[Paleopsych] NYTBR: The Capitalist Manifesto

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The Capitalist Manifesto
http://www.nytimes.com/2005/11/27/books/review/27easterbrook.html

    THE MORAL CONSEQUENCES OF ECONOMIC GROWTH
    By Benjamin M. Friedman.
    570 pp. Alfred A. Knopf. $35.

    Review by GREGG EASTERBROOK

    ECONOMIC growth has gotten a bad name in recent decades - seen in many
    quarters as a cause of resource depletion, stress and sprawl, and as
    an excuse for pro-business policies that mainly benefit plutocrats.
    Some have described growth as a false god: after all, the spending
    caused by car crashes and lawsuits increases the gross domestic
    product. One nonprofit organization, Redefining Progress, proposes
    tossing out growth as the first economic yardstick and substituting a
    "Genuine Progress Indicator" that, among other things, weighs
    volunteer work as well as the output of goods and services. By this
    group's measure, American society peaked in 1976 and has been
    declining ever since. Others think ending the fascination with
    economic growth would make Western life less materialistic and more
    fulfilling. Modern families "work themselves to exhaustion to pay for
    stuff that sits around not being used," Thomas Naylor, a professor
    emeritus of economics at Duke University, has written. If economic
    growth were no longer the goal, there would be less anxiety and more
    leisurely meals.

    But would there be more social justice? No, says Benjamin Friedman, a
    professor of economics at Harvard University, in "The Moral
    Consequences of Economic Growth." Friedman argues that economic growth
    is essential to "greater opportunity, tolerance of diversity, social
    mobility, commitment to fairness and dedication to democracy." During
    times of expansion, he writes, nations tend to liberalize - increasing
    rights, reducing restrictions, expanding benefits for the needy.
    During times of stagnation, they veer toward authoritarianism.
    Economic growth not only raises living standards and makes liberal
    social policies possible, it causes people to be optimistic about the
    future, which improves human happiness. "It is simply not true that
    moral considerations argue wholly against economic growth," Friedman
    contends. Instead, moral considerations argue that large-scale growth
    must continue at least for several generations, both in the West and
    the developing world.

    Each American, the World Wildlife Federation calculates, demands more
    than four times as much of the earth as the global average for all men
    and women, most of this demand being resource consumption. Some think
    such figures mean American resource consumption must go down; to
    Friedman's thinking, any reduction would only harm the rest of the
    world by slowing global growth. What the statistic actually tells you,
    he would say, is that overall global resource consumption must go up,
    up, up - to bring reasonable equality of living standards to the
    developing world and to encourage the liberalization and increased
    human rights that accompany economic expansion. If by the middle of
    the 21st century everyone on earth were to realize the living standard
    of present-day Portugal (taking into account expected population
    expansion), Friedman calculates, global economic output must
    quadruple. That's a lot of growth.

    "The Moral Consequences of Economic Growth" is an impressive work:
    commanding, insistent and meticulously researched. Much of it is
    devoted to showing that in the last two centuries, periods of growth
    have in most nations coincided with progress toward fairness, social
    mobility, openness and other desirable goals, while periods of
    stagnation have coincided with retreat from progressive goals. These
    sections sometimes have a history-lesson quality, discoursing on
    period novels, music and other tangential matters. And sometimes the
    history lesson gets out of hand, as when the author pauses to inform
    readers that the Federal Republic of Germany was commonly known as
    West Germany. More important, Friedman's attempt to argue that there
    is something close to an inevitable link between economic growth and
    social advancement is not entirely successful, a troublesome point
    since such a link is essential to his thesis.

    For example, Friedman contends that economic growth aided American,
    French and English social reforms of the second half of the 19th
    century. Probably, but there was also a recession in the United States
    beginning in 1893, yet pressure for liberal reforms continued: the
    suffrage, good-government and social-gospel movements strengthened
    during that time. It was in the midst of a depression, in 1935, that
    Social Security, a huge progressive leap, was enacted. Economic growth
    has sometimes been weak in the United States for much of the last
    three decades, yet in this period American society has become
    significantly more open and tolerant - discrimination appears at an
    all-time low. On the flip side, the 20's were the heyday of the Klan
    in the United States, though the "roaring" economy of the decade was
    growing briskly.

    None of this disproves Friedman's hypothesis, only clouds its horizon.
    Surely liberalization works better where there is growth, while growth
    works better where there is liberalization - as China is learning. But
    the relationship between the two forces may always be fuzzy; the
    modern era might have seen movement toward greater personal freedom
    and social fairness regardless of whether high-output industrial
    economies replaced low-growth agrarian systems. Repressive forces,
    from skinheads to Nazis and Maoists, may spring more from evil in the
    human psyche than from any economic indicator. Friedman's thesis is
    now being tested in China, home of the world's most impressive
    economic growth. If he's right, China will rapidly become more open,
    gentle and democratic. Let's hope he's right.

    Though "The Moral Consequences of Economic Growth" may not quite
    succeed in showing an iron law of growth and liberalization, Friedman
    is surely correct when he contends that economic expansion must remain
    the world's goal, at least for the next few generations. Growth, he
    notes, has already placed mankind on a course toward the elimination
    of destitution. Despite the popular misconception of worsening
    developing-world misery, the fraction of people in poverty is in
    steady decline. Thirty years ago 20 percent of the planet lived on $1
    or less a day; today, even adjusting for inflation, only 5 percent
    does, despite a much larger global population. Probably one reason
    democracy is taking hold is that living standards are rising, putting
    men and women in a position to demand liberty. And with democracy
    spreading and rising wages giving ever more people a stake in the
    global economic system, it could be expected that war would decline.
    It has. Even taking Iraq into account, a study by the Center for
    International Development and Conflict Management, at the University
    of Maryland, found that the extent and intensity of combat in the
    world is only about half what it was 15 years ago.

    Friedman concludes his book by turning to psychology, which shows that
    people's assumptions about whether their lives will improve are at
    least as important as whether their lives are good in the present.
    Right now, American living standards and household income are the
    highest they have ever been; but because middle-class income has been
    stagnant for more than two decades, while the wealthy hoard society's
    gains, many Americans have negative expectations. "America's greatest
    need today is to restore the reality. . . that our people are moving
    ahead," Friedman writes. How? He recommends lower government spending
    (freeing money for private investment), repealing upper-income tax
    cuts (to shrink the federal deficit), higher Social Security
    retirement ages, choice-based Medicare and big improvements in the
    educational system (educated workers are more productive, which
    accelerates growth). Friedman doesn't worry that we will run out of
    petroleum, trees or living space. What he does worry about is that we
    will run out of growth.

    Gregg Easterbrook is a visiting fellow at the Brookings Institution, a
    contributing editor of The Atlantic Monthly and the author, most
    recently, of "The Progress Paradox."