Kearneysville, WV. Things are looking up. According to the “experts” the global economy appears to be stabilizing. For what it’s worth, the use of phrases like “economic Armageddon” are not being uttered with the frequency they were last fall. The world, which only months ago, was teetering on the brink of disaster is daring to utter a sigh of relief. The wise men, it seems, have saved us again. Soon everything will be back to normal. But we ought not uncork the champagne just yet. True, the Obama administration has injected an unfathomable number of dollars into the U.S. economy, but American citizens have yet to do their part. This from the Associated Press:
“The brightening outlook in Europe and Asia and the improvement in U.S. credit markets and indicators reflect heavy government stimulus spending. Many analysts question whether the top economies can sustain recoveries after stimulus measures and easy-credit policies have run their course—and in the absence of significant new consumer spending, especially among Americans.”
Yes, Americans have committed a dizzying amount of money to the recovery, leveraging their collective future and, what’s more, the futures of generations yet born. But there is more we can do. Nay. According to the experts, there is more we must do: Consumer spending must increase. To be sure, great numbers have flocked to the auto dealers to exchange their old cars for more energy efficient ones. But Americans, it seems, have thus far been reluctant to spend on items that, unlike the “cash-for-clunkers” affair, do not include a hefty tax incentive. It appears that Americans are trying to be more careful with their money. The threat of financial disaster has apparently produced a reluctance among Americans to consume with the same gusto as before.
But isn’t saving good? Isn’t living within one’s means financially wise? Well, these ideas seem a bit old fashioned. Our brave new economy is predicated on one unquestioned axiom: growth. A healthy economy is a growing economy, and an economy that experiences “negative growth” is sick. This from the same Associated Press article:
“It’s not clear that [Asian and European] economies can continue to move forward without stimulus,” said Mark Zandi, chief economist for Moody’s Economy.com. “And that’s in part why stock markets across the globe are nervous. It will be difficult for other countries to pull out of recession until the U.S., still one quarter of the world economy, starts growing.”
The world is depending on us to consume so that our economy can grow and, thereby stimulate the economies of the world. But, again, isn’t saving a good thing? Doesn’t saving (and the investing that accompanies it) provide capital for producers? This creates jobs, which provides disposable income and thereby frees up money to purchase more stuff and, in the process, drive the whole mechanism toward new and greater heights.
Everything hums along like clockwork as long as consumers consume. A wrench is thrown into the entire affair if consumers choose not to spend. And so, we find economists worrying that the genius of the stimulus is threatened by a reticence among Americans to open their wallets. This, of course, raises a whole set of further questions: what would happen to the economy if Americans began to barter for, rather than purchase, at least some of the things they need? What if neighbors began, say, sharing mowers, roto-tillers, ladders, and other tools rather than filling every garage in the neighborhood with same items? What if more Americans began growing some of their own food, making do with one car rather than two, eating at home, and generally attempting to live lives characterized by simplicity and frugality? If Americans are already beginning to make changes in this direction, are they recklessly threatening the economic recovery?
Growth is necessary for a return to a healthy world economy. But growth is threatened when people make alterations in their lives based on a recognition of limits. The obvious conclusion is unsettling given the axiomatic nature of the idea of growth. Perhaps, though, the idea of perpetual growth needs to be reassessed. The economist E.F. Schumacher’s suggestively titled book, Small is Beautiful: Economics as if People Mattered, provides a helpful roadmap toward this re-evaluation.
Schumacher argues that the idea of perpetual growth is an error lying at the heart of modern economic thought. The idea of growth is attractive because it is quantifiable, but focusing exclusively upon quantity neglects the idea of quality, which would seem at least equally important. For example, the economist can measure the GNP and determine that it has grown, say, 3%. But the economist would dismiss the question as nonsense if one were to ask whether or not the growth itself was good or bad. According to Schumacher, “he would lose all his certainties if he even entertained such a question: growth of GNP must be a good thing, irrespective of what has grown and who, if anyone, has benefitted. The idea that there could be pathological growth, unhealthy growth, disruptive or destructive growth, is to him a perverse idea which must not be allowed to surface.”
In other words, the vast majority of economists assume, as an article of faith, that growth is necessary and always good, but Schumacher points out an obvious problem: infinite growth in a finite environment is an obvious impossibility.”[1] Given the natural resource crunch that many are predicting, given the issues of pollution and global warming that have recently come to the fore, the idea that infinite growth is impossible needs to be considered. But this, according to Schumacher, does not mean that we simply need to seek a cessation of growth. Even those few economists who agree that infinite growth is not possible, “cannot get away from the purely quantitative growth concept. Instead of insisting on the primacy of qualitative distinctions, they simply substitute non-growth for growth, that is to say, one emptiness for another.”[2]
We need, then, to wean ourselves from the habit of favoring quantitative facts over qualitative facts. Instead, we must, according to Schumacher, subordinate the quantitative to the qualitative. We must first attempt to grasp what is good for human beings before we can determine whether or not some forms of growth are good or not. Of course, that requires hard work, much thought, and is susceptible to error in ways that simple quantities are not. Nevertheless, it is an enterprise that must be undertaken.
