How much growth is enough? (Economics).(analysis of economic growth as a policy objective in postwar world)

AT THE END of the Second World War, public and official opinion in Western countries, with the Great Depression of the 1930s in mind, gave top priority among economic policy objectives to full employment. In England, the Beveridge Report on "Full Employment in a Free Society" became the agenda of the postwar world; the San Francisco conference, at the insistence of the Australian delegation, made full employment one of the objectives of the United Nations.

But already there were signs in the wind. The Atlantic Charter in 1940 included "advancement for all" among the Allies' postwar aims. Colin Clark, in his 1940 book The Conditions of Economic Progress, turned economists' attention away from static issues of resource allocation. Arthur Lewis soon after the war expounded "The Theory of Economic Growth". By 1950 it was apparent that, with the "return to scarcity", the problem was no longer how to achieve full employment but how to avoid inflation. During the 1960s economic growth became the supreme policy objective.

Economic growth was now seen as the way (a) to achieve advances in living standards, (b) to maintain internal balance by countering excess demand through increased production, (c) to maintain external balance (in the "dollar short" countries) by improving the competitiveness of export and import-competing industries, and (d) to help defuse the class struggle--increased output for all would make redistribution less important.

But already during the 1960s critics of economic growth as a policy objective came to be heard. J.K. Galbraith made a strong impression when he contrasted "Private Affluence and Public Squalor". E.J. Mishan highlighted "The Costs of Economic Growth". The New Left stirred the student revolt and the counter-culture of the hippies. More important and lasting in its effects was the emergence during the 1960s of the environmentalist movement. An influential think-tank, the Club of Rome, sponsored a study of "The Limits to Growth" which were set, so it claimed, by inadequacy of the food supply for the world's growing population.

Today, at the end of the century, environmentalism remains an influential ideology. But long-term economic growth is no longer the target of radical critics. Their target is still capitalism, but now more specifically economic rationalism and globalisation. Greens still wonder whether there are limits to growth, but their environmentalist concerns relate primarily to the "greenhouse effect" and the need for alternative sources of energy (other than nuclear energy, which they consider even more objectionable). When Greens worry about growth, their focus is on population growth--its effect on pollution and adequacy of food supply--rather than on growth of GDP.

The demonstrators at Seattle, Davos, Melbourne and Gothenburg vented their anger at economists who advocate, and politicians who pursue, market-oriented economic policies--decontrol, deregulation, privatisation--and at the trend towards the opening up of national economies which goes by the name of globalisation. They are old-fashioned protectionists and economic nationalists. They object to decontrol of foreign trade and capital movements and to multinationals which, through direct foreign investment and acquisition, establish a foothold and often acquire significant influence in national economies. But all this has nothing to do with economic growth.

Radical critics of the existing economic order also object to widespread and, some claim, increasing inequality between rich and poor within countries and between developed and under-developed economies. One also still hears objections to "consumerism", echoes of Galbraith's "private affluence and public squalor". But here again the critique is directed at the present social order, not at long-term trends.