There is a populist argument that holds economic growth is, at best, a necessary evil. Expanding GDP leads to far too much environmental damage and way too many fast-food outlets to ever consider economic development something we might call a moral pursuit.
But Benjamin Friedman, in his new book, The Moral Consequences of Economic Growth, argues exactly that: there is a moral component to preserving and sustaining economic growth, and it's more important than ever. After reading the book, one tends to agree. An esteemed Harvard economist, Friedman sifts through the history of the Enlightenment, U.S. popular literature of the 19th century, the rise and fall (and rise) of the Ku Klux Klan, and many economic statistics to show us the tight correlation that exists between general economic growth and the prevalence in a society of ideas like respect for diversity, racial tolerance and charity. It's no coincidence, he says, that the two major civil rights bills enacted in the U.S. were both passed when incomes were on the rise. Nor is it random chance that when income growth has stagnated, membership in the Ku Klux Klan has swelled. Friedman makes it clear that only when the vast U.S. middle-class population feels secure about its own economic prospects does it open up to the kind of increased social mobility that comes with progressive legislation such as affirmative action. “People are more willing to support anti-discrimination policies and to accept the risk that their advantage over others might erode if they are confident that, even if this should happen, their own living standard will rise over time,” he writes.
That may seem obvious, but it's unsettling. Though we'd like to think otherwise, the conclusion is that the best intentions of a majority of the population are subject not to will but rather to the laws of economics: when the chips are down, individuals will always look out only for themselves and revert to a less charitable mode of existence. But this notion is what makes Friedman's book an important one. By exploring the relationship between economic growth and the resulting societal effects, we become more conscious of the dynamic at work, and are better able to work to prevent the historical pattern from playing out one more time. Friedman's point? If you let income growth falter, social chaos ensues.
So what, then, is the list of policies that flows from this realization? If there is a fault in this book, it's this: Friedman doesn't seem to be sure himself what the deep engines of economic growth are–though, in his defence, one might point out no economist has ever come up with the perfect answer to that question. There are, however, a few policy initiatives that Friedman says seem to work fairly well over time. One is a constant investment in physical and human capital so that productivity–which feeds directly into better living standards–is sustained.
The bad news here is that Canada does a miserable job on that account. Our rate of productivity growth is notoriously low (we dropped from sixth to 12th place according to a recent Conference Board of Canada report), and that has to be a worry. Ralph Goodale promises the next federal budget will be a “productivity budget.” Let's hope so. If history can teach us anything, it's that economic growth, although it doesn't make all the difference in the world, sure does make a lot.