Schumacher continues by arguing that “from an economic point of view, the central concept of wisdom is permanence. We must study the economics of permanence.”[3] What does that mean? Well for one thing, I suspect this means practicing the habit (or art?) of being satisfied. That is to say, we must be content with what we have. Perhaps it means resisting the siren song of consumerism and looking to intangible things for satisfaction, for “what is seen is temporal, but what is unseen is eternal.” I think it must mean cultivating the habit of saving and preserving as opposed to profligacy and waste. One wonders what Lawrence Summers and the rest of the President’s men would say to Schumacher’s modest proposals.
Ultimately, we are faced with a choice. The economic wise men chide us to rise to the challenge. Americans, return to your profligate ways and save the world! But, according to Schumacher, another way exists; perhaps it is only dimly seen now, but we can find it if we seek it. We can make the choice to understand and pursue an economics of permanence. If we neglect this fairer way, we may one day find ourselves compelled to learn its lessons by dint of hard necessity.
[1] Schumacher, 51. Italics added.
[2] Schumacher, 51. Italics in original.
[3] Schumacher, 34.
“A real man,” Eric Voegelin wrote in his essay ‘On Hegel,’ “participates in the reality of God and the world, of society and himself, and articulates his experiences by more or less adequate language symbols.”
In pieces like this, Mark, I think people get the image of people cuing up to get into Wal-Mart to ‘consume’ rather than to get stuff that, they believe, are needed for survival. That the problem is the ‘consumerist’ economic principles that define our need to grow to exist. But, I think, that’s a symptom of the disease.
At the root of the problem you’re discussing, I think, are any number of spiritual pathologies first instituted during the Enlightenment and carried through with men like Hegel and his associates who’ve succeeded in convincing folks, even a number of our are fellows here at FPR, that God is either dead or never was.
In fact, we as a people, in losing God have lost the ability to discern the equivalence of symbols that express man’s search for truth about himself and the ground of his existence. And, without the ability to seek the truth of things we, more or less, cease to be human and become that what you’ve described, or an Obama supporter.
And, so it is that we have contracted a spiritual disease that infects the individual and society in terms of second realities that are created to attack the the truth of things, the First reality, and deform and derail man’s existence.
I do agree with you re: the effects of the disorder you’ve so accurately described but what we must see beyond the closed curtain is the Great Man rising, for they always rise in the “epochs of transition when the ‘old moral form of the nations is to be radically overcome by a new one.'”
It is worth noting that the etymological origin of “thrift” shares the same root as “thrive.” Thrift encompasses more than merely financial responsibility, but a proper balance between humanity and the world and between the temporal dimensions – past, present, and future. It requires a responsible stewardship of the world – not taking more than our due, and leaving the world in good condition for responsible use in the future – and the dispositions of gratitude to generations past (for having acted to ensure the thriving of their progeny) and obligation to the future (ensuring that they too will live in conditions in which they thrive).
It is truly stunning that we have learned so little from our recent near-economic collapse to think that we can simply go back to “normal.” We are simply pushing the problem of not living within our means – based on imbalances in our treatment of the world and future generations – into the future, onto our children. And while most of them (those at least who have been born) who might be able to cry foul are now satisfied to be distracted by electronic toys, there will come a day when they will wonder what kind of monsters we were…
I have a photocopy on the fridge of the original ad for the 1920’s development that includes my house. Considering that these several blocks of brick and stone duplexes were built to accommodate Mobility (in the photo there’s a Model T parked in the street), it’s all the more noteworthy that “Built to Endure” is part of the pitch.
[…] The swine. Everything hums along like clockwork as long as consumers consume. A wrench is thrown into the entire affair if consumers choose not to spend. And so, we find economists worrying that the genius of the stimulus is threatened by a reticence among Americans to open their wallets. This, of course, raises a whole set of further questions: what would happen to the economy if Americans began to barter for, rather than purchase, at least some of the things they need? What if neighbors began, say, sharing mowers, roto-tillers, ladders, and other tools rather than filling every garage in the neighborhood with same items? What if more Americans began growing some of their own food, making do with one car rather than two, eating at home, and generally attempting to live lives characterized by simplicity and frugality? If Americans are already beginning to make changes in this direction, are they recklessly threatening the economic recovery? […]
Mr. Mitchell:
A most enjoyable post, sir, and one that is, if for no one else but me, exceedingly timely. I’ve been undergoing some cognitive dissonance over the last few years—-as I have told friends, there are only a few questions that concern me, but they’re questions such as ‘how should one live.’
While on vacation in North Carolina in July, a friend gave me Schumacher’s book, and it has resonated with me on a profound level. I was, inchoately, asking some of the same questions Schumacher addressed. Schumacher’s book led me here, and I am an enthusiastic lurker.
