The Growth Consensus Unravels
This article is from the July/August 1999 issue of Dollars and Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/1999/0799rowe.html
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Economics has been called the dismal science, but beneath its gray exterior is a system of belief worthy of Pollyanna.
Yes, economists manage to see a dark cloud in every silver lining. Downturn follows uptick, and inflation rears its ugly head. But there’s a story within that story—a gauzy romance, a lyric ode to Stuff. It’s built into the language. A thing produced is called a "good," for example, no questions asked. The word is more than just a term of art. It suggests the automatic benediction which economics bestows upon commodities of any kind.
By the same token, an activity for sale is called a "service." In conventional economics there are no "dis-services," no actions that might be better left undone. The bank that gouges you with ATM fees, the lawyer who runs up the bill—such things are "services" so long as someone pays. If a friend or neighbor fixes your plumbing for free, it’s not a "service" and so it doesn’t count.
The sum total of these products and activities is called the Gross Domestic Product, or GDP. If the GDP is greater this year than last, then the result is called "growth." There is no bad GDP and no bad growth; economics does not even have a word for such a thing. It does have a word for less growth. In such a case, economists say growth is "sluggish" and the economy is in "recession." No matter what is growing—more payments to doctors because of worsening health, more toxic cleanup—so long as there is more of it, then the economic mind declares it good.
This purports to be "objective science." In reality it is a rhetorical construct with the value judgments built in, and this rhetoric has been the basis of economic debate in the United States for the last half century at least. True, people have disagreed over how best to promote a rising GDP. Liberals generally wanted to use government more, conservatives less. But regarding the beneficence of a rising GDP, there has been little debate at all.
If anything, the Left traditionally has believed in growth with even greater fervor than the Right. It was John Maynard Keynes, after all, who devised the growth-boosting mechanisms of macroeconomic policy to combat the Depression of the 1930s; it was Keynesians who embraced these strategies after the War and turned the GDP into a totem. There’s no point in seeking a bigger pie to redistribute to the poor, if you don’t believe the expanding pie is desirable in the first place.
Today, however, the growth consensus is starting to unravel across the political spectrum and in ways that are both obvious and subtle. The issue is no longer just the impact of growth upon the environment—the toxic impacts of industry and the like. It now goes deeper, to what growth actually consists of and what it means in people’s lives. The things economists call "goods" and "services" increasingly don’t strike people as such. There is a growing disconnect between the way people experience growth and the way the policy establishment talks about it, and this gap is becoming an unspoken subtext to much of American political life.
The group most commonly associated with an antigrowth stance is environmentalists, of course. To be sure, one faction, the environmental economists, is trying to put green new wine into the old bottles of economic thought. If we would just make people pay the "true" cost of, say, the gasoline they burn, through the tax system for example, then the market would do the rest. We’d have benign, less-polluting growth, they say, perhaps even more than now. But the core of the environmental movement remains deeply suspicious of the growth ethos, and probably would be even if the environmental impacts somehow could be lessened.
In the middle are suburbanites who applaud growth in the abstract, but oppose the particular manifestations they see around them—the traffic, sprawl and crowded schools. On the Right, meanwhile, an anti-growth politics is arising practically unnoticed. When social conservatives denounce gambling, pornography, or sex and violence in the media, they are talking about specific instances of the growth that their political leaders rhapsodize on other days.
Environmentalists have been like social conservatives in one key respect. They have been moralistic regarding growth, often scolding people for enjoying themselves at the expense of future generations and the earth. Their concern is valid, up to a point—the consumer culture does promote the time horizon of a five year old. But politically it is not the most promising line of attack, and conceptually it concedes too much ground. To moralize about consumption as they do is to accept the conventional premise that it really is something chosen—an enjoyable form of self-indulgence that has unfortunate consequences for the earth.
