Nothing more preoccupies the modern political process than economic growth. As never before, it is the touchstone of policy success. Countries rate their progress against others by their income per person, which can rise only through faster growth. High growth is a cause of national pride; low growth attracts accusations of incompetence in the case of rich countries and pity in the case of poor countries. A country that experiences a period of low growth goes through an agony of national soul-searching, in which pundits of the left and right expostulate about ‘where we went wrong’ and whether there is some fault in the national character.
Every newspaper, every day, quotes a political leader or a commentator arguing that we need more economic growth to improve national wellbeing and build a better society. The release of the quarterly national accounts unfailingly receives extensive coverage. Picking out growth in gross national product (GNP), journalists write as if they have an infallible technical barometer of a nation’s progress. Derived by some of the best statisticians using the internationally agreed system of national accounting, GNP appears to provide a measure of prosperity that is immune to argument. If GNP growth reaches or exceeds expectations, government leaders crow about their achievements. If it falls below expectations, opposition parties attack the government for its ineptitude. Throughout history national leaders have promised freedom, equality, mass education, moral invigoration and the restoration of national pride; now they promise more economic growth.
In the thrall of the growth fetish, all the major political parties in the West have made themselves captives of the national accounts. The parties may differ on social policy, but there is unchallengeable consensus that the overriding objective of government must be growth of the economy. The parties fighting elections each promise to manage the economy better, so that economic growth will be higher. The answer to almost every problem is ‘more economic growth’. Unemployment is rife: only growth can create the jobs. Schools and hospitals are under-funded: growth will improve the budget. Protection of the environment is unaffordable: the solution is growth. Poverty is entrenched: growth will rescue the poor. Income distribution is unequal: growth will make everyone better off. For decades we have been promised that growth will unlock possibilities that previous generations could only dream about. Economic growth will deliver a life of ever-increasing leisure, more free services, devices to relieve the drudgery of household work, opportunities for personal enrichment, exciting space travel, and cures for the diseases of humankind. The lure of growth is endless.
But, in the face of the fabulous promises of economic growth, at the beginning of the 21st century we are confronted by an awful fact. Despite high and sustained levels of economic growth in the West over a period of 50 years—growth that has seen average real incomes increase several times over—the mass of people are no more satisfied with their lives now than they were then. If growth is intended to give us better lives, and there can be no other purpose, it has failed. This fact is proved in Chapter 2 but in the meantime the reader can simply ask this question: Do I believe that on the whole people are happier now than they were 40 or 50 years ago? When asked this, almost everyone says ‘no’.
The more we examine the role of growth in modern society, the more our obsession with growth appears to be a fetish—that is, an inanimate object worshipped for its apparent magical powers. Economic growth purports to be a very ordinary idea, no more than an increase in the volume of goods and services produced each year. But closer analysis reveals that it ‘abounds in metaphysical subtleties and theological niceties’.1 The product of growth, which for ordinary people takes the form of its universal equivalent, money income, represents of course much more than a greater ability to consume. Increase in income is the very object of life in modern society, in which all the hopes and schemes of men and women are invested. Indeed, as is argued in Chapter 3, increasing income has become pivotal to the creation and reproduction of self in modern society. Thus growth takes on significance not because it multiplies the pile of goods and services available for consumption but because of the excitation it produces in people, the promise of bliss it holds.
In the 1930s and 1940s Papua New Guinea witnessed a proliferation of religious movements predicting an imminent new age of plenty. The people believed that the new age would be initiated by the arrival of ‘cargo’ sent by supernatural beings—a belief that grew from observing planes and ships that arrived from nowhere and brought cargo to colonial officials. Sometimes members of cargo cults built symbolic landing strips and warehouses, in preparation for the arrival of cargo, and abandoned traditional sources of sustenance as a mundane distraction.