It seems obvious, to me at least, that the orgy of consumer spending which has formed the basis of the American economy for lo these past decades has been unsustainable, and that a recovery predicated upon its resumption is the sheerest of madness.
In a related vein, Sharon Astyk muses on the distinction between problems to be solved and predicaments to be endured. Using this taxonomy (which she attributes in large measure to John Michael Greer), I wonder whether we can really usefully apply Schumacher’s economics of permanence by choice (i. e. as a solution to a problem). It seems to me we are too far gone down too many rabbit holes to find our way home, and that we will indeed I don’t know that we can “solve” this shifting of responsibility to future generations. We have foisted on them a predicament that they will have to endure, and have heaped burning coals on our own heads.
Mr. Cheeks:
Perhaps it is due to the mostly sleepless night spent behind the wheel of the family van on a return from the last weekend away before the child is born, but I must confess that I do not understand what you are talking about when you say this:
Is this a short-hand reference to the writings of Voegelin or Hegel (neither of which I have read)? Or perhaps to the Wizard of Oz? The Antichrist? Nietzsche’s superman? Obama? Who or what are you casting as “the Great Man rising,” and is his rising a good thing or a bad thing? (And would not the “spiritual disease” you refer to earlier be nothing more nor less than Original Sin?) Enlighten me please.
Weasly, it’s Bob and congrats on the baby, we need babies, and my prayers for the wife who’s doing all the work!
Re: the phrase, it’s just a warning of a phenomenon that appears to occur in history under conditions similar to the one we’re experiencing where the Great Man, Superman, or Dictator rises up in the midst of chaos to promise order! My comments to Mark implied a certain collapse of moral order as the fundamental culprit in our cultural difficulties and the “old moral form of the nations is to be radically overcome by a new one,” is a quote from EV that’s the foundation of my humble efforts to work out Obama’s participation in the current deculturation! In Hegelian terms, I think Obama is the sorcerer who incorporates a line-of-meaning that runs Marx, Hegel, Boehme. Intuitively, I know it has a gnostic component, and I’m trying to figure out where it’s at. This past week Obama talked about his political enemies “bearing false witness,” so I think we’re getting close to a revelation!
BTW this wasn’t a snarky critique of Mark’s piece, it was excellent. I just wanted him to differentiate a little more.
Mark,
There a consequences zero growth or negative growth in GNP. Perhaps the most dire is unemployment and underemployment.
Unemployment is still growing, underemployment is also a serious problem. How, aside from economic growth, can this be remedied?
One solution, alluded to in your piece, is that “official work” in the formal economy be replaced by “unoffical work” in the informal economy.
There are a couple of problems with this idea:
1) The informal economy is more skills dependent – There is of course unskilled opportunities in the informal economy but those positions (day laborers) would largely fair better with the legal protections of the formal economy. Skilled persons on the other hand (Plumbers, electricians, carpenters, etc.) may fair just as well or better. The question is, what of the unskilled?
2) Taxation – A shift to the informal economy would result in lower tax revenues that would have to be made up by increasing levels of taxation on the formal economy. This would of course encourage the movement of even more goods and services to the informal economy.
I believe we can have sustainable growth but I understand your skepticism. The question then is what does a zero or negative growth world look like? Is it really a better alternative?
I think it is useful (in the light of Patrick’s observation) to note that “thrift” is a term that ought to apply more to goods than to money. That is, we are thrifty when we use and re-use a thing over and over again. It is use that creates value, and the more use a thing gets over a longer period of time, the more values are created. These use-values are indeed the whole point of creating anything. Our profligacy is measured not so much by what we spend as by what we throw out. Don’t look at the debt to measure our waste; look at the trash-heap, where waste is ordinarily measured.
Unfortunately, modern capitalism depends on large trash heaps. The ideal is to constantly create new desires which can only be fulfilled by new products. Ideally, a product will spend as little time as possible in the hands of the consumer while on its way to the garbage dump, the true measure of our “progress.”
The economists are, in a sense, correct. Thrift in money is problematic, to say the least, if the money cannot find investment. When it doesn’t, it is just hoarding and represents a loss of purchasing power to the economy, which can only result in unsold goods (recession). But they are economically wrong to misunderstand the nature of thrift as connected with expanding use-values, and morally wrong to think that spending alone creates values.
BobMr. Cheeks:Sorry, can’t do it. It just doesn’t feel right—we have to share a beer before I can drop into the familiar. As my Gravatar perhaps suggests, I’m an old-fashioned guy. Permit me the formality of addressing you by title and surname.
That’s more or less how I understood your comment entire. Thanks for the clarifications on the part I had difficulty with.
Dude!
I’m never snarky, or rather mean snarky, unless the fellow is beyond the pale!
and how should I address you? And, yes address me as you wish.
Mr. Cheeks:
Address me as you wish; it’s a pseudonym after all. And you misunderstood my latest comment on your comment, which as I reread it I can see how it might happen. What I meant to say was that I understood your statement as you intended it, not as snark. I just didn’t get one part of it. Blasted text-only medium. We can go offline with this back and forth if you wish so as not to waste the good professor’s combox space. GMail knows me as weaslypilgrim.
