Reader Mail: Economic Growth

Reddit

How about a little reader mail?

Dear Daily Reckoners:

As I wonder how long South Australia can survive with the drying of the Murray basin, a la the Coloraoo; I also wonder about all of the paper which the USA delivers to the Orientals who then pass it on to Australia for all those raw materials. I remember when you all were unhappy about being a British garden turned into a mine. Of what advantage is it to Oz to completely excavate? Then what? I used to shovel the phosphate from Nauru at Adelaide Chemical.

Yours,