Friday, 19 November 2010

Oikonomia, Indeed

Dainius Kreivys writes:

If traditional family values were stronger in our society, we would have a much stronger economy, not to mention a more mature society. That is why today, in an era when each of Lady Gaga’s new dresses gets major headlines, it is important to speak about the family from a rational point of view, as a crucial part of economic policy.

In many countries, family businesses are the most important engine of the economy, and Lithuania is no exception. That is not just because they constitute a major part of the economy. Nobody can deny that successful families more often produce responsible citizens who later also become outstanding professionals. Economically, that means better qualified specialists, people who create added value in the economy, people who support themselves, create jobs, maintain a family and pay taxes; people who do not live off welfare benefits.

Family upbringing also has real significance for crime rates. The values that are transmitted in families contribute to reducing crime, meaning the state does not have to spend as much on public order. So a policy that supports the success of a country’s families has a significant impact on GDP, and that is why I suggest that the family should be the central axis of every country’s economic development strategies and business promotion programmes.

Consider the family from the perspective of government revenues and expenditures. A family represents revenue for the state treasury. Behind almost every tailor, cafe, guest house, rural tourism getaway or farm, you will find a family business with family members working shoulder to shoulder. The size of these undertakings may not amaze anyone, but they are not called the engine of the economy for nothing. These families provide stable jobs for themselves, create work for others and pay taxes, thus contributing to economic growth.

Families usually form in order to have children. In the eyes of an economist, every person is an “economic unit” which increases the country's GDP and brings a variety of tax payments to the state budget. The family also plays a key role in raising responsible citizens, shaping their values. Without slighting the efforts that single-parent families make, one has to say that this is much easier to do in an intact family. Their investment in the welfare of each child involves the energy, time and financial resources of two people, not just one. Again, for confirmation just look at the statistics: children who grow up in one-parent families are more likely to end up in high-risk groups and more often commit crimes. For the national budget, that means not only higher costs to fight crime, but also greater social security spending.

The state cannot by any means forget or neglect single-parent families, but the top priority has to be encouraging people to marry, to live family life and to defend their families. Regarding informal partnerships, the statistics show no mercy: children of unmarried couples achieve less than those of married couples. Moreover, the probability that such a child will eventually be left with just one parent is several times larger than for children born to married couples. Therefore, two people just living together, in my view, do not constitute a real family and cannot fulfil the role of a family.

For all these reasons, I am really pleased by some recent private initiatives in Lithuania that are helping large numbers of families raise virtuous, responsible and educated citizens for our country. Many European countries, including Lithuania, are now struggling with the painful consequences of devaluation of the notion of family: an increasing retirement age, tragically declining birth rates and aging populations with ever larger numbers of economically inactive persons enjoying (well-deserved) retirement. This will get even more painful, as we reach the point where each employed person will have to maintain not just one but two or more non-employed persons.

It seems to me that many of us are mistaken in thinking that the decision to start a family, to stay in a family and to defend one’s family is something purely emotional. We live in a rational world, and one in which the family plays a very rational role. A country that does not adequately value the family’s impact on its economy, in the long run is doomed to battling extended economic recession, not to mention the costs of social welfare programs and crime reduction. To go beyond mere declarations and truly recognize the value of the family for the national economy, governments need to promote a more effective social security system and programs to support family businesses. In the nearest future, as the economic recovery consolidates, we should take a close look at both of these things, viewing them as parts of the national investment program.

1 comment:

  1. Part of the problem with current mainstream economics, though, is the fact that stable families don’t necessarily mean better GDP statistics. Family breakdown is actually beneficial to GDP stats because it increases market transactions, what GDP measures.

    When a divorce occurs, you now have two households consuming instead of one, and home production undertaken by the former family unit is now often outsourced to restaurants, daycare centers, etc.

    Plus, we now have an entire industry devoted to broken families. Lawyers, their staff, marriage counselors, book writers, therapists, government bureaucrats employed in departments dealing with family issues, all of these groups benefit from the current anti-family climate in many advanced countries, and it all increases GDP by increasing market transactions.

    Contrast this with home production by homemakers and children and other family members growing their own food, mending their own clothes, etc., all of which is non-monetary, non-market activity (for the most the part) and therefore not counted in GDP statistics.