Thursday, 11 September 2014

Say when.

I did not have an invite to attend the Chamber of Commerce pre-election debate. Doubtless my views on growth would have been most unwelcome at an event billed 'How do we promote growth? What are the implications? What are the Social and Environmental impacts? ' Did you spot the underlying assumption?

The chamber are not alone in this. If you have a spare £75 to attend the Institute of Directors annual debate, you can be enlightened by an esteemed panel on 'Should Jersey Relax Its Immigration Policy?; which goes on to ask 'what sort of impact a relaxation of immigration volumes would have on island life, and how a policy might be articulated that balances the needs of businesses, economic growth and islanders'. See it's there again.

 Politicians do the same. This is from the Treasury minister's blog 'The treasury principles include..... Competition - property taxes should support the competitiveness of the economy and promote jobs and growth; '

 It is the sine qua non of Jersey government, the underlying unimpeachable, beyond question assumption: growth is good, desirable, the principal imperative.

Fortunately there was quite a good running commentary on twitter of the Chamber of Commerce debate. I was struck by a couple of the post event comments along the lines that there seems to be no way to resolve the problems. My logical head wants to point out what should be obvious when such a scenario arises : check your assumptions and review your constraints. Is it really true that growth is necessary, is it really the case that you need to increase the population to achieve growth? For many years I have held the answer to both of those questions is no. I find it of note that the view has gained considerable ground in the last decade, to the point where it is now possible to discuss it without simply being declared an economic ignoramus, or dangerous lunatic, possibly both.

 How does a concept like growth gain such an insidious hold on us, collectively? I think the answer is two fold. One part is in human psychology, the other in the nature of a society and particularly the experiences of those who influence and make decisions.

 In psychology related terms we have two well known observations. First, people tend to believe numerical evidence more readily than quantitative evidence, even though the latter might be better evidence Believe me, I was a research engineer, its true. They also like to have simple ways to rationalise and evaluate complex systems and data. It is far easier to point to a single measurable quantity such as GDP or GVA and see its value increasing as a good indicator, than it is to think through the interconnected web of resources and impacts. It is so much easier for a politician to sell growth than it is to debate the physical resource allocation that economics is really about.

 The second factor is that there are circumstances , not in government, where growth is almost always validly seen as good. It is not hard to grasp that for business owners growth is an indicator of success and unless handled badly (eg cash flow failure) is for them a desirable, enriching thing. Transposing that perception into government is easy, but it is incorrect. What is good for a business is not necessarily good for a society. A lot depends on externalities.

 A business is broadly in inward looking entity. Generally unless constrained by law, it is not concerned with what goes on outside of itself. Historically that lead to pollution and contamination problems as enterprises exported the waste and an external body picked up the costs of dealing with it. It is also the case that if a business grows by taking market from another and driving it out of business that is an externality. There is no cost born by the growing entity, but the tab for the resulting unemployment of former employees of the ceased business falls on the government. Similarly if a business decides to shed a stable but unprofitable operation in favour of a growing option, many of the costs are borne by society. Government does not have the same luxury. Civilized societies cannot simply shed 'excess' 'unproductive' people, any more than they can simply pollute their neighbours without consequence. Decisions in government are different from those in business, with different constraints, objectives and consequences. It is much more a zero sum game than for a business. Assumptions that are workable , even useful, in business are potentially a hindrance when applied to governance of a society.

 Organisations like the Chamber of Commerce and Institute of Directors promoting growth comes as no surprise in the light of the above. Of course we have many people of a similar background in the States. I have even heard people state that we need a States composed only of (successful) business people! What a disaster that would be; we already have a dearth of scientists, philosophers, artists etc to give a balance of outlook and experience.

 The inappropriate transference of the concept from business to government is not the only problem with growth. There are many. I do find it irritating when the term is used as some vague expression almost like a magic potion that when swallowed will simply make things better. What such people often mean is they want the expected and desirable results of economic growth , such as higher employment. Economic growth doesn't necessarily mean that will happen , it is quite conceivable of a situation where one has growth and fewer employed people.

 How growth is measured or determined is a further issue. Typically gross domestic product or some derivative of that is used. It is a measure of size, but it is crude. All paid activities count positively to size, even when they are clearly destructive in nature. Car accidents are a good example, obviously undesirable, but making a contribution towards GDP. David Suzuki has another example: that a corporation polluting a river. If the river has become polluted, an expensive program will be required to clean it up. Residents might buy expensive bottled water rather than cheaper tap water. Suzuki points to this new economic activity will raise GDP, and though the GDP has risen overall in the community the quality of life has decreased.

Third in my concerns over the use of growth as a measure of success or progress of a society is that it is significantly correlated with resource consumption. Logically when dealing with finite resources there has to be a limit to consumption, growth only hastens the depletion. I believe we are rapidly approaching a strongly resource constrained world, be it agricultural land, fresh water, oil or wood. We have faced single resource depletion before, such as whale oil, but to face several occurring concurrently is beyond humanities experience. Of course not all activities entail much, if any, material consumption or waste production. There is one hopes no limit to love, compassion, art , knowledge or understanding. It is a concept so important that it has its own term – sustainable development

 There is also a philosophical point about growth that really needs to be made. I observe that we live in an age of immense material wealth compared to any other in history, at least for us in the 'developed' world. So wealthy that we discard more useful resources than most have ever had available to them. We have a society that frets and consumes resources to treat the symptoms of overindulgence, especially in health care. There is surely a point where our material appetites are satiated. There is a point, I hope, where we realise we do not need more stuff, we don't even want more stuff. It is more possible than most realise. If you find it hard to believe, and you might want to look up the Endowment Effect eg

I have a simple question for those who want more growth. What is the criterion, the point at which we have grown enough? I have asked it numerous times of those who espouse growth and growing the economy , and never yet heard a solid answer. That ought to indicate something. The implication frightens me.

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