Growth is not a bad word!

My recent post, Choice of Economic Systems: A Conditional Preference for theMarket—what does that mean?, attracted a spirited response from one of my colleagues.  Concerning our economic system, he asks:

 How can we have continual growth in our economy when we are dealing with a finite creation? When we have continual growth in the biosphere, it creates serious effects - cancer, habitat destruction, pollution, and so on. Is our economic system not fundamentally wrong when it depends on continual growth?^[1]

At a time when oil prices have dropped by half, Canadian and U.S. energy companies are drastically cutting future capital spending and reducing their work-force and governments are facing consequent tax revenue reductions, it may seem strange to talk about too much growth. Economic decline looms ahead. Nevertheless, my colleague’s concerns must be taken seriously in a blog which pretends to look at political-economics as God’s steward.

Reservations about economic growth are not new. They were put forward, for example, by Bob Goudzwaard who wrote a whole book entitled Schaduwen van het Groei-Geloof^[2] which can be loosely translated as “the shadow side of the growth-religion. On the other hand another Christian author, Calvin Beisner, argues that “Significantly slowing the rate of growth of wealth...serious downturns in growth are more dangerous to material economy than any other likely man-made disaster.”^[3] What are we to make of that stark difference of opinion? Can we as Christians support the prevalent goal of increased economic growth? To answer that question, both the negative and positive aspects of growth will be reviewed in this post.

The Negative Aspects of Growth

Economic growth, as a goal in itself, is to be rejected. That has been well-recognized by Christian economists. Tiemstra, for example, wrote, “The notion that growth is always a good thing is based on the materialistic principle that more is always better, which is clearly unbiblical.”^[4] But, the basic issue of materialistic idolatry is not the only concern. In the post-war period an unbridled faith in the virtues of growth tended to form the basis of economic thinking. Goudzwaard, especially, pointed to the dangerous character of this "growth religion" which saw growth and progress as the medicine against all ills.^[5] However, the negative aspects of growth are now reasonably well-recognized--although the willingness to adequately deal with them may at times be insufficient.

In the secular world, the limits of growth were brought to the forefront by the work of the Club of Rome with reports in 1972 and 1974. Though these reports were justly criticized in many respects and their dire predictions did not come to pass, they did open the eyes of the world to the problems of population growth, food scarcity, pollution and the depletion of natural resources. Christian authors also have signalled the threat of extinction of many animal and plant species, the congestion and air-pollution that make many areas unliveable and the use of God's creation as a garbage dump.^[6] Donald Hay, for instance, provides a useful review of the secular critics of growth and concludes that "from a Christian standpoint...their critiques do not go far enough"^[7] and, that "economic growth leading to ever-increasing consumption is not an objective for the economy which a Christian can espouse.”

Nevertheless, we also need to be careful not to overstate the negative aspects of growth. All the noted negative aspects of growth are not exclusive to a growing economy. A stable or declining economy would, unless other action is taken, still be a polluting one! Moreover, a complete doomsday mentality is also not appropriate for Christians. This was recognized by Nijkamp when he criticized the first Club of Rome report because it did not reflect "the conviction that God created the world with an inconceivable potential, and that mankind has received many gifts and talents from God."^[8] The Cornwall Declaration on Environmental Stewardship also notes:

Many people ... ignore our potential, as bearers of God’s image, to add to the earth’s abundance. The increasing realization of this potential has enabled people blessed with an advanced economy not only to reduce pollution, while producing more of the goods and services responsible for the great improvements in the human condition, but also to alleviate the negative effects of much past pollution.^[9]

We certainly do not need to fear an abrupt halt in economic activity due to the using up of specific resources. In fact, the market has a beneficial part to play. If prices are allowed to reflect true scarcity, the market has an amazing capacity to encourage the utilization of the potential God has provided. The oil industry, for example, illustrated the impact of higher prices on availability. As prices increased, it became increasingly profitable to develop the vast deposits of “oil sands” in Canada’s northern Alberta, the “off-shore” deposits of oil beneath the oceans and large deposits of “shale oil” in various countries. Remote gas deposits can now be liquefied and transported by ship when the price is high enough. Rather than fearing “peak oil”, we are now faced with a surplus! The market has the ability to reduce the use of scarce resources and encourages the development of more expensive sources and substitutes–if prices are permitted to rise freely as resources become scarce.

