Environmentalists often argue that governments' fixation on GDP and economic development harms our planet, claiming that economic growth equals environmental destruction. This argument is partly valid, but it is not entirely so. While it is true that governments often talk about GDP, this does not necessarily mean that economic growth is their priority. In a broader context, economic growth can significantly benefit society and is something we should aspire to.
Regardless of political ideology, governments worldwide support economic development when all factors are constant. Economic growth increases a country's prosperity, gives citizens more choices, and allows governments to serve them better. This political expediency will enable governments to meet the needs of different demographic groups without taking sides, thus increasing their chances of remaining in power. A government that works honestly can provide more public services without changing the tax structure. A corrupt government can safely divert funds to its advantage without causing unrest because greater prosperity leads to fewer political problems.
However, the desire for a specific outcome and the sacrifices needed to achieve it differ. Measures necessary for economic prosperity often pose a major political challenge because they upset the status quo and vested interests. The housing crisis in many wealthy countries, where house prices have been rising faster than income growth, is a case in point.
Rising housing costs, with prices outpacing incomes, significantly reduce people's natural wealth and limit their choices. The cause of this crisis is the same in different countries: a housing shortage in desirable locations. This shortage has led to fierce competition among potential homeowners, forcing them to live above their means and making housing unaffordable for many, leading to increased homelessness.
But why is supply so limited, and shouldn't brilliant builders build more to take advantage of high prices? This is where government regulations come in. Strict zoning regulations and bureaucratic hurdles often prevent the construction of new housing. Why? Because unknown housing risks devaluing existing properties, which is incomprehensible to existing homeowners, an important political group. This has far-reaching consequences, such as reducing mobility to areas with better economic opportunities, decreasing birth rates due to financial instability, and increasing social inequality.
Moreover, governments often perpetuate economic stagnation through policies that cater to specific interest groups, such as fossil fuel subsidies, restricting economic migration and free trade (like Brexit!), and unnecessary professional licensing. Therefore, the idea that governments prioritize economic growth at all costs is a myth. Instead, governments balance their actions based on immediate political advantages and disadvantages, often making implementing economic growth drivers politically unviable.
However, this political aversion to economic growth is regrettable, considering its immense benefits. Economic expansion means people have more choices and can afford more of what they desire: more vegan options, more travel, more learning resources, more public goods, etc. In essence, it is good when people can achieve what they value.
Indeed, increased income could lead to higher consumption of items deemed harmful by environmental advocates, such as gas-powered SUVs or unsustainable seafood. But there is no direct correlation between economic growth and environmental degradation.
Actual economic growth should factor in the social cost of environmental damage, just like it should consider housing shortages. While GDP, which only includes market transactions and government spending, is often used to measure economic growth, it doesn't encompass the whole picture. Moreover, technological advances—the primary driver of economic growth—can reduce resource consumption per production unit, thereby mitigating environmental impact.
Although increased efficiency may lead to increased consumption, this is not an economic growth issue per se but rather an issue of social cost and persuasion. As societies become more prosperous, their economies shift toward service sectors with minimal environmental impact, demonstrating that economic growth and ecological sustainability are not mutually exclusive.
Although environmentalists often criticize the pursuit of economic growth as incompatible with sustainable development, it is vital to scrutinize this argument. Economic growth should not be demonized but steered in a direction that improves society and preserves our planet.
It is undeniable that the immediate attraction of prosperity in the form of increased GDP is an irresistible incentive for governments around the world. This economic expansion, in turn, offers citizens better living conditions, more choices, and a prosperous society. The political expediency of this prosperity allows governments to serve more interest groups, making it easier for them to stay in power. Thus, from the perspective of governments, the desire for economic growth is understandable and not entirely wrong.
However, the reality is more complex than it seems. Valuing economic growth and taking the necessary steps to achieve it are two different things. For example, the housing crisis in many developed countries is a classic example of policy failure. Despite rising real estate prices, affordable housing in prime areas remains scarce due to restrictive government regulations. The impact of these policies goes beyond housing affordability to issues such as mobility, fertility rates, and social inequality.
The path to economic growth is often clouded by policies that target narrow interest groups, such as restrictions on economic migration, barriers to free trade, and unnecessary occupational licensing. It is, therefore, wrong to assume that governments prioritize economic growth at all costs. On the contrary, they weigh their actions' immediate political advantages and disadvantages and often sacrifice long-term economic growth for short-term political gain.
This political reluctance to embrace economic growth is regrettable, especially considering the potential benefits of economic expansion. With greater prosperity, citizens can afford a broader range of goods and services, which helps improve the quality of life. However, there is an important caveat. It is essential to distinguish between economic growth exacerbating environmental problems and growth conscious of its ecological footprint.
Rising incomes may lead to greater consumption of environmentally harmful goods. However, this does not represent a challenge to economic growth as such. Instead, it demonstrates the need for a growth model that incorporates the social costs of environmental damage.
Technological progress, the cornerstone of economic growth, can contribute to this goal by reducing the resource intensity of our economies. As societies progress and thrive, their economies shift to service-based sectors that do not require as many physical resources. This shows that economic growth can occur without harming the environment.
In short, if managed responsibly, economic growth promises a prosperous society with minimal environmental impact. However, we must push governments to prioritize sustainable economic development over short-term political gains to realize this vision. We must strive to create a financial system that improves our quality of life while preserving our planet for future generations.
In summary, economic growth is essential and beneficial. It improves the quality of life in developing countries and gives wealthier countries access to better services with minimal environmental impact. However, achieving this growth is not guaranteed, as governments often prioritize immediate political benefits over long-term economic prosperity. Therefore, citizens must actively support government policies promoting sustainable economic growth.
Art: midjourney.com