Classical economics presumes that unlimited economic growth is possible
and good. Both assessments are wrong.
Economic growth requires resource utilization. Humans have access to limited
quantities of all resources. With respect to some resources, the quantities are
in desperately short supply. For example, the earth has insufficient carbon
based fuels to permit all humans to consume those fuels at the per capita rate
enjoyed by people in North America and Europe. Furthermore, consumption of
carbon based fuels directly contributes to global warming.
Beef consumption is another example of the problem of presuming the
possibility of unlimited economic growth. Raising cattle is perhaps the largest
source of carbon dioxide emissions. Raising cattle for food requires more land and
resources than does a vegetarian diet. Humans do not have to forego eating meat
to achieve ecological health. However, moderating meet consumption is one-step toward
ecological health.
As the examples of both carbon based fuels and beef consumption
illustrate, unlimited economic growth is neither possible nor good.
Furthermore, human flourishing, at some level of consumption, shows diminishing
returns from additional consumption. Unlimited economic growth is not
synonymous with human flourishing.
If economic growth is not the panacea for economic problems that
candidates of both political parties presume, what is the answer?
First, economic health requires an intact social fabric; unfortunately,
in Europe and the U.S. the social fabric is increasingly frayed as access to
opportunity shifts toward the elite and away from the least advantaged. This
growing disparity between the wealthy elite and an impoverished underclass augers
poorly for the future, raising the possibility of social disintegration. As the
world increasingly becomes a global community, global social disparities will
loom as large as, if not larger than, national discrepancies.
Second, economic health requires long-term sustainability. In the past,
human utilization of resources did not exceed the earth’s capacity for
self-renewal so grievously. When that did happen (e.g., in newly
industrialized, coal-burning London), time brought improvements and the global
effect was minimal. Today, the consequences of excessive resource utilization
or using resources in a way that notably pollutes or harms the environment is
more of a problem because of the greater scale, e.g., the concurrent industrialization
of India and China even while the West continues at unsustainably high levels
of consumption and pollution.
Third, economic health requires shifting the emphasis from material
consumption to genuinely improving the quality of life. For example, producing
art arguably enriches the world more than does producing more cars and trucks
(or electronic gadgets, clothes, etc.). Similarly, improving health through
better diets, exercise, adequate sleep, and the practice of preventive medicine
is less resource intensive, less polluting, and has the potential to improve
human flourishing more than traditional economic growth can. Encouraging people
to consume education (take courses, earn degrees, read, write, listen) in lieu
of conspicuous material consumption can also improve quality of life while expending
few non-renewable resources.
Fourth, economic health requires that inflows balance outflows. The
discrepancy between traditional notions of economic growth and ecological
sustainability occurs in part because economics, finance, and accounting have ignored
many production costs, e.g., the cost of pollution. Likewise, both personal and
national economic health requires that inflows balance outflows. Politicians across
the board have unrealistic proposals for achieving this balance. Some politicians
advocate austerity, dramatically reducing outflows (government spending). Some even
advocate more dramatic cuts in outflows by concurrently reducing inflows (tax
revenues) in spite of U.S. history over the last thirty years demonstrating
that tax cuts cause insufficient growth in economic activity to offset the
reduction in government income. Other politicians advocate raising taxes to
increase inflows, intending to balance outflows. Dependence on debt is a reprise
of the causes of today’s ecological crisis: pushing the cost of current
consumption onto future generations.
This vision of dynamic, sustainable economic health is consonant with an
ethic that values all people equally and that values all of creation. Different
cultures and different sectors of the economy will rightly opt for various
economic models (capitalism, socialism, etc.) to achieve economic health. Communist
efforts to collectivize farming consistently resulted in diminished
agricultural output. Thus, capitalism is the preferable economic model for farming
and much production.
Alternatively, capitalism relies upon informed consumers choosing between
multiple vendors to balance supply and demand at the lowest price. Healthcare has
few knowledgeable consumers (perhaps mostly patients who are themselves
healthcare professionals) and few vendors competing on price (scarcely any
patient inquires about the cost of care ahead of time). Relying on the
capitalist model for healthcare is a misfit, which the high cost of care and
poor outcomes in the U.S. reflect.
3 comments:
Some resources are limited, at least given our current technology. But I'd argue that one of the most important resources, now and going forward, is technology itself. The supply of technology appears to be limitless. That's not to say that technology can rewrite the laws of physics, although quantum technology will be able to do things that few can presently imagine.
Seems to me that the question is not whether to grow but how to grow. I agree that western society is increasingly polarized. I would argue, though, that new media give western society a much better view of the problems in less wealthy areas of the world. It's difficult to know whether the third world is better or worse off, on average, than 50 years ago. From what I can tell about India and China, it's better. The challenge is how to sustain these improvements without using more fossil fuels (or, in the minds of some, without developing nuclear energy as an alternative).
I wonder if universities will begin to see the over-30 age group as a primary market for educational services, instead of focusing on the under-30 age group as a target market.
The capitalist model has its place in healthcare; it has either directly paid for underlying science in technology such as MRI machines and drugs or brought to market the technologies developed in a non-profit setting. Again, I think the question is how to apply (and limit) the capitalist model to healthcare most effectively and use other approaches too.
A reader emailed me this comment:
Yes, oh yes!
Economic health requires shifting the emphasis from material consumption to genuinely improving the quality of life. For example, producing art arguably enriches the world more than does producing more cars and trucks (or electronic gadgets, clothes, etc.). Similarly, improving health through better diets, exercise, adequate sleep, and the practice of preventive medicine is less resource intensive, less polluting, and has the potential to improve human flourishing more than traditional economic growth can. Encouraging people to consume education (take courses, earn degrees, read, write, listen) in lieu of conspicuous material consumption can also improve quality of life while expending few non-renewable resources.
Technology is a subset of knowledge. Building tech devices requires limited resources and so we have a limited capacity to do that. Miniaturization will obviously shift those limits in a positive direction, allowing humans to achieve more using fewer limited resources such as energy and rare metals.
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