This year is the 500th anniversary of Thomas More’s Utopia, a book that, in the midst of the political, social and technological upheavals of the first Renaissance, imagined a radically different society. “Utopia” literally means “no-place”, and over time the word has come to mean a fantasy land where all our problems have been solved.
I have argued elsewhere that the 21st century can be humanity’s best. This can be the century when we solve poverty and disease, and flip the human condition from scarcity to abundance—for all.
But I doubt that we will reach that utopia by following the same economic map that guides us today. In too many contexts, we concentrate faster than we distribute. We deplete faster than we regenerate. Society serves the economy, when surely it should be the other way around.
A new map is needed to navigate this new economic world of global markets, global finance, digital monopolies, automation and aging workforces. And it begins with rethinking our destination, “growth”.
Economic growth matters
Today’s economic map aims for a place marked “growth”.
As destinations go, economic growth matters. Bigly. If we live in the “developing” world—say, in Nambia—our community has a long list of development needs: physical infrastructure, like roads, water systems, power systems, sewage, telecom and ports; social infrastructure, like schools and hospitals; and government infrastructure like courts, police, statistics agencies, public health bureaus and all the bureaucracies that help hold society together. All these things make life better, all these things cost money, and the faster we grow our economy the faster we can afford to build (and maintain) them.
China is the headline example of how sustained economic growth can end poverty—and, in the space of two generations, transform a society whose main economic output was cheap manufactures into one that is poised to lead the way in new technologies like AI and quantum computing.
Economic growth is an important destination for “developed” countries, too. First, because every developed country has a lot of developing left to do (in my home province of Saskatchewan, Canada, one in four children still live in poverty). Second, because our domestic politics gets uglier and uglier the closer we get to the opposite destination (i.e., economic stagnation).
To see why, look first at a fast-growing country—again, take China. China’s economy is growing at a rate of about 6.5% this year. All else being equal, that means the Chinese government’s total tax revenues will grow about 6.5%, too. That means the government can afford to spend on every stakeholder in society this year the same amount that it spent on them last year, and has a big pot of totally new money to dish out however it wants. No wonder people are happy with their government. No hard choices.
But in a slow-growth country (which is to say, all the world’s advanced economies), if government wants to spend more money somewhere, it either needs to: (a) raise taxes or (b) spend less money somewhere else. Either way, the process creates winners and losers. Hard choices. Bitter politics, and bitter partisan divides. (Sound familiar?)
So economic growth matters. Our problem is: it matters too much to us. The environmental movement has been hammering this point into all of our heads for more than 50 years. Economic growth at the expense of our climate, of fresh water, of fresh air, of nonrenewable resources or of the global commons like oceans and fisheries and forests doesn’t move civilization forward in any long-term sense.
The bad consequences of our growth addiction show up in the short-term, too. We all saw this, spectacularly, in the finance industry during the global financial crisis. An industry pursued growth, but broke the ecosystem upon which growth depends.
We are seeing this addiction again today—this time, in the tech industry. From Facebook to Uber to AirBnb and Amazon, tech businesses are rushing to build “platform monopolies”. They, and the venture capital that funds them, believe that “network effects” within our digital society make these games “winner-take-all”. And so the emphasis across the tech startup sector is almost exclusively on growth. Society can sort out the risks later—whether it’s how to protect domestic political discourse from foreign interference, how to protect workers and consumers in the gig economy, or how to usefully re-employ whole labor markets that have been displaced by AI and automation.
We are naïve if we think that these risks will sort themselves out. They won’t.
There is good evidence, for example, that within developed countries “the economy” is now splitting into two: the one, a “dynamic sector” of high-value industries where AI, robotics and other technologies are creating tremendous gains in wealth and productivity; and the other, a “stagnant sector” of low-value industries with low job security and low pay.
Now, depending on your political stripes, conditions in the stagnant sector are either “deeply worrying” or “the way the world works”.
But what we should all be worried by evidence that these conditions are beginning to drag down the overall economy. (For econ-geeks, here’s the paper. For the rest of us: It’s like we’re all at a house party playing Monopoly. As the game goes on, more and more of us go bankrupt. The crowd sitting bored on the sofa, waiting for the game to end, is getting bigger, while the group still having fun around the table is getting smaller and smaller. The whole party’s getting dull. But then, the rules aren’t designed to keep everyone in play. They’re designed to declare a winner.)
Question our destination
Again and again, we steer for growth with a single-mindedness that would make Ahab proud—and again and again, we risk wrecking our ship en route.
So it’s time to ask ourselves some utopian questions: Is our economy aimed at the right destination? And if that destination’s not “growth”, then where?
Three links to help navigate the now
- Sign up for monthly updates from the Institute for New Economic Thinking. INET was founded by Nobel economists after the financial crisis with a mission is to make economics serve society. The best resource on the web for…yep, you guessed it…new economic thinking.
- Read Douglas Rushkoff’s book, Throwing Rocks at the Google Bus. Doug and I shared the stage at a summit on the “circular economy” this summer. Doug’s the one who coined the phrase “social media”, and his latest book shakes popular faith in today’s tech sector.
- Follow Adair Turner. He’s a former financial regulator (in the UK), and the one banker who just makes sense. His last book, Between Debt and the Devil, is wonkish but…just makes sense.