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The moral consequences of economic growth

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Most advocates of economic growth are content with its self-evident results: it makes us wealthier. But at least since the late 18th century there have been thinkers who emphasised its broader social, moral and political benefits. With The Moral Consequences of Economic Growth Harvard academic Benjamin Friedman joins them. His basic argument is that opportunity, tolerance, fairness and democracy are all more likely to occur with economic growth than not. He tests his hypothesis through a couple of hundred pages of American, British, French and German history. Even on his own account, the argument doesn’t always work. There were low-growth periods when moral progress was made, and high-growth periods when it was not. More often than not, however, there’s a rough match between the two.

The first 100 pages, of more than 400, are the most interesting. There Friedman makes the case for the dynamic process of growth, rather than just the static state of high wealth, being a driver of moral progress. He argues, plausibly enough, that people are more sympathetic to the aspirations of others if they believe that everyone can get ahead. When there are poor ethnic minorities, for example, dominant groups will fight much harder to keep them down if they believe that there is fixed amount of wealth, instead of wealth that can grow to improve everyone’s situation. He also argues, using the literature on social comparison, that we will be less concerned about others getting ahead if we are ourselves better off compared to our own recent past.

Though this argument hardly leads to radical policy conclusions – all major political parties remain committed to growth – it is relevant to the anti-growth critiques made in Australia by people like Clive Hamilton and Richard Eckersley. Their argument is the reverse of Friedman’s, that our striving for extra wealth is damaging to the good society (for my critique of Hamilton’s latest book see here (pdf)). A basic problem in the Hamilton/Eckersley stance is that they propose measures to reduce growth now, though their own data shows that most people think they have too little money, rather than too much. Low growth would dash those aspirations for more, and if Friedman is right spill over into social conflicts that Hamilton and Eckersley have not, in my reading, factored in. Their assumption seems to be that if we were about as happy now as we were 20, 30 or 40 years ago on much lower income than on average we have today than we ought to be content with steady or lower income.

This, however, is unlikely to be the case. As Johan Norberg has argued people are happier when they are optimistic about their prospects. The contentedness we see in the historical well-being statistics is partly due to the fact that people thought they were able to advance themselves, from whatever point they were at. If large numbers of people lose that optimism, then on Friedman’s thesis – and I think he’s right on this – we’ll see more fights over resources in a low growth society, and not the more relaxed and comfortable world that Hamilton and Eckersley predict.

That said, I believe that many aspects of ‘moral progress’ would be preserved even in a stagnating economy. While in developing countries democracy may be endangered by poor economic performance, I don’t think this would be true of Australia (we survived the 1930s depression, and many recessions since, without any serious challenge to democracy). Nor do I think that there would necessarily be major reversals of the social changes of the last few decades. While economic growth may have triggered them or facilitated them, they have now acquired their own independent moral and social force.

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Written by Admin

December 18, 2005 at 9:40 pm

Posted in Uncategorized

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