Positive Aspects of Growth

The necessary recognition of the negative effects of growth has, moreover, lost some of its earlier one-sidedness. Economic growth is now, no longer, seen as a source of all misery but also as a means to deal with other problems such as unemployment and poverty. A general reassessment of the benefits of the free market process has no doubt contributed to this more positive emphasis. The essence of a free market economy is that businesses, seeing a need in the market for certain goods and services, organize themselves to meet those needs. They acquire the necessary facilities-- factories, offices, shops, machinery, etc. They employ workers and provide necessary training and begin the production process. As needs and wants change, existing businesses adapt or new businesses arise to meet the new needs. The result of this constant striving to adapt is growth. Without growth, there would be less adaptation to meet the needs of a changing society^[10]. Therefore, we cannot ignore, as Klay has accused some Christians of doing:

the contradiction between their dislike of growth and their outspoken support for the goals of low unemployment and more equitable income for the poor people of America and the poor nations of the world.^[11]

Not only is growth an inevitable result of a well-functioning free market it can also be justified by our stewardship mandate. Development of the earth so that man can glorify God, is likely to include growth.  As Nijkamp has noted, if one condemns all further economic and technical growth, "Then one would neglect the command to develop the earth and ignore the good things God has put into creation which one may, unquestionably, enjoy."^[12] Groenewold has noted that the command to develop the earth and its potential will "surely mean inventing new ways of doing things and more efficient production."^[13] The Cornwall Declaration, notes that

Human beings are called to be fruitful, to bring forth good things from the earth, to join with God in making provision for our temporal well-being, and to enhance the beauty and fruitfulness of the rest of the earth. Our call to fruitfulness, therefore, is not contrary to but complementary with our call to steward God’s gifts^.[14]

In a follow-up essay, the Catholic leaders involved in drawing up this declaration note,

the good steward does not allow the resources entrusted to him to lie fallow or to fail to produce their proper fruit...Rather, he uses them, develops them, and, to the best of his ability, strives to realize their increase so that he may enjoy his livelihood and provide for the good of his family and his descendants.^[15]

Stewardship, then, appears to contradict a general restraint on growth.

Probably the most important reason for evaluating growth as positive is that growth is necessary to provide productive employment.^[16] As a minimum, economies need to grow to provide jobs for increasing populations. If we are already faced with unemployment and underemployment, additional growth is required.^[17] The latest “great recession” which began in 2008, has illustrated again how difficult it is to reduce unemployment in a slow growth economy.

The poor can best be helped by creating jobs for them. Growth is essential for that to happen. Klay has noted, in this regard:

People and nations are materially poor because they are not producing and exchanging valuable   surpluses with others. Consequently, virtually the only way that the poor can find their way out of poverty, without displacing others, is to find a niche for their skills and other resources in an expanding domestic and world economy.^[18]

The American “founding fathers”, Novak noted, understood

that an economic system without profit is merely spinning its wheels, providing neither for the unmet needs of the poor nor for progress...A growth rate averaging just 2 percent a year was sustained in Great Britain from 1780 until 1914, and made that tiny nation the world’s leading power. ^[19]

Moreover, adaptation is an essential part of a productive market system. Adaptation requires that both financial resources and people be drawn out of obsolete, less efficient activities into more necessary, productive ones. "Without economic growth, which increases the total number of jobs available to individuals and communities, the problems of dislocation and long-term unemployment increase."^[20] That is not to say that this adaptation will not cause dislocation and job losses in the interim. Christians must support government efforts to ensure that harm caused to individuals and families through this process is adequately alleviated (e.g. through employment insurance).

Nevertheless, we need to recognize with Beisner that:

Significantly slowing the rate of growth of wealth for many people, can mean drastically slowing long-term improvement of their material well-being. Serious downturns in growth are more dangerous to material economy than any other likely man-made disaster. If we care about our neighbours near and far, present and future, we must care about the future of economic growth.

To improve the lot of the poorest countries, economic growth is necessary not only in those countries--so that productive jobs can be created there--but also in the developed countries so that we are able to import from the less developed ones. We must, therefore, be fully aware that stopping economic growth will hurt the poor much more than the rich^[21]--both in the third world and at home. US experience, for example, suggests that middle class lobbying against pollution has been successful in holding up some developments of mining, industry and nuclear power, as well as slowing down the building of new highways. But, as Hay notes, "the costs of development foregone have often fallen on lower income groups."^[22]

Although increasing living standards should by no means be a goal in itself, the improvement in the lot of mankind that economic growth has generated over time is not to be ignored. Indoor plumbing as opposed to outhouses, modern medicine rather than application of leeches, our varied food choices compared to “turnips, fried onions and dried bread” and automobiles and aeroplanes instead of horse and buggies are only a few examples^[23] that none of us would care to give up.

