Monthly Growth Scan

Principal author:
John L. Clark


This article examines other sources that discuss the policy of economic growth, focusing on sources from December, 2010.

Last month, I started keeping track of those places where I notice others discussing growth as a general policy. I am mainly concerned about the dominant perspective that growth is necessary or at least highly desirable. The devotion to economic growth continued boldly in December, taking special note of that jewel of modern spending holidays: Christmas.

Let's start off strong, shall we? Guess who wrote the following nonsense?

[W]e're living in a finite world, one in which resource constraints are becoming increasingly binding. This won't bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.

If you guessed Paul Krugman (or cheated and peeked at the reference), you're right! How can economic growth, which both historically and theoretically cannot be decoupled from its fuel, natural resources, possibly continue as the availability of those resources becomes constrained? Ask Krugman. No, seriously, ask him, because I would really like to see him try to answer that one.

As with last month, the New York Times is leading the way in trumpeting the desirability of growth. Alongside editorials like that of Krugman, they publish long articles that emphasize the purported importance of growth. Last month, it was an article coveting the growth prospects in China. (More recently, it fell to The Nation to worry over Chinese growth.) This month, the extensive article on growth from The New York Times is a long examination of Geoffrey West's research into the benefits found from the growth of cities. Chiefly, the article is excited about “the increased output of people living in big cities”; every time a city doubles in size it leads to an increase in economic activity of “approximately 15 percent per capita”. The price tag for this effect, however, is extraordinary:

[H]ow much energy does our lifestyle [in America] require? Well, when you add up all our calories and then you add up the energy needed to run the computer and the air-conditioner, you get an incredibly large number, somewhere around 11,000 watts. Now you can ask yourself: What kind of animal requires 11,000 watts to live? And what you find is that we have created a lifestyle where we need more watts than a blue whale. We require more energy than the biggest animal that has ever existed. That is why our lifestyle is unsustainable. We can't have seven billion blue whales on this planet. It's not even clear that we can afford to have 300 million blue whales.

Ominously, in the same article, West warns that resource constraints will eventually impede growth:

West sees human history as defined by this constant tension between expansion and scarcity, between the relentless growth made possible by cities and the limited resources that hold our growth back. "The only thing that stops the superlinear equations is when we run out of something we need," West says. "And so the growth slows down. If nothing else changes, the system will eventually start to collapse."

As if growth is something that could simply have some unpleasant side effects that we need to manage carefully. Thomas Friedman seems to think so:

The politicians we need are what I'd call "pay-as-you-go progressives" — those who combine fiscal prudence with growth initiatives to make their cities, their states or our country great again. Everyone knows the first rule of holes: When you're in one, stop digging. But people often forget the second rule of holes: You can only grow your way out. You can't borrow your way out.

The problem is that we are in this hole because of a policy that assumes continual growth. And now we are seeing growth slow down around us. That's what we call a recession. What will the collapse of which West hints look like? Tom Whipple is much more forthright, and I thank him for it:

Wall Street is getting nervous. ... The nervousness of course is that once global energy production starts to decline, capitalism as we have known it for the last few centuries will no longer be the same.

Where does the whale-like amount of energy, that we require to fuel the residents of our growing cities, come from? We look everywhere we can for these resources, and we do whatever it takes to secure their use. One recent example of this shows how growth is rooted in exploitation of the land, and the consequent displacement of others who were using it:

Across Africa and the developing world, a new global land rush is gobbling up large expanses of arable land. Despite their ageless traditions, stunned villagers are discovering that African governments typically own their land and have been leasing it, often at bargain prices, to private investors and foreign governments for decades to come.

Investors are (always) rushing to find targets that show signs of growth:

Foreign direct investment [in Poland's economy] is expected to be up 28 percent this year, drawn by the country's status as one of the few growth stories in Europe.

Of course, it is always instructive to note that military spending continues to pace, and even exceed, the overall growth trends.

[The size of the military] is the one area where elections scarcely matter. President Obama, a Democrat who symbolized new directions, requested about 6 percent more for the military this year than at the peak of the Bush administration.

James Ledbetter has a strong essay in which he recalls President Eisenhower's warnings about the perils of military growth:

Despite regular expectations that the United States will enjoy a peace dividend, we continue to spend more on the military than the countries with the next 15 largest military budgets combined. ... Such perpetual growth seems to confirm Eisenhower's concern about the size and influence of the military.

All of this exploitation is guided by the gospel of wealth, that everyone must continually work to improve their own economic situation.

America can't move forward until we once again believe, as they did, that everyone can enter Frontierland if they try hard enough, and that no one will be denied a dream because a private party has rented out Tomorrowland.

Frontierland, apparently, is entered with a sense of entitlement in mind and a gun in hand.