Aha!…the off-center mugpiece of Shiffman returns! Would that “e pluribus unum” might be replaced with the latin equivalent of “Built to Last”.
Most people have heard of that epic tale of frontier darkness known as the Donner Party. But few people go beyond the sordid tales of cannibalism to study the role of likely the most important person in that gothic drama: The Standard Issue American Huckster, Lansford Hastings. Hastings , an Ohio lawyer was the classic American Booster. In addition to being an early resident of Oregon, he had spent some time with that other blowhard of early empire and the California Bear Republic, Col. John C. Fremont. Hastings was constantly angling to create some new Pacific Republic with himself at the helm. Meeting a man of similar bent in Fremont, Hastings was much interested in the cavalry officer’s reconnoitering of the sere Great Basin. The trapper Jedediah Smith was the rightful explorer of that glorious wasteland and Kit Carson was generally the real brains behind Fremont but nonetheless, Fremont was given the name “The Pathfinder”. Senator Thomas Hart Benton, his well-connected father-in-law was almost able to buy him the Presidency.
Hastings, charmed by his fellow blowhard in uniform, used the Colonel’s information to try and solicit more people to his quack schemes in California. He had never used the brutal route across the Wasatch Mountains and the interminable waste of the Bonneville salt flats himself but he met one emigrant group in Wyoming to try the route and left word for more to follow his lead. His group surprisingly made it but the ill-fated Donners were late enough to meet their doom in the Snowy Sierras after struggling across some of the most inhospitable landscape in the world.
The United States of America remains to this day a Frontier Nation. Despite eradicating the Frontier over a hundred years ago, we still act and think like a Frontier Culture. While we still possessed the remnant luxury of waning frontier up until the 60’s it is now long-gone for all but Alaska and even there, it has transformed itself into caricature. Now, the ethos is a tarbaby that keeps on embroiling us in ever more ridiculous and debased behavior. From military expansionism and benighted crusades to waste and heedless extraction, we proudly hoist a flag up the pole at F Troop every chance we can get. Being enthralled by the ethic of Frontier Thought, the nation produces Boosters and Hucksters like Hastings with prodigious regularity and there is no shortage of dreamers and schemers who are ready to attempt crossing unknown terrain on some idiotic notion of a sure thing, only to end up camping in the snow and eating one’s camp-mates instead of the more abundant mules because “they taste better”. To solidify the issue in farce, the Boosters themselves never suffer near so much for their idiocy as do the folks who listen to the blandishments and believe everything they are told .
This is why we can suffer through a Civil War, Depression and World Wars only to do our very best to recreate them and recast them as some kind of hale and hearty tribute to our Manifest Destiny on the one hand and our exceptionalism on the other. Shopping, Packaging, Entertainment and Marketing are our new “Frontier” and one assumes that while we may not gnaw on our fellow’s shank bone quite so directly as the ill-fated Donners, we are all cannibals nonetheless. With all these “green shoots” a-popping, maybe we’re just vegan cannibals. …full of Hope and Rip-Roaring for Change. Flags snapping in the breeze over the sands of Babylon, mortgaged to the hilt with a Chinese culture that makes our history look like a momentary interlude, assigning Corporations all the legal protections of the individual but none of the responsibilities, we frontier on and somebody should wake up and inform the lead party that those Digger injuns they are pot-shotting across the playa aint Digger injuns, they’re the stragglers in their own party, going in circles in a hostile Great Basin of our own Determined Creation
Great post. I completely agree that it would be ridiculous for economists to yearn for a return to the consumer spending spree that left millions of Americans deep in debt. On the other hand, if Americans refuse to buy things they can afford out of fear that they might lose their jobs, the economy will get worse. There must be a happy medium where the national savings rate is positive, yet there’s enough spending to create jobs.
Also, I disagree that the economy cannot grow indefinitely. The growth of the economy means the creation of wealth, but that does not necessarily mean material wealth. Or, even where it does, it could mean improving the quality of material goods rather than the quantity. For the global economy to grow to 10 times its current size might mean the development of technologies which will improve the quality of life for everyone significantly, while reducing our impact on the environment. It would be a tragedy if a so-called “economics of permanence” locked humanity into its current condition.
[…] or not saving is good, keep doing it … it’s good for you and your […]
I am having to agree with Dan and Eric. We need some growth even if it only covers the effects of population growth and inflation. For us to stay at the same GNP but have an increase in population and having inflation as well we would be seeing in the long run people with less. Chances are they would look to the government to support them (See Rome’s large group of poor who do not work but demand to be entertained). Those who are working then suffer a larger burden to maintain them without growth.
Growth in population almost necessitates some real growth which is why most economist look at growth as good. Until there is a stabilization of population in our world there needs to be growth.
