The Deception of Growth

So what am I (and what am I going to be) bleating on about in general anyway?  Well, the world has many problems of course, and I'll discuss some of them in future posts, but it seems clear that a great deal of them are captured neatly by one single statement of fact:

People are no happier today than they were in the 1950s, despite a three-fold increase in their income.

I've paraphrased here for impact, so let me break it down for you.  It refers to people in the US and the UK, and the increase in income is in real terms, meaning that we can buy three times as much stuff with our earnings today than we could in 1950 - and our standard of living has improved correspondingly.  We can fill our homes with PlayStations, mobile phones, HD TVs; and other frivolities like toilets, lighting, central heating and hot running water.  And yet we are no happier?  Surely that can't be?  I've seen how happy Lego Star Wars for PS2 alone makes my friend and this family.

Sadly it is true.  And the reason is well understood.  It stems from the fact that although people care about their income, their wealth and their PS2 games catalogue, what they care about a lot more is how it relates to everyone else's - to the average.  Whether someone feels happy or not depends on how well their lot compares to the Jones's.

And herein lies the paradox.  For whereas society's real incomes can continually grow over time, it is a mathematical impossibility to improve society's relative incomes.  Add up everyone's income expressed as a delta from the mean and the answer will always be zero.

So, what can we conclude from this?  Quite simply,

 Economic growth is not a viable route to a happier society.

And yet growth is still the single most quoted indicator of a country's performance and of its government's success at the helm.  It's almost implicitly understood that growth is good, stagnation is bad and recession is, well, downright cataclysmic.  Yet, considering that growth does not improve well-being in the long run (as proven above), and given that we have a finite number of resources on the planet, which makes the goal of indefinite growth grossly irresponsible anyway, then controlled long-term recession may well be part of the solution.  And stagnation almost certainly is.  It's time to focus on a different indicator.

In my next post I will discuss GDP and how it executes the impressive double-whammy of (a) completely failing to measure what it is trying to measure and (b) not being of any relevance even if it succeeded.  Tune in for the next exciting instalment.