Is Growth Overrated?

Lynsey Hanley in The Guardian thinks it is:

We are rich enough. Economic growth has done as much as it can to improve material conditions in the developed countries, and in some cases appears to be damaging health. If Britain were instead to concentrate on making its citizens’ incomes as equal as those of people in Japan and Scandinavia, we could each have seven extra weeks’ holiday a year, we would be thinner, we would each live a year or so longer, and we’d trust each other more.

Epidemiologists Richard Wilkinson and Kate Pickett don’t soft-soap their message. It is brave to write a book arguing that economies should stop growing when millions of jobs are being lost, though they may be pushing at an open door in public consciousness. We know there is something wrong, and this book goes a long way towards explaining what and why.

Long-term readers will recognize that I’m a longtime booster of all-things Scandinavian, and it’s actually as a big fan of Nordic countries that I have my doubts about this argument. The crux of the matter is that the Scandinavian countries are not poor. They’re not even close. These are some of the richest countries on earth. After all, good health and high levels are trust are not only consequences of equality, they’re causes of growth. Likewise, it strikes me as unlikely that Denmark would stick with its egalitarian social model if it entered a prolonged period of declining real living standards. The lesson of Scandinavia isn’t that other countries should abandon growth in the quest for equality, it’s that if you can manage to build an effective public sector that people have confidence in, that will pay off in terms of both growth and equality.


The other issues to consider here have to do with the interconnected nature of global life. If we sealed the border and kicked all the immigrants out, measured inequality in the United States would plummet. But real living standards for the remaining poor people would only increase modestly and real living standards for the exiled used-to-be-immigrants would decline drastically. This sort of thing is not sound policy even if the egalitarian result has some desirable aspects. Similarly, economic growth in China and India is unquestionably leading to large increases in human welfare and it will be very hard for poor countries to grow unless rich countries also grow so we can buy stuff from them.

The one dimension along which there really is a clear growth-related tradeoff that we probably ought to think about more is work vs leisure. A country will have more measured output if people work longer hours, but the welfare impacts of this are not always clear, and it’s important to distinguish between countries where average income is low because the workers are unproductive and countries where average income is low because people don’t spend much time on the job. Koreans and Dutch people work radically different hours in a way that has to be considered when you’re asking who’s better off.