Dogma Premise 42 – Economic Growth Is Good
Dogma Premise # 42
Economic growth is an indicator of improved social welfare.
Dogma Premise #42 conflates corporate profits with improved social welfare by focusing on economic growth as a proxy for both.
If all businesses were simultaneously to become more profitable, for example by increasing their revenue faster than they increased their costs, the result would be economic growth and/or increased productivity. In theory, improvements in economic output and productivity would result in a higher standard of living for all that could be sustained with the same or less work. Because businesses generally try to grow both their revenue and their profits, it is loosely believed that if businesses do well, everyone participating in the economy will be better off. This is most famously presented in the concise aphorism, “What’s good for General Motors is good for America.” By contrast, if economic growth is negative, there will be fewer goods and services to go around, and the general standard of living will decline.
In fact, economic growth is good if it improves the general welfare — for example, allowing everyone more leisure without reducing the standard of living. But economic growth is bad if harms the standard of living – for example, by destroying the environment or imposing bad work conditions. Enslaving children, for example, and sending them to workhouses might generate economic growth, but at a terrible cost.
Popular culture in the United States systematically misrepresents economic issues such as economic growth, inflation, currency values, and the stock market in support of the notion that if business does well, then Americans are better off. For example, inflation is always presented as bad, but in fact it is bad for lenders and good for debtors. Stock market growth is presented as good, but it is only good for those who own stock. For those who are merely customers of a business — for example, people who buy gasoline for the cars but do not own the oil company — massive profits and stock price growth may indicate that you are being overcharged at the pump. The same is true again with currency prices. A “strong dollar” is considered good, whereas a “weak dollar” is presented as cause for concern. In reality, a strong dollar is good for imports and travel abroad, and a weak dollar is good for exports, and tourism from overseas. Depending on your role in the economy, you might be affected differently. And of course currency traders are the ones most impacted, but they represent a nominal fraction of the population.
The focus on business success is a misdirection intended to distract from the ultimate question, which is whether all this business activity is leaving us better off or worse off as a society. The correct measures of this would be things like public health (infant mortality, average lifespan, depression rates, suicide), crime rates, median income, poverty rate, literacy rate, average work week, pollution rates, amount of vacation, retirement age, availability art & culture, availability of parks & recreation opportunities, etc. These are the things that people really care about, and economic growth is a bad proxy. If corporate profits are up, and our standard of living is down, that is a bad result for most people. Corporate profits and business results are widely reported via standardized indices. Standard of living is not. And that is the danger of focusing on economic growth.
Another problem with economic growth is that it is routinely mis-measured. Economic growth purports to measure what goods and services have been produced, but this leads to all kinds of paradoxes. For example, if somebody writes graffiti on my wall, and I hire someone to repaint the wall, the amount I spent on the repair is considered economic growth. If no one grafittis my wall and I do not have to hire someone to fix it, that is a no-growth condition. In this case, increased economic activity is bad, not good. Similarly, if blenders tend to break after two years, and everyone replaces their appliance biannually, that represents a lot of economic activity. But if blenders are built better and last for ten years before breaking, then 80% of the economic activity of blender-replacement is lost. Again, the lower-growth situation is better. Oil spills generate huge amounts of economic activity even though the damage may not be entirely repaired. If I clean my room and you clean your room, that does not count as economic activity, because we are working for ourselves. But if I pay you to clean my room and you pay me to clean your room, then it is counted as economic production, even though the actual amount of work or distribution of wealth is unchanged. In this way, the domestic services of parenting and house care are rendered economically invisible — unless you hire a housekeeper and a chef.
A similar problem exists with measuring productivity. If a labor-saving device is introduced in a factory that allows the workers to product twice as many products in the same time, productivity is said to have doubled. However, the same productivity doubling might also result from cutting the workers’ wages in half, beating them until they work twice as hard, or replacing half of them with slaves.
Because of these contradictions in the definitions of economic growth and productivity, it is not clear whether whether growth and productivity increases are actually leaving us richer or poorer.
A standard measure of our collective wealth and living conditions, along with the actual distribution of wealth and hardship, would help us to understand whether our economy is generating the outcomes we want.
The culture of capitalism focuses on business results, economic growth, corporate profits, and the stock market in order to distract attention from what capitalism is actually doing to real people. Whether economic growth is good depends on how it is created and who gets the rewards.
Of course, in a capitalist economy, to the maximum extent possible, all rewards of economic growth are retained by the wealthy as profits, not shared throughout the economy with everyone responsible for producing the favorable economic activity. Dogma Premise 42 tries to hide that fact.