Why people are wrong to oppose economic growth

After a brief appearance in the 1970s, opposition to economic growth has resurfaced. Over the last 18 months we have heard much from Clive Hamilton, a leading proponent of the view that economic growth is a fetish and should be stopped. Others express similar opinions. They argue that the benefits of economic growth, at least in countries above modest average-income levels, are a mirage because survey evidence shows that growth is not accompanied by corresponding increases in reported life satisfaction. There are three reasons why I reject this anti-economic- growth standpoint. First, there is no evidence that economic growth is a fetish in high-income countries. When asked in the World Values Survey about aims for their nation, people in these countries give lower priority to economic growth than people in poorer countries. If economic growth is a fetish we would expect people in high-income countries to give economic growth just as high a priority as people in low-income countries.

In addition to the direct evidence on economic-growth priority, a higher proportion of people in high-income countries tend to be more satisfied with their financial situation, to favour less importance being placed on work, and to say that leisure is very important. In general, the proportion of people in high-income countries who emphasise the importance of good pay in a job is lower than in low- income countries. The attitudes of Australians on these matters are similar to those of other countries with comparable income levels. There is nothing in these results to suggest that there is a growth fetish in Australia or other high-income countries. Second, the argument that economic growth’s benefits are a mirage is weak. The fact that economic growth in rich countries has not led to much improvement in reported happiness or life satisfaction can be attributed to rising aspirations. Contrary to claims by Clive Hamilton, however, rising aspirations have little to do with preference manipulation by the advertising industry. Humans have an innate capability to influence their own aspirations. We feel that disappointment will be inevitable if we set our sights too high. We tend to aspire to things that we believe are within our reach, or not too far beyond it. Both rising aspirations and economic growth are strongly related to the advance

of knowledge. As Steven Pinker pointed out in his book How the Mind Works, Ice Age people would have been wasting their time if they had fretted about their lack of camping stoves, penicillin and hunting rifles or if they had striven for them instead of better caves and spears. Third, economic growth is primarily the result of the decisions of individuals, including as members of families and firms, in making choices about work, leisure, saving, consumption, investment, research, innovation, etc. No-one makes such decisions for the purpose of raising or lowering the rate of economic growth. Economic growth is an outcome of the decisions of many different people, made in many different ways, for many different reasons. Governments make decisions about the priority to give to economic growth. But the economic reforms that governments have introduced in Australia over the last couple of decades have facilitated higher economic growth by increasing economic freedom. Those who say that economic growth is given too high a priority are arguing for greater restrictions on individual freedom. They want individual preferences as expressed in market decisions to be constrained. They are rejecting approaches to public policy that seek to correct specific problems, such as environmental pollution, with minimal interference in individual freedom. Along with nearly everyone else, some anti-growth advocates profess to be interested in the wellbeing of people. It is hard to imagine how the policies they advocate could make people happier, but let us assume for the sake of argument that the stationary state is some kind of nirvana and that people do become happier after they get there. Would this justify the restriction of individual freedom required to get to that point? I say ”no”. It is not acceptable for governments to interfere with individual freedom even when there are strong grounds to believe that this will make the people concerned become happier or give them greater capability to achieve wellbeing. When people have the mental competence to accept responsibility for their actions they should be allowed to get what they want, provided that this does not interfere with the similar rights of others.

Winton Bates is an economic consultant. This piece is based on his article entitled, Is economics given too high a priority? in the summer 2004-05 issue of The Centre for Independent Studies’ journal Policy.