Why is it that growth is always pitched as not only a good thing, but the only thing, as though the alternatives are so bad as to not be worth discussing? Why is it that stasis or contraction in the economy are never considered except as Bad Things to be avoided at all costs? Why is the prospect of having to make do with less so horrifying that we will go into an inconceivable amount of debt to preserve some nebulous concept of growth instead of making some modicum of preparation for the coming rainy day? We are like the people laughing at Noah while he built the ark. You know who got the last laugh in that story.
We should call indefinite economic growth what it is—theft. We take and take and take and expect that the bill will never come due in our lifetime. But there is no free lunch. says the proverb. Nature doesn’t countenance theft—it exacts restitution with interest. Indefinite growth is the lie we tell ourselves to avoid the truth of our situation. That lie will kill us one day if we keep believing it.
Schumacher, of course, does not argue for no growth. He does argue that growth, per se, is not necessarily good or bad. There must be another way to evaluate growth besides measuring its size. He suggests something radical: evaluating the quality of the growth rather than merely the quantity. He asks us get off the quantification band wagon and begin asking questions about what is good for human beings. That seems like a suggestion worth pondering. It is something most economists are completely unprepared to do.
Wesley,
Not all growth is bad but no growth over long extend periods with populations growing means eventually starvation. Growth in an economy is not just using up items that are consumed and destroyed. Agriculture must grow to sustane larger populations just so people can eat. That is growth in the economy. The service/heathcare industry will need more doctors and nurses. That is growth in the economy. More people should mean more educators that is also growth in the government and economy. Why is it that many people make the assumption that growth in the economy is only about buying disposable consumables and destroying the enviroment and turning people into robots?
One of our largest areas of current economic growth deals specifically with trying to come up with renewalable resources.
Growth and shrinkage in and of themselves are neither positive or negative in the economy. It is what is growing and what is shrinking that makes it positive or negative and how it is growing and shrinking, having said that I still maintain that as long as populations are growing certain areas of the economy must grow (food and water supply) or we will have starvation and wars.
Oops, It looks as Mark made my comment for me. =)
Weasly,
“Why is it that growth is always pitched as not only a good thing, but the only thing, as though the alternatives are so bad as to not be worth discussing?”
I don’t think anyone has ever suggested that growth is the only thing, I know of no economist that argues this and I don’t see anyone here in the comments arguing that. The alternatives are discussed frequently it’s simply that most economists believe stasis or negative growth would have profoundly negative effects (On things like the previously mentioned employment) that would outweigh any benefits. We’re talking about it here right now.
“Why is it that stasis or contraction in the economy are never considered except as Bad Things to be avoided at all costs?”
This is because most data indicates that there are severe consequences in unemployment, poverty, and growing income disparity to static or negative growth that outweigh any benefits. This is the argument.
“Why is the prospect of having to make do with less so horrifying that we will go into an inconceivable amount of debt to preserve some nebulous concept of growth instead of making some modicum of preparation for the coming rainy day?”
Because there are millions of people around the world who are already malnourished, sick, and dying. Having less will literally kill them. Here in the United States there are millions of people currently receiving unemployment benefits and when they run out and they can’t find gainful employment they will slowly but surely get behind on their rent, their mortgage, their gas bills. These people will be evicted, foreclosed upon, or have their heat turned off this winter. Maybe they’ll move in with family or friends but some will wind up in homeless shelters. Some will find themselves under bridges. That’s why.
There is “growth” and then there is “growth”. As an immature Republic, we developed industrial capacity and the jobs to go with it and this productivity and broad based economic solvency created a force that could power up for war as the need arose. As a Corporate Globalist and Full-Time International Cop, we have exported jobs, ensconced a consumptive military across the globe and tried an experiment where debt was a commodity and the consumer could be used to farm debt. It did not work out to well and the growth economy of the preceding years has been revealed to be a decline economy.
When debt is transformed into a commodity, it is not surprising that somebody might try and change the definition of “decline” to “growth”
The debt ratio of the GNP makes any discussion of “growth” look a tad over-optimistic.
That is precisely what I am getting at. My beef is with indefinite growth or mindless growth, growth for the sake of growing, or growth at all costs. There seems a reflexive reaction among many (most?) economists and their hangers-on that lack of growth (defined as the upward trend of some abstraction on a chart) is the end-all-and-be-all of apocalyptic scenarios. But what if contraction of the economy is accompanied by a big increase in egalitarian virtue (neighbors looking out for neighbors or some such)? Is that still an unmitigated catastrophe? Contrariwise, should we really be willing to pursue growth at all costs? Is there a cost too high, such that we decide to suffer the consequences of economic contraction rather than keep on keeping on? (BTW, Sharon Astyk has another rumination up today that is germaine to this discussion.)
Because that is exactly how many of us see economic growth manifest in the world? Because that is how our government tells us to stimulate growth? (“Go shopping,” commanded our President in the aftermath of 9/11.) Because that is how the media portrays economic growth? Because we are told that saving hurts the economy? Because businesses increase efficiency by getting rid of labor and convincing the rest to work harder? Because the jobs available to the unskilled in this knowledge economy are the epitome of robotic? If the economists would have us honor a more encompassing view of economic growth, perhaps they could do us the favor of expressing it in larger terms.
