The Changes Needed in the Composition of GDP
by John Lawrence
The four components of GDP are personal consumption, business investment, government spending, and net exports. Right now personal consumption is 70% of GDP in the US. Business investment is 18%. Most businesses are buying back their stock rather than investing in manufacturing or R&D. Government spending is 17%. More than 60% is military spending. Net exports were -5% since imports (18%) were greater than exports (13%). This represents an oil based economy heavy on fossil fuel pollution. What needs to happen to fend off global warming is a reduction in personal consumption especially in those aspects that are high in greenhouse gas (GHG) emissions such as automobile, airplane and cruise ship travel. Government needs to increase its spending in areas of infrastructure rebuilding and spending on renewable energy systems while reducing military spending which is highly GHG contributing as well.
Businesses need to be encouraged to manufacture here in the US instead of importing everything from China and elsewhere because cargo ships are highly polluting. Businesses which help solve the climate change dilemma need to be encouraged while high polluters need to be reined in. We need to become more like Europe where personal consumption is only 54% of GDP. In Europe government spending is 46.5% of GDP. Of this spending on defense amounted to 1.2 % of GDP in 2018. Contrast this with the 60% that the US spends on defense, and you see the difference between a highly militarized nation that has no money to spend on infrastructure much less a Green New Deal and a group of countries that spends more of its money on the welfare of its citizens. Trump has been agitating to get European countries to spend 2% on defense. This would still mean that the US would be spending 30 times as much.
If Bernie Sanders wins the election for President of the US, we can expect radical changes in the current composition of GDP. Certain items of personal consumption need to be reduced, namely combustion engine car travel. The infrastructure for electric automobiles needs to be built out. Government subsidies need to be given to electric car purchasers. Mass transit needs to be built out and encouraged. Military expenditures need to be reduced both to promote peace in the world and so that the money can be freed up for more constructive purposes. Coal fired electric power generating plants need to be replaced with renewable energy electric power generating plants. Frivolous personal consumption needs to be discouraged while consumption based on human needs for all people should be encouraged especially affordable housing, nutritious non-industrialized food production which is affordable for all and universal health care like Europe has.
In short we need to become more like Europe with a reduced military empire and an increased build out of green infrastructure based on renewable energy. Bernie Sanders represents this kind of change for America - a government which invests in its people and takes radical steps to mitigate global warming.