That’s "consumption" in the common parlance—the sport utility vehicle loading up at Wal-Mart, the stuff piling up in the basement and garage. But increasingly that’s not what people actually experience, nor is it what the term really means. In economics, consumption means everything people spend money on, pleasurable or not. Wal-Mart is just one dimension of a much larger and increasingly unpleasant whole. The lawyers’ fees for the house settlement or divorce; the repair work on the car after it was rear-ended; the cancer treatments for the uncle who was a three-pack-a-day smoker; the stress medications and weight loss regimens—all these and more are "consumption." They all go into the GDP.
Cancer treatments and lawyer’s fees are not what come to mind when environmentalists lament the nation’s excess consumption, or for that matter when economists applaud America’s "consumers" for keeping the world economy afloat. Yet increasingly such things are what consumption actually consists of in the economy today. More and more, it consists not of pleasurable things that people choose, but rather of things that most people would gladly do without.
Much consumption today is addictive, for example. Millions of Americans are engaged in a grim daily struggle with themselves to do less of it. They want to eat less, drink less, smoke less, gamble less, talk less on the telephone—do less buying, period. Yet economic reasoning declares as growth and progress, that which people themselves regard as a tyrannical affliction.
Economists resist this reality of a divided self, because it would complicate their models beyond repair. They cling instead to an 18th century model of human psychology—the "rational" and self-interested man—which assumes those complexities away. As David McClelland, the Harvard psychologist, once put it, economists "haven’t even discovered Freud, let alone Abraham Maslow." (They also haven’t discovered the Apostle Paul, who lamented that "the good that I would I do not, but the evil that I would not that I do.")
Then too there’s the mounting expenditure that sellers foist upon people through machination and deceit. People don’t choose to pay for the corrupt campaign finance system or for bloated executive pay packages. The cost of these is hidden in the prices that we pay at the store. As I write this, the Washington Post is reporting that Microsoft has hired Ralph Reed, former head of the Christian Coalition, and Grover Norquist, a right-wing polemicist, as lobbyists in Washington. When I bought this computer with Windows 95, Bill Gates never asked me whether I wanted to help support a bunch of Beltway operators like these.
This is compulsory consumption, not choice, and the economy is rife with it today. People don’t choose to pay some $40 billion a year in telemarketing fraud. They don’t choose to pay 32% more for prescription drugs than do people in Canada. ("Free trade" means that corporations are free to buy their labor and materials in other countries, but ordinary Americans aren’t equally free to do their shopping there.) For that matter, people don’t choose to spend $25 and up for inkjet printer cartridges. The manufacturers design the printers to make money on the cartridges because, as the Wall Street Journal put it, that’s "where the big profit margins are."
Yet another category of consumption that most people would gladly do without arises from the need to deal with the offshoots and implications of growth. Bottled water has become a multibillion dollar business in the United States because people don’t trust what comes from the tap. There’s a growing market for sound insulation and double-pane windows because the economy produces so much noise. A wide array of physical and social stresses arise from the activities that get lumped into the euphemistic term "growth."
The economy in such cases doesn’t solve problems so much as create new problems that require more expenditure to solve. Food is supposed to sustain people, for example. But today the dis-economies of eating sustain the GDP instead. The food industry spends some $21 billion a year on advertising to entice people to eat food they don’t need. Not coincidentally there’s now a $32 billion diet and weight loss industry to help people take off the pounds that inevitably result. When that doesn’t work, which is often, there is always the vacuum pump or knife. There were some 110,000 liposuctions in the United States last year; at five pounds each that’s some 275 tons of flab up the tube.
It is a grueling cycle of indulgence and repentance, binge and purge. Yet each stage of this miserable experience, viewed through the pollyanic lens of economics, becomes growth and therefore good. The problem here goes far beyond the old critique of how the consumer culture cultivates feelings of inadequacy, lack and need so people will buy and buy again. Now this culture actually makes life worse, in order to sell solutions that purport to make it better.
