1649. More on growth.

Provocation #12.Interesting Ted Talk video posted monday. By Dambisa Moyo
https://www.ted.com/talks/dambisa_moyo_economic_growth_has_stalled_let_s_fix_it

I don’t go into this to criticize her but this is a symptom of a failure on the part of economics to teach systems thinking. Here are parts of the transcript. Many economists could give a talk like this in content and logic. Her original in bold

Our ability to create and sustain economic growth is the defining challenge of our time.

Increasing growth has a high chance of harming the environment and driving towards the intolerable 4°. It also fuels the machine of income inequality

Of course there are other challenges — health care, disease burdens and pandemics, environmental challenges and, of course, radicalized terrorism. However, to the extent that we can actually solve the economic growth challenge, it will take us a long way to solving the challenges that I’ve just elucidated.

Strong strong assertion but there is no solid analysis that showsincreased growth will help solve those problems.

More importantly, unless and until we solve economic growth and create sustainable, long-term economic growth, we’ll be unable to address the seemingly intractable challenges that continue to pervade the globe today, whether it’s health care, education or economic development.

Interersting shift in logic, making economic development one of the intractable challenges.  That begs the question:is development and or growth good for the species and hte planet?

The fundamental question is this: How are we going to create economic growth in advanced and developed economies like the United States and across Europe at a time when they continue to struggle to create economic growth after the financial crisis?

She said that growth was the defining challlenge but insead of any analsis growth is just asserted.

They continue to underperform and to see an erosion in the three key drivers of economic growth: capital, labor and productivity. In particular, these developed economies continue to see debts and deficits, the decline and erosion of both the quality and quantity of labor and they also see productivity stalling.

Capial gains from growth, labor is replaced, and productivity – output per worker – is the logic that replaces workers with robots (se the Finacial Time yeseterday on the robotic tgroeat to white collar jobs)

In a similar vein, how are we going to create economic growth in the emerging markets, where 90 percent of the world’s population lives and where, on average, 70 percent of the population is under the age of 25? In these countries, it is essential that they grow at a minimum of seven percent a year in order to put a dent in poverty and to double per capita incomes in one generation. 

Economic growth in the “emerging markets”(I put in “”‘s because the social structure of development tends to reward elites and push people off the land.) The seven percent really has to do with return to capital, not to the good of the country. As we know, inthe current regime most increase goes to the one percent.

Her heart is in the right place but the economic mind, following the actual course structre in most universites, is filled with memes that get in the way of analysis

Economic growth matters. With economic growth, countries and societies enter into a virtuous cycle of upward mobility, opportunity and improved living standards. 

Pure assertion. Sure, some move up, bu the number is small. Wages might even increase, but less than prices.

Without growth, countries contract and atrophy, not just in the annals of economic statistics but also in the meaning of life and how lives are lived. Economic growth matters powerfully for the individual. If growth wanes, the risk to human progress and the risk of political and social instability rises, and societies become dimmer, coarser and smaller.

The assertion is that without growth things get worse (why?) and with it they get better. Pure assertion to which there is very significant counter evidence.

The context matters. And countries in emerging markets do not need to grow at the same rates as developed countries.

So we want a regime that lets the developed countries continue to outpace the eemerging. What is the real narrative there?

Sensing resistance she adds,

Now, I know some of you in this room find this to be a risky proposition. There are some people here who will turn around and be quite disillusioned by what’s happened around the world and basically ascribe that to economic growth. You worry about the overpopulation of the planet. And looking at the UN’s recent statistics and projections that the world will have 11 billion people on the planet before it plateaus in 2100, you’re concerned about what that does to natural resources — arable land, potable water, energy and minerals. You are also concerned about the degradation of the environment. And you worry about how man, embodied in the corporate globalist, has become greedy and corrupt.

But I’m here to tell you today that economic growth has been the backbone of changes in living standards of millions of people around the world. 

Increasing migrations, policee state, land stealing, and high rise living in actually pretty bad conditions. Raising children and caring for old when there is no longer any comunity is a real deprivation.  Sure incomes have goe up for many, but prices rise and what  can bought has shifted from rural agricultue markets with variety to reduced varities of much less freshness.

The definition of capitalism, very simply put, is that the factors of production, such as trade and industry, capital and labor, are left in the hands of the private sector and not the state.

