Growth, Equity and/or Sustainability: Do we need to choose?
In TP1, we were discussing some of the challenges of measuring innovation and competitiveness and how the goal of dedicating 3% of GDP to R&D has come to be seen as the gold standard. But, of course, we should focus not only on the numerator but the denominator. Every debate, from Brexit to the ongoing US-China trade war seems to revolve around impacts on GDP. But what is GDP? Gross Domestic Product offers a measure of the level and growth of the economy (although even the basic HM Treasury explainer mixes up the two concepts!) measured in terms of the value of goods and services produced in a given country. But a narrow focus on GDP as a measure of growth and economic strength has led to a range of critiques. Most recently, Greta Thunberg speaking at the UN dismissed ‘fairytales of eternal economic growth’, which is in a long line of such concerns dating back to Kenneth Boulding’s Spaceship Earth and the Club of Rome’s Limits to Growth on how the focus on growth is not viable on a finite planet. Some claim that we should be more focused on concepts such as happiness or ‘thriving’ (a la Kate Raworth) or that once we attain some level of ‘basic needs‘ leading to the so-called Easterlin Paradox. By contrast, Stevenson and Wolfers find no evidence of any such satiation and Diane Coyle points out basic fallacies in claims about shifting toward a happiness measure. More generally, there have also been concerns that growth inevitably exacerbate the situation with regard to inequality despite the fact that as the OECD explains, the evidence shows that policies to reduce income inequality lead to higher growth and so such policies ‘should not only be pursued to improve social outcomes but also to sustain long-term growth‘.
- Do you agree with those more sceptical of the focus on growth or do you believe that growth has brought with it more benefits than problems?
- Do you believe that a narrow focus on GDP growth crowds out attention to other considerations such as equitable distribution and environmental impacts?
- Consider the interplay of GDP growth, inequality and sustainability in a country or period of particular interest.