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The growth fetish exposed again Samuel Brittan: Financial Times: 26/03/04 There is a saying about serving new wine in old bottles. There ought to be another one about serving good wine, whether new or old, in unattractive bottles. This is brought to mind by a book by the Australian left-wing environmentalist, Clive Hamilton, entitled Growth Fetish, about to be republished in the UK (Pluto Press, £13). He argues that the quest for maximum growth of GDP is a vulgarisation of sound economics -- what I call lumpeneconomics - even though 99 people out of 100 probably think that is what the subject is about. Hamilton's book is, however, written in the grating idiom of "left speaking to left". (It is of course no more attractive when other authors speak as members of the "centre right" calling out to each other.) He even calls for a social democracy that "strikes fear in the boardrooms". This is all a little unnecessary, especially in view of his view that top corporate executives are not all that happy even now. If Hamilton had heard Gordon Brown's Budget speech he would have been in agonies of despair. For here was the leader of genuine Labour, as distinct from Tony Blair's Third Way, boasting of his success almost entirely in terms of British growth rates relative to those in other countries or in the past. Hamilton's Achilles heel is his belief that neo-liberals, with whom he identifies nearly all academic economists, are at the root of all the evils he discusses. It so happens that I bought his book on the fourth floor of a large and serious bookshop. There was just one small section devoted to academic economics, with just as many texts attacking or qualifying free market economics as endorsing it. Most of the surrounding space was taken up with business books and the like, while a few yards away there were stacks of volumes of a New Age kind. The best and most attractively laid out section was on popular science. The author's claim to unmask neoliberal economists falters when he shows very little awareness of who they are or their distinctive doctrines. Friedman and Hayek always turn up as identical twins without any discussion of their differences or any mention of other neoliberals. Hayek's main concern was the advance of civilization and he avoided discussing GDP numbers or even happiness. Friedman's main concern is with individual freedom. But he regards that as a personal value judgment. Professionally he is concerned to show that a free market economy can also deliver rising living standards. Both writers formed their outlook, to some extent defensively, at a time when many people, including CIA analysts, feared that Soviet communism would eventually produce far greater wealth than the capitalist West; or as Nikita Kruschev elegantly put it, "we will bury you." There are indeed contemporary mainstream economists, often of an interventionist bent, who come closer to meeting Hamilton's caricature. An example is a paper mentioned by David Turner in the FT of March 22 based on US and European data in which the authors suggest subsidies to workers to move home or occupation to escape from the pernicious influence of social contacts on job procurement, which they believe reduce individual wages by 5 to 7 per cent of those affected and thereby reduce aggregate national productivity. (Social Contacts and Occupational Choice, Bentolila, Michelacci and Suarez, www.cepr.org.) They recognise that workers might prefer to find jobs among their associates, but that does not disturb their main conclusions. As one might expect, Hamilton regurgitates the questionnaire studies which show that in modern industrial countries people do not report greater satisfaction with life as material standards increase. Most left-wing writers go on from there to say that what matters to people is their relative position and then - with a big logical jump - assert that it is greater equality that will really make for happiness. Hamilton's saving grace is that he goes beyond such assertions and discusses with some insight the roots of happiness and self-esteem. He has the courage to assert that the Left has been too much pre-occupied with the most deprived 10 per cent of the population - of course they matter, but the rest of us should not be ignored. As he writes, the Left's deprivation model is "the opposite of the truth... By any standard the countries of western Europe and north America plus Japan and Australasia are enormously wealthy." He then launches into the culture of long hours and macho business, which are depriving us of the leisure and amenity which advancing technology makes possible. He rightly dismisses, along with most genuine economists, the idea that market capitalism depends on ever-rising GDP per head. He does not claim to be original. He is very happy to cite the mid-19th century British philosopher and economist John Stuart Mill on the potential joys of a stationary state in which material output no longer increases from year to year but people enjoy innovation in the arts of life. He also acknowledges, not only Keynes, who wrote 70 years ago about "economic possibilities for our grandchildren" which should by now have banished the economic problem; he also gives due credit to Ezra Mishan, who attacked the growthmanship of the 1960s from the standpoint or orthodox economic welfare theory. In more recent decades the Nobel Prize-winning economist, the late John Hicks, formulated "the law of the diminishing marginal significance of economics." Predictably, the advertising industry emerges as a chief culprit for the endless pursuit of more and more consumption goods. There are long disquisitions on the way in which trainers or gym shoes are branded as symbols of virility on lines familiar from 1960's sociologists. Indeed Galbraith got in still earlier with his attack on The Affluent Society, after which auto manufacturers began to drop their notorious tail fins and invest in more serviceable smaller vehicles. Even earlier in the 1890s the American thinker Thorstein Veblen analysed the symbolic role of upper class consumption. In the end, our present author shies away from advocating a ban on advertising except for children (where I partially agree) and just asks for a tightening up of its tax treatment. He evens forgets to advocate a progressive expenditure tax which is the other staple diet among authors in his camp. He might reflect that his own book is a form of advertising for an alternative culture which will get nowhere unless it is publicised. Hamilton is rightly keen to go beyond the GDP yardstick, the limitations of which were emphasised 70 years ago by Simon Kuznets, the American pioneer of national income statistics, and an early collaborator of Milton Friedman's. There have been several experiments with other indices. There is a UN development one which takes into account life expectancy and education as well as GDP per head. It should make a further correction for working hours and -- if it wants to be heroic -- goods and services produced in the home. But going much further takes one very much into the realms of purely personal opinion, such as how much, if any, negative value should be attached to income disparities ("inequality"). It is one such index, known as GPI or genuine progress indicator, which gave rise to the amused media stories that 1976 was a happiness peak for the British population. Maybe the sterling crisis that forced the Chancellor, Dennis Healey, to turn back at London Airport on his way to the IMF or the protracted Cabinet sessions on how to cut public spending, were not as much discussed in the pubs and on the terraces as economic writers would have liked. Even so it seems a peculiar year to take; and it was not much later that the happy British electorate turned out the Labour Government and installed Margaret Thatcher. At first sight Hamilton is mercifully light on policy recommendations. His main demand is for shorter working hours; and although he prematurely praises the French experiment it is not clear to what extent he advocates compulsion. His ideal is eudemonia, a word of Aristotle's to capture the idea of well-being arising from the full realisation of human potential. But his assertion that people are not the best judges of their own happiness will tempt authoritarians of every kind. It opens the way for potentially sinister technocratic recommendations such as "Echo design principles should be required in everything and any resource used could be minimalised by closed loop cycles." The most encouraging evidence in this book is that people are voluntarily turning against the cult of long hours. He cites survey evidence that 19 per cent of the US population had in the last five years voluntarily decided to make changes in their lifestyle that reduce their take-home pay. Some clever entrepreneurs already see the advantages of hiring such people on terms they prefer. At least I can make my non left-wing contribution to fighting the growth fetish by refusing to go to breakfast meetings on how to improve the worklife balance.
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