Is Growth Good?
What are the moral consequences of economic growth? It’s a subject that political economist Benjamin M. Friedman tackles in a new book. Growth numbers may move markets, but do they also lull us into a false sense of satisfaction and security?
A small but thoughtful set of responses to the question "Is Growth Good?" posed this month conveys the sense that the wrong questions were asked. According to the responses, growth is not only good—it is necessary. But we need to be selective in the kinds of growth targeted. In fact, many kinds of growth offer great returns while requiring little or none of the world’s resources, therefore having seemingly few limits.
Fran Henry makes the case for economic growth when she says, "According to the World Health Organization, one of the risk factors for violence of all sorts is poverty—not absolute poverty, but inequality between the classes. If growth brings more economic equality into a society, then yes, growth is good." Pruthul Patel writes, "Growth is life. Without growth there is no life—be it of an economy, entity, or individual. . . . Expecting rationality in growth just limits the prospects of growth. There are no boundaries to growth."
Others suggest that certain kinds of growth are particularly important. M. Ramji comments, ". . . we should also consider the implications of growth in education and knowledge, spiritual growth, growth in top-level sporting teams, and so on." Angelo Giovas goes even further in suggesting that "the key is not more outward growth (which, as was pointed out in the article, has its limits) but more inward renewal (which has no limits)." Charlie Cullinane recognizes an important distinction: "Granted, the ethics of growth can be two-sided, but growth should not be confused with greed. Agriculture, healthcare, and education . . . are areas of potential growth that can be positive if not tainted by greed."
All of this suggests that other kinds of growth actually enable the kind of economic growth that we generally measure and read about. It's reasonably obvious, for example, that growth in such things as the rule of law, so-called transparency, and ethical behavior foster trust in business that is essential to a growing economy. Growth in a chain of enablers, such as education, has the potential for leading directly to the development of ideas that actually expand the limits of even those kinds of growth that rely on physical resources with supposedly finite properties. If all this is true, why is so much more emphasis placed on measuring, reporting, and rewarding end and effect—economic growth—than the means and causes of economic growth? Is there too long a lag time between the two to interest managers (and in some cases even policymakers)? Is there too great a physical and psychological gap between those investing in the kinds of growth that eventually drive economic growth and those benefiting from the investment? If so, what does that portend for the real versus the ideal future described by our respondents? What do you think?
How often have you heard a manager say, "If we don’t grow, we’ll invite decline"? Growth at the organizational level opens up opportunities for new customers, new hiring, acquisitions, increased profitability, and generally more liberal policies as a result of the removal of constraints associated with stagnation. This implies that the benefits of growth are more than just economic. But does this translate to the global economy? Benjamin Friedman, as the result of an examination of the economic and social histories of the United States, Britain, France, Germany, and a number of developing economies that he describes in his new book, The Moral Consequences of Economic Growth, believes that it does.
Friedman asserts that economic growth fosters "moral societies" characterized by openness of opportunity, tolerance, economic and social mobility, fairness, and democracy. Similarly, economies that fail to grow run the risk of encountering the reverse effects. His analysis suggests that major events occurring in response to periods of growth foster openness, tolerance, mobility, fairness, and democracy to support his thesis. The reverse is also true. He maintains that increasingly moral societies result from periods of time in which people are optimistic about the future, possibly as a result of recent improvements in their well-being. He cites this data to suggest that we should be particularly optimistic about the possible development of increasingly moral societies, including democratization, in China and India. At the same time, stagnant income levels for a period of several decades, broken only by the five-year period between 1995 and 2000, suggest a potential source of concern for the United States.
Of course, these views depend on how one views growth. Gross domestic product has been growing at a brisk pace in the U.S. for the past decade. These are the growth numbers that move markets. Is it possible that they could well lull one into a false sense of satisfaction and security? After all, GDP is an imperfect measure at best. For example, it goes up when a nation suffers a natural disaster and cleans up after it or fights a war, neither of which add to the net wealth of the world as a whole. And GDP remains unaffected when people volunteer to help those in need or simply carry on the daily voluntary activities needed to keep a family together. But that isn’t how Friedman measures growth. He defines it as "a rising standard of living for the clear majority of citizens. . . . Economic progress needs to be broadly based if it is to foster social and political progress." Further, Friedman maintains that moral societies foster economic growth. This all suggests that the growth statistic that should move markets is a measure of optimism about the present and future.
The general conclusion that is to be taken from this work is that growth, as defined by Friedman, should be sought by everyone. But of course, this raises some additional questions. If the benefits of growth are not equitably (versus equally) distributed, what effect will this have on such things as democratization? Further, can the planet sustain the kind of growth that would be needed to foster moral societies around the world? Already, the impact of economic development in China and India on the world’s resources and environment is an issue under debate. Who or what body decides all of this, or will it be the independent actions of government and business leaders acting in national interests? If that is the case, who worries about what has been known for years as the "tragedy of the commons," that is, the utilization and allocation of what some perceive as a somewhat fixed supply of resources? Or is the amount of these resources expanded by the very process of growth?
Is growth good? If so, what kind and for how long? What do you think?