Economists occasionally point out that societies generally move to the right during periods of sustained low growth and economic stress. Yet left-leaning advocates of low or even no growth policies rarely acknowledge the conflict between their antipathy towards growth and the sort of social values they like to see prevail. While some “the end of growth is nigh” types are simply expressing doubt that 20th century rates of increase can be attained in an era of resource scarcity, others see a low-growth future as attractive, even virtuous, with smaller, more autonomous, more cohesive communities.
Perhaps they should be careful what they wish for. Robert Shiller, in Parallels to 1937 at Project Syndicate (hat tip David L), argues for easing up on sanctions against Russia because low growth might have spurred the conflict in the first place. Although his article focuses on the risks of the conflict in Eastern Europe devolving into war, his reasoning has broader implications.
The other term that suddenly became prominent around 1937 was “underconsumptionism” – the theory that fearful people may want to save too much for difficult times ahead. Moreover, the amount of saving that people desire exceeds the available investment opportunities. As a result, the desire to save will not add to aggregate saving to start new businesses, construct and sell new buildings, and so forth. Though investors may bid up prices of existing capital assets, their attempts to save only slow down the economy.
“Secular stagnation” and “underconsumptionism” are terms that betray an underlying pessimism, which, by discouraging spending, not only reinforces a weak economy, but also generates anger, intolerance, and a potential for violence.
In his magnum opus The Moral Consequences of Economic Growth, Benjamin M. Friedman showed many examples of declining economic growth giving rise – with variable and sometimes long lags – to intolerance, aggressive nationalism, and war. He concluded that, “The value of a rising standard of living lies not just in the concrete improvements it brings to how individuals live but in how it shapes the social, political, and ultimately the moral character of a people.”
Some will doubt the importance of economic growth. Maybe, many say, we are too ambitious and ought to enjoy a higher quality of life with more leisure. Maybe they are right.
But the real issue is self-esteem and the social-comparison processes that psychologist Leon Festinger observed as a universal human trait. Though many will deny it, we are always comparing ourselves with others, and hoping to climb the social ladder. People will never be happy with newfound opportunities for leisure if it seems to signal their failure relative to others.
The hope that economic growth promotes peace and tolerance is based on people’s tendency to compare themselves not just to others in the present, but also to the what they remember of people – including themselves – in the past. According to Friedman, “Obviously nothing can enable the majority of the population to be better off than everyone else. But not only is it possible for most people to be better off than they used to be, that is precisely what economic growth means.”
Mind you, prior to the Industrial Revolution, very low growth was the norm. But that also meant that, absent war, pestilence, natural disasters, and famine, societies were stable. Ancient Egypt lasted for nearly 3000 years. In pre-modern Europe, peasants did not have much in the way of career options. Ideas like the Great Chain of Being and upward mobility in the afterlife legitimized the social order. And even though lack of modern hygiene and medical treatments meant lifespans were short, yeoman farmers who had access to pastureland could fare well. As Yasha Levine wrote in 2010, describing the research of economist Michael Perelman:
One thing that the historical record makes obviously clear is that Adam Smith and his laissez-faire buddies were a bunch of closet-case statists, who needed brutal government policies to whip the English peasantry into a good capitalistic workforce willing to accept wage slavery…
Yep, despite what you might have learned, the transition to a capitalistic society did not happen naturally or smoothly. See, English peasants didn’t want to give up their rural communal lifestyle, leave their land and go work for below-subsistence wages in shitty, dangerous factories being set up by a new, rich class of landowning capitalists. And for good reason, too. Using Adam Smith’s own estimates of factory wages being paid at the time in Scotland, a factory-peasant would have to toil for more than three days to buy a pair of commercially produced shoes. Or they could make their own traditional brogues using their own leather in a matter of hours, and spend the rest of the time getting wasted on ale. It’s really not much of a choice, is it?…
Faced with a peasantry that didn’t feel like playing the role of slave, philosophers, economists, politicians, moralists and leading business figures began advocating for government action. Over time, they enacted a series of laws and measures designed to push peasants out of the old and into the new by destroying their traditional means of self-support…
Perelman outlines the many different policies through which peasants were forced off the land—from the enactment of so-called Game Laws that prohibited peasants from hunting, to the destruction of the peasant productivity by fencing the commons into smaller lots—but by far the most interesting parts of the book are where you get to read Adam Smith’s proto-capitalist colleagues complaining and whining about how peasants are too independent and comfortable to be properly exploited, and trying to figure out how to force them to accept a life of wage slavery.
This pamphlet from the time captures the general attitude towards successful, self-sufficient peasant farmers:
The possession of a cow or two, with a hog, and a few geese, naturally exalts the peasant. . . . In sauntering after his cattle, he acquires a habit of indolence. Quarter, half, and occasionally whole days, are imperceptibly lost. Day labour becomes disgusting; the aversion in- creases by indulgence. And at length the sale of a half-fed calf, or hog, furnishes the means of adding intemperance to idleness.
Daniel Defoe, the novelist and trader, noted that in the Scottish Highlands “people were extremely well furnished with provisions. … venison exceedingly plentiful, and at all seasons, young or old, which they kill with their guns whenever they find it.’’
Readers might argue that Levine and Perelman contradict the argument made by Friedman and Shiller, that people can get on quite well if there is no growth, provided they have easy access to the necessities. However, in addition to having some surplus on a material level (as demonstrated by ample loafing time), the English pre-modern peasants also had a stable, and hence fairly secure social order.
By contrast, for ordinary people, capitalism necessitates selling one’s labor as a condition of survival. That puts workers at the tail end of the whipsaws of the marketplace.
The comparatively short period of influential unions and resulting strong labor bargaining power ameliorated those risks and produced roughly two generations of relative stability and middle class prosperity. But even that period sat in a frame of a never-quite-mature, ever-morphing social order that we’ve been indoctrinated to see as every bit as normal as the Elizabethans saw the Great Chain of Being. Most of us have deeply internalized a belief that our system is largely meritocratic and rewards personal responsibility, hard work, and adaptability. For society as a whole, those value promote individualism, status competition, and weak community ties.
Creating this modern culture took generations and entailed tremendous dislocation and stress. The proto-industrialists who drove the transformation recognized the need for a new ideology to legitimate their power and justify the workings of capitalism, and it permeates our social arrangements.
From what I can tell, the proponents of a no-growth future have sorely neglected the doctrinal side of their program. If they are right about where we are headed, they need to heed Shiller’s warning. The inertial path is that reactionaries take charge.