Westerners might mock cargo cults as primitive superstition, but there are strong parallels with the modern growth fetish. Cargo cults and the growth fetish both invest magical powers in the properties of material goods, possession of which is believed to provide for a paradise on earth. This state can be attained through more cargo or more money; each has prophets whose role is to persuade ordinary people to keep the faith, to believe that more cargo or more money will arrive and will take believers to a plane of ecstasy. While the colonialists who ruled over the cult members were defined by their possession of large amounts of cargo, those who rule over people in the grip of the growth fetish are defined by their ownership of large amounts of money, and in both groups there is a widespread belief that anyone can join the elite by acquiring similar magnitudes of cargo or money. Westerners seem to differ in that they understand that the cargo does not appear from nowhere but must be produced, although many people believe that fortunes can be conjured from thin air, through pyramid selling, lotteries, stock market speculation, tax evasion, or myriads of get-rich-quick schemes. Even those who do no more than write books on get-rich-quick schemes often get rich quickly. Like the cargo cultists, many Westerners are willing to abandon more traditional forms of sustenance, such as a nine-to-five job, in order to pursue manna.
Growth fetishism is not confined to advanced countries. Developing countries are also obsessed—perhaps the last and most potent legacy of colonialism. They have little choice. Were they to deviate from the pursuit of maximum economic growth, we can be sure that, if ‘the markets’ did not exact retribution, the IMF and the World Bank would. The ‘Asian miracle’ was a miracle of growth. Determined to beat the West at its own game, the little tigers learned to roar by sustaining growth rates of 8 per cent, 9 per cent and even 10 per cent a year over a decade or two. In one of history’s great reversals, Western commentators and market pundits in the 1980s began to berate their own governments for failing to match the growth performance of East Asia: the strategies of the little tigers became the model to be emulated. This usually meant faster trade liberalisation, lower wages, labour market ‘flexibility’, and deep cuts in taxation and social security. The tigers of East Asia had apparently learnt their lessons from the industrialised countries so well that they had become the teachers, and political leaders in the West became the dutiful students. Why? Because 8 per cent is higher than 4 per cent.
The East Asian tigers drew their inspiration from Japan, seen the world over as a voracious growth machine. We will consider later the malaise into which the Japanese economy sank in the 1990s, but for now it is worth quoting one of the most astute observers of that country, Gavan McCormack:
The goal of attaining something like Japanese consumption levels has driven growth in much of Asia since at least the Vietnam War, and has come to define the kind of future to which people aspire. Japan is thought to have found, deciphered, and put into practice an alchemical formula for growth and prosperity. It constitutes both model and magnet, pulling upon the entire Asian region . . . In no country is social life so structured around the imperatives of economic life, or are people subjected to more pressure to consume. Nowhere is the emptiness of affluence more deeply felt.2
Socialist countries too were smitten by growth. The Cold War ideological divide was not about the desirability of economic growth. On that all agreed. What they disagreed about was which system of economic organisation—socialism or capitalism—could generate more growth. ‘Scientific socialists’ set out to prove that a properly planned and managed economy based on collective ownership of the means of production could surpass capitalism in improving the standard of living of ordinary people. It could do so because the people would be working for themselves, rather than being exploited, and because a socialist system could avoid the crippling economic crises that were integral to capitalism. The early successes of the Soviet space program shocked the United States: they seemed to suggest that the socialist system had superior productive power.
Although Karl Marx had devoted much of his early writing to the psychological impact of wage labour under capitalism—how proletarians became alienated from their true nature, and the liberating effect of free men and women working collectively for the common good—in practice socialism in Eastern Europe quickly became preoccupied with industrial production. Lenin adopted the slogan ‘Soviets plus electrification’. In China it took longer: the struggle to create new socialist men and women raged through the ’50s, ’60s and ’70s, until the pragmatic leadership of Deng Zhao Ping turned China onto the capitalist road and an orgy of money making. Growth fetishism now grips China. It has been hailed by the apologists of growth in the West, but many, within China and without, are now asking: Is this what the great Chinese experiment with socialism has come to?
There can be little doubt that in recent decades the most evangelical promoters of growth fetishism have been the economists, whose profession has since the 1970s dominated public debate and policy formation throughout the world. Economists—or, at least, that part of the profession that has had most influence since the early 1980s—are relentless advocates of more growth as the solution to all problems, and as a profession have become wholly uncritical of the economic system. One particular school of economists has achieved uncontested control: the neoclassical or free-market school. Even before the neoclassical school won the day, the rival schools of Keynesians, Ricardians and Marxists largely accepted the pre-eminence of growth, albeit with an equal emphasis on the distribution of the fruits of growth. Only the Institutionalist school, associated with names such as Veblen and Galbraith, seriously questioned the goals of the system by pointing out the corrosive effects of ‘conspicuous consumption’, consumer emptiness and ‘private affluence, public squalor’.
