Monday, January 30, 2006

A strong argument for the GHP growth plan

When the Greater Houston Partnership announced its new 10-year strategic plan of aggressive growth a couple weeks ago, it was not without controversy. There seems to be a whiff of sentiment that the challenges of growth may outweigh the benefits. Continuing yesterday's theme of slightly-dated Economist articles, there was an excellent book review of "The Moral Consequences of Economic Growth" by Benjamin M. Friedman. Its focus is at the national level, but the lessons are certainly applicable to states and cities.

Growing prosperity, history suggests, makes people more tolerant, more willing to settle disputes peacefully, more inclined to favour democracy. Stagnation and economic decline are associated with intolerance, ethnic strife and dictatorship.

It is not obvious that this should be true, so why has this tended in practice to happen? Mr Friedman's explanation is that people's sense of well-being is essentially relative. They become accustomed to any fixed standard of living, rich or poor. They are happiest if they feel their standard of living is rising (something that, in principle, all members of a society can experience at once), or if they feel that they are better off than their peers (which is divisive and not an aspiration that everyone can realise at once).

The key thing is the way these two standards of comparison - —the potentially harmonious and the socially self-defeating - —interact. If people are becoming better off relative to their own past standard of living, they will care less about where they stand in relation to others. If they are not growing better off relative to their own past standard of living, they will care more about their placing in relation to others - —and the result is frustration, intolerance and social friction. Growth, in short, has moral as well as material benefits.

A more controversial version of this thesis might be that growth supports liberal free-market capitalism, while stagnation trends towards redistributionist socialism (Exhibit A: see current political trends in Latin America). And, if you assume that socialism further limits the incentives to growth (i.e. socialist societies grow slower), then you can see the potential negative feedback spiral: slowing growth -> socialist tendencies -> further slowing -> more aggressive redistributionist socialist impulses -> yet more slowing and stagnation -> etc.

Please don't interpret this as a libertarian, capitalist, Republican, conservative, or free-market rant. Clearly some level of progressivism makes sense in tax policy, minimum wage and elsewhere, but a balance must be struck.

This thesis would also help explain why most older core cities, as their economies become less dynamic and proportionally more of the metro growth happens in the far suburbs, seem to make a political turn to the left (earlier discussion here). Don't get me wrong - there are plenty of other variables that affect a city's or region's political leanings - but it does seem to be one of the correlating causes.

Sigh. After writing this, I've realized there's no set of caveats that can avoid a firestorm in the comments. So be it. Let me at least shift the focus back to the book and article to wrap up:

A concluding chapter looks at policies to promote growth in the United States. Much of what Mr Friedman has to say on this accords with mainstream thinking, but it no doubt bears repeating. He underlines the need to curb the fiscal deficit in order to encourage private capital formation, and discusses at length how to do this. He argues that limits on public spending and the reversal of some of the Bush administration's tax cuts will both be needed, together with changes to Social Security and Medicare. More controversially, he advocates competition among America's schools as a way to improve sagging educational standards.

These ideas for raising America's rate of growth, though mostly orthodox, are lent a strange new vitality by the rest of this unorthodox book. Rich as it is, America still needs to grow - not for faster cars and iPods, but to "find the energy, the wherewithal, and most importantly the human attitudes that together sustain an open, tolerant and democratic society."


At 8:42 PM, January 30, 2006, Anonymous Anonymous said...

No firestorm here (despite a comment I posted earlier regarding growth/domestic migration). Growth can be progressive-- vis-a-vis economic growth that provides stable jobs, healthcare, and livable wages for people of all economic classes. Essentially, growth that "lifts all boats."

Growth can also be regressive; growth in minimum-wage, low-security jobs with little chance for upward mobility for the poor, while lining the pockets of the wealthy. Essentially, economic growth that is fueled by the expansion of the working-poor, without any chance of mobility. (Of course, a salient question for another time is whether economic growth in today's economy can be achieved without the expansion of a working-poor class.)

Anyway, that was a point of departure. Just trying to argue that growth, in and of itself, can be "progressive."

At 9:10 PM, January 30, 2006, Blogger Tory Gattis said...

> Just trying to argue that growth, in and of itself, can be "progressive."



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