The Economic Growth Fallacy
I have no disagreement with his facts. I am, however, uncomfortable with his conclusions. His starting point is that economic stagnation is a bad thing. I disagree. More is not always better. It depends where you are on the Lifecycle. For a start-up company, just as for a growing child, or for an emerging economy, more IS better. No question. But for a company in post Go-Go, or for a grown person, and for a nation with what I would call a “saturated economy,” more is not always “more.” It often ends up being less. There is more in one thing but less in something else. On the margin, what we gain in one field is much less than what we lose on the other field.
What am I referring to?
I have noticed that in developed economies the standard of living keeps rising while the quality of life is going down. Men and women are chasing after more and more economic wellness, but have less and less time to enjoy what they already have. We have more possessions but with more stress. I witness more laughter in one day in developing countries than in a whole year in a developed country.
If we place quality of life on the vertical axis and economic growth on the horizontal axis, the curve that shows the relation of the two variables will be, say, a normal distribution. It will not be linear, ascending up and up forever.
A “saturated economy” to me is one where, on the margins, one more unit of economic wellness produces one less unit of quality of life. Do we need in America one hundred different versions of bread? And indeed the enormous choices in almost everything? And planned obsolescence? What a tremendous cost we pay for this abundance in human energy to produce and distribute it
Emerging economies need more of what they already have because they have so little. But why us? Economic stagnation, a halt to chasing growth as if it were a necessity, is exactly what we need.
What should be our new goal then? Improving our quality of life.
Years ago while I was driving along the coast from San Diego, California to Los Angeles, and as I was gazing out the window, I had an insight about the past and the possible future of civilization. First I saw agricultural fields. Then there were chimneys. Then I reached Laguna Beach, a small picturesque town populated mainly by artists, many of whom live quite modestly, enjoying their leisure time.
This is it, I said to myself. This is the future. This is how it should be: Take early retirement. When you are young, earn enough for food and shelter to feel secure in old age, and when you reach your saturation point, stop working for more money. That is when you should start working to secure free time to grow emotionally, socially, and artistically.
Once I had a client who challenged consultants and economic theory. He said to me that he disagreed with consultants who constantly preach growth, and who tell him that he needs to grow more. He is happy to be a hundred million dollar company forever, he said. It is good enough for him because he wants to enjoy his life, his free time and his family.
Current strategic theory tells us that if we do not grow we die. Not true. We need to change, yes, but change does not necessarily mean to grow.
A company needs to change. Granted, it needs to adapt to a changing environment. If it does not do so it becomes irrelevant and will be abandoned by its customers and die.
OK, but change does not necessarily mean growth in the quantity. It can mean growth in the quality. “Bigger is not necessarily better.” “Better can be more, but in quality of life…..”
It is possible for a person or family to say “We have enough. Now let us enjoy what we have.” The same can apply to a company that can decide that its present size meets its needs, and it will now focus on striving continuously to be the best it can be at its present scale. For that, it will constantly change and improve on what it does, how and why.
But this idea or principle does not apply only to people or companies. It can apply to society as well.
The nation can concentrate on “better” national quality of life: freer time, more art, culture, sports, mental and physical health improvement, less crime, less mental diseases, better education. There is so much more to life than how much we have not only for a person, family or a company, but for the nation as well.
Take unemployment. One way to solve it, of course, is to have MORE ECONOMIC activity. So we are back into “more is better.” But what if we change our goals, so that we emphasize the importance and necessity of maintaining a higher quality of life? How then might we solve unemployment?
Have job sharing. Then the weekend for people will consist of four or three days rather than only two. Play more. Work less. More people will work but less. But then people will earn less money, you might reasonably say. That is exactly the idea. It is not necessary to have more. Just enough.
Why does the USA have to be the economic powerhouse of the world? Why can it not be a country with the best quality of life, complete with art, sports, and time and space for self-growth?
Post-industrial society should not stand for more economic growth. We need to change goals as we move up the Lifecycle curve. Not only in personal and corporate life, but also in national policy.
Ichak Kalderon Adizes