måndag 25 augusti 2014

Growth - what is it good for?

A friend, that probably will serve in the Swedish parliament (at least) the following 4 years, bribed me with grilled cheese at the "Russian" party this Saturday and ambushed me with the question "Why is growth good? How do you explain growth to a voter, in just a few sentences?"

Being not just slightly intoxicated from Czech beer and pure vodka, I came up with nothing coherent at the time, but I kept thinking about it during my time in hangover hell on Sunday.


The shortest possible answer I have now is that growth equals choice. To get there, I went through the following steps:

What is (economic) growth? It is producing more or better (products and services). If the gauge is to carry any meaning whatsoever, it has to be measured per person; per capita. In addition, producing more by working longer hours isn't really sustainable (unless you like doing it), so let's define growth as producing more/better per hour, which at the same time happens to be the definition of productivity.

Pollution deducts from growth. Further, the production must account for the big picture and so called externalities like pollution. It's not true growth if more and faster products (cars) means increasing pollution of the environment, in the end casing illnesses and potentially reduced living standards in the future. On the other hand, all pollution risks aren't known beforehand and some may even be accetable in the short run as investments for the future.

So, growth=productivity, i.e., accomplishing more with the same effort, by being smarter and using more streamlined processes and better tools (without impacting the environment irreparably).

Collective growth, societal growth, GDP growth is relatively easy to measure and thus gets the most attention. GDP growth typically also means more resources for public servants and more profits for the largest companies and remuneration for their management. That kind of growth is more or less meaningless for the individual and may also leads to suboptimization, externalities etc since the focus is on total production for a society, rather than sustainable and meaningful hourly production per person.

High productivity (productivity growth should now be established as equal to meaningful economic growth) means any one person or a society can fulfil his needs and desires, utilizing less resources (time and material) than otherwise, while keeping the environment clean and healthy. High productivity means anybody productive (knowledgeable, connected, using modern tools) is free to choose how to spend more of his time and resources after providing for food and shelter.

Growth = human nature

It is human nature to want more, both absolutely and relatively; most want more than yesterday and more than his neighbour. We developed in a world of scarce resources, of fat days and lean days, so the gene lines that survived from 100 000 BC to today are dominated by competitiveness, hoarding, growth. Most won't be happy or fulfilled unless they get more (of something). Very few are like me, content with consuming and providing information for free. Most want a bigger house, a faster car, more expensive hotel rooms on vacation etc.

In any case, we can't fight nature on a big scale, if humans want growth, politicians should let them strive for it. Just make sure the possible negative side-effects are contained, e.g., enforce environment-friendly transportation and production by charging for the pollution.

To me, growth means freedom and the possibility to choose. When billions of people strive for personal growth on a free market, they compete to offer the best service, best products at the lowest prices and least environmental impact. That means I will have billions of various efficiently produced products to choose from, to consume or invest in as tools for further productivity enhancement, in my turn enabling further improved productivity and growth. This frees up time and resources for further growth or leisuretime for relaxation, exploration and mental growth. Different preferences will decide any individual's optimal mix of work and leisure, but in any case higher productivity and growth means higher degrees of freedom and choice.

Old-economy jobs may be difficult to perform in a piecemeal fashion. Hence, reduced work weeks or work days are rarely relevant or efficient solutions, in particular not centrally planned by a union or a government. However, it can be difficult for an individual to work part-time by choice, in anything but the most menial of professions (and these may be the least positively affected by productivity; in many cases soon even eliminated altogether by technology). The more pervasive the information economy becomes the easier it will be to work exactly your preferred number of hours per day or week or year. Others will have to wait decades more.

In the meantime the fruits of increased productivity for most will be earlier retirement, better healthcare, better/more variety of products and healthier lives.

growth=productivity=choice=freedom (and human nature)

Growth means being more productive, using tools to make more with less, including making better tools to further productivity growth in the next generation. Better and better products and tools, means fulfilling basic needs using (or destroying) less resources, thus releasing time and resources for freedom of choice between material growth and mental growth. Growth also means collecting more information, understanding the universe and global processes, enabling production with less pollution and sooner or later even reversing pollution.

More choice and more freedom is always better. If you don't like it, you can always choose to be less productive or in other ways limit your own freedom or potential choices

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