Is wellbeing only economic growth? Only salaries? Or is wellbeing also being able to breathe clean air and drink clean water?
Long-Run Growth
(Part F)
by
Charles Lamson
The Antigrowth Argument
Those who argue against economic growth generally make four major points:
Growth Has Negative Effects on the Quality of Life Perhaps the most significant "unmeasurable" changes that affect the quantity of life occur in the early stages of growth when societies become industrialized. More is produced: Agricultural productivity is higher, more manufactured goods are available, and so forth. However, most people are crowded into cities, and their lives change drastically. Before industrialization, most people in the western world lived in small towns in the country. Most were poor, and they worked long hours to produce enough food to survive. After industrialization and urbanization in 18th century England, men, women, and children worked long hours at routine jobs in hot, crowded factories. They were paid low wages and had very little control over their lives.  Even today, growth continues to change the quality of life in ways that are observable but not taken into account when we calculate growth rates. U.S. agriculture, for example, is becoming more productive every year. As productivity goes up, food prices drop, and fewer resources are needed in the agricultural sector. During the early 1970s, small family farmers all over the United States found that making a living was becoming nearly impossible. The villain was growth and progress. The cost was the decline of a lifestyle that many people want to maintain and that many others think of as an important part of America. There are other consequences of growth that are not counted in the growth calculation. Perhaps the most significant is environmental damage. As the industrial engine is fed, waste is produced. Often, both the feeding and the waist cause massive environmental damage. A dramatic example is the surface, or strip, mining of coal that has ravaged many parts of the United States. Another is the uncontrolled harvesting of U.S. forests. Modern growth requires paper and wood products, and large areas of timber in many states have been cleared and never replanted. The disposal of industrial waste has not begun to keep pace with industrial growth. It is now clear that growing and prosperous chemical companies have for decades been dumping hazardous, often carcinogenic, waste products into the nation's soil and water. It is costing billions to clean them up. Those costs were never taken into account when the market was allocating resources to the growing chemical industry.  Growth-related problems are everywhere. Japan paid little attention to the environment during the early years of its rapid economic growth. Many of the results were disastrous. The best known of these results were their horrifying birth defects following the dumping of industrial mercury into the waters of Minamata Bay. In addition to birth defects, thousands of cases of "Minamata disease" in adults have been documented, and hundreds have died. Growth Encourages the Creation of Artificial Needs The nature of preferences has been debated within the economics profession for many years. The orthodox view, which lies at the heart of modern welfare economics, is that preferences exist among consumers and that the economy's purpose is to serve those needs. According to the notion of consumer sovereignty, people are free to choose, and things that people do not want will not sell. The consumer rules. The opposite view is that preferences are formed within the economic system. To continue growing, firms need a continuously expanding set of demands. To ensure that demand grows, firms create it by managing our minds and manipulating our behavior with elaborate advertising, fancy packaging, and other marketing techniques that persuade us to buy things for which we have no intrinsic need. Growth Means the Rapid Depletion of a Finite Quantity of Resources In 1972, the Club of Rome, a group of "concerned citizens," contracted with a group at MIT to do a study entitled The Limits to Growth (Dennis L. Meadows et al., 1972). The book-length final report presented the results of computer simulations that assumed present growth rates of population, food, industrial output, and resource exhaustion. According to these data, sometime after the year 2002 limits will be reached, and the entire world economy will come crashing down: Collapse occurs because of nonrenewable resource depletion. The industrial capital stock grows to a level that requires an enormous input of resources. In the very process of that growth, it depletes a large fraction of the resource reserves available. As resource prices rise and mines are depleted, more and more capital must be used for obtaining resources, leaving less to be invested for future growth. Finally, investment cannot keep up with depreciation and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent on industrial input (such as fertilizers, pesticides, hospital laboratories, computers, and especially energy for mechanization. . . . Population finally decreases when the death rate is driven upward by the lack of food and health services. [Dennis L. Meadows., The Limits of Growth (1972) pp. 131-132] This argument is similar to one offered almost 200 years ago by Thomas Malthus.  In the early 1970s many thought that the Club of Rome's prediction had come true. It seemed the world was starting to run up against the limits of world energy supplies; the prices of energy products shot up, and there were serious shortages. In the years since, new reserves have been found, new sources of energy have been discovered and developed, and conservation measures have been tremendously successful (automobile gas mileage has been pushed up to levels that were inconceivable 35 years ago). A variation of the depletion of resources argument stops short of predicting doomsday. It does point out that unchecked growth in the developed world may have undesirable distributional consequences. To fuel our growth, we are buying vast quantities of minerals and other resources from the developing countries, which have become dependent on the proceeds of those sales to buy food and other commodities on world markets. If this continues, by the time these countries have grown to the point that they need mineral resources, their resources may be gone. Growth Requires an Unfair Income Distribution and Propagates It One cause of growth is capital accumulation. Capital investment requires saving, and saving comes from the rich. The rich save more than the poor, and in the developing countries most people are poor and need to use whatever income they have for survival. Critics also claim that the real beneficiaries of growth are the rich. Choices open to the "haves" in society are greatly enhanced, but the choices open to the "have-nots" remain severely limited. If the benefits of growth trickle down to the poor, why are there more homeless today than there were twenty years ago?  Summary: No Right Answer We have presented the arguments for and against economic growth in simple terms. in reality, even those who take extreme positions in this debate acknowledge there is no "right answer." To suggest that all economic growth is bad is wrong; to suggest that economic growth should run unchecked is equally wrong. The question is: How can we derive the benefits of growth and at the same time minimize its undesirable consequences? Society must make some hard choices, and there are many trade-offs. For example, we can grow faster if we pay less attention to environmental concerns, but how much environmental damage should we accept to get how much economic growth? Many argue that we can achieve an acceptable level of economic growth and protect the environment at the same time. There is also a trade-off between growth and the distribution of income. More financial inequality would probably lead to more saving and ultimately to more capital and faster growth. Using taxes and income transfers to redistribute some of the benefits of growth to the poor probably does slow the rate of growth. However, it is not a question of all or nothing; society must decide how much inequality is desirable. As long as these trade-offs exist, people will disagree.  *CASE & FAIR, 2004, PRINCIPLES OF ECONOMICS, 7TH ED., PP. 644-646* end |
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