G8 embodies growth scepticism

My comment in this week’s Fund Strategy looks at the “growth and responsibility” motto of last week’s G8 summit. It is a classic growth sceptic formulation.

The slogan for last week’s G8 summit of world leaders in Germany was “growth and responsibility”. The more closely it is examined the stranger it sounds.

Economic growth has benefits that should be obvious. It has allowed humanity to lengthen life expectancy considerably, slash infant mortality, dramatically reduce working hours and correspondingly increase leisure time. It is closely related to improvements in science and technology, which can also enhance our lives. In a world where almost half the population still lives on less than $2 a day the benefits to be gained are massive. Even those in the developed world could benefit from more resources.

The difficult bit is the “responsibility” part. What does it mean? A close examination of the discussion shows that it refers to the acceptance of self-imposed limits on growth. In other words growth might be OK in certain restricted circumstances but it is viewed as essential to accept limits on what can be achieved. The language is truly Orwellian.

The reasons given for the need for limits are typically environmental and social. It is argued that too much growth can damage the environment and that a growth-oriented consumer society makes people miserable. Another contention is that growth leads to inequalities, which themselves cause problems.

None of these arguments is particularly convincing. Typically as the economy becomes more developed the resources become available to improve the environment. For example, a noteworthy news story last week was a report from the Environment Agency that showed toxic pollution in Britain was at its lowest level for a century.

The argument about inequality is similarly misplaced. It may be the case that growth can lead to greater inequality – it often depends how you measure it – but the general trend is for absolute living standards to rise. To the extent there is a problem the solution is to work out how to have even more growth rather than holding back on development.

Perhaps the strangest argument of all is on happiness. It should be clear that there is no necessary link between prosperity and subjective well-being. But the argument for mass affluence is based primarily on its objective benefits rather than the separate question of people’s feelings.

The “growth and responsibility” motto should be rejected. Adding caveats to the need for growth is a retrograde step.