Voices 29/06/2015

Who Would Not Favor Economic Growth?

One of the enduring fault lines in American politics has been over how to best increase economic growth. Conservatives and libertarians have generally argued for lower taxes and fewer regulations. Liberals have called for government investment in infrastructure and measures designed to boost consumer spending. Supply-side versus demand-side stimulus gets debated, and the impact of trade and immigration policies cleaves party lines. Even issues like unemployment insurance and education reform are argued about in terms of their contribution to a growing economy.

They may have wildly different ideas about how to get there, but all sides have agreed on the basic destination: a growing economy. Until recently.

Lately, on the Left a new strain of thought has risen that questions whether growth is a good thing after all. “Growth shouldn’t be any president’s economic goal,” writes former labor secretary Robert Reich. Reich complains that “almost all the gains from growth have gone to the richest 1 percent.” He goes on to suggest that rather than growing the economy, the government should be concerned with creating more jobs, even if that means sacrificing innovation or efficiency that might benefit the economy as a whole.

There is a story, perhaps apocryphal, about Milton Friedman. While touring China, he came upon a team of nearly 100 workers building an earthen dam with shovels. Friedman pointed out that with a bulldozer, a single worker could create the dam in an afternoon. A Communist official replied, “Yes, but think of all the unemployment that would create.”

“Oh,” said Friedman, “I thought you were building a dam. If it’s jobs you want, then take away their shovels and give them spoons.”

Reich clearly has joined the spoon brigade.

Speaking of China: That also seems to be the attitude of the Left’s new intellectual hero, Thomas Piketty. In his now-famous book, Capital in the Twenty-First Century, Piketty laments that economic growth in China has led to rising inequality; he is apparently indifferent to the fact that that economic growth has lifted billions of people out of poverty. Better, he seems to be saying, that we be equally poor than unequally rich.

It is one thing when these ideas are bandied about by pundits or academics, but they are also making their way into the political arena. Vermont senator and Democratic presidential candidate Bernie Sanders is also critical of economic growth. He was asked directly: If the policies he was advocating were to “result in a more equitable distribution of income, but less economic growth, is that trade-off worth making?” Sanders replied forthrightly, “Yes.”

In fact Sanders has a host of reasons for opposing economic growth. Taking a Reich-like line, he believes that growth serves little purpose because most of the gains go to the rich. “If 99 percent of all the new income goes to the top 1 percent, you could triple it, it wouldn’t matter much to the average middle-class person. The whole size of the economy and the GDP doesn’t matter if people continue to work longer hours for low wages.”

Moreover, “you can’t just continue growth for the sake of growth in a world in which we are struggling with climate change and all kinds of environmental problems.” Besides, economic growth, according to Sanders, both stems from and leads to mindless consumerism. “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.”

So far, Hillary Clinton still talks about her desire for a growing economy. But with Sanders attracting large and enthusiastic crowds, and coming within ten points of Clinton in one poll in New Hampshire, one wonders how long that commitment will last. Indeed, already her policies have moved left; she has started espousing more redistribution, higher taxes, and increased regulation of business in ways that would almost certainly slow economic growth.

To be sure, the Republican candidates remain focused on economic growth. Jeb Bush says that he seeks an economy growing at least 4 percent a year. Marco Rubio calls for “a growing economy, not a growing government.” Scott Walker says that “nationally we need to have more talk about growth.” And Rand Paul explains that his new tax plan is “pro-growth.”

But even among Republicans, there are voices — especially among opponents of free trade and open immigration — that seem to put jobs or cultural values ahead of economic growth.

Economic growth has benefited us all, rich and poor alike, enormously. It’s easy to forget how different life was just a century ago, when only 20 percent of American homes had electricity, life expectancy was not even 55, and one out of ten children died before the age of 15. We no longer devote nearly half of our days simply to putting food on the table. Women, minorities, and the poor in particular are better off because we are a wealthier nation.

The difference between redistribution and growth is as stark as the difference between Venezuela and Hong Kong. It may well be a difference that we see debated in 2016.

di Michael Tanner