Today, the benefits of growth are taken to be so self-evident that one has to search hard to find any reference to them in economics texts. Open any university text and the subject is immediately defined as the study of how to use scarce resources to best satisfy unlimited wants. These ‘wants’ are assumed to be those that consumption satisfies, and the first half of the text is occupied with analysis of the behaviour of consumers in their quest to maximise their ‘utility’. By subtle fusion, human beings have become ‘consumers’ and human desire has been defined in terms of goods; it follows that the only way to make people happier is to provide more goods. In other words, the objective is growth. The other half of the textbook is devoted to macroeconomics, a subject whose purpose is above all to understand how the government should manage the economy so that the growth rate is maximised over time.
Economists have not always been uncritical advocates of growth. The early economists understood that their task was to explore the human condition and the progress of nations. This was, of course, the case with moral philosopher and political economist Adam Smith, whose analysis of how markets work has been so bastardised by 20th century advocates of free markets. The neoliberal Right’s cannibalisation of Smith’s work is a historical libel. Writing in 1865, John Stuart Mill devoted sustained attention to a concept that would be unthinkable to today’s economists and policy makers—the idea of the stationary state. Like many of his contemporaries, he believed that any serious discussion of the relationship between economic growth and human wellbeing leads ineluctably to a consideration of the stationary state. Mill asked, ‘Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind?’3 One searches in vain for any mention of these questions in modern economics texts. In a passage whose sentiments have a surprisingly modern ring, Mill declared that he had no aversion to a stationary state of capital and wealth:
I confess I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling, crushing, elbowing, and treading on each other’s heels, which form the existing type of social life, are the most desirable lot of human kind, or anything but the disagreeable symptoms of one of the phases of industrial progress . . . the best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.4 There have been few dissenters in recent times, but one of the most penetrating was E.J. Mishan. In a prescient essay published in 1967, Mishan, then Reader in Economics at the London School of Economics, prefigured some of the most powerful critiques of growth to come from outside the profession. He prefaced his essay with the observation that popular post-war political debates served only to confuse the chief question that confronted Britain: whether to seek to adjust the environment to gratify human nature or to adjust human nature to preserve the environment. Mishan’s book, The Costs of Economic Growth, exposed the mystical reverence in which GNP growth had come to be held: ‘Apparently one has but to consult it to comprehend the entire condition of society. Among the faithful . . . any doubt that, say, a four per cent growth rate . . . is better for the nation than a three per cent growth rate is near-heresy; is tantamount to a doubt that four is greater than three’.5
While doubters such as Mishan could still find a publisher in the 1960s, the economic and political changes of the 1970s put an end to that. The history of the world entered a new phase. Confronted by simultaneous inflation and unemployment in the emerging globalised world, Keynesianism was forced onto the back foot. At the same time, right-wing intellectual activists began lifting the nostrums of neoclassical economics from the textbooks and turning them into policy prescriptions. This task was left in large part to right-wing think tanks outside academe. The canon of neoliberalism that emerged swept away the Left and has faced no serious intellectual or political challenge.
The fact that neoliberalism remains unchallenged is extraordinary given the events of recent history, for laissez-faire capitalism has been marked by devastating failures. The transition of Eastern Europe from central planning to private ownership and free markets has plunged citizens of those countries into material poverty and social chaos, creating a new form of criminal capitalism. World markets have become extraordinarily volatile and are now dominated by exchange rate speculators, so that various countries, often for no good reason, have been thrown into crisis by speculative attacks on their currencies, resulting in widespread and prolonged misery. In addition, the costs of economic growth, which fall largely outside the marketplace and so do not appear in the national accounts, have become inescapably apparent—in the form of disturbing signs of ecological decline, an array of social problems that growth has failed to correct, and epidemics of unemployment, overwork and insecurity. Finally (and this a theme to which I return repeatedly), despite succeeding in delivering much higher incomes for the majority of people, those societies are characterised by a prevading and deep-rooted malaise. The neoliberal growth project has failed. The dismal science has a dismal record.