Dan’s defense of growth is largely the one I would offer. I hope that defense is reasonably engaged in future or past writings here.
So now some of the arguments for growth are becoming clearer in my mind. The above quote is pulled from The Martenson Report, specifically The Shell Game – How the Federal Reserve is Monetizing Debt. One of the things that frustrates me about economics in general is how anti-intuitive it is. Depending primarily on Dr. Mitchell’s summary of Schumacher, I can grok Schumacher’s argument. It makes sense to me. It fits into my experience of the world. On the other hand, as I dig into how both our actual economy and that part of it we call the monetary system work, I am perplexed by just how skewed from a natural ordering of things it seems. It makes no sense to me that the system is unable to handle non-growth, but from the quote above, I begin to get an inkling of how that might be.
Incidentally, there is a tie here to Dr. Deneen’s post, Constitution as Regime, in the sense that the economy, along with the Constitution, doesn’t do what we want it to do, but does what it was designed to do.
Given that, it seems that moving to a more human-centered economy ala Schumacher will necessarily involve rather massive pain and suffering because it must work against the very thing that the current economy needs to function well at all. Keeping the system as it stands will involve rather massive pain and suffering because it is unsustainable and is running up against hard limits to expansion. Rock, meet hard place. Hard place, meet rock. It looks like we are well on the way to the day where we What a mess….
— — —
Sorry for the extensive commenting on this post. I am in the process of really coming to comprehend our position. Stuff I’ve given intellectual assent to for many years is finally becoming real to me (slow learner, I know), and it isn’t exactly a pleasant process, involving, as it does, a fair amount of tilting at windmills and swinging wildly in the dark.
There is a real real problem with this discussion centered around a couple of claims:
“If the economists would have us honor a more encompassing view of economic growth, perhaps they could do us the favor of expressing it in larger terms.”
and earlier,
“He suggests something radical: evaluating the quality of the growth rather than merely the quantity.”
Growth is merely an economic term for a set of data on economic activity over time. True, most economists agree that growth is good for economies and by extension is good for people. No serious economist I have ever encountered thought that growth is the only criteria for economic success or failure and the only criterion for what’s good for people.
For example: If Zimbabwe were to, against all odds experience slight economic growth this year and the United States economy were to experience slight negative growth the economist’s conclusion wouldn’t be that Zimbabwe is a better economy or a better place for human persons to live. They would, unsurprisingly consider other factors when making such an evaluation.
The two suggestions by the author and a commenter suggest growth is not up to the task of telling us what’s good for human persons. I agree. Every economist on the face of the earth agrees. Growth is merely one economic statistic among a giant mass of statistics.
Is it important? Yes, because it is composed of very large sets of data that are boiled down simply in the form of how much more or less economic activity was their this year vs. last year. It’s set of data, all economic activity, is the most comprehensive available. They cannot express anything larger.
Anything larger is outside of the discipline. Discussing the quality of growth is something best discussed by philosophers on the abstract level and politicians on the practical level. There are all sorts of things we disapprove of that are not included in our definition of “All economic activity” and thus aren’t reflected in growth. Illegal drugs are one. Prostitution is another.
If you believe that certain industries and business practices and opposed to human goods, MAKE IT ILLEGAL TO PARTICIPATE OF USE THEM! Once you do they will no longer count for or against growth. They will either disappear or move into the informal economy. Growth is what you make it when you set the parameters of the marketplace. If you don’t like those parameters, change them. Don’t complain about statistics and the inadequacy of economic science. Don’t pretend that you’re trying to found a ‘new science of man’ just tell the current scientists, through the political process, what to exclude from their slide rules.
Dan, I would disagree with you on two counts. One, the economists do, in fact, treat growth as an end in itself and regard every uptick as “good.” Two, the failure to interpret the meaning of the numbers is methodologically incorrect from a purely scientific standpoint; it distorts the measurement of the economy. I could give a dozen reasons why this is an error, but here I will give just one.
Every economy is a combination of an exchange economy and a use economy. To illustrate the point, we can say that we work to earn money to buy meat and potatoes (the exchange economy) in order to bring them home and cook dinner (the use economy). Economists deal only with the exchange economy, which leads to distortions in measurement because the exchange economy tends to be monetized while the use economy tends to be non-monetized.
To see how this distorts the numbers, consider that much of the so-called “growth” of the last 30 years has merely been a shift from the use to exchange. Meals that used to be cooked in the kitchen are now cooked by Ronald MacDonald, children that were raised at home now go to a day-care center. Because the functions are now monetized, it looks like “growth” from the standpoint of the GDP, but it does not, in fact, represent a growth in goods and services, and may represent a shrinkage.
Nothing dealing with human relations (and economics deals with such relations) can be considered “value-free,” and the attempt to do so distorts the discussion not merely on some moral plane, but on the practical and scientific plane as well. This, by the way, was the whole point of Caritas in Veritate.
