It's time to stop defining a nation's success through economic growth

January 23, 2022

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It's time to stop defining a nation's success through economic growth

How should we judge the strength of an economy? Perhaps our failing, division-racked societies around the world should prompt us to take a close look at how we judge a country’s worth.

A new paper argues that maybe we should stop being hyper-focused on economic growth as a leading indicator of a society’s success, if only because we may be headed for a long-run decline in growth this century whether we like it or not. And, I would argue, economic growth a false indicator of a country’s accomplishment anyway.

The paper, published in the journal Nature Human Behavior, argues that slowing growth could bring challenges particularly in countries with multicultural democracies like the United States. To address these challenges, the authors call for a “guided civic revival” aimed at decoupling social capital and well-being from economic growth.

For developed democracies like the United States or Western Europe, economic growth has historically been a key measure of success and central to national identity, the lead author noted.

Economic growth is measured by gross domestic product (GDP), which is also what the U.S. uses to balance its federal budget. But the Congressional Budget Office projects federal debt to outpace GDP in the coming decades as growth slows, meaning the U.S. may need to look at other ways to offset budget deficits.

What the researchers say: “In order to prepare for a slow-growth future, we might need to move away from the notion of a growing economy as central to national identity,” the lead author said.

The researchers argue that slowing growth gives rise to challenges not just in social solidarity, but also in opportunity and inequality, personal finance (retirement, savings), mental health and overall trust in government. These challenges aren’t easily solved, but the paper identifies four key areas of focus as a place to start:

  • strengthening democratic institutions;
  • increasing social integration and reducing economic inequality;
  • increasing the public’s return on investment by closing tax loopholes, reducing corruption and likely raising taxes; and
  • improving non-economic aspects of people’s well-being.

One example they offer to improve social solidarity and reduce inequality is to integrate communities more, rather than segregate them based on how much money people earn.

“Instead of building subsidized housing in a concentrated area, the government could give families vouchers so they can live where they want,” the lead researcher said. “Then families can become more integrated in the community. In experiments, this type of program has also been successful at reducing inter-generational poverty.”

The authors also point out that slow growth shouldn’t necessarily be avoided. Economists have previously noted that two of the main causes of slowing growth—aging populations and shifts from goods to services—actually reflect improvements in well-being.

So, what? I couldn’t agree more but given what is likely to happen in the 2022 and 2024 US elections it’s not at all certain that it’s immediately possible.

Those with a vested interest in low corporate and individual taxes and segregation based on both race and income and who support the political right are certain to make sure that very little changes for them. They will probably win in the end—power elites together with massive disparities in income and wealth have been the norm for human beings for the last 10,000 years. I am sure that there will be opposition to them this time, as there often is, which will be lengthy, bloody and wrenching. As were the 1789 French and the 1917 Russian revolutions.

The result may be the disintegration, for example, of China, Russia, the US and the UK and/or the capitalist system as we know it. But as they say in France, in the end plus ça change.

Dr Bob Murray

Bob Murray, MBA, PhD (Clinical Psychology), is an internationally recognised expert in strategy, leadership, influencing, human motivation and behavioural change.

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