Amazing to me that such awkward thinking can so often be passed off and acccepted. (Wait till we see the moderator join in.) This just a few memes strung together. Neoliberal ideology, and misses that the current trend of capitalism to create unity with the state to control populations and institutions for the good of corporations and local elites.

It’s really essential here that we understand that fundamentally the critique is not for economic growth per se but what has happened to capitalism. And to the extent that we need to create economic growth over the long term, we’re going to have to pursue it with a better form of economic stance.

I read this as syaing to increase profit we need more discipine and to get rid of the negatives that “are what happened to capitalism.”

The next paragraphs cry outfor analysis but it is missing. Only the memes are left.

Economic growth needs capitalism, but it needs it to work properly. And as I mentioned a moment ago, the core of the capitalist system has been defined by private actors. And even this, however, is a very simplistic dichotomy. Capitalism: good; non-capitalism: bad. When in practical experience, capitalism is much more of a spectrum. And we have countries such as China, which have practiced more state capitalism, and we have countries like the Unites States which are more market capitalist.

Our efforts to critique the capitalist system, however, have tended to focus on countries like China that are in fact not blatantly market capitalism.

However, there is a real reason and real concern for us to now focus our attentions on purer forms of capitalism, particularly those embodied by the United States. This is really important because this type of capitalism has increasingly been afforded the critique that it is now fostering corruption and, worse still, it’s increasing income inequality — the idea that the few are benefiting at the expense of the many.

The two really critical questions that we need to address is how can we fix capitalism so that it can help create economic growth but at the same time can help to address social ills.

In order to think about that framing, we have to ask ourselves, how does capitalism work today? Very simplistically, capitalism is set on the basis of an individual utility maximizer — a selfish individual who goes after what he or she wants. And only after they’ve maximized their utility do they then decide it’s important to provide support to other social contracts. Of course, in this system governments do tax, and they use part of their revenues to fund social programs, recognizing that government’s role is not just regulation but also to be arbiter of social goods. But nevertheless, this framework — this two-stage framework — is the basis from which we must now start to think about how we can improve the capitalist model.

But she had said earlier that the state should stay out. I leve the rest of her talk as self evident. But do see the interaction by the moderator.

I would argue that there are two sides to this challenge. First of all, we can draw on the right-wing policies to see what could be beneficial for us to think about how we can improve capitalism.

In particular, right-leaning policies have tended to focus on things like conditional transfers, where we pay and reward people for doing the things that we actually think can help enhance economic growth. For example, sending children to school, parents could earn money for that, or getting their children inoculated or immunized, parents could get paid for doing that.

Now, quite apart from the debate on whether or not we should be paying people to do what we think they should do anyway, the fact of the matter is that pay for performance has actually yielded some positive results in places like Mexico, in Brazil and also in pilot programs in New York.

But there are also benefits and significant changes underway on left-leaning policies. Arguments that government should expand its role and responsibility so that it’s not so narrowly defined and that government should be much more of an arbiter of the factors of production have become commonplace with the success of China. But also we’ve started to have debates about how the role of the private sector should move away from just being a profit motive and really be more engaged in the delivery of social programs. Things like the corporate social responsibility programs, albeit small in scale, are moving in that right direction. Of course, left-leaning policies have also tended to blur the lines between government, NGOs and private sector.

Two very good examples of this are the 19th-century United States, when the infrastructure rollout was really about public-private partnerships. More recently, of course, the advent of the Internet has also proven to the world that public and private can work together for the betterment of society.

My fundamental message to you is this: We cannot continue to try and solve the world economic growth challenges by being dogmatic and being unnecessarily ideological. In order to create sustainable, long-term economic growth and solve the challenges and social ills that continue to plague the world today, we’re going to have to be more broad-minded about what might work.

10:01 Ultimately, we have to recognize that ideology is the enemy of growth.

10:07 Thank you.

10:08 (Applause)

Enter Bruno the moderator. (Times are in the orignal ted talk)

10:14 Bruno Giussani: I want to ask a couple of questions, Dambisa, because one could react to your last sentence by saying growth is also an ideology, it’s possibly the dominant ideology of our times. What do you say to those who react that way?

