Reuters - Must We Always Grow the Economy? E-mail

By James Ledbetter

In one chapter of his sharp new book "The Next Convergence," the economist Michael Spence asks a simple yet evocative question: Why do we want our economy to grow? Spoiler alert: He does find a few good reasons. It's rare, though, to hear an economist raise even theoretical doubt over such a deeply ingrained assumption in Western economies; one may as well ask why we want electricity.

In the United States, we hear that economic growth should trump nearly all other social and political considerations (a position held by some on the right), or that growth should be tempered by other important values -- environmental protection, health and safety, wealth redistribution -- which is widely believed on the left.

But almost no one anywhere on the modern political spectrum argues that we should try not to grow the economy, or that never-ending growth is impossible.

Yet it's a curious consensus since, as Spence notes, "for most people, the main goal is a decent level of income." We may associate growth with providing material comfort for ourselves, but growth is primarily a means to an end, rather than an end in itself.

Many people will quite reasonably say that they want the economy to grow so that standards of living can improve for the worst off. Yet there is ample evidence that in the world's largest economies, the growth that has occurred in recent decades has made economic inequality worse, not better.

At a minimum, if raising living standards for the poor is a society's main goal, there are faster paths to getting there than waiting for that old rising tide to lift all the boats.

Moreover, our automatic assumption about the virtue or even feasibility of growth is hardly universal. John Stuart Mill, a towering philosopher of the 19th century, assumed that advanced societies would grow their wealth until they reached a "stationary state," a point at which all basic human needs had been met and the accumulation of greater capital would be unnecessary. He viewed this evolution not only as inevitable, but desirable.

"The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back, by the efforts of others to push themselves forward," Mill wrote.

Such a view is obviously hard to square with American conceptions of liberty and self-determination. Most Americans accept that the state has a right to tax them, but would never accept the idea that they or their businesses could be coerced to stop increasing their wealth. And a glance at the Forbes 400 list of billionaires suggests that voluntary wealth caps aren't very popular, either. ( here )

Even in America, however, economic growth has not always been as reflexive a political goal as it is today. Particularly before trade became truly globalized, there were usually easier ways for corporations to increase profits than to invest in the capacity to grow. In the 1940s and 1950s, many industrial businesses prioritized lower taxes and price stability over growth, and the Eisenhower administration largely agreed.

It was in fact the political left -- trade unions and the liberal economists who came into power under John Kennedy -- who urged the country to adopt a stance of permanent economic growth. They saw sustained growth as a way to create jobs and to pay for social goods, such as poverty reduction.

As Daniel Bell noted in his classic book The Cultural Contradictions of Capitalism: "The idea of growth has been so fully absorbed as an economic ideology that one no longer realizes how much of a liberal innovation it was."

There have, of course, been challenges to this world view in subsequent years. The most prominent came from the "Club of Rome," whose 1972 book Limits to Growth laid out much of the critique that is today widely associated with the slow-to-no growth philosophy of many environmentalists.

Yet no major government on a national level has seriously tried to pursue a strategy of keeping its economy from growing. So long as competition exists among nation-states, the failure to grow will be associated with a fear of being overtaken, economically or even militarily.

That competition may be one reason that Mill's idea of a stationary state seems so distant to a modern reader. Another, discussed by Spence, is that innovation inevitably fuels economic growth, and so long as humans innovate they will create growth, even unintentionally.

Still, history and nature provide precious few examples of anything that grows forever. Increasingly as we integrate into what Spence calls a "multispeed world," we will encounter instances in which growth itself is not sufficient. The recent election in Peru, for example, saw the victory of an anti-poverty leftist, even though Peru's per capita gross income has risen 82 percent in the last five years. (The Wall Street Journal cited an economist's study title as summing up the national mood: "It Isn't the Economy, Stupid: Economic Growth Does Not Reduce Political Discontent in Peru." --here )

And so the challenge for the West is: Can we channel our thirst for economic growth into something more effective, like better distribution of wealth?

James Ledbetter is the op-ed editor of Reuters. He is the author of the new book "Unwarranted Influence: Dwight D. Eisenhower and the Military-Industrial Complex," published in January 2011. The opinions expressed here are his own.

