Wednesday, June 19, 2024

The World Keeps Getting Richer. Some People Are Worried

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In April, 1968, a consequential meeting took place in the Villa Farnesina, a stately Roman home built for Pope Julius II’s treasurer and adorned with frescoes by Raphael. The conveners were Alexander King, a Scottish chemist who directed scientific affairs for the Organization for Economic Co-operation and Development, and Aurelio Peccei, an Italian industrialist who simultaneously held executive positions at the automaker Fiat, the typewriter manufacturer Olivetti, and a large consulting firm. Like many modern friendships, King and Peccei’s was cemented by a shared deep-seated anxiety. They gave the object of their concern a grand name: the “world problématique,” meaning the interrelated cultural, political, and environmental conflicts that threatened humanity. But the organization they launched came to be known, more simply, as the Club of Rome. Its mission, in Peccei’s words, was to “rebel against the suicidal ignorance of the human condition.”

Within a couple of years, the club recruited a brilliant M.I.T. systems analyst named Jay Forrester, and he and his colleagues set about building a computer model to capture the linkages between booming resource consumption, population growth, and ecological exhaustion. The conclusions reached by World3, as the whizzy model was called, were laid out in “The Limits to Growth,” a book that the Club of Rome published in 1972. World3 glumly predicted that humanity was despoiling nature so fast that civilizational collapse would occur “sometime within the next one hundred years.” In bloodless mathematical terms, this was the result of an exponential function outpacing a linear one. In more vivid biological terms, we were like a colony of yeast mindlessly feeding on a pile of grapes, and soon to perish from the effluvia of our rapid growth (ethanol in the case of yeast, environmental pollution in the case of humans). “Deliberately limiting growth would be difficult, but not impossible,” the book maintained. “A decision to do nothing is a decision to increase the risk of collapse.” It sold millions of copies in more than thirty languages.

For all of that, growth continued rather yeastily. In the fifty years since this manifesto, the American economy has increased fourfold, far outstripping the country’s population, which has increased by sixty per cent. For the rest of the world, growth during this period has been even more dramatic. The global economy has become twenty-six times bigger—or twelve times higher per person. In 1970, half of humanity lived in extreme poverty, subsisting on less than two dollars a day. Today, only a tenth of the global population lives in extreme poverty. As astonishing as this growth engine has been to behold, we do seem to be choking on its exhaust. When “The Limits to Growth” was published, humanity had, in its history as a species, emitted half a trillion tons of carbon dioxide into the environment. We belched out triple that amount in the ensuing years. The world was just 0.4 degrees Celsius warmer than the pre-industrial average back then; last year, it was 1.5 degrees warmer, and on track to hit three degrees by the end of the century, at which point all kinds of cataclysms are expected—polar ice caps petering out, swollen oceans swallowing the coasts, almighty wildfires, famine, and more.

Accordingly, the Club of Rome’s arguments are being recapitulated today—with even greater urgency and moral force behind them. “We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth,” the Swedish climate activist Greta Thunberg told the United Nations in 2019. “The eyes of all future generations are upon you. And, if you choose to fail us, I say we will never forgive you.” But there is another moral claim to consider. Idling the great machinery of the global economy seems cruel to the striving masses who have not yet reached comfortable material standards. Then, there are the realities of democratic politics. Few members of the affluent world would selflessly swear off all future growth for the sake of the climate, let alone for the billions in Asia and Africa who are not nearly so prosperous. Is there any good way forward?

The paradox of growth—that we suffer from both too much of it and too little of it—is the subject of “Growth: A History and a Reckoning” (Belknap), by Daniel Susskind, an economist at King’s College London. A world without growth is difficult for modern people to comprehend, but it characterized most of human history. An advanced ancient civilization like the Minoan, on the island of Crete—the legendary home of Daedalus, Icarus, and the Minotaur—could boast an average life expectancy of a little more than thirty years. Leap forward three millennia, to 1770, and you find that the average life expectancy on the European continent had increased only to something like thirty-four years. Genealogical records from the nine centuries between 800 and 1700 reveal no life-span gains even for European noblemen, the most privileged class, who typically died in their fifties. (Within certain parameters, longevity has proved a good proxy for affluence.) Remarkably careful records kept by the English on the wages of builders show essentially no improvement relative to the cost of living up until 1800—and this in one of the richest societies in the world at the time.

