THE MORAL CONSEQUENCES OF ECONOMIC GROWTH Benjamin M. Friedman Economic growth has become the secular religion of advancing industrial societies. —Daniel Bell, The Cultural Contradictions of Capitalism re we right to care so much about economic growth ate them. But moral thinking, in practically every known Aas we clearly do? For citizens of all too many of culture, enjoins us not to place undue emphasis on our the world’s countries, where poverty is still the norm, material concerns. We are also increasingly aware that the answer is immediate and obvious. But the tangible economic development—industrialization in particular, improvements in the basics of life that make economic and more recently globalization—often brings undesir- growth so important whenever living standards are low— able side effects, like damage to the environment or the greater life expectancy, fewer diseases, less infant mor- homogenization of what used to be distinctive cultures, tality and malnutrition—have mostly been played out and we have come to regard these matters, too, in moral long before a country’s per capita income reaches the terms. On both counts, we therefore think of economic levels enjoyed in today’s advanced industrialized econo- growth in terms of material considerations versus moral mies. Americans are no healthier than Koreans or Por- ones: Do we have the right to burden future genera- tuguese, for example, and we live no longer, despite an tions, or even other species, for our own material ad- average income more than twice what they have. Yet vantage? Will the emphasis we place on growth, or the whether our standard of living will continue to improve, actions we take to achieve it, compromise our moral and how fast, remain matters of acute concern for us integrity? We weigh material positives against moral nonetheless. negatives. Perhaps because we are never clear about just why I believe this thinking is seriously, in some circum- we attach so much importance to economic growth in stances dangerously, incomplete. The value of a rising the first place, we are often at cross-purposes—at times standard of living lies not just in the concrete improve- we seem almost embarrassed—about what we want. Not ments it brings to how individuals live but in how it only do we acknowledge other values; as a matter of shapes the social, political and, ultimately, the moral principle we place them on a higher plane than our character of a people. material well-being. Even in parts of the world where Economic growth—meaning a rising standard of liv- the need to improve nutrition and literacy and human ing for the clear majority of citizens—more often than life expectancy is urgent, there is often a grudging as- not fosters greater opportunity, tolerance of diversity, pect to the recognition that achieving superior growth social mobility, commitment to fairness, and dedication is a top priority. As a result, especially when faster growth to democracy. Ever since the Enlightenment, Western would require sacrifice from entrenched constituencies thinking has regarded each of these tendencies positively, with well-established interests, the political process of- and in explicitly moral terms. ten fails to muster the determination to press forward. Even societies that have already made great advances The all-too-frequent outcome, in low- and high-income in these very dimensions, for example, most of today’s countries alike, is economic disappointment, and in some Western democracies, are more likely to make still fur- cases outright stagnation. ther progress when their living standards rise. But when The root of the problem, I believe, is that our con- living standards stagnate or decline, most societies make ventional thinking about economic growth fails to re- little if any progress toward any of these goals, and in flect the breadth of what growth, or its absence, means all too many instances they plainly retrogress. Many for a society. We recognize, of course, the advantages countries with highly developed economies, including of a higher material standard of living, and we appreci- the United States, have experienced alternating eras of THE MORAL CONSEQUENCES OF ECONOMIC GROWTH 15 economic growth and stagnation in which their demo- or pull of public policy—it is important that we take cratic values have strengthened or weakened accord- these moral positives into account. ingly. How the citizens of any country think about eco- Economic Growth or Stagnation? nomic growth, and what actions they take in conse- Especially in a work focused on the positive link quence, are therefore a matter of far broader impor- between economic growth and social and political tance than we conventionally assume. In many countries progress, it may seem strange to think that the United today, even the most basic qualities of any society— States, now so preeminent across the world in economic democracy or dictatorship, tolerance or ethnic hatred terms, faces any significant threat in this regard. One and violence, widespread opportunity or economic oli- country after another—including even China and garchy—remain in flux. In some countries where there Singapore, which thus far have hesitated to liberalize is now a democracy, it is still new and therefore frag- politically—has adopted American approaches to the ile. Because of the link between rising or falling living management of its economy, based on free enterprise, standards and just these aspects of social and political private initiative, and mobile capital. Why would on- development, the absence of growth in so many of what going economic growth not therefore herald an era of we usually call “developing economies,” even though further social and political progress that would rein- many of them are not actually developing, threatens force the openness of American society and otherwise their prospects in ways that standard measures of na- strengthen and broaden American democracy? tional income do not even suggest. The same concern One concern is simply that the robust growth of the applies, albeit in a more subtle way, to mature democ- latter half of the 1990s may prove to have been only a racies as well. temporary interlude, a “bubble,” as many disappointed Even in the United States, I believe, the quality of stock market investors now regard it, between the stag- our democracy—more fundamentally, the moral char- nation that dominated most of the final quarter of the acter of American society—is similarly at risk. The twentieth century and further stagnation yet to come. central economic question for the U.S. at the outset of But even the prosperity that the United States experi- the twentyfirst century is whether the nation in the gen- enced in the late 1990s bypassed large parts, in some eration ahead will again achieve increasing prosperity, important dimensions a clear majority, of the country’s as in the decades immediately following World War II, citizens. Jobs were plentiful, but too many provided or lapse into the stagnation of living standards for the poor wages, little if any training, and no opportunity majority of our citizens that persisted from the early for advancement. 1970s until the early 1990s. And the more important Economic progress needs to be broadly based if it is question that then follows concerns how these different to foster social and political progress. That progress economic paths would affect our democratic political requires the positive experience of a sufficiently broad institutions and the broader character of our society. As crosssection of a country’s population in order to shape the economic historian Alexander Gerschenkron once the national mood and direction. But except for a brief observed, “even a long democratic history does not period in the late 1990s, most of the fruits of the last necessarily immunize a country from becoming a ‘de- three decades of economic growth in the United States mocracy without democrats.’” Our own experience, have accrued to only a small slice of the American popu- as well as that of other countries, demonstrates that lation. Nor was that short period of widespread pros- merely being rich is no bar to a society’s retreat into perity sufficient to allow most American families to rigidity and intolerance once enough of its citizens make up for the economic stagnation or outright de- lose the sense that they are getting ahead. The famil- cline they had endured during previous years. After al- iar balancing of material positives against moral nega- lowing for higher prices, the average worker in Ameri- tives when we discuss economic growth is therefore can business in 2004 made 16 percent less each week a false choice, and the parallel assumption that how than thirty-plus years earlier. For most Americans, the we value material versus moral concerns neatly maps reward for work today is well below what it used to be. into whether we should eagerly embrace economic With more and more twoearner households, and more growth or temper our enthusiasm for it is wrong as individuals holding two jobs, most families’ incomes well. Economic growth bears moral benefits as well, have more than held their ground. However, nearly all and when we debate the often hard decisions that of the gain realized over these last three decades has inevitably arise—in choosing economic policies that occurred only in the burst of strong growth in the late either encourage growth or retard it, and even in our 1990s. Despite mostly low unemployment, and some reactions to growth that takes place apart from the push modest growth in the U.S. gross domestic product— 16 SOCIETY • JANUARY/FEBRUARY 2006 and despite the increased prevalence of two-earner fami- were more active and visible than at any time since the lies and two-job workers—the median family’s income 1930s, antigovernment private “militias” flourished as made little gain beyond inflation from the early 1970s never before, and all the while many of our elected to the early 1990s.