After sustained attacks from outside the profession, a few economists have at last acknowledged that the link between growth and wellbeing may not be self-evident. But no serious consideration is given to the critique; after all, conceding that more economic growth may not make people any better off would be a fatal blow to economists—attacking their credibility, their influence, and their jealously guarded place as conjurors of cargo. Gregory Mankiw, regarded as one of the more enlightened economists of the 1990s and author of an influential US textbook, is typical in devoting two pages in a volume of nearly 800 to the question of the relationship between GDP and wellbeing. But, rather than take up the serious arguments or consider the mountain of empirical evidence, Mankiw resorts to platitudes and tautologies in defence of GDP: ‘Because most people would prefer to receive higher income and enjoy higher expenditure, GDP per person seems a natural measure of the economic wellbeing of the average individual’.6 As we will see, the idea that it makes sense to measure a person’s wellbeing by the amount of money they have is in fact highly contentious. But what may slip by in Mankiw’s apparently innocuous statement is the reliance of neoliberal economists on the belief that what people as individuals prefer is, always and everywhere, good for them. An alcoholic would prefer more drinks, but we don’t measure their wellbeing by the number of drinks they have.
The economists have a well-worn escape route: ‘We have nothing to say about how people’s preferences are formed. We are not psychologists or sociologists, we just take preferences as given’. On this the elaborate structure of economics is built. More importantly, it provides the ideological basis for neoliberal philosophy and free-market policies. But what the economists, philosophers and policy makers do not want pointed out is that the markets themselves influence preferences. If consumers do not act in their own interests or can serve their interests only by acting collectively (subjects I return to), the whole structure of neoliberalism begins to crumble.
For the most part, neoliberal economists are schooled in mathematics and economic theory and are innocent of philosophy, psychology and history. They are notorious for their ignorance of the fact that neoclassical economics embodies a specific philosophical position known as ‘utilitarianism’. So, for them, just as the capitalist firm described in the textbooks transforms inputs into goods and services for the market, wellbeing is produced by pouring goods and services into a receptacle marked ‘human being’—as if people were production processes that convert commodities into happiness. Thus Mankiw, forced to concede that GDP does not directly measure those things that make life worthwhile, declares nevertheless that ‘it does measure our ability to obtain the inputs into a worthwhile life’.7
Neoliberal economists have simply grown up absorbing the ideology of growth and are now, like Soviet apparatchiks, unable to question it. Some of their eminent predecessors were more sensitive to the questions of wellbeing and economics. Even the originators of the system of national accounts that now rules our lives were acutely conscious of its limitations. John Maynard Keynes, John Hicks and Simon Kuznets first developed the system of national accounting because their governments needed better ways of managing their economies in the face of dramatic swings in the business cycle between the world wars. These economists repeatedly warned against using measures such as GNP as indicators of prosperity. Kuznets, the originator of the system of uniform national accounts in the United States, warned Congress in 1934, ‘The welfare of a nation can scarcely be inferred from a measurement of national income . . .’8 Kuznets watched in dismay as his warnings were ignored and economists and policy makers grew accustomed to equating prosperity with growth in national income. By 1962 he was writing that the construction and use of the system of national accounting must be rethought: ‘Distinctions must be kept in mind between quantity and quality of growth, between its costs and returns, and between the short and the long run . . . Goals for ‘more’ growth should specify more growth of what and for what’.9 The warnings went unheeded.
In 1995 a report prepared for the Merck Family Fund launched a devastating attack on growth fetishism in the United States. Yearning for Balance reports the results of a detailed investigation, through a national survey and focus groups, of US citizens’ perspectives on consumption and the American lifestyle.10 The report reached four important conclusions. First, Americans believe that the value system that dominates their society is wrong: ‘They believe materialism, greed, and selfishness increasingly dominate American life, crowding out a more meaningful set of values centered on family, responsibility, and community’.11 The vast majority want their lives to be based on values of family closeness, friendship, and individual and social responsibility, yet they believe their society fails to promote these values. They desperately want to achieve a balance between the material and non-material sides of their lives, since the latter has been driven out by greed.