These millennia of stagnation are what led to the 1798 publication of Thomas Malthus’s “An Essay on the Principle of Population,” which claimed that there were inescapable limits on human flourishing. Malthus, who did much to give economics its reputation as the “dismal science,” presaged the thesis of “The Limits to Growth”: his arguments relied on the disparity between a naturally exponential curve (population) and a slower, linear series (our capacity to produce food). These days, “Malthusianism” is often used pejoratively to refer to a discredited theory, and yet his was descriptively correct at the time of its début. Hunter-gatherers, medieval peasants, and eighteenth-century laborers, economic historians say, had similar living standards, eking out lives of subsistence.

“Modern economic growth began just two hundred years ago,” Susskind writes. “If the sum of human history were an hour long, then this reversal in fortune took place in the last couple of seconds.” The turning point, which some economists call the Great Divergence, came with the Industrial Revolution, which triggered an explosion in prosperity in Europe and North America, and led to the sustained worldwide growth that humans are still enjoying today. Susskind’s narration properly captures the astonishing triumph of these shifts. Complaining about too much growth is a bit like complaining about too much democracy: once you consider a world without it, you might find your feelings tempered.

How did we arrive at the contemporary fixation on growth? The concept of gross domestic product (originally gross national product) is less than a century old. It was not until 1933 that Simon Kuznets, a government economist who later won a Nobel Prize, was commissioned to create a systematic series of national accounts. When Franklin D. Roosevelt was campaigning for reëlection in 1936 at Forbes Field, where the Pittsburgh Pirates once played, he explained the task of assessing the national economy by analogy: “A baseball park is a good place to talk about box scores. Tonight, I am going to talk to you about the box score of the government of the United States.” Even from the start, Kuznets grasped that he was measuring the sum total of marketized output, not of human welfare. After publishing his proposed metric, he noted the obvious omission of “services of housewives and other members of the family” and argued for the exclusion of expenditures he considered socially unproductive, such as military spending, consumer marketing, and financial speculation. John Maynard Keynes disagreed. He maintained that G.N.P. ought to be a descriptive measure that included military spending, among other governmental expenditures, to help with macroeconomic planning, instead of the half-descriptive, half-normative measure that Kuznets favored. The looming World War helped Keynes win the debate.

This decisive settlement would set the track for economics as it took up new questions that revolutionized the field: What causes growth, and how do people get more of it? Susskind even contends that the most important economic meeting in 1944 was not the Bretton Woods Conference, in which the United States and the United Kingdom thrashed out the system of global capitalism that would reign supreme after the end of the Second World War, but a little-known gathering at which government statisticians standardized the system of national economic accounts. In the ensuing decades, brilliant economists would labor over dazzling models that tried to compress the enormous social complexity of human beings—our ability to generate technological innovations, our capacity to educate ourselves, our stabilizing institutions like the rule of law and property rights—into the concise language of mathematics. This improved our understanding of how humans prospered, but only along the lines of a particular kind of growth that had always been contested.

Indeed, the moral debate over growth statistics, present at their creation, never abated. You can see this in the disagreement between John F. Kennedy and his brother Robert. When J.F.K. was running for President, he said that “the first and most comprehensive failure in our performance has been in our rate of economic growth,” particularly in relation to the (seemingly) rapidly expanding Soviet Union. Eight years later, when R.F.K. was campaigning for the Presidency, he assailed G.N.P. as a worthless statistic: “It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.” Soviet planners, for their part, rejected capitalist growth statistics in favor of a measure aligned with their socialist values, the “net material product,” which excluded activities deemed “non-productive,” such as banking, housing, and health care. Analysts at the C.I.A. spent decades poring over those alternative statistics to estimate the actual size of the Soviet economy and especially the scale of its military expenditures. Their failure to do so correctly was one reason that the New York senator Daniel Patrick Moynihan argued for the agency’s dismantling in 1991.

