Why economic growth?
Science says if we don’t reduce industrial growth, Mother Nature will soon curtail it for us. Economics says if we don’t reduce debt-financed growth, the financial markets will curtail it for us.
Why, I wonder, can’t the nation deliberately stop growing for a time – just freeze the frame while we make changes to those dangerous industrial processes and spending habits?
I hear many reasons why we can’t.
Accommodate population So long as there is population growth, there need to be more goods and more jobs.
Reduce poverty America is highest in income disparity among developed nations. Unless we take from the rich and give to the poor, growth is the only way for the poor to raise their standards of living.
It’s an inalienable right The pursuit of happiness. From “Manifest Destiny” to “keeping up with the Jones,” to Silicon Valley, our national values have shouted “the bigger the better.”
There are people who propose ways to stabilize our population, raise up the poor, and redefine happiness. I give a wistful nod towards all of these goals, but I don’t give them any more chance than the polar bear or the balanced budget.
That’s because economists point to a bigger, more insistent pressure for growth:
Debt service When we bought our house, were we going to sacrifice for 15 years to pay the interest? Of course not. We sacrificed at the beginning, but soon inflation, higher wages and a rising stock market took over the payments for us. Without growth, we’d still be sacrificing.
And if growth slows or stops?
A developing country borrows to build infrastructure, dams, education programs, etc. If no economic growth results from all this, paying loan interest can beggar the country and its people. Think Argentina (2002) and Greece (2010).
Our national debt has passed 50% of what the country produces each year (GDP). Just arresting our nation’s interest payments (by balancing the budget) would take a huge bite out of what Americans spend.
A family buys a big house in 2007. . . well, need I say more?
Everyone with debt – governments, companies, gamblers – is banking on growth, literally. The pain of slow growth is enormous.
But an individual family – how might a family learn the economic realities and avoid pain by loosening the ties between happiness and growth?
Help me think this through.