, Bill Clinton adopted the slogan “It’s The Economy, stupid.” According to the Clinton campaign, The Economy is undeniably people’s primary, if not singular, matter of concern. Clinton’s declaration was the culmination of Margaret Thatcher’s earlier insistence that “there’s no such thing as society.” The two slogans express a substitution that occurred within mainstream political opinion: Society was replaced with The Economy. One of the consequences of this substitution was the closure of public debate on the boundaries and content of human well-being, which was to become increasingly calculative. But this closure constitutes a paradox: while Thatcher rejected outright the existence of an emergent social being that exceeds the individual, in its place Clinton deployed another emergent being, this one the product of individualist economic theory and its calculative practices.

The non-existence of The Economy means it can be neither entirely blamed for nor exonerated from producing climate change—which is not to say it is not implicated. Indeed, the material circulations that The Economy is intended to describe in their entirety generate waste products that are the engine of global warming and climate change. More importantly, the calculative practices that constrain our attention to economic matters have systematically failed to account for those waste products. This is why we continue to have defenders of economic growth when the pursuit of growth has arguably resulted in the climate crisis.

Timothy Mitchell argues that the idea of The Economy began to emerge “toward the end of the 1930s” with the development of national accounting.22Timothy Mitchell, Rule of Experts: Egypt, Techno-politics, Modernity (Berkeley: University of California Press, 2002), 82. The ascription of timelessness to The Economy derives, in part, from the much older components out of which the idea was assembled. Of principle importance are monetized transactions, dating back millennia and offering the means for calculating national accounts, which economists claim measure The Economy. But, economic processes have always been seen as exceeding monetary exchange. At least since David Hume, money has been considered a distraction; a nominal expression of value that obscures the real mechanisms of commodity exchange.33David Hume, “Of Money,” in Essays, Moral, Political, and Literary, ed. Eugene F. Miller (Indianapolis: Liberty Fund Inc., 1987 [1752]), http://www.econlib.org/library/LFBooks/Hume/hmMPL26.html. Since then money has predominantly been theorized as a mere intermediary, and the distinction between real and nominal is now a fundamental component of The Economy.44Jonathan Nitzan and Shimshon Bichler, “Capital Accumulation: Breaking the Duality of ‘Economics’ and ‘Politics’,” in Global Political Economy: Contemporary Theories, ed. Ronen Palan (New York: Routledge, 2000), 67–88.

The declarations of politicians and pundits about The Economy continually reconstitute it as an actually existing object, as do the policies justified by national accounting—and gross domestic product (GDP), calculated by aggregating economic transactions, is the key ingredient in that reconstitution. Simply put, when GDP is increasing The Economy is growing.

It is possible to add together the sales of trees with the sales of armoured vehicles with the sales of massages because each is given a monetary value, which exists because each of these things has a price. However, within the calculative-rhetorical framework of The Economy, nominal increases in GDP are not a suitable indicator of growth. Nominal GDP will increase if prices increase, but this does not mean that people are actually better off. To remove inflation, statisticians have derived a measure known as real GDP.

The quarterly proclamations by Statistics Canada about the country’s real GDP are reported by the media as a snapshot of The Economy. A tenth of a percentage point up or down gets leveraged as an indication of sound stewardship or wanton mismanagement by the government. However, the very construction of “real” GDP undermines the implicit notion that it offers an objective measure of an objective entity.

Statistical agencies are large, complex apparatuses devised for data collection, sorting, and adjustment, all of which are needed to construct the measure. While statisticians standardize procedures to instill confidence in their constructions, the calculation of real GDP has numerous problems that require continual tinkering with to resolve.55Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi, Report by the Commission on the Measurement of Economic Performance and Social Progress, September 2009. For example, to account for changes in quality that get expressed in price changes, statisticians adjust the values used to construct real GDP. One of the consequences of these adjustments is the inability to compare real GDP values over long periods of time.

Debates around carbon pricing are the most visible deployments of The Economy, particularly by those who assert that their rejection of the scheme is a defence of The Economy. Conflicting studies contend that carbon pricing will boost or damage The Economy, provoking qualitative transformations that will have a financial expression. That expression may indicate a fall in economic performance. However, it is fundamentally predicated on calculative practices, determined by what is included and excluded from the calculations.

The misunderstanding of Baudrillard’s provocation is related to the popular misinterpretation of “construction” to mean “not real.” Although The Economy does not take place in the way presented in popular discourse, it is very much real. When we hear that The Economy is doing poorly, expressed in coverage of political declarations about statistical constructions, we factor that into our behaviours. Rather than representing the processes deemed economic, The Economy is grafted back onto them through the impacts it has on government policies, as well as on the plans and habits of businesses and the public. As such, there is no unfettered Economy that simply takes place, separate from either the global ecosystem or government policies.