Europe's attack on capitalism
Stefan Theil, Newsweek 19 Mar 10; from the magazine issue dated Mar 29, 2010
Take the worst economic crisis in 60 years. Combine it with the erosion of the West's predominance. Add apocalyptic warnings of climate change. What you'll get are some radical new ideas.
One of those now swirling through the European zeitgeist turns out to be a very old one, albeit in new garb. It's the revival of the assertion that economic development is and should be finite—limited today by scarce resources, overpopulation, and rising sea levels.
In Britain, a government commission has drawn up plans for a "steady state economy" that forgoes future economic growth in the name of sustainability by cutting work hours and banning TV commercials (to reduce consumerism). In Germany, new bestseller called Exit: Prosperity Without Growth is just the latest in a growing body of literature pleading for Germans to learn to live with less. In France, President Nicolas Sarkozy—who once came to power exhorting the French to work harder and earn more—has thrown his weight behind an expert report that declares the pursuit of GDP growth a "fetish" and strives to replace the GDP statistic with a broader measure of national contentment.
Few would argue the world can just go back to the old go-go economy, where a large part of what was taken as growth was financed by unsustainable bubbles in credit and asset prices. The 2008 spike in the cost of food and oil reminded us that the present rate of resource depletion can't go on forever. And the debate over whether GDP statistics are really the proper measure of human progress is perfectly valid—and not new. Economists are the first to admit that GDP is at best a proxy for prosperity, not an end in itself.
Yet today's no-growthers seem to make the same mistakes as their many predecessors, from Thomas Malthus—who predicted in 1798 that rising populations would inevitably starve—to the Club of Rome, a group of scientists who warned in 1972 that the world would start running out of key resources in the 1980s. Such movements extrapolate growth rates for resource use and pollution but don't take enough account of technical innovation, environmental regulation, greater efficiency, and behavioral change. Take Exit author Meinhard Miegel's claim that the world is running out of food. It largely ignores, among other things, the barely tapped potential of genetic engineering and other plant-breeding technologies.
Such faults are often overlooked because the no-growthers resonate in Europe today for intellectual and political reasons, not economic or technological ones. Critiques of growth have always been, at their core, about uneasiness with capitalism itself. That this critique becomes mainstream when capitalism seems to be failing us is no surprise. After all, the Club of Rome made its first splash in the 1970s, during a long slowdown when people were also becoming newly aware of environmental degradation.
It's also no surprise that the movement is now centered in Europe and led by a French president. In no other country on earth is public disapproval of the market economy, as measured by opinion polls, deeper. French children, in a widely used and by no means exceptional schoolbook, learn that "economic growth imposes a hectic form of life that produces overwork, stress, nervous depression, cardiovascular disease, and cancer." To the 2.6 billion people worldwide trying to stay alive on less than $2 a day, the idea that economic growth causes stress may sound crazy. But in Europe, even conservatives have widely bought into the Marxist idea of "economism"—the notion that capitalism has reduced our lives to a series of market transactions.
There's something to these critiques. But the no-growthers are unrealistic about how painful a no-growth reality would be. As the Harvard scholar Benjamin Friedman argues eloquently in The Moral Consequences of Economic Growth, a society that gives up on growth invites nasty fights over the distribution of limited resources and paves the way for intolerance and populism. That economic growth isn't everything—it doesn't measure the value of our relationships, our communities, our culture—is obvious. But so is the correlation between prosperity and quality of life, including health, longevity, and the freedom to pursue happiness. Even if the critics are right and growth is going to be harder to attain post-crisis, that's no reason to give up on it. Just the opposite: all the more reason to spend our energy coming up with the right policies—from education and innovation to entrepreneurship and competition—that will help foster it.
