The Anomaly of Economic Growth


The Anomaly of Economic Growth

June 3, 2024

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This piece originally appeared in City Journal.

Growth: A History and a Reckoning, by Daniel Susskind (Belknap Press, 304 pp., $29.95)

“Once you start thinking about growth,” the late economist Robert Lucas said, “it’s hard to think about anything else.” For economists, maybe. For the rest of us, economic growth has generally been an afterthought, even as it provides much that we take for granted, from higher living standards to more leisure time. Even our access to cheap light after dark, Daniel Susskind reminds us in Growth: A History and a Reckoning, ranks among “the great historical luxuries.” Economic growth has shaped our expectations so much that we now select our presidents by asking: “Am I better off now than I was four years ago?”

And yet, we’re still confused about growth. Historians and economists disagree about what causes it. Policymakers disagree about how to get more of it. And, thanks to the emergence of climate doomsters, some wonder whether we should have it at all. Turns out that it’s as hard to think about growth as it is not to think about it.

Thus, Susskind deserves thanks for providing a concise and informative study of the idea, its past, and its potential future. A professor at King’s College, London, he is both a reliable guide to economists’ often arcane arguments about growth and a clear commentator on their significance. His book considers the debates over growth’s causes, its recent elevation as a priority for governments, policies for promoting it, and rising concerns about its downsides.

One reason for so much disagreement about the causes and consequences of economic growth, Susskind shows, is that it’s such a new phenomenon. Sustained economic growth began only with the Industrial Revolution; everything before that he calls the “Long Stagnation.” Searching for the cause of economic growth can feel futile. Still, Susskind makes a compelling case that the secret to it is “the cultural shift that propelled people toward the pursuit of useful ideas in the eighteenth century,” together with the new technologies those ideas inspired. No other cause seems able to explain why the Industrial Revolution happened when and where it did.

While humans have always wanted more stuff, Susskind shows how historically singular it is for policymakers, politicians, and the public to value economic expansion so highly. Angela Merkel knew her audience would get it when she said, “We need three things above all. First: growth. Second: growth. And third: growth.” But her words would have baffled people throughout most of history. We accept the pursuit of growth as a given, Susskind suggests, partly because it offers an easy fix for political disagreements: “by pursuing growth, you could sidestep many of the practical tradeoffs in political life.” When economic indicators point up and everyone has more money in the bank, it’s much easier to tolerate other problems.

This is one reason, Susskind argues, why boosting growth and escaping the “secular stagnation” of recent decades is so necessary. To that end, he offers a succinct agenda focused on developing new ideas through intellectual property reform, high-skilled immigration, major investments in R&D, and support for technological innovation. Here, Susskind astutely emphasizes our real, albeit partial, control over the direction of technological development: “the incentives that drive people to develop some technologies and abandon others are not fixed features of life.” Rather, they “can be constructed and maintained” through policies. He persuasively rebuts the degrowth movement, which basically wants to tank the economy to save the rainforests. On the contrary, Susskind shows, growth increasingly complements environmental preservation and improvement.

A key question that Susskind does not ask is whether one country’s growth can conflict with another’s. His policy recommendations are general enough to apply to any developed nation—but what happens when growth goals clash with political imperatives? Susskind notes the Cold War’s “growthmanship” between the U.S. and Soviet Union but leaves unaddressed the rise of China as an authoritarian economic powerhouse.

Susskind is aware of other tradeoffs, though, and he avoids the smugness to which growth’s boosters often succumb (“Medieval peasants would have killed for your air fryer, so quit complaining!”). Instead, he calls attention to the “growth dilemma”—a pull toward more growth because of its promise versus an equally strong pull toward less growth on account of its costs. Examples he offers include automation-induced unemployment, economic inequality, and the erosion of local communities. Though Susskind acknowledges the existence of genuine tradeoffs, he argues plausibly that our capacity to direct technological change, as opposed simply to submitting to it, enables us to soften these tradeoffs, if not wholly eliminate them.

While Growth covers an impressive range of perspectives and issues, Susskind may have missed the ultimate conflict: economic expansion versus population degrowth. For the last few centuries, a rising economy and population have seemed to be mutually reinforcing; but no more. Instead, we face what economist Philip Pilkington calls “capitalism’s overlooked contradiction.” Growth creates wealth, but wealth reduces birth rates—a change that, over time, slows growth. In a wealthier world, there could be fewer and fewer people to generate the new ideas that Susskind puts at the center of his theory, and geriatric societies are unlikely to have the energy to implement what ideas remain.

Other than mentioning the “folly of quasi-Malthusian attempts to influence fertility,” Susskind is silent on this problem. South Korea, Italy, and other nations are struggling with depopulation already. The rest of the developed world will face it soon, potentially menacing the abundance that has now shaped life for generations. We may, with all respect to Robert Lucas, have to start thinking about not just economic growth, but population growth as well.

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