Good growth brings peace – except in a welfare society

In "The Moral Consequences of Economic Growth," Harvard University economist Benjamin Friedman argues that rapid economic growth is morally uplifting. "Economic growth – meaning a rising standard of living for the clear majority of citizens – more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy," he writes. Further, the opposite is true. Poor growth feeds prejudice, class conflict and anti-democratic tendencies.

According to Friedman:

In the United States, exploding economic growth after World War II coincided with a broad expansion of rights for women, blacks and the poor.

Good times often played out similarly in Europe; as Britain's per capita incomes rose 35 per cent, the government opened civil service jobs to competitive testing and religious tolerance improved.

Nazi Germany is, of course, the classic case of the converse; growth's absence proved to be morally destructive.

Friedman mostly misses the real growth predicament facing most advanced societies, say observers. The immediate dilemma involves the welfare state. It requires fast economic growth to pay all the promised benefits. But the mounting costs of those benefits – especially as population’s age in the United States, Europe and Japan – may stifle growth through higher taxes and budget deficits. If so, the welfare state may cause the stagnation and strains against which Friedman warns.

Source: Robert J. Samuelson, Even Good Growth Can't Satisfy Welfare's Appetite, Washington Post, January 11, 2006.

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For more on Economy: http://www.ncpa.org/iss/eco/

FMF Policy Bulletin/ 31 January 2006