John,
Good points a couple comments:
“One, the economists do, in fact, treat growth as an end in itself and regard every uptick as “good.””
Your correct here. Most economists see growth as being a positive thing in general and any growth would be a positive thing. Now if there was growth in the “poring radioactive waste on unsuspecting economists while they sleep industry” there is no question they would view this as bad. Bad for human persons and perhaps even bad for the economy. Growth is never the ONLY thing economists look at. There is such a thing as bad growth according to economists.
“Two, the failure to interpret the meaning of the numbers is methodologically incorrect from a purely scientific standpoint; it distorts the measurement of the economy.”
I agree with this again for the most part, especially your distinction between exchange and use (This being the sort of difference I highlighted between formal and informal economies). Growth is definitely growth in the formal economy and this is sometimes at the expense of the informal economy. But it works the other way too doesn’t it? I take the wages I earn at McDonald’s (In the formal economy) and spend it on smack (In the informal economy). The formal economy by and large allows the informal economy to function. Its this idea of dependence on the formal economy that makes me treat growth the way I do. Despite its shortcomings it still tells us a lot and is a net positive most of the time.
“Nothing dealing with human relations (and economics deals with such relations) can be considered “value-free,” and the attempt to do so distorts the discussion not merely on some moral plane, but on the practical and scientific plane as well.”
Absolutely! The dispute is one over whether growth is a net positive or a net negative. Both sides should realize that decisions about our attitudes to growth are moral calculations. The statistic itself however is value free (as all measurements must be to be meaningful). I have no problem with people giving evidence as to why growth is a net bad, or that growth isn’t the only thing we should consider (Again I don’t think anyone disagrees here). I have problems with blanket statements like “Quality not Quantity” used as an argument against a statistic. There are serious issues here and waxing Quixotic about how stupid it is that the government tells us to shop does not address them.
Thanks for the post. You nicely articulated some concepts that I have been thinking about as well, and inspired me to read Schumacher’s book. Since I work in the corporate environment, I get opportunities to evangelize this idea of re-thinking how we define a healthy economy. The good new is, many people I talk to get it. They are ready for a change. The problem is, how does it work out on a macro scale? There are plenty of detractors, however. Sometimes I talk about this idea and people will look at me like I’m crazy. We recognize the problem, but I’ve found that the next challenge is coming up with a solution that can be worked out in the “real world”. But, one step at a time. I tend to think that change is going to be realized on a grass-roots level and the reason I love FPR! I have tossed around the idea with a Localist buddy of mine, and fellow-business man and entreprenuer about starting a local education circuit here in Orlando, where we challenge people’s notions of the good life and economy in a discussion oriented medium. Perhaps even of how to think of business in a new way (i.e. not by perpetual growth). I think it would be fruitful, and there is no better time than the present to start the conversation.
Keep on,
J
Justin,
Did you read the book? Is it long? Maybe you can let me borrow when you are done as I am here in Orlando as well.
Brett
Brett…I have not. I’m finishing another book right now, so I’ll read Schumacher’s next and let you know when I’m done. I’ll need to find it…
John’s distinction between the use and the exchange economy is helpful to me, but I’m unclear about the examples used.
He writes of McDonalds and Daycare: “Because the functions are now monetized, it looks like “growth” from the standpoint of the GDP, but it does not, in fact, represent a growth in goods and services, and may represent a shrinkage.”
McDonalds makes food provision fast. This is a true growth in service, yes?
Daycare arguably “frees” parents from their children, allowing them greater economic productivity. Isn’t this too a growth in service? If one daycare agent takes care of ten kids in the place of five mothers, who now do other things, isn’t this a kind of true economic growth?
Kevin:
At the risk of speaking out of turn, I think part of the point of FPR is to re-evaluate some of the external costs.
Daycare is growth . . . but is it good growth? I’ve been a stay at home dad for a few years (while winding up my mother’s estate) and I have loved being with my children. They can be annoying and bothersome, yes, but I’m there for them, I cook and wash and mow the yard.
This is, doubtless, not the most economic efficient thing to do. But I grew up in a world of fathers who saw their children bright and early in the morning, and right before bedtime. My father did that. I can’t blame him, he was out working, and working hard, to provide for us. But that’s the one regret I have about my relationship with my father, that I didn’t get to spend more time with him.
I can imagine that it is much the same with mothers.
As for McDonald’s, well. It is fast, and it is cheap . . . but that’s only by disguising external costs. CAFO produced corn-fed antibiotic and hormone-pumped beef may seem to be “real food” but it’s really not. The Omega 3 and Omega 6 ratio is all out of whack (unnatural), the bun is shelf-stabilized and chock full of HFCS (corn and more corn) and people forget how to cook.
If that’s growth, it’s cancerous.
If I’m out of line, please excuse me—I’m just finding this place fascinating.
Kevin, Your argument is that the speed of the meal is an increase in service. I think there is reason to doubt that but even if we concede that point, it would only mean that some portion of the meal represented “growth,” not the full amount. Yet it is the full amount that is counted by economists. Further, “speed” is a service in some cases, but not in others; in other cases, slowness of the meal is a service: it provides time and place for interaction and bonding.
