There are three certainties in life: death, taxes, and an American president claiming that they are growing the economy to be stronger than ever. As humans, it seems perfectly normal to obsess over economic growth, because we always assume that it would directly improve our lives. Here's the real shocker – economic growth, in its current form, is usually NOT a good thing.
We often hear remarks like "President Trump grew the economy at X%" or "Covid-19 will result in a GDP decrease of Y%". But what does this truly mean for the average citizen? Does the fact that the USA achieved a GDP increase of X% mean anything substantial to a butcher in Nebraska, a barber in Illinois, or a data analyst in New York? Well, GDP is defined as the "total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period". It does not take an expert in economics to spot that human well-being is not a factor taken into consideration when measuring economic growth.
A common claim is that a higher GDP places a state in a better position to reward its citizens with a better quality of life. Let us consider a theoretical scenario to test this argument. If a government payed all its citizens a high income to dig up holes and fill them back up again, will GDP and human well-being mutually increase? The answer is no – GDP would inevitably rise, but unless one has a vehement impulse for manual labour, quality of life would not get better. What this example teaches us, is that an increase in GDP can only cause a better life for citizens if governments choose to invest in the right areas. For example, 43 countries in the world currently offer universal healthcare – that is, accessible healthcare for any citizen of any income. The USA, boasting a GDP far surpassing that of any other country, does not offer universal healthcare. Whether or not one agrees with the implementation of universal healthcare, there lies a sizeable discrepancy between a country's GDP and its effect on human well-being.
We welcome a devil's advocate to our engaging debate on economic growth, and they say: 'Maybe economic growth is not directly beneficial for the average citizen, but surely it does no harm'. This argument is valid in most cases – it would be ludicrous to suggest that developing nations like Ivory Coast or Somalia should aim to dial down economic growth. If invested in the right areas, economic growth could allow for a world of good: a reduction in levels of poverty, a rise in life expectancy, access to food and water, and even a higher average income. But one must wonder why some developed nations have begun placing more emphasis on human well-being and less emphasis on economic growth. New Zealand, for example, has completely abandoned GDP as an objective in their budget; replacing this measurement with the Happiness Index. And they are joined by countries like Scotland and Iceland, who place greater emphasis on citizens lives rather than fueling a reckless desire to expand a wasteful economy. This recklessness creates more unequal societies and caters to the interests of the top one per cent, rather than the general population. Crucially, a constant goal of economic growth is unsustainable in the long-term and can result in a deterioration in citizens quality of life, rather than an increase. For example, while the USA and China possess the highest GDPs in the world, they trail behind countries like Switzerland, New Zealand, Germany and Singapore in areas like life expectancy, happiness, and quality of life.
Is the solution to aggressively combat economic growth? Well, not exactly. Kate Raworth of Oxford University's Environmental Change Institute introduces what she labels a "compass for human prosperity in the 21st century" – doughnut economics.
Picture a regular doughnut; the inner boundary represents human needs such as education, food, water, and health. Fall in the hole, and you fall short of supplying social well-being. Opposingly, the outer boundary represents planetary restrictions – if you overshoot the outer crust, you fail to sustainably address problems like climate change, toxic air pollution or ensuring that our oceans are clean. Doughnut economics teaches us how to create sustainable economies, that are durable in the long-term and care for human well-being AND our planet. Raworth's progressive theory has begun to be implemented worldwide by economies that recognise a need to address social welfare and our planet's deteriorating condition sustainably.
Developed nations need to understand that economic growth is a variable that tends to fail to directly influence our lives. Our thinking on the economy is outdated, and we must look forward to creating economies that consider our planetary boundaries, while genuinely working to make our lives better. As Kate Raworth states, our economies must "grow up" – we must realise that the end goal is not to create an economy that gets exponentially larger, but rather, to create one that gets exponentially better.