Growth is also important because it makes it easier to solve other economic and social problems. For example, growth will help us deal with the looming burden of health and retirement benefits of an aging population^[24]. Growing economic prosperity also more readily permits individuals to spend on helping the disadvantaged. Moreover, it is much easier to find support for necessary public spending on such things as environmental cleanup and assistance to the poor, when the cost is merely a slower growth in private consumption than when the cost is a cutback in that consumption. While, in principle, restraints on consumption may be appropriate, everyone will recognize that it may be very difficult to take a step backwards. Debates about redistributing a constant total income rather than a growing one tend to become very contentious^[25]. Growth is, thus, likely to generate a more harmonious society--also a Christian virtue.

A healthy, growing economy is probably also essential if industry is to do its part in, for example, fighting environmental pollution. A modern, progressive industry is necessary to come up with the needed technology. Industries that are doing well can afford and justify pollution abatement equipment more readily than those that are just making ends meet. Moreover, installation of such equipment as part of new investments is usually cheaper and more effective than rebuilding of old plants. Moreover, technology can be used to get more food and timber out of our land thus leaving more room for wildlife. “The deliberate halting of growth rates, either in the West or the Third World is incomprehensible”. Rather, “our most feasible option is to employ wealth and technology to preserve nature with human tools”^[26]. Various studies, in fact, have shown that, up to a point at least, countries with higher per capita incomes have better environmental results. Panayatou has recently noted that with higher incomes citizens are more likely to demand action to improve the environment. Moreover, economic growth makes the resources available for such action.

It has even been argued that economic growth fosters moral and social progress. Benjamin Friedman found that, in the US, for example, during periods of growth “there was movement toward openness, tolerance, mobility, fairness, and democracy...race relations improved, civil rights bills were enacted, immigrati0n was welcomed, social mobility was affirmed. etc.” Decades of economic stagnation, on the other hand, generated “the resurgence of the Klu Klux Klan, the rise of the Aryan nation, serious labour unrest, populism (looking backwards),..curtailment of immigration..retrenchment of social programs.”^[27] Recent lack of growth has also at least contributed to the unrest in the financial weak European countries-Greece, Italy, Spain.
 

 Conclusion

Growth as a goal in itself is to be rejected as materialistic striving. Economic growth is not the solution to all economic ills. The negative effects of such striving have become painfully obvious in terms of such things as food scarcity, pollution and garbage problems, and inadequate concern for the impoverished third world. Nevertheless, growth, as such, is not wrong and does have significant positive elements.

Growth can be justified on the basis of stewardship. It is essential to provide jobs for increasing populations and reduce unemployment--the best way to assist the poor. Economic growth also makes it easier to find support for necessary but costly public action. Rather than arguing about the division of a shrinking pie, the increase in the pie can be devoted to necessary causes. In fact, a healthy, growing economy is probably required to enable industry to make a contribution to such things as the environment.

 We may well advocate growth for the sake of the benefits it brings. However, to avoid misunderstandings it is better to focus on those benefits--e.g. to strive for full employment through a healthy industry--rather than to call for growth as such. To explicitly seek to reduce growth is highly questionable. If a factory that produces necessary goods is found to be unsafe, the solution is not to run it at a reduced pace. Rather, the safety deficiencies should be rectified! It is, moreover, unclear how one would implement a decision to “halt growth” in a representative democracy. It is easy to call for reduced growth but what instruments would be used to effect them–increase interest rates? Increase taxes? Prevent business from adding new equipment, building new factories? All of these are politically unattractive and would be hurting the good as well as the bad.

 Instead, we need to work to reduce the negative effects of growth--particularly those on the environment. If that results in reduced growth, we should, to the extent necessary, be prepared to accept that--and we need to encourage the government to educate all people to do so. However, we must explicitly count the cost of the potentially serious side-effects--on the employment picture and on the weak in our society throughout the world. Government measures will be necessary to foster stable, long-run sustainable growth and to mitigate the negative effects of that growth.

In any case, to argue about the question of whether growth should be intentionally reduced is futile. Let us not waste our efforts by fulminating against growth as such. Rather, we need to identify and prioritize the greatest domestic and global challenges and decide how to deal with them.^[28] Let us humbly seek to create employment opportunities for all to exercise their cultural mandate. Let us seek to help the poor and weak. Let us, then, responsibly seek to counter the negative effects of growth and seek to repair the damage done to creation in the past. The result may well be a lower growth rate. Growth should be seen only as a means to achieve basic Christian goals. Fostering long-term sustainable growth, while fighting the negative effects, is the appropriate Christian response.

Related Posts

Choice of Economic Systems: A Conditional Preference for theMarket—what does that mean?

