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Main Content
Bigger, Stronger, Smarter, Richer
Some thoughts on the fixation with economic growth
Economic expansion has been the mantra of the Western political classes for the past five decades, a preoccupation that requires plenty of head-scratching to come up with creative ways to stimulate growth. Loyal followers of David Cameron claim that the United Kingdom should deregulate business and reform employment law to really ‘go for growth’, while on the other side of the Atlantic Barack Obama has been left pondering ‘how to achieve greater global growth’.
The fact is that the global economy in 2011 is almost five times larger than it was in the sixties, tying into the assumption that this growth will go on forever. It is often assumed to know no bounds, affecting not those countries where a better quality of life is clearly needed, but also those where an overabundance of material wealth is associated with improvements to well-being.
Policymakers have often lived in harmony with the myth of eternal growth, piling up debt in the belief that it only takes money to makes the economy work. With energy, raw materials and human resources not taken into account, the gravity of the situation can easily be underestimated. Yet as both these and the financial resources – in the form of credit – are stretched to their extremes, economic growth in the US and Europe is unlikely to materialise despite the dominating doctrine. Meanwhile, the recession and crisis of the capitalism model is encouraging society to look for new scenarios of development that can be sustained in and beyond the current climate.
Despite the realisation, at least by some, that things are not going to according to plan, the fetish for figures remains in its position as a central dilemma. Does the GDP still provide a good benchmark of living standards? Much of the time the quality of life citizens experience daily hardly corresponds to what is reported in official statistics, particularly since the pursuit of the growth myth comes at a cost.
Economic expansion rarely delivers its benefits evenly. Instead, it often rewards the strong and ignores the weak, creating a polarisation in society that in the long term could result in heightened social friction – exemplified in the Occupy movement. The more society wants to produce, the more resources are needed. Natural resources are by definition limited and growth implies a loss of non-renewable resources. From raw materials and fuels to land, these assets diminish according to how much economic output is created and how strong the drive is to maximise production. The combination puts a strain on the environment that results in widespread water, air and noise pollution.
Institutions that play a role in economic growth and development need to be regarded as a critical bastion for maintaining the social, economic and financial status quo by avoiding planning a radical change. The World Bank’s stance in this debate is that ‘growth is good for the poor’ as economic expansion is allegedly closing the gap between the haves and the have-nots. This conclusion does not touch upon the question whether economic growth is sustainable socially, ecologically and economically, perhaps contributing to why it is debated so often.
Because nothing in nature grows indefinitely, however, the assumption that resources can expand indefinitely and can produce endless material is deeply flawed. The reality of the never-ending growth is a mere monetary growth that leads to inflation or a purely virtual ‘new economy’ - without production, transportation and physical consumption of resources. Such thinking has contributed to the boom of the financial sector over the last thirty years. Today, however, accumulation of capital does not only imply the production of real goods but it also follows the logic of a financial system partially disconnected from the real economy. In this situation, the profit rates in the sector can be many times higher than the growth of any indicator of a productive economy and still be within the scope of the GDP.
The shift to a more mechanised manufacturing sector has placed pressure on the service sector to find an occupation for the increasing numbers of people who would have otherwise been left jobless. Yet the advent of new communication technologies is likely to raise the productivity rates in the service sector, for which finances give no guarantee that a larger workforce could be absorbed.
A new scenario for the future requires differentiating between the two concepts of ‘economic growth’ and ‘economic development’. The first deals with quantity, whereas the second should focus on quality. Growth is not important for growth’s sake, but presumably it is critical for the achievement of a higher level of individual and societal welfare. If an increased amount of goods and services work towards that end, then pursuit of growth is welcome. If going big does not help society get better, however, then the growth myth is wasteful and potentially dangerous.
Growth is still a concept that is somewhat valid for developing countries, as without expansion there is no hope of improving daily life. The condition is that this has to be pursued intelligently. The West, on the hand, has already reached the peak of material wealth and exporting that lifestyle further can only be imposed by destroying nature to the point where life on earth is endangered.
In all cases, prosperity goes beyond material concerns. It is more about the ability to thrive as a society that is living in harmony with the natural limits of a finite planet.