Economic Growth: Is It Worth Having?

I don’t write about the economy much, first because I am not an economist, and second because so many others already do it. But this little essay is here because I was stimulated by a fine speech by Mike Keating, former Secretary of the Department of Prime Minister and Cabinet, as the opening paper in a symposium celebrating the life and work of the late Ian Castles, a colleague and friend of Mike Keating’s, and one of mine too. Ian was one of the clearest thinkers I have ever met, and one of the most honest in his appraisal of anything. His approach was a simple one. Go to the data. Go to the argument. Do the data match the argument? Since he finished his career in the public service as Australian Statistician you can guess that he was formidable in his work and his conclusions.

The title of this essay is in fact the title of a Treasury paper of 1973, nearly forty years ago, and some of it at least was the work of Ian Castles. And there are some real parallels in the thinking then and now. The Treasury Paper was in part a riposte to the Club of Rome’s Limits to Growth, which appeared a few months earlier and had achieved worldwide fame. We were running out of resources and food, said the Club. Over-population and pollution were threatening spaceship Earth, and the outcome would be wars, pestilence and plague. The remedy was clear: ‘there is no other avenue to survival’, it said, than a deliberate and controlled end to growth.

You can hear the same talk now, though it is couched in terms of  ‘climate change’. But the themes are similar: our pollution is said to be carbon dioxide, plus the soot that the Chinese are pouring into the skies after burning the coal we are sending them, over-population is still here (how will we feed the 9 billion?), oil will be gone in a few years, the oceans are being emptied of fish, and so on. The remedy is clear: we must become carbon-neutral, abandon air-conditioners and gas guzzlers, stop eating meat, and so on.

And the message has some passionate adherents, as anyone knows who is ever in any kind of debate, either live or on the Internet, about global warming. I think it’s time for Treasury to put out a 2013 version of its older paper, which is a calm and reasoned examination of the issue, written in accessible English and without a word of jargon. Where are they gone, those paper-writers of yesteryear?

Its 1973 message is no less relevant today. Economic growth is not a goal in itself. Rather it is the means to good social ends. In particular, it should be the outcome of policies whose aim is to improve the living standards of the Australian people.

And it doesn’t have to mean increased pollution, which is a separate problem that can be deal with on its own terms. Yes, there are trade-offs. Mining means digging holes in the ground, but they can be filled in time. Noise can be reduced, as can particulates. We are reminded that, beyond a certain point, there are trade-offs in reducing pollution too. The cost of eliminating this or that completely will reduce the amount of money that can be spent on other good social ends.

The world is not running out of resources, and we are now actually feeding the world’s population save in parts of sub-Saharan Africa. (Actually, since the Club of Rome published its report, the world’s population has grown further and is better fed than it was then.) If a particular resource becomes scarce we will move to alternatives, as we have done in the past.

Arguments about growth are often really arguments about priorities, and we should be clear about what is at issue. There can be a mismatch between what individuals decide to do and the social outcome of the decisions — for example, we can buy cars and find that there is nowhere to park our cars when we go to work, a matter much worse now than it was in 1973! But that is not a reason for banning cars, or blaming growth. It is another problem, and one that has several possible solutions.

The 1973 paper suggests also that critics of growth are often critics of the use of the usual indicator of growth, the index we call GDP per capita at constant prices. But that was in the 1970s when international comparisons were the rage, and the GDP per capita measure was the weapon of choice both for growth adherents and their opponents. My guess is that this is much less an issue today, though I try to avoid GDP comparisons where I can, because of their obvious limitations.

Don’t attack economic growth, is the paper’s message: ‘it seems to constitute the key to achieving many of the things going to make up national well-being’. As I say, the message, and the argument that supports it, are as relevant to 2012 as they were to 1973.


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