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
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,
"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.READ THIS ON REUTERS.COM