I’m prepping for a couple of events at the University of Manchester on Tuesday, one for the general public, one more technical, on the faults of GDP and how to improve official statistics. I’ve been looking back at H.W.Arndt’s 1978 The Rise and Fall of Economic Growth.
The overriding message is the interplay of political imperatives, economic events and economic thought in shaping the statistics people are interested in. The classical economists (not least Marx) were interested in growth because they saw the new technologies of the time transforming life. But after J.S.Mill, the book points out, there was a long period of economic thought focusing on static questions – with the notable exception of Schumpeter. Although Colin Clark, in compiling precursor GDP statistics, focused on output growth, Keynes for one was concerned largely with the level of output and employment. “There is in fact hardly a trace of interest in economic growth as a policy objective in the official or professional literature of western countries before 1950,” Arndt writes of this period.
The revival of growthmanship came thanks to the Cold War, when a combination of the newly available data on GDP for a number of countries, theories of growth from Solow and others (Harrod, Domar), and the imperative for the US to beat the Soviet Union meant GDP growth targets got inscribed in policy. In the 1950s official documents compared levels of output per capita; “The first UN Economic Survey of Europe to present growth rates for real DP … was for 1957.” Growth in the west became a key issue in the 1960 US Presidential election, and a growth target was inscribed in the founding charter of the OECD (as Matthias Schmelzer documents in his history of the organization, The Hegemony of Growth).
As Arndt points out, it didn’t take long for the emphasis on growth to face critiques, including from other economists such as J K Galbraith (Private Affluence, Public Squalor) and E.J.Mishan (The Costs of Economic Growth). Harry Johnson described the obsession with growth as fetishism, and Colin Clark too latched onto the Nixonian coinage, growthmanship, to disparage the newly all-consuming policy aim.
It’s tempting to accept that growth is so over, given how much stronger the sustainability concerns are now than in the 1960s. But I don’t think it’s so simple. Benjamin Friedman’s excellent The Moral Consequences of Economic Growth makes the case that an expanding economy enables redistribution, tolerance and other ethical desiderata.
We’re also, like the classical economists, in a period of technological change. Growth is driven by innovation in a Schumpeterian process, and we certainly do want this to continue – especially to the extent it involves new ideas and intangible outputs.
No doubt this is part of what we’ll discuss on Tuesday. Below is the pre-reading!