This counting mistake is evident in development economics. We go into economies where money is marginal and make it central by destroying all the older relationships. Then the “development agencies” say, “These people were living on less than a dollar a day, and now they have two. The situation has improved by 100%.” Well, not really. Often, we have just “developed” them from a secure subsistence economy into an economy of dependent pauperism. In the process, we have moved ourselves into pauperism. Our development has exported poverty around the globe, and in doing so has imported it to our own country.
Thank you both for replying.
The example of developing economies was quite helpful. Can you recommend further reading on that point?
Reconsidering economics as a qualitative, rather than quantitative, endeavor is difficult for me. My education was initially focused in science and engineering. There the idea is that when the figures don’t add up, people die (say, in a poorly designed bridge’s collapse).
Similarly, there is an attitude that quantitative economic inefficiency kills people. Outsourcing one’s childrearing or speeding through a meal someone else has prepared helps one refine industry ______, which may result in X amount of measurable productivity and create more jobs down the line.
Of course, this is the universalistic attitude of Liberalism, which equates duties to hypothetical strangers with duties to self and family.
A side note: I just realized with shock that the real time strategy computer games of my adolescence reinforce this quantity-focused “productivity or apocalypse!” attitude. In some games, one must quickly acquire massive quantities of resources X Y and Z. Failure to do so will result in witnessing one’s more efficient opponents devastate your digital lands and peoples.
“Of course, this is the universalistic attitude of Liberalism, which equates duties to hypothetical strangers with duties to self and family.”
Christianity does this too.
Kevin, I think the analogy to engineering holds. Or better yet, architecture. Every building must obey the laws of physics, or else it just falls down. But these laws do not dictate one “correct” building; there are infinite possibilities. Economics is architectonic: certain laws must be followed, but these are used in a variety of ways.
In engineering, “efficiency” is never defined by one term. An engineer must trade off conflicting goals against each other: cost, weight, speed, size, etc. Nearly every engineering problem involves both quantitative and qualitative measures. In any non-trivial engineering problem, several different measures must be used, with the elegant solution the one that covers the most features with the least effort.
Economics is quantifiable, but not reducible to quantity. Money flows through an economy are strictly quantifiable in theory at least, but the economy cannot be reduced to these flows, because money merely “stands for” real goods and services which have are otherwise incommensurable with each other. Further, goods flow in non-monetary ways as well.
No engineer can pronounce one system more efficient than another without knowing the costs of the inputs. In the presence of subsidies and externalities, this is not possible, so bad economics corrupts engineering as well. For example, the WalMart distribution system is judged to be an engineering marvel, but if the full costs of the road network were included, would it still be efficient?
To return to the subject of Mark’s essay, if thrift is measured in terms of money, then it is paradoxical, because it withdraws purchasing power from the economy, narrowing the base and reducing the size of the economy. Unless the savings can be converted to investment or spending by lending, then thrift is equivalent to hoarding. Such thrift creates poverty. But if thrift is defined in terms of use (“use it up, wear it out, re-use it”) then the very act of thrift creates wealth.
That’s a bit rambling, but its early and I haven’t finished my coffee.
Most individuals do not accept there is such a thing as global warming. They do not believe that man’s activities have any bearing on nature. Nature is viewed as a free lunch to be exploited. The extremity of this view was the Libertarian Ayn Rand who did not believe in building codes. Like her supporter Alan Greenspan she believed that individuals would always do the right thing in response to the market. So it would be argued why put extra insulation in your home to burn less fossil fuels when the cost of those fuels is not a disproportionate part of your expenditure. The big questions are what is the right of any politicians to save citizens from themselves,if they have a right how do they go about doing it and is it actually in their interests for re-election to do this?
Ha! “No free lunch–except nature.”
This is a who shall be the Final Arbiter question. Or what right did some politicians have to sign the Kyoto Agreement into law. Or better still why do we actually have politicians in the first place instead of relying on the market to settle everything. Here is John Locke on the subject:-
“First, there wants an established, settled, known law, received and allowed by common consent to be the standard of right and wrong and the common measure to decide all controversies between them. For though the Law of Nature be plain and intelligible to all rational creatures, yet men, being biased by their interest, as well as ignorant for want of study of it, are not apt to allow of it as a law binding them in the application of it to their particular cases.” (Two Treatises of Government II.ix.124.)
I’m sure Locke didn’t have Global Warming, or the Law of Entropy, in mind when he wrote the above but he did write it with the following in mind:-
“Secondly, in the State of Nature there wants a known and indifferent judge, with authority to determine all differences according to the established law. For every one in that state being both judge and executioner of the Law of Nature, men being partial to themselves, passion and revenge is very apt to carry them too far, and with too much heat in their own cases, as well as negligence and unconcernedness, make them too remiss in other men’s.” (Two Treatises of Government II.ix.125)
Who will tell us what the State of Nature needs?
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