Common ground

Why economic growth won't improve poverty and inequality

A few weeks ago I posted something on the obsession that neoclassical economics has with growth. We often also blur the lines between growth and development, forgetting that increases in GDP don't always translate into increases in quality of life or lower levels of inequality. Here are a few really basic reasons why not:

Growth may be jobless, meaning that GDP can grow, even though unemployment is high. It's not a phenomenon that's all that rare in a world where technology can replace what only humans could previously do - output increases, but more people are left with no income.

Ruthless growth refers to a situation in which healthy GDP statistics mask the ugly economic truth about a country: high levels of inequality, exploitation and poverty.

The pursuit of growth as we currently practice it is also futureless. This means that we are sacrificing future wellbeing in order to grow more now - the destruction of environmental capital, which is irreplaceable, is continuing at an alarming rate and, ironically, means less production possibility in future.

As lower income countries start to grow, the growth experienced is often rootless. This means that GDP grows as foreign firms invest in and trade more with the developing country, but the exposure to new, Western products, lifestyle and general pace of life erodes the unique cultural identity of the developing country, often leading to a loss of meaning in life.

Finally, growth is also often voiceless - GDP races along, soaring from one pinnacle to the next, while human rights are ignored in the process. (Ahem. China.)

These factors combine to give growth that is just generally meaningless - societies chase after "wealth" and "prosperity", measuring these items according to money value, and in the process lose perspective about what's truly important. Morality erodes as "it's just business" and "business is business and business must grow, regardless of crummies in tummies, you know" takes centre stage. Less and less time is available as more and more hours need to be clocked up at the office - leading to the demise of relaitonships, health and creativity.

So if all of this is true...

Why isn't any of it mentioned in Econ textbooks (I have so far found ONE text book which refers to these problems. It is not prescribed anymore).

And why do development practitioners still believe that "Growth is a necessary, but insufficient condition for development"?

More on this in my next post.