In practice, an economic growth program consolidates wealth with those who are in the best position to increase their wealth: those who are already wealthy. This is the most natural consequence of growth, and it leads to a fairly obvious conflict even among those who support an economic growth program: do you support the most natural progression of wealth accumulation, or do you try to emphasize the growth of the overall system, perhaps requiring some individual sacrifice? The former tends to be the conservative position, and the latter the liberal one. Neither position is sustainable, but we saw this political drama play out this past month with respect to the pending expiration of Bush's across-the-board tax cuts. Of course, the self-justified wealthy tend to prefer the former approach, so it is not surprising that liberals, although purportedly in power, ended up bowing to the conservative position.

President Obama quickly settled on a compromise with conservatives that would extend all of the Bush tax cuts. Andrew Leonard opined that this was inevitable because of the need for continued growth.

If you are taking the "long view," as Obama professed during his press conference on Tuesday, then there is no more important objective than increasing economic growth. In this view, drawing a line in the sand -- sacrificing the entire package of payroll tax cuts and unemployment benefits and small business tax incentives -- in an effort to live up to campaign promises and raise taxes on the rich would not achieve the one thing that Democrats of all stripes need most in order to fare well in the 2012 elections: a healthy economy.

Leonard continued his capitulation to the needs of growth in his article Tax cut deal: All over but the shouting. Using very similar language, an overwhelming number of commentators and politicians reinforced the mantra of growth, differing only in the implementation details. We've seen how Krugman feels about growth; his protest to this compromise puts him at the front of the liberal camp:

How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

He complained again about how the deal would damage growth in his article Obama's Hostage Deal. Then Speaker of the House Nancy Pelosi traced similar lines:

Any provision must be judged by two criteria: does it create jobs to grow our economy and does it add to the deficit?

Many other writers displayed their support for growth alongside their distain for the tax compromise, which would eventually pass anyway.

Understanding the conservative position on growth requires examining how their message changed before and after Obama brokered the compromise. Before it was finalized, they wanted to see all the tax breaks continue, including those for the wealthy:

Representative Paul Ryan: "I would love to see the chance of getting a compromise, so we can have good pro-growth tax reform, which is not tax increases but lowering tax rates so we can have economic growth in America."

After the compromise was finalized, however, they emphasized that they don't generally want tax cuts to increase spending; that would emphasize tax cuts to the majority, and would thus increase the proportional tax burden on the wealthy:

There's a strong consensus among economists that the key to growth is to inject demand into the economy, either by spending or giving people money to spend through tax credits, rebates, etc. Some Republicans do support measures like this. But according to Ryan, they're the minority within the party.

"Some people are for it. I think [Rep.] Louie Gohmert (R-TX) was pitching the payroll tax thing originally," Ryan said. "That's just not good economics. I think the majority [are against it]."

But neither question the fundamental goal, which is that some form of growth must endure. Ben Bernanke, chairman of the Federal Reserve, put things in perspective (with respect to the unquestioned goal of growth), while at the same time continuing to occlude any sense of meaning behind the concept of sustainability:

Bernanke pointed out that the economy is growing at an annual pace of around 2.5 percent -- far too slow to reduce unemployment. For a self-sustaining recovery, consumers and businesses would need to spend more, so the economy could grow faster.

Higher stock prices would boost the wealth and confidence of individuals and businesses. Spending would rise, lifting incomes, profits and economic growth. Bernanke has referred to this as a "virtuous cycle."

But this month brought us Christmas, a time of joy and fun for everyone! That is what is truly important, right? But while politicians were busy trying to push capital around in order to best stimulate growth, analysts were carefully inspecting the season not for the happiness that it brings, but for growth in consumer spending. The New York Times proclaimed that Home-Stretch Buying Lifts Merchants' Spirits and that Online Sales Rose 15% This Holiday, Beating In-Store Growth, Report Says.

The growth of online purchases is expected to surpass in-store sales this Christmas, though it still represents a small percentage of total sales. The National Retail Federation said last week that it expected sales in November and December to increase 3.3 percent this year, up from 2.3 percent a year ago, to $451.4 billion.

And so we see that our disastrous obsession with growth continues to pervade our culture. We continue to find it in our politics and in our reporting, and this month we also find it in our stockings and under our Christmas trees. It's also gravely reflected in our military; using a similar analysis to the one used for Peak Oil, one investigator antipates that the United States empire will enter terminal decline soon. The New York Times looks to 2011 with optimism:

Economists in universities and on Wall Street have raised their growth projections for next year.

But global natural resources are at or near terminal decline, over a billion Chinese covet our prodigious way of life and control a prodigious amount of our debt, and our military continues to be overextended. If we don't want to repent of our suffocating devotion to growth, then 2011 may become the year of the scapegoat.

This page was last modified on 2010-12-31 20:36:00-05:00.

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