Published with kind permission by Macrobusiness
Fairfax’s Ross Gittins has penned a good article questioning the economics profession’s infatuation with growth and calling for policy makers to focus on quality and raising living standards instead:
Most economists I know never doubt that a growing economy is what keeps us happy and, should the economy stop growing, it would make us all inconsolable.
They can’t prove that, of course, but they’re as convinced of it as anyone else selling something.
I’m not so sure. I’m sure a lot of greedy business people would be unhappy if their profits and bonuses stopped growing, but I often wonder if the rest of us could adjust to a stationary economy a lot more easily than it suits economists and business people to believe…
That’s been my big problem with economists’ obsession with economic growth. It defines prosperity almost wholly in material terms. Any preference for greater leisure over greater production is assumed to be retrograde.
Weekends are there to be commercialised. Family ties are great, so long as they don’t stop you being shifted to Perth.
But I’d like to see if, in a stagnant economy, we could throw the switch from quantity to quality. Not more, better.
I feel your pain, Ross. I have previously argued that “economists’, the media’s, and the Government’s infatuation with GDP is one of the biggest shortcomings in macro-economics”.
This infatuation with real GDP growth has led to spurious (and damaging) policies like the pursuit of endless population growth on the basis that it stimulates headline GDP (more inputs equals more outputs), even though it provides next to no long-term benefits to everyone’s share of the economic pie and arguably reduces living standards of the incumbent population (think greater competition for jobs, more time stuck in traffic, smaller and more expensive housing, environmental degradation, etc).
Then there is the focus on the quantity of growth in GDP, rather than the quality (and sustainability) of growth, such as frivolous debt-fuelled consumption and the Government and RBA’s never ending drive to increase house (land) prices and private debt, which creates structural imbalances and damages longer-run productivity and competitiveness.
The sooner economists, commentators and policy makers abandon their fetish with “growth” and replace it with broader measures of well-being, the better.