Economics may be bad for your health! - Part 2
Benefits of economic growth
Economic growth has long been the goal of conventional economics and politics. It is both the prize and the credo that governs our daily lives. I am unsure as to whether infinite growth is either achievable, sustainable, or for that matter desirable or beneficial to society as a whole.
The arguments in its favour go something like this:
1. Increased consumption is good for you! Greater consumption equals greater prosperity. The economic assumption is that consumption is related to utility, where utility is a measure of the relative satisfaction from or desirability of the consumption of goods. Put very crudely, greater consumption is a measure of success, wealth and good fortune.
2. Increased earnings means increased taxation that in turn creates better healthcare, education and welfare services (or some cynics might say, more money to spend on wars!).
3. Economic growth creates jobs. Higher employment means less poverty. This is something of a fallacy. In some parts of Europe, including where I live in France, there is something called “structural unemployment” that is brought about by structural changes in the underlying needs of the local economy and the geographical distribution and concentrations of the population. In short, there is a mismatch between people living in a place and the employment opportunities available to them there, that is only capable of remedy over time, usually long periods of time.
That’s the theory, at least!
So what’s the problem?
1. Is infinite economic growth sustainable or desirable?
I read a report last year by an economist who predicted that very soon the world's manufacturing capacity will outstrip its ability of consumption. Simply put that means soon we will be able to make more than we need or can ever hope to use. So what happens then?
If you have a house, two cars and all the other things you need, why would you want to own more houses, or three cars, or even two washing machines? Infinite growth in consumption makes no sense. Does increased ownership lead to greater utility or satisfaction? Of course, it does not and there is a law of diminishing returns when people have more money than things to spend it on. That is to say, the utility of ownership diminishes, and when that happens so does the value of goods, which in turn creates more economic pressures.
For sections of the population who experience dire poverty and unemployment, economic growth may provide a remedy, but the evidence is that high economic growth can cause greater inequality and a real increase in relative poverty (Brookings Institution 2007), since it is the better educated and already wealthy that tend to benefit from economic growth rather than the less well off.
2. Damage to the environment through increased pollution that is a consequence of economic growth is becoming a real problem for the entire world. Of course, a benefit of growth might be the investment in technologies that create less pollution. To-date this appears to have been viewed as a lower priority than the pursuit of wealth for its own sake.
3. Increased inequality gives rise to more crimes and social problems. Between 1960 and 1990 the US crime rate went up by some 300%. While crime rates in the USA may have peaked out now, there is nevertheless a strong correlation between economic growth and increasing crime rates.
4. High economic growth is a slave-driver and has led to longer hours worked with a commensurate increase in personal and social anxiety. An economist might argue that this reflects the fact that people value money more than leisure or quality of life. How would they know when they have no leisure? That takes me to my next point…
5. The American Medical Association maintains that stress is a significant determinant in 80% of all our illnesses (that is not to say it’s the only cause). It could be argued that heart disease, obesity and stress related illnesses are a direct consequence of economic growth.
So what of increased prosperity? What of economic growth?
They have created as many new problems as they have solved.
It may be time to look for a better way.
I do not believe that politics holds all the answers either. Left-wing, right-wing or centrist mass politics have all shown themselves to be deeply flawed.
It is not something that the cult of the presidential individual can possibly apprehend. Barrack Obama or John McCain will make no difference, nor will Gordon Brown or Nicholas Sarkozy. I am unsure as to how well the ideology of nation states will serve the world in the long-term either.
One thing is for sure, if we want a better world, then we will all have to take responsibility for its wellbeing, all of us, without exception. That is the underlying principal of true democracy that we claim to hold so dear. It is not enough, as we have in the past, to argue for political freedom alone; there is social, personal and psychological freedom to consider too.
Economic growth is not the Holy Grail.
So what next?
Economic growth has long been the goal of conventional economics and politics. It is both the prize and the credo that governs our daily lives. I am unsure as to whether infinite growth is either achievable, sustainable, or for that matter desirable or beneficial to society as a whole.
The arguments in its favour go something like this:
1. Increased consumption is good for you! Greater consumption equals greater prosperity. The economic assumption is that consumption is related to utility, where utility is a measure of the relative satisfaction from or desirability of the consumption of goods. Put very crudely, greater consumption is a measure of success, wealth and good fortune.
2. Increased earnings means increased taxation that in turn creates better healthcare, education and welfare services (or some cynics might say, more money to spend on wars!).
3. Economic growth creates jobs. Higher employment means less poverty. This is something of a fallacy. In some parts of Europe, including where I live in France, there is something called “structural unemployment” that is brought about by structural changes in the underlying needs of the local economy and the geographical distribution and concentrations of the population. In short, there is a mismatch between people living in a place and the employment opportunities available to them there, that is only capable of remedy over time, usually long periods of time.
That’s the theory, at least!
So what’s the problem?
1. Is infinite economic growth sustainable or desirable?
I read a report last year by an economist who predicted that very soon the world's manufacturing capacity will outstrip its ability of consumption. Simply put that means soon we will be able to make more than we need or can ever hope to use. So what happens then?
If you have a house, two cars and all the other things you need, why would you want to own more houses, or three cars, or even two washing machines? Infinite growth in consumption makes no sense. Does increased ownership lead to greater utility or satisfaction? Of course, it does not and there is a law of diminishing returns when people have more money than things to spend it on. That is to say, the utility of ownership diminishes, and when that happens so does the value of goods, which in turn creates more economic pressures.
For sections of the population who experience dire poverty and unemployment, economic growth may provide a remedy, but the evidence is that high economic growth can cause greater inequality and a real increase in relative poverty (Brookings Institution 2007), since it is the better educated and already wealthy that tend to benefit from economic growth rather than the less well off.
2. Damage to the environment through increased pollution that is a consequence of economic growth is becoming a real problem for the entire world. Of course, a benefit of growth might be the investment in technologies that create less pollution. To-date this appears to have been viewed as a lower priority than the pursuit of wealth for its own sake.
3. Increased inequality gives rise to more crimes and social problems. Between 1960 and 1990 the US crime rate went up by some 300%. While crime rates in the USA may have peaked out now, there is nevertheless a strong correlation between economic growth and increasing crime rates.
4. High economic growth is a slave-driver and has led to longer hours worked with a commensurate increase in personal and social anxiety. An economist might argue that this reflects the fact that people value money more than leisure or quality of life. How would they know when they have no leisure? That takes me to my next point…
5. The American Medical Association maintains that stress is a significant determinant in 80% of all our illnesses (that is not to say it’s the only cause). It could be argued that heart disease, obesity and stress related illnesses are a direct consequence of economic growth.
So what of increased prosperity? What of economic growth?
They have created as many new problems as they have solved.
It may be time to look for a better way.
I do not believe that politics holds all the answers either. Left-wing, right-wing or centrist mass politics have all shown themselves to be deeply flawed.
It is not something that the cult of the presidential individual can possibly apprehend. Barrack Obama or John McCain will make no difference, nor will Gordon Brown or Nicholas Sarkozy. I am unsure as to how well the ideology of nation states will serve the world in the long-term either.
One thing is for sure, if we want a better world, then we will all have to take responsibility for its wellbeing, all of us, without exception. That is the underlying principal of true democracy that we claim to hold so dear. It is not enough, as we have in the past, to argue for political freedom alone; there is social, personal and psychological freedom to consider too.
Economic growth is not the Holy Grail.
So what next?
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