The Moral Consequences of Economic Growth [Paperback]

Almost everyone can agree that economic growth is good: the material benefits of more jobs, better pay, bigger houses and more money to spend on education and healthcare are indisputable. There may be a few spoilers railing against resource depletion, urban blight, and greenhouse gases, but ultimately those problems can be overcome by growth also. Now Harvard professor Benjamin Friedman argues that in addition to material benefits there are also moral benefits.

Friedmand writes that: "Economic growth - meaning a rising standard of living for a clear majority of citizens - more often than not fosters greater oppurtunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy." And conversely, when there is economic stagnation or decline the citizen's "moral character" tends to decline accordingly, there being less tolerance, less openess, and less generosity to the poor and the disadvantaged.

Using the United States as a case in point, Friedman argues that from 1953 to 1973 median family income doubled. As the economy grew and Americans prospered, society became more open and tolerant. During this period, segregation became unconstitutional, the right to vote was guaranteed, racial discrimination was banned, fair housing and equal employment opportunity legislation was enacted. These events made America a more just and equitable society. Then from 1973 to 1995, the average wage in today's dollars declined. The national mood toward progressive social programs began to sour. Indeed these programs were cited by some as being unduly burdensome and being the cause of slow wage growth. Nevertheless, in times of falling incomes, Americans naturally become more concerned with their share of the shrinking economic pie. Friedman also sees here a deterioration of moral character.

It should be fairly obvious by now that Friedman is a liberal and equates morality with social welfare programs - this being the most contentious issue of the book. Conservatives and libertarians will be quick to point out that support for affirmative action, immigration, strong unions, endangered species, etc. have been detrimental to economic growth and are, therefore, by Friedman's definition, immoral. These critics will claim that in order to foster economic growth we must have reduced taxes, less regulation, non-union labor and fewer workplace rules. The resulting economic growth would raise all boats, and would thus be morally correct.

Friedman and his critcs do not disagree that the end result of economic growth - aside from material well-being - should be tolerance, openess, social mobility and dedication to democracy. They disagree on the means of achieving those goals. Friedman favors government intervention on behalf of the poor and the disadvantaged. The big question is whether or not it is in fact helping them. Two other books that have examined this question are Amartya Sen's "Development As Freedom" and Jeffrey Sach's "The End of Poverty." They have concluded that the poor must be provided with at least the basic tools for develpment. This doesn't mean generous welfare programs, but it does mean some public assistance - they need basic capablilites to achieve and contribute to society. Friedman is at his best when he stresses the importance of economic growth in providing these opportunities.

People who complain that books like Freakonomics are too short, elementary or filled with fluff should take a look at Friedman's Moral Consequences of Economic Growth. Not to say that this is an introduction to economics, gee-whiz or otherwise. This is a different book entirely. Focusing on how economic activity can impact human culture from a moral standpoint instead gives this book an interdisciplinary "bigger picture" authority and appeal. There is a lot to appreciate in this book and while I wouldn't exactly call it an easy read, it is understandable even to a non-economist like myself. I don't agree with all of Friedman's arguments, but in my opinion he does a fine job of choosing and presenting relevant issues. So whether or not you agree with what he has to say, this book will give you plenty of good food for thought.

What is the link between growth and democracy? In his latest book, The Moral Consequences of Economic Growth, Harvard University Professor Benjamin Friedman argues that economic growth or its absence shapes the moral character of a society. For the broad majority of a country's citizens, whether or not living standards are rising determines whether laws are tolerant of new ideas, supportive of immigrants, or protective of poor people. Throughout history, stagnation and economic decline have been associated with intolerance, while growth has been associated with increased tolerance and democracy.

While much of the evidence covered by Professor Friedman is drawn from the history of western economies, he argues that there is plenty of evidence available from developing economies as well. In that context, his book provides abundant illustrations suggesting that even if rising incomes do not solve all problems, they certainly help significantly improve the moral strength of societies, including their ability to open up to welfare improving reforms.

Consider ethnic disputes. When they often originate in a fight over limited resources, economic growth enables conflicting groups to compromise simply because they become less inclined to suspect that others are doing better at their expense. As long as people see their own income rising, they worry less about doing better than others. This creates an environment favorable to political and social advances. The "moral" gains achieved then further fuel the motivation to work towards growth collectively.

Friedman warns, however, that trying to go too fast on the moral front simply to get ahead on that dimension without delivering on the growth agenda can prove to be a major problem, or even be unsustainable. New democracies tend, indeed, to remain fragile as long as there is a concern by the vast majority of their citizens that growth prospects are not likely or that its gains will not be shared fairly. Improving economic conditions are part of what makes a society able to sustain a democracy.

Without growth, little human progress can be achieved. Conversely, economic growth leads to more open, tolerant, and democratic societies. From a policy perspective, Friedman argues that a more explicit recognition of this externality may be an important addition to public discourse on the importance of growth. The quality of growth matters a great deal as well, as Professor Friedman notes, since basic fairness provides positive incentives for societies to develop.