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21 June, 2012  ▪  John Lucas


Growth is a flawed concept. It is measured in terms of the Gross Domestic Product (GDP), which dissolves under scrutiny into concepts that are inaccurate measures of economic or social well being.

Growth is worshipped by politicians. They think it will solve all their problems: they take credit for themselves when the economy does grow; and are chided by their opponents when it does not.  Extreme environmentalists often take the opposite line, demonizing growth as the destroyer of the natural world, and looking back nostalgically to a pristine age, when men were not herded into the murky neighbourhood of dark Satanic mills, but lived peaceful lives in rural surroundings.  Both are wrong. Growth is a flawed concept, not worthy of worship; but in so far as we can make sense of it, it is not always bad; indeed, in time past it has been mostly, on balance, good, though now we may be reaching the end of its being what we want.

Growth is a flawed concept. It is measured in terms of the Gross Domestic Product (GDP), which dissolves under scrutiny into concepts that are inaccurate measures of economic or social well being. Once measured, the Gross Domestic Product acquires scientific status, and can be cited in arguments as an indisputable fact, much as at one time the increase in body weight was cited as incontrovertible evidence that school milk was improving children's health.  We always should be wary of figures in economics. They do measure what they measure, but whether what they measure is relevant is a different issue. A simple example shows the unreliability of  the Gross Domestic Product as a measure of well being: We could have a great deal of growth by having a law that required husbands to pay their wives for cooking, housekeeping and sexual services, and wives to pay their husbands for rent and handyman jobs around the house.  Other, less fanciful examples make the same point.  Mr and Mrs Jones retire to the country, where she does unpaid work with the Women's Voluntary Service. A new government takes over the voluntary work she has been doing, and puts it on a paid basis. To meet the additional cost, it has to raise income tax. Mr Jones finds his pension no longer adequate, but the shortfall is matched by Mrs Jones' earnings.  Financially Mr and Mrs Jones are no better or worse off, but the Gross Domestic Product is increased because her activity now counts as gainful employment. Miss Smith is an elderly patient, who used to have to take a bus to the surgery to get a repeat prescription, walk to the chemist, take another bus home, and next day go back to the chemist and collect the medicine. Now she telephones the surgery, which prints out the prescription, gets the doctor to sign it and sends it over to the chemist, where it will be waiting for her next day.

The Gross Domestic Product is diminished, but the world is a better place. David Hume had a small income. He could have supplemented it by taking paid employment, but chose instead to live frugally and spend his time philosophizing. The Gross Domestic Product would have been greater, but he, and we, would have been worse off, if he had.  In many university towns the hospitals cooperate with the university in fostering teaching and research, and no account is taken of whether a copying machine has been used for hospital or university business.  If in the name of transparency an exact tally was kept, and hospitals billed the university for each item and vice versa, the Gross Domestic Product would be increased, with no increase in the teaching or research done. Indeed, we could greatly increase the Gross Domestic Product by requiring every firm to be split up into its component individuals, who would invoice and pay one another for each bit of help given or received.

The Gross Domestic Product is not a reliable measure of well being, but it is an indicator of economic activity.  If an economic transaction takes place, both parties are better off... It is easy to argue from this that the more economic transactions there are, the better, and often this has been the case. At the beginning of the Twentieth Century each village contained a large number of  agricultural labourers who worked long hours to till the fields and tend the flocks.  Now tractors and milking machines have replaced farm hands and milk maids, and farmers employ only a few well-paid workmen. The old village economy provided employment for all, and fostered fellow feeling as communal effort brought the harvest home, but the fruits of all their labours had to be shared among many, and gave to the agricultural labourer only a paltry wage in return for back-breaking work which left them exhausted, if not crippled in old age. The modern farm, of course, depends not only on its workmen, but on those who make tractors, provide diesel oil, manufacture fertilisers, and invent new strains of wheat; but even so, there are far fewer to claim a share in the proceeds of production. In spite of many ills, growth has made us better off than our ancestors. Life is less nasty and less short than it was when we were unable to exploit our own special skills, and in return obtain goods and services from distant suppliers.

Economic growth has been, over the centuries, a force for good. It can be still, but it need not be always so. If I stay late at the office selling insurance policies, I spend less time with my family, less time at the pub, less time with my mates playing cricket.  At least on some occasions, these non-economic activities are more worthwhile than the economic ones that displace them. It is not only a question of crowding out, but of social togetherness. I want family, friends, colleagues, companions, mates, as well as shops, customers, suppliers, employers, and employees. Money enables me to do business about all manner of different matters with distant parties with whom I have little in common, but I do not want to put my nearest and dearest at a distance from myself.  What gives meaning to my life is not money and the anonymous relations it engenders, but face-to-face conversations with those we care about, and the shared activities we do together...

We need to set economic activity in context with the other forms of social activity, and the many other values of the good life. Getting and spending money is important, but not all-important.  Although it is by and large the case that if I spend more, I am getting more of what I want, and to that extent, am better off,  it is also the case that by and large and over time, I have to earn it, which means that, by and large and over time, I have to work. And though not all work is a disutility, it is reasonable to suppose that paid employment mostly is---that is why it is paid. If there is more economic activity, we shall have more money to spend, but shall have to work harder to get it.

Many people are willing to work harder in order to get more money, but it is a choice, and there have always been some individuals who at some time have decided the other way. Some take early retirement, others downsize, and exchange lucrative employment in the big city for much less well-paid jobs that they can do from a pleasant country village. Their numbers seem to be increasing.  Although it is still worth earning money to get certain positional goods, the attraction of being able to buy a fourth wide-screen TV set is resistible. It may be that not just some individuals, but whole populations in mature economies, are becoming satiated with consumer goods, and are altering the balance between economic and other activities.

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