The growth imperative


(This policy bulletin is an extract from the book 'Habits of highly effective countries: Lessons for South Africa' published by the Law Review Project in 2006)

Everything gets better with growth

Growth matters for two reasons. Firstly, there are many statistically significant concurrences, but by far the most significant, as already mentioned, is that almost all policy makers’ objectives are achieved in rich countries. The evidence suggests that countries become richer faster if their governments implement high growth policies, that is, policies that characterise high growth countries. Secondly, few people realise how much faster countries become much wealthier if they achieve just slightly higher growth rates. This ‘growth imperative’ section addresses these two aspects in turn.

The overwhelming coincidence between growth and most policy objectives suggests that growth is both an effect and a cause. Factors that are good for growth are likely to be factors that are also good, for example, for savings, investment, job creation and competitiveness. Additionally, high growth means more wealth and coincides with more and better education, health care, infrastructure, security, safe water and clean air. High growth tends to follow the implementation of the specific policies identified in our research. Those policies also appear to be good for almost everything else that policy makers desire.

It is commonly assumed that ‘society’ and ‘the planet’ endure massive impacts as side-effects of economic growth, that growth promotes social tensions and class conflict, causes resource depletion, destroys the environment, endangers species, pollutes rivers and oceans, and much more. The reality is much more satisfactory. Almost every indicator of human and environmental well-being is much better in rich than in poor countries, and, instead of causing problems such as social or environmental damage, these indicators improve rapidly at high growth rates. In his book, It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years, the late Julian Simon (with Stephen Moore) summarises most of the relevant data to show that, notwithstanding the propensity for catastrophism, most things are getting better for most people in most countries most of the time. This is a popular version of more substantial books, such as his seminal The Ultimate Resource II.

By achieving the single objective of high economic growth, governments can get as close to ‘free lunches’ as reality permits. Economists tend to regard this as so obvious that they proceed without illustrating the point with hard data on the determinants of economic growth. This project is indebted to them for it. It means that it was possible to draw on what has been done, which does not yet include comprehensive value-free identification of all factors coinciding with high economic growth.

Although the facts no longer leave room for serious debate, most people, even experts, remain surprisingly uninformed. The relevant point here is that everything examined suggested that growth is the best way to achieve policy objectives. With prosperity, it makes surprisingly little difference what non-growth policies governments adopt. High growth appears to be very forgiving. Policy makers can make many mistakes and the consequences will be ameliorated if there is high growth.

Source: This policy bulletin may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.


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