Traffic shows this syndrome in a finely developed form. First we build sprawling suburbs so people need a car to go almost anywhere. The resulting long commutes are daily torture but help build up the GDP. Americans spend some $5 billion a year in gasoline alone while they sit in traffic and go nowhere. As the price of gas increases this growth sector will expand.
Commerce deplores a vacuum, and the exasperating hours in the car have spawned a booming subeconomy of relaxation tapes, cell phones, even special bibs. Billboards have 1-800 numbers so commuters can shop while they stew. Talk radio thrives on traffic-bound commuters, which accounts for some of the contentious, get-out-of-my-face tone. The traffic also helps sustain a $130 billion a year car wreck industry; and if Gates succeeds in getting computers into cars, that sector should get a major boost.
The health implications also are good for growth. Los Angeles, which has the worst traffic in the nation, also leads—if that’s the word—in hospital admissions due to respiratory ailments. The resulting medical bills go into the GDP. And while Americans sit in traffic they aren’t walking or getting exercise. More likely they are entertaining themselves orally with a glazed donut or a Big Mac, which helps explain why the portion of middle-aged Americans who are clinically obese has doubled since the 1960s.
C. Everett Koop, the former Surgeon General, estimates that some 70% of the nation’s medical expenses are lifestyle induced. Yet the same lifestyle that promotes disease also produces a rising GDP. (Keynes observed that traditional virtues like thrift are bad for growth; now it appears that health is bad for growth too.) We literally are growing ourselves sick, and this puts a grim new twist on the economic doctrine of "complementary goods," which describes the way new products tend to spawn a host of others. The automobile gave rise to car wash franchises, drive-in restaurants, fuzz busters, tire dumps, and so forth. Television produced an antenna industry, VCRs, soap magazines, ad infinitum. The texts present this phenomenon as the wondrous perpetual motion machine of the market— goods beget more goods. But now the machine is producing complementary ills and collateral damages instead.
Suggestive of this new dynamic is a pesticide plant in Richmond, California, which is owned by a transnational corporation that also makes the breast cancer drug tamoxifen. Many researchers believe that pesticides, and the toxins created in the production of them, play a role in breast cancer. "It’s a pretty good deal," a local physician told the East Bay Express, a Bay Area weekly. "First you cause the cancer, then you profit from curing it." Both the alleged cause and cure make the GDP go up, and this syndrome has become a central dynamic of growth in the U.S. today.
Mainstream economists would argue that this is all beside the point. If people didn’t have to spend money on such things as commuting or medical costs, they’d simply spend it on something else, they say. Growth would be the same or even greater, so the actual content of growth should be of little concern to those who promote it. That view holds sway in the nation’s policy councils; as a result we try continually to grow our way out of problems, when increasingly we are growing our way in.
To the extent conventional economics has raised an eyebrow at growth, it has done so mainly through the concept of "externalities". These are negative side effects suffered by those not party to a transaction between a buyer and a seller. Man buys car, car pollutes air, others suffer that "externality." As the language implies, anything outside the original transaction is deemed secondary, a subordinate reality, and therefore easily overlooked. More, the effects upon buyer and seller—the "internalities" one might say—are assumed to be good.
Today however that mental schema is collapsing. Externalities are starting to overwhelm internalities. A single jet ski can cause more misery for the people who reside by a lake, than it gives pleasure to the person riding it.
More importantly, and as just discussed, internalities themselves are coming into question, and with them the assumption of choice, which is the moral linchpin of market thought.
If people choose what they buy, as market theory posits, then—externalities aside—the sum total of all their buying must be the greatest good of all. That’s the ideology behind the GDP. But if people don’t always choose, then the model starts to fall apart, which is what is happening today. The practical implications are obvious. If growth consists increasingly of problems rather than solutions, then scolding people for consuming too much is barking up the wrong tree. It is possible to talk instead about ridding our lives of what we don’t want as well as forsaking what we do want—or think we want.
