Economic growth and prosperity, two concepts that fit perfectly together, like peanut butter and jelly, or summer and the sun. As with all things, there are voices that challenge this notion, and those voices are becoming increasingly loud. In a recent article in The New Yorker, author John Cassidy examined the relationship among economic growth, prosperity and the sustainability of our planet.
Cassidy summarizes the goal in our current economic system as striving for constant growth. Growth in economic output, as measured by GDP, results in an increased quality of life for all and provides the government with an increasing stream of revenue by which to expand its budget and debt load. But can we still attain prosperity without growth?
The answer is yes, according to a group of people Cassidy introduces as “slowthers.” Slowthers, along with their cousins from the “degrowth” movement, believe that slowing or halting economic growth doesn’t have to mean the end of prosperity. Economic growth in its current form, the argument goes, does more harm than good. For one, there is the constant and increasing strain on our environment. More growth means more fossil fuel consumption and more draining of our planet’s natural resources. Second, the current version of growth does not benefit all of society equally. Look back to the bull market over the past decade and determine who has benefitted the most from this expansion — those with investible assets and real estate. Unequal growth has been accepted because with any growth there is still the potential for a quality of life increase for all. For slow or no growth to become acceptable, economic value must be distributed (or redistributed) more equitably. Naturally, this leads along the path to a debate about whether a democratic society is conducive to a slow or no growth environment.
If we can’t keep things the same, and we can’t handle slowing growth – what can we do? Cassidy’s article introduces a potential solution in the form of “green growthers,” or those who believe we can have economic growth and prosperity while reducing our carbon emission. Green technology adoption is key to this movement and proponents argue that it can fuel economic growth well into the future, with mitigation or removal of our impact on the environment. This is likely the only way to sustain our planet in perpetuity when growth must be a part of the equation. However, there will need to be measures in place to ensure the transition of technologies does not leave a large swath of the population behind. Again, a tricky political and societal issue.
Try as we might, we may not have much of a choice about economic growth. The two ingredients for increasing GDP are new entrants into the labor force and improvements in productivity. When these factors are no longer guaranteed, economic growth will falter. Societies worldwide, ours included, are beginning to come to terms with aging demographics. An older society means a smaller workforce and slower growth. Social Security and elder care systems also typically are based on the idea that a large young population will always be available to support a small old population. Technological innovation that can lead to increases in productivity will always be a possibility, but it remains to be seen if it can keep up or outpace the shift in demographics.
Looking on the bright side of the picture, Cassidy argues that in the developed world slowing growth is a good thing. In our case, slowing growth means our quality of life has increased to the point where we would rather spend time on leisure (as economists put it) rather than work. Additionally, as our society has become more prosperous, we have moved from a production-based economy to a service-based economy. In a service-based economy, we are less likely to see vast jumps in productivity due to the nature of those producing the output (i.e., humans).
For less developed nations, worldwide growth has a ripple effect that needs to be contemplated. China’s economy developed by providing cheaper manufacturing services to more prosperous nations (at a notable detriment to the environment). If we decide to slow growth now, developing nations may not be privy to the same opportunities that others once had. The balance between growth, inequality, and prosperity is a delicate equation where the answer is not clear.
What is known is that aggregate growth has increased the quality of life for countless individuals. Cassidy cites economic research that shows the global population in extreme poverty is now less than half of what it was 30 years ago. But, the sad fact is that the number remains in the hundreds of millions.
So, what can we do to benefit the future of our planet and society as a whole? Have more babies, invest in green technology and push for platforms that benefit all people, not just a select few.