Folklore: Problem-Solving Power of Economic Growth

I want to thank U.S. OMB Director Mick Mulvaney for stating so clearly a textbook example of economic growth folklore, conveniently highlighted in this story’s headline:

Mulvaney to Kudlow: ‘Economic Growth Solves All of our Problems’

I’m sure this statement doesn’t raise the hackles of most readers. We’ve all been programmed from birth to believe in the universal goodness of economic growth. But my job is to put statements like this under the microscope and expose them for what they are: fairy tales. The sooner we stop buying the BS in these bedtime stories, the sooner society can transition away from our destructive growth-obsessed system and move toward a more sustainable system based on “enough.”

“Boosting economic growth will solve many problems in the United States, including the ongoing discussion about what to do about healthcare, Office of Management and Budget Director Mick Mulvaney said in a radio interview Saturday.”

It’s truly difficult to “create jobs” to replace those in antiquated industries and those replaced by automation or increasing efficiency. It’s much easier to just sit back and say, “We’re going to restore robust economic growth.” Why go to all the trouble of developing a detailed plan for jobs, trade, taxes, social security solvency and balanced budgets, when you can just hope for robust economic growth? One reason might be that it’s never really solved all those problems.

Mulvaney shares the Wall of Shame today with the host of the subject radio program, Larry Kudlow. Kudlow is no stranger to our Wall of Shame; he is one of the most prolific growth boosters going. While I didn’t listen to the show (it’s pretty hard to take unless you are in love with unsustainable growth), I’m sure Kudlow lapped up Mulvaney’s pro-growth message. I imagine Kudlow didn’t press Mulvaney to back up this statement with any specific plans:

“We never saw three percent growth in a single year for the Obama administration, in the 90s, it was typical for us. There’s no reason we can’t get that back.”

Actually economic growth of 3% or better has never been a consistent fixture of the U.S. economy. That amount of growth has come and gone, and come and gone – and we haven’t matched the growth rate of the 1960s since, well the 1960s. So there may be some sound reasons we can’t “get that back.” Among them, on a full planet further growth becomes uneconomic. The cheapest, easiest to extract, deposits of raw materials have been exhausted. Energy return on energy invested is drastically lower today than 100 years ago. The pie isn’t getting any bigger.

Truth be told, on a full planet, economic growth creates many more problems than it might solve. Growth of our economy accelerates the rate at which we’re already liquidating the oceans of fish, disrupting the climate, killing coral reefs, toxifying soil, air and water, depleting fertile soil, extinguishing species and drying up rivers and aquifers. It is chipping away at the capacity of our life-support systems. Pursuing economic growth is burning down the house to keep warm.

Yet, according to this story, Mulvaney actually said this:

“Economic growth solves all of our problems.”

That belief, and the repetition of that and similar messages by politicians and economists, keeps strong our misplaced faith in economic growth. For a better understanding, explore the links at More About Limits to Growth. In particular, read Rich Heinberg’s book, The End of Growth.