10:25 DM: Well, I think that that’s completely legitimate, and I think that we’re already having that discussion. There’s a lot of work going on around happiness and other metrics being used for measuring people’s success and improvements in living standards. And so I think that we should be open to what could deliver improvements in people’s living standards and continue to reduce poverty around the world.

10:45 BG: So you’re basically pleading for rehabilitating growth, but the only way for that happen without compromising the capacity of the earth, to take us on a long journey, is for economic growth somehow to decouple from the underlying use of resources. Do you see that happening?

10:59 DM: Well, I think that I’m more optimistic about human ability and ingenuity. I think if we start to constrain ourselves using the finite, scarce and depleting resources that we know today, we could get quite negative and quite concerned about the way the world is.

11:14 However, we’ve seen the Club of Rome, we’ve seen previous claims that the world would be running out of resources, and it’s not to argue that those things are not valid. But I think, with ingenuity we could see desalination, I think we could reinvest in energy, so that we can actually get better outcomes. And so in that sense, I’m much more optimistic about what humans can do.

11:34 BG: The thing that strikes me about your proposals for rehabilitating growth and taking a different direction is that you’re kind of suggesting to fix capitalism with more capitalism — with putting a price tag on good behavior as incentive or developing a bigger role for business in social issues. Is that what you’re suggesting?

11:55 DM: I’m suggesting we have to be open-minded. I think it is absolutely the case that traditional models of economic growth are not working the way we would like them to. And I think it’s no accident that today the largest economy in the world, the United States, has democracy, liberal democracy, as it’s core political stance and it has free market capitalism — to the extent that it is free — free market capitalism as its economic stance. The second largest economy is China. It has deprioritized democracy and it has state capitalism, which is a completely different model. These two countries, completely different political models and completely different economic models, and yet they have the same income inequality number measured as a Gini coefficient.

12:36 I think those are the debates we should have, because it’s not clear at all what model we should be adopting, and I think there needs to be much more discourse and much more humility about what we know and what we don’t know.

For an alternative critique see the interview with Frithof Capra,
http://evonomics.com/why-economists-dont-know-how-to-think-about-growth/
What s so striking is the different tone and vocabulary

FC: Like “growth,” “development” is used today in two quite different senses, one qualitative and the other quantitative. For biologists, development is a fundamental property of life. All living systems develop; life continually reaches out to create novelty. The biological concept of development implies a sense of multi-faceted unfolding, of living organisms, ecosystems, or human communities reaching their potential. Most economists, by contrast, restrict the use of “development” to a single economic dimension, usually measured in terms of per capita GDP. Economists recognize only money and cash flows, ignoring all other forms of fundamental wealth — all ecological, social, and cultural assets. Now, when we speak about “sustainable development,“ we need to specify which kind of development we have in mind. If “development” is used in the current narrow economic sense, such economic development can never be sustainable, and the term “sustainable development” would be an oxymoron. If, however, the process of development is understood as more than a purely economic process, including social, ecological, and spiritual dimensions, and if it is associated with qualitative economic growth, then such a multidimensional systemic process can indeed be sustainable.

EJ: Economists, especially those of the neoliberal mold, argue that the most important criteria to pay attention to are financial: quarterly profits, return on investments, number of jobs created, Gross Domestic Product, etc. In many cases, peoples’ salaries are based on these criteria. Non-financial criteria, such as impacts to the environment, are considered to be what are called “externalities” and not included in their assessments. What reason would people have to include non-financial criteria in their assessments and how could such a change in economic culture be achieved?

FC: This is really a variation on the basic theme we are discussing. The criteria used by neoliberal economists are criteria of quantitative growth, which is manifestly unsustainable. We urgently need to shift to criteria of qualitative growth and development, most of which are non-financial, to overcome our multi-faceted global crisis. The only way this change will come, in my view, is through pressure by grassroots movements.

EJ: Much of the modern economic order is generated from the top-down. International agreements such as the Trans Pacific Partnership and North American Free Trade Agreement or institutions such as the World Trade Organization and International Monetary Fund often set the rules for domestic economic policy. Ecology, on the other hand, is driven from the bottom up. How can such an inversion as you are suggesting be implemented without a fundamental restructuring of the economic system?

FC: To create an economic system that is in harmony with nature’s principles of ecology, we need to fundamentally restructure our global financial institutions. Several economists in academia and in the global civil society have been working on this issue; see, for example, the book The Case Against the Global Economy. 

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