Politically this is a more promising path. But to where? The economy may be turning into a kind of round robin of difficulty and affliction, but we are all tied to the game. The sickness industry employs a lot of people, as do ad agencies and trash haulers. The fastest-growing occupations in the country include debt collectors and prison guards. What would we do without our problems and dysfunctions?
The problem is especially acute for those at the bottom of the income scale who have not shared much in the apparent prosperity. For them, a bigger piece of a bad pie might be better than none.
This is the economic conundrum of our age. No one has more than pieces of an answer, but it helps to see that much growth today is really an optical illusion created by accounting tricks. The official tally ignores totally the cost side of the growth ledger—the toll of traffic upon our time and health for example. In fact, it actually counts such costs as growth and gain. By the same token, the official tally ignores the economic contributions of the natural environment and the social structure; so that the more the economy destroys these, and puts commoditized substitutes in their places, the more the experts say the economy has "grown." Pollute the lakes and oceans so that people have to join private swim clubs and the economy grows. Erode the social infrastructure of community so people have to buy services from the market instead of getting help from their neighbors, and it grows some more. The real economy—the one that sustains us—has diminished. All that has grown is the need to buy commoditized substitutes for things we used to have for free.
So one might rephrase the question thus: how do we achieve real growth, as opposed to the statistical illusion that passes for growth today? Four decades ago, John Kenneth Galbraith argued in The Affluent Society that conventional economic reasoning is rapidly becoming obsolete. An economics based upon scarcity simply doesn’t work in an economy of hyper-abundance, he said. If it takes a $200 billion (today) advertising industry to maintain what economists quaintly call "demand," then perhaps that demand isn’t as urgent as conventional theory posits. Perhaps it’s not even demand in any sane meaning of the word.
Galbraith argued that genuine economy called for shifting some resources from consumption that needs to be prodded, to needs which are indisputably great: schools, parks, older people, the inner cities and the like. For this he was skewered as a proto-socialist. Yet today the case is even stronger, as advertisers worm into virtually every waking moment in a desperate effort to keep the growth machine on track.
Galbraith was arguing for a larger public sector. But that brings dysfunctions of its own, such as bureaucracy; and it depends upon an enlarging private sector as a fiscal base to begin with. Today we need to go further, and establish new ground rules for the economy, so that it produces more genuine growth on its own. We also need to find ways to revive the nonmarket economy of informal community exchange, so that people do not need money to meet every single life need.
In the first category, environmental fiscal policy can help. While the corporate world has flogged workers to be more productive, resources such as petroleum have been in effect loafing on the job. If we used these more efficiently the result could be jobs and growth, even in conventional terms, with less environmental pollution. If we used land more efficiently—that is, reduced urban sprawl—the social and environmental gains would be great.
Another ground rule is the corporate charter laws. We need to restore these to their original purpose: to keep large business organizations within the compass of the common good. But such shifts can do only so much. More efficient cars might simply encourage more traffic, for example. Cheap renewable power for electronic devices could encourage more noise. In other words, the answer won’t just be a more efficient version of what we do now. Sooner or later we’ll need different ways of thinking about work and growth and how we allocate the means of life.
This is where the social economy comes in, the informal exchange between neighbors and friends. There are some promising trends. One is the return to the traditional village model in housing. Structure does affect content. When houses are close together, and people can walk to stores and work, it encourages the spontaneous social interaction that nurtures real community. New local currencies, such as Time Dollars, provide a kind of lattice work upon which informal nonmarket exchange can take root and grow.
Changes like these are off the grid of economics as conventionally defined. It took centuries for the market to emerge from the stagnation of feudalism. The next organizing principle, whatever it is, most likely will emerge slowly as well. This much we can say with certainty. As the market hurtles towards multiple implosions, social and environmental as well as financial, it is just possible that the economics profession is going to have to do what it constantly lectures the rest of us to do: adjust to new realities and show a willingness to change.