Inevitability of the Need for Economic Growth—the Nth time.
Branko Milanovic argues that calls for international organisations to de-emphasize growth should be approached with caution.
Today, I got into a bit of a Twitter spat with Kate Raworth who suggested in a talk to OECD top brass that their statement of objectives (defined, I guess, in the 1950s or 1960s) which emphasizes the achievement of high growth rates should be modified to create “redistributive and regenerative economies..whether or not they grow”. I have to confess not to have read Kate’s very successful “Doughnut economics” yet but hope to make up for that very soon. But I have read some reviews and my reaction to the suggested change in the OECD mission statement was thoroughly negative. De-emphasizing growth is not desirable, and perhaps more importantly, is utterly unrealizable in societies like our modern societies. Because I am convinced of the latter, perhaps I should refrain from criticizing her position—since I believe that nothing will ever come of it.
But let me still explain under several headings why I think so. (Surely, the OECD statement may be changed for PR reasons, but this is immaterial.)
Economic growth is key for reducing global poverty (and even global inequality). This is an easy point and I am sure Kate would agree that countries in Africa need more growth than what they have now. The same argument applies to many other parts of the world: South Asia, Latin America, most of Eastern Europe, many OECD members: Greece, Turkey, Mexico, Chile. (And even the richer ones do not seem particularly happy with the recent period of zero growth: they would not be complaining of the Global Recession otherwise.) Growth is (with better redistribution) the only way to get out of poverty. Even growth that is to some extent going roughshod over environmental and other concerns is better than no growth—and this is one of the reasons why I am so supportive of the new Chinese investment Bank and generally of China’s investment in Africa (I wrote on that here).
Commodification of today’s societies. But the really important counter-argument to Kate is that her proposal fails to acknowledge the nature of today’s capitalist economies. They are built on two “fundaments”: (a) at the individual level, greed and the insatiable desire for more, and (b) on the collective level, competition as a means to achieve more. These are not necessarily most attractive ethical characteristics for either individuals or collectives but they are indispensable for capitalism to function—they provide the engine that pushes it ever further.
Such characteristics have then become fully internalized by the majority of the population. They have led to the progressive expansion of commodification of things that were never commodified before. It is of course well-known since Marx, Polanyi and Gramsci that capitalism commodified factors of production (labor, land, capital.) (For a nice discussion of the early commodification and how it led to growth, see my review of Bas van Bevel's wonderful new book “The invisible hand?”).
Commodification has continued unabated since. Art, entertainment, knowledge have become fully commodified. Nowadays, we are witnessing encroachments of commodification in the areas we never dreamed of. Gig economy is from today’s perspective an extreme commodification (but from tomorrow’s perspective may be just a new normal). My free time has become a commodity: rather then drinking beer with friends, I do taxi service. My apartment when I am not there has become a commodity to sell. Even my “free” drinking-beer time has become a commodity: I use it to “network”. Thus even the free time needs to be justified in terms of leading to greater income. People attend speeches of famous economists (who, by the way, have commodified their speeches) not because they expect to learn much, but because they expect to find there others with whom they can “network” (meaning, create future lucrative connections during a time ostensibly spent “learning”). I could go on.
This extreme commodification is obviously linked with insatiability of our needs and our desire to climb up in hierarchical rankings. Since today’s uber-capitalism accepts only one ranking criterion, money (and since all other possible ranking criteria can be, through commodification, converted into the money-metric), the desire for higher societal rank is almost entirely identified with the desire for higher income.
And if everybody wants to have higher income, how can we then argue they our society should cease to place a premium on economic growth and that growth should become a “response variable” (as Kate argues)? Being a “response variable” means “yes, I do not argue for zero growth like the Club of Rome in the 1960s, but I am fine with whatever growth rate turns out to be”. But if what I see as the “fundaments” around which all modern societies are organized, are correct then the only rate of growth that can really “turn out” will be a maximum rate of growth.
The Italian example. Let me then, as a way of illustration, introduce the Italian example.
I think that it could be reasonably argued that no group of people in the history of the world has lived as pleasant lives as today’s Italians. The advantage are well-known: lots of wealth, peace, moderate working hours, strong family and friendship bonds, nice weather, beautiful historical and natural sights, excellent and healthy food. Who then needs to grow? And Italy did not. It has by now stagnated for a generation and while in 1999, its GDP per capita was 3.5 times the world average, it is today 2.5 times. One could say, “it does not matter if people are happy”. But the problem is that, while superficially people may be happy this Summer as they congregate on the beaches and drink aperol, there is a deep malaise induced precisely by the absence of growth. The young are not happy because of lack of opportunities, the middle-aged people are not happy by non-challenging jobs, the old are not happy because their pensions are stagnant. So even if you have achieved a stagnant Arcadia, you cannot be happy and stop running because others are overtaking you and the fundamental features of capitalism, in Italy and elsewhere, are as I have described them above.
If one really believed in, and wanted to argue for the incidental nature of economic growth (“whether or not the economies grow”), then he or she should start by trying to change the bases on which our (global capitalist) civilization has been built, namely insatiability of needs and commodification. But these features have become so strongly ingrained that I cannot see how they can be changed in any foreseeable future. All the rest is romanticism.
This post first appeared on Branko's blog and was reposted with permission.