Second, Americans believe that materialism has overtaken society, with dire consequences; that ‘lust’ for material things lies at the root of crime, family breakdown and drug addiction. Four-fifths believe they consume far more than they need to and are concerned about the inability of people today to save for the things they want. Children are considered to be especially possessed by a corrupting materialism. Third, Americans are ambivalent about the contradiction they face. They can see that materialism is corroding society and themselves, but they are too fearful to change their behaviour in any significant way. They are wedded to ‘financial security’, even though they understand that non-material aspirations are the ones that will give them contented lives. They therefore avoid too close an examination of their own behaviour, yet the contradiction gives rise to a deep conflict of conscience.
Finally, Americans understand, albeit somewhat vaguely, that rampant consumerism is destroying the natural environment. There is an overwhelming concern that the world left for their children will be less safe and less secure and will have the wrong value system. In stark contrast with the optimism of the postwar boom, there is a pervasive sense that things can only get worse, that the future is bleak.
Yearning for Balance demonstrates that, in the nation that epitomises growth fetishism, the growth project has for the most part failed to improve people’s lives. It is not simply that other trends in society, occurring in parallel with rising incomes, have offset the benefits of wealth: the process of economic growth itself has produced a seriously sick society. The richest people in the world are saying they are miserable, that it’s not worth it and, most disturbingly of all, that the process of getting rich causes the problems. Continued pursuit of material acquisition gives rise to inner conflicts that become manifest in society in various ways. At the level of the individual, some religious groups and popular gurus attempt to reconcile acquisitiveness and religious belief: ‘God wants you to be rich’. For Christians, this takes some work, given the Bible’s unambiguous statements about the effects of wealth: ‘The love of money is the root of all evil’; ‘It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God’; ‘For what shall it profit a man, if he shall gain the whole world, and lose his own soul?’. Because they look so uncomfortable doing so, devotees of this peculiar late 20th century theology of acquisitiveness display its implausibility whenever they talk about it. Other people pretend that their real interest is in something for the benefit of humankind, such as advancing information technology, and that wealth is an accidental by-product they can take or leave.
Others do not attempt to reconcile wealth with purity but investigate ways of cultivating the deeper aspects of themselves. This explains the proliferation of self-help books, a publishing phenomenon in itself. It is easy to be dismissive of this trend because the books, often written by unctuous self-styled gurus, are full of pop psychology, false promises and superficiality. But the Yearning for Balance report suggests that the self-help movement represents something important—the search for meaning beyond the world of consumption; the recognition, if only subliminally, that the socially sanctioned recipe for contentment is a sham. Although one might ask what such people are searching for, a more interesting question to ask is why a larger number of people appear not to be making any attempt to resolve the contradiction. Like Jack Nicholson’s rebellious character ‘Mack’ in One Flew over the Cuckoo’s Nest, at least those in the self-help movement are trying; at least they are looking for another way, rather than succumbing to the deadening security of the consumer asylum. But of course self-help can go only so far. The growth fetish is the product of a social structure that skews the priorities of individuals. Just as we will not solve our environmental problems by appealing to voluntary action by enlightened individuals, the answer to the growth fetish is political.
One of the more subtle effects of the rise of neoliberalism is the way this school of thought has countered popular views about the distribution of power in society. For neoliberals, the enemy of freedom is collectivism and the power of the state. They argue that free markets and competition quite properly give power to individuals because only individuals can make choices about what is in their interests. The individual is not the citizen but the consumer, and for the consumer to be powerful everything must be brought into the realm of the market. Of course, ‘empowering the consumer’ means entrenching inequality because the power of consumers is directly proportional to their incomes. Empowering the consumer provides the rationale for the commodification of everything, including education, the natural environment and government services. But in societies restructured on neoliberal principles, it is not really the consumers who are served by the shift in power. The shift in power serves those who acquire more power as the influence of government is pared back—the corporations and the financial markets. In fact, neoliberalism takes power from individuals because, whereas previously individuals had power in the market as well as power as citizens acting in the political process, now they have power only in the market. But the power of choice in the marketplace is no power at all. Indeed, as is shown in subsequent chapters, the individual becomes a victim of the forces of the market.