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BLOOMBERG BUSINESSWEEK
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 WNYC - Leonard Lopate in conversation with Michael Spence and Matthew Bishop (NY Bureau Chief, The Economist) discuss the future of economic growth.
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FINANCIAL TIMES - Future of America Conference debate features Michael Spence.
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THE ECONOMIST
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MARKETPLACE
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BLOOMBERG
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THE NEW YORK TIMES
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BLOOMBERG
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BLOOMBERG
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THE FINANCIAL TIMES
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THE NEW YORK TIMES
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Michael Spence and Christopher Alessi
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WASHINGTON POST - Ezra Klein Q&A with Michael Spence, 'I don't think there's a solution to the employment problem in the short run'
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BLOOMBERG - Michael Spence talks about the outlook for a political resolution to Italy's debt woes. Spence also discusses the U.S. debt-ceiling debate and the country's credit rating with Maryam Nemazee on "The Pulse."
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REUTERS - Nobel prize-winning economist Michael Spence comments on the ongoing negotiations to raise the U.S. debt ceiling.
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THE ECONOMIST - "America the Sclerotic"
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HUFFINGTON POST / JEFF MADRICK - "Impact of Job Numbers Goes Far Beyond the Jobless"
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ON POINT WITH TOM ASHBROOK - Are we in danger of slipping back into another global financial crisis, one even more dangerous than the one that scared us so in two thousand eight?
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CNBC WITH MARIA BARTIROMO "US not a giant in the future global economy" Michael Spence describes the changing fortune of the United States' economy in the 21st century.
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FOX BULLS & BEARS
"How can the debt be reined in while boosting the economy?"
2001 Nobel Prize Winner in Economics Michael Spence on why Republicans and Democrats need to find a compromise on the debt for the benefit of the economy.
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CNBC SQUAWK BOX
"Greece Cannot Avoid Default"
There is no way Greece can avoid a default, says Michael Spence, Nobel laureate, with Mark Olson, former Federal Reserve governor.
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CNBC SQUAWK BOX
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Michael Spence talks about current and future job creation.
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FOX BUSINESS/LOU DOBBS
"Resolving Greece's Debt Crises". Nobel Prize-winning Economist Michael Spence on why Greece can’t solve its debt crisis on its own without a default or restructuring.
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WABC RADIO -
John Batchelor and Michael Spence, Nobel laureate and author of "The Next Convergence" discuss globalization and the permanent changes it has on the global marketplace.

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CNBC SQUAWK BOX -
"Market Risk and the Economy" 

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PROJECT SYNDICATE -
Nobel laureate and Project Syndicate contributor, Michael Spence discusses global economic growth in a "multispeed" world and the challenges ahead for countries like the U.S. and China.

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TIME - What U.S. Recovery? Michael Spence weighs in on Myth #3.

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Conversations host Harry Kreisler welcomes Nobel Laureate Michael Spence for a discussion of his new book, "The Next Convergence.

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REUTERS - "Why do we want our economy to grow?" -  In "The Next Convergence" Michael Spence asks this simple yet evocative question.

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NEWSWEEK - The Stanford economist and author of "The Next Convergence" talks to Newsweek’s R. M. Schneiderman about American inequality, the Chinese economy, and how to score a Nobel.

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INSTITUTIONAL INVESTER - Nobel Prize–winning economist Michael Spence warns that the era of discount money is coming to a jarring conclusion.

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CNN - China's economic rise and the future of the global economy.

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CNN - Michael Spence examines how emerging economies are reshaping the international order.

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Google Authors - Nobel Prize-winning economist Michael Spence spoke to Googlers in Mountain View about his book "The Next Convergence."

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MSNBC - Dylan Ratigan Show: Getting America Back to Work - Michael Spence and panel discuss the sluggish job recovery and how the government can help change it.

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The New York Times - "French Minister to Seek Top I.M.F. Job"

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KUOW.ORG - "While the Economy May Recover, the Job Market Will Not"

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Bloomberg TV - Michael Spence on IMF Leadership, Greece's Default Risk.

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Author, Michael Spence at "Politics and Prose" discussing his new book,"The Next Convergence", as well as the rapid growth rates in China and India.

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Yahoo! Finance - "U.S. May Have to Live with Slow Employment Growth"

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Yahoo! Finance - "Why Globalization is Good for America"

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Yahoo! Finance - "Europe's Downward Spiral: Portugal Gets Bailout But Greek Default Unavaoidable"

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Carnegie Council - Public Affairs Program: Michael Spence addresses critical economic questions.

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Council on Foreign Relations's Michael Spence discusses his new book, "The Next Convergence: The Future of Economic Growth in a Multispeed World," as well as the rapid growth rates in India and China.

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CNBC Squawk Box - Michael Spence discusses what the Strauss-Kahn arrest means for the European debt crisis;
weighs in on Europe and America's two different yet similar fiscal problems.

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Michael Spence

WNYC - Michael Spence and Leonard Lopate discuss his new book "The Next Convergence."

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Michael Spence talks about his new book with Ron Insana

Michael Spence joins Ron Insana to discuss his new book "The Next Convergence."

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