Criticisms of G.D.P. remain plentiful, and justly so. It still misses what is priceless about life. Leaving a forest alone does nothing for G.D.P., but cutting it down for lumber shows up as a positive contribution. Heart attacks that result in expensive ambulance trips and intensive-care stays appear immediately in consumption statistics; the benefits of heading off heart attacks by statins and preventive care may not leave a mark for decades. Hurricanes and wildfires boost output because of spending on emergency aid and reconstruction. Modern-day acolytes of Kuznets propose various modifications to G.D.P.—for instance, using “natural capital” accounting to capture the cost of depleting natural resources (something the Biden Administration is exploring); including estimates of black-market income generated through organized crime and illegal sex work (currently required by the European Union); and incorporating alternative measures that expressly penalize income inequality (like the so-called Genuine Progress Indicator).

Susskind is impatient with all this technocratic tinkering. He agrees that G.D.P. has conceptual failings and that the single-minded pursuit of it has been “climate-destroying, inequality-creating, work-threatening, politics-undermining, and community-disrupting,” but he dismisses the notion that “there is a Platonic calculation out there, an ideal form of GDP that can do everything and please everyone.”

He has even less sympathy for contemporary “degrowthers,” who too quickly dismiss the possibility of green growth and whose counsel of self-induced economic recession is, Susskind contends, “akin to driving down a road, knocking over an animal, and reversing back over the corpse to try to fix the problem.” Yet, as valuable as Susskind’s intellectual history of growth is, his promised reckoning is unsatisfying. After taking aim at the degrowthers, he recommends, confusingly, something he calls “weak degrowth.” The idea is that we should have somewhat less regard for economic growth and more for legitimate concerns like income equality, environmental conservation, and community preservation. But he gives little guidance on how policymakers ought to weigh these competing measures of human flourishing. He advocates mini-plebiscites that mimic the ancient Athenian assembly as one solution to our political-economy malaise—a curiously utopian proposal.

The degrowth program gains power from defeatism. When economic growth and productivity both went slack after the 2008 global financial crisis, there was much talk of “secular stagnation”—a term coined by the economist Alvin Hansen after the Great Depression to describe a state of low growth, low inflation, and high unemployment that could persist for years. At the same time, problems like the anti-globalization backlash, surging income disparities in the rich world, and a warming planet became more apparent. In “The Rise and Fall of American Growth,” a magisterial book published in 2016, the macroeconomist Robert J. Gordon identified major headwinds—increasing inequality, a dysfunctional education system, an aging population, rising government debt—and forecast long-run stagnation for the coming twenty-five years. He thought that real G.D.P. growth per capita would be below one per cent per year, less than half the rate enjoyed by Americans in the preceding century.

Since 2020, though, U.S. growth per person has been more than two per cent—even after taking high inflation into account, and despite the shock of the pandemic. Tight labor markets and low unemployment mean that wage growth has been strongest at the bottom of the income ladder—which is why inequality in the U.S. actually seems to be on a downswing. Those of us who are in our twenties, despite our notorious angst, are richer than prior U.S. generations were at our age, including millennials, Gen X-ers, and boomers. Growth and carbon emissions have decoupled: U.S. annual emissions are seventeen per cent less than the six billion tons emitted in 2007, our all-time maximum. Emissions have to be cut further, and that’s a goal of the Inflation Reduction Act, which will spend hundreds of billions of dollars over the next decade on green-energy subsidies. The latest estimates suggest that it will double the pace of carbon-emissions reduction from two per cent per year to four per cent. The Biden Administration hopes that future growth will be shared more equitably in the United States, which is why it has issued requirements for community-benefit agreements that could include child-care facilities, high-wage jobs (preferably of the unionized variety), and Buy American provisions that protect domestic industry.



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