In practice, growth fetishism has been responsible for a historic transfer of political authority from the state to the private market. If growth is the path to greater national and personal wellbeing, should not those responsible for growth be encouraged at every opportunity? Growth fetishism therefore cedes enormous political power to business, and corporations are never reluctant to argue that, since they are creators of wealth, it is their interests that should be paramount for government. In any political debate, whether it be about health funding, rail privatisation, greenhouse policies or a new freeway, those who argue that a certain decision will facilitate investment immediately have the upper hand. Only when the social costs of more investment are obvious and overwhelming—for example, mining in a national park or the health damage caused by further investment in tobacco production—might governments step in to oppose ‘development’.
The enormous growth in global financial markets consolidated the argument that the markets are irresistible, so it would be folly to resist. The process was largely completed by the end of the 1980s. The fall of the Berlin Wall in 1989 drove home the message that the Left had lost its raison d’être.12 While the Left in the West was traditionally too moderate, and too committed to political and civil liberties, to support socialism as practised in Eastern Europe, the Soviet bloc had nevertheless tempered the excesses of capitalism and served as a bulwark against the final triumph of US corporate capitalism.
Governments of all persuasions are now mesmerised by economic growth and find it awkward to think about national progress more broadly. Growth, investment, development, competitiveness, free trade—these aspects of the market system are powerful political symbols, before which political parties of the Left and Right kneel. In the last 25 years, politics in the West has been marked by the ideological convergence of the main parties.
The process has been one in which social democrats have abandoned their traditional commitments and converged on the free-market policies of the conservatives. It is now a commonplace to observe that the conservatives, seeing their political ground occupied by the parties of the Left, have purified their neoliberalism, discarded the old ideas of social conservatism, and moved further to the Right. But this process is now starting to turn in on itself. In one state of Australia, for instance, when the conservative party installed a moderate to replace a right-wing leader who had lost two elections, a party official observed that they had not been able to outflank the Labor government from the Right, so it was time to try to do so from the Left.13 The convergence of social democratic politics on Thatcherism was possible because the fundamental goal of both social democracy and Thatcherism had become the same—more growth—and once the socialist method of attaining more growth lost credibility there was nowhere else to go. In fact, these trends provided conservative thinkers such as Francis Fukuyama with the raw material for a grand theory of convergence:
. . . while earlier forms of government were characterized by grave defects and irrationalities that led to their eventual collapse, liberal democracy [is] arguably free from such fundamental internal contradictions . . . [I]t makes sense . . . to speak of a coherent and directional History of mankind that will eventually lead the greater part of humanity to liberal democracy.14
The political implications of the ideological convergence that occurred during the 1980s and 1990s have been profound. While the technocratic elites were rewarded ever more generously by the markets, for many working people the benefits of growth became more elusive: incomes at the bottom stagnated, unemployment rose, and working hours became longer. But, with the exception of Japan, even in the less stable economic environment of the 1980s growth resumed and consumption preoccupied the masses as never before.
As a result of these changes, and especially the convergence of the political parties, the political culture of Western democracies has been transformed. The blame for this must be laid principally at the feet of the social democratic and labour parties. People no longer know what the parties of the Left stand for. The policies of these parties no longer resonate. Party loyalty has been eroded because the sense of class solidarity that once defined the parties of the Left has evaporated. The more the parties converge in substance, the more they must attempt to differentiate themselves through ‘spin’. The politics of spin are the politics of falsity, and there is a popular belief that the democratic process has become an elaborate charade. The major parties, now dominated by careerists, become frenzied about trivial things, lashing out at their opponents with declarations of outrage while tacitly agreeing not to break the neoliberal consensus on what really matters. No wonder people feel alienated and political space is created for the emergence of parties of the far Right. The irony is that, instead of blaming the system and the operators who benefit from it, some who become alienated turn their bitterness on those least able to protect themselves—single mothers, immigrants and indigenous people, for example.
Growth fetishism and its handmaiden neoliberalism thus undermine democracy. They have eroded democratic practice and democratic awareness in ordinary people. Social democracy is being superseded by a sort of market totalitarianism. When older people bemoan the corruption of modern politics, they nevertheless feel that it is a historical aberration impinging on the constancy of democratic rights and that in the end the people can still have their say. Disturbingly, younger people hear only the accusation that the system is incurably corrupt—and they believe it.