Moral Consequences of Economic Growth, The

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Moral Consequences of Economic Growth, The

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Economics and Politics


by: Benjamin M. Friedman

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Do you ever feel like you just can't get ahead with the bills? You are not alone. More than half of Americans believe the American dream has become impossible for most people to achieve. And two-thirds think this goal will be even harder for the next generation. (One reason for the gloominess--average full-time income has fallen 15 percent since 1975.) All this has author Benjamin Friedman worried. In his hefty, 549-page tome, The Moral Consequences of Economic Growth, the acclaimed Harvard economist and advisor to the Federal Reserve Board says economic stagnation is bad for the moral health of a nation. This book reminds us all of a truly important moral issuethe likely effects of economic growth or stagnation on societys tolerance, its fairness, and its democratic values. Ben Friedman establishes yet again why he is one of Americas best economists. Friedman, a former chair of Harvard's economics department, argues that economic growth is vital to social and political progress. The author demonstrates how economic growth promotes the social, political, and economic well-being of a citizenry, and he refutes the popular myth that economic growth is inconsistent with the development of human liberty and dignity. Witness Hitler's Germany. Without growth, people look for answers in intolerance and fear. And that, Friedman warns, is where the U.S. is headed if the economic stagnation of the past three decades doesn't soon reverse. It's not enough for gross domestic product to rise, he says. Growth also has to be more evenly distributed. The rich shouldn't be the only ones getting richer.
Friedman's arguments are provocative but at times lack rigor. In his comparisons of various countries, he offers no objective data to measure their levels of social progress, relying instead on his own--sometimes selective--interpretation of historical events. He glosses over the fact that China, where the economy has grown sevenfold since 1978, has seen little political change in that time. He also acknowledges that the Great Depression--which brought Americans together to achieve great social and political progress--tends to disprove his theory. Friedman makes a good case that the economy sometimes influences social movements, but the jury is still out on exactly when and how that happens.


Important details left out? This book begins with an interesting thesis, defining morality and its definition within a context of economic growth. The idea that economic growth or stagnation effects the mindsets of the people living in that time period is a logical argument that Friedman often well supports with historical facts. However, the exceptions to his argument make one wonder if he really believes in his own thesis, or if he just felt the need to write a book. Further, for every chapter in the book, there seem to be at least one or more flawed arguments or points that, with a little thorough thought or research, don't make sense or can easily be disproven. With these things being the case, some may find the author's argument a little hard to buy. The entire book seems to build up to the final chapter, which Friedman uses to make policy recommendations that would aid in economic growth; this final chapter could have stood alone from the book entirely, however, because the evidence in the book an his arguments elsewhere in the book (ie. the importance of education) do not add or support his final policy recommendations. His policy recommendations could have easily been listed by students in an economics class as responses to the question "What should the government do to promote economic growth?" They don't push the argument forward or indicate anything that hasn't already been suggested in the past, nor do they give suggestions as to how to go about implementing his policies.

There's a major deificiency in the chapter on environmental concerns is a lack of coverage in the arena of ecological economics. Indeed much of the most recent critcism of economic growth has emanated from this area of inquiry. Friedman only covers EF Schumacher with relatively little analysis and completely neglects the work of Herman Daly, Robert Costanza and other ecological economists. Friedman, in a private communication, admitted not being familiar with this genre which is a telling sign of how polarized the field of economics has become. The neoclassical school has dominance and maintains the mainstream academic societies, dismissing the ecological school as a sentimental aberration. On the other hand the ecological economists are content with their own associations and journals. When shall the twain meet if we are to have a sound and balanced discussion towards sustainable development?

The author argues that economic growth or its absence shapes the moral character of a society. For the broad majority of a country's citizens, whether or not living standards are rising determines whether laws are tolerant of new ideas, supportive of immigrants, or protective of poor people. Throughout history, stagnation and economic decline have been associated with intolerance, while growth has been associated with increased tolerance and democracy.
The author argues that there is plenty of evidence available from developing economies as well. In that context, his book provides many illustrations suggesting that even if rising incomes do not solve all problems, they certainly help significantly improve the moral strength of societies, including their ability to open up to welfare improving reforms.
Consider ethnic disputes. When they often originate in a fight over limited resources, economic growth enables conflicting groups to compromise simply because they become less inclined to suspect that others are doing better at their expense. As long as people see their own income rising, they worry less about doing better than others. This creates an environment favorable to political and social advances. The "moral" gains achieved then further fuel the motivation to work towards growth collectively.
The author warns, however, that trying to go too fast on the moral front simply to get ahead on that dimension without delivering on the growth agenda can prove to be a major problem, or even be unsustainable. New democracies tend, indeed, to remain fragile as long as there is a concern by the vast majority of their citizens that growth prospects are not likely or that its gains will not be shared fairly. Improving economic conditions are part of what makes a society able to sustain a democracy.
Without growth, little human progress can be achieved. On the other hand, economic growth leads to more open, tolerant, and democratic societies. From a policy perspective, Friedman argues that a more explicit recognition of this externality may be an important addition to public discourse on the importance of growth. The quality of growth matters a great deal as well, as Friedman notes, since basic fairness provides positive incentives for societies to develop.

This probing study argues that, far from fostering rapacious materialism, economic growth is a prerequisite for the creation of a liberal, open society. Harvard economist Friedman, author of Day of Reckoning: The Consequences of American Economic Policy in the 1980s, contends that periods of robust economic growth, in which most people see their circumstances palpably improving, foster tolerance, democracy and generous public support for the disadvantaged. Economic stagnation and insecurity, by contrast, usher in distrust, retrenchment and reaction, as well as a tightfisted callousness toward the poor and -- from the nativism of 19th-century Populists to the white supremacist movement of the 1980s -- a scapegoating of immigrants and minorities. Exploring two centuries of historical evidence, from income and unemployment data to period novels, Friedman elucidates connections between economic conditions, social attitudes and public policy throughout the world. He offers a nuanced defense of globalization against claims that it promotes inequality and, less convincingly, remains optimistic that technology will resolve the conflicts between continual growth and environmental degradation. Friedman's progressive attitude does not extend to his cautious approach to promoting growth in America; a critic of Bush's tax cuts and deficits, he advocates fiscal discipline to free savings for investment, along with educational initiatives, including "school choice," to boost worker productivity. Its muted conclusion aside, Friedman's is a lucid, judiciously reasoned call for renewed attention to broad-based economic advancement.

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