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[1] I would note that the economic system as such does not depend on continued economic growth. Achieving societal goals such as creating sufficient jobs, necessitate  continued economic goals.

[2] B. Goudzwaard, Schaduwen van het Groei-geloof [Shadows of the growth faith], Kok, Kampen, 1974. See also K.B. (Benne) Van Popta, “De onbeheerste welvaartsmaatschappij’ [The uncontrolled affluent soicety], Radix, Vol. 7, 1981, p.50

[3] E. Calvin Beisner, Prospects for Growth: A Biblical View of Population, Resources and the Future, Crossway, Westchester, 1990,p. 171.

[4] John P. Tiemstra, "Christianity and Economics: A Review of the Recent Literature," Christian Scholars Review, 1993, Vol. XII, 3, p.232

[5] B. Goudzwaard, op.cit.,  Economie en Vooruitgangsidee, [Economics and the idea of progress], Bohn, Haarlem, 1972 and Goudzwaard & de Lange, 1994. 

[6] For example, Nijkamp op. cit., p.16 and Van Popta, op. cit. p.50

[7] Op. cit., p.292. See also Nick Groenewold, "The Economy: is Australia in a Mess?"  Newsletter, ARCP/CPSA, Dec. 1990 and Robin Kendrick Klay, Counting the Cost: The Economics of Christian Stewardship, Eerdmans, Grand Rapids, 1986,  op. cit., Chapter 9.

[8] 1976, p.32. See also Grudem in Chewning, Vol.2 1989, p.38. God's bountiful providence is also stressed by Beisner, 1990, pp.21,22. Beisner also reviews the so-called "population problem" showing that various scary growth projections have been significantly overstated. He concludes (p.64) that "From a Christian perspective of faith in a God of providence, we can be confident that human population will never present an insuperable problem."

[9] Barkey,  Ed., op. cit., p. xii. The Cornwall Declaration, agreed upon in February 2000, was the work of clergy, theologians, economists, environmental scientists and policy experts who included “many of the nation’s leading Jewish, Catholic, and Protestant minds.

[10] In theory, the change from producing unwanted goods to wanted ones can take place in a stable society. Resources can be switched to alternative uses. However, without growth this process is likely to be slower and more painful.

[11] Op. cit., p.156.

[12] Herfstij der vooruitgang [Autumn of Progress], GSEV # 36, De Vuurbaak, Groningen, 1980, p.15.

[13] Dec. 1990, op.cit., p.5.

[14] Barkey, op. cit. p. xiv.

[15] Ibid, p. 32.

[16] Of course, jobs could be created by destroying capital (machines) and doing things more laboriously by hand but that would be unstewardly.

[17]A 1992 report (The Globe & Mail, Dec. 30,1992) noted that "for three decades, economists generally held to the rule that an annual growth rate of 2.5 to 3 percent for the US economy was sufficient to absorb nearly everyone seeking jobs..with companies shrinking staffs and reorganizing to become more competitive, economists think it will require...perhaps more than 3.5 percent on average during the next two or three years.". In March 2003, Edward Gardner, a Division Chief in the International Monetary Fund’s Middle East Eastern Department, estimated that reducing unemployment in 7 middle East countries (Algeria, Egypt, Iran, Jordan, Pakistan and Tunisia) from an average of 15% to half that, would require a leap in GDP growth of 2% a year over the recent trend of 3.7%–while maintaining some improvement in prosperity. See Eward Gardner, “Wanted More Jobs”, Finance & Development, March 2003, p.20. Some debate exists, however; see, for example, Roland Hoksbergen. “The morality of economic growth”, The Reformed Journal, Dec. 1982, p.11.

[18] Op. cit., p.158

[19] Michael Novak, The Spirit of Democratic Capitalism, American Enterprise Institute, Simon & Schuster, New York, 1982, p121.

[20] Op. cit., p.159

[21] See Griffiths, 1984, p.12 and Vickers, 1982.

[22] Op. cit., p.287.

[23] See Stapleford, op. cit, p. 76.

[24] See Jason Clemens and Brian Lee Crowley, “Solutions for an Aging society”, National Post, Mar. 2, 2012, p.A13

[25] While redistribution is easier politically during periods of growth, such redistribution may itself reduce the rate of growth.

[26] D’Souza, op. cit. pp148-150.

[27] Benjamin Friedman, The Moral Consequences of Economic Growth,  2005 as reviewed by John E. Stapleford in Faith & Economics, Spring/Fall 2006, p.144.

[28] See Claar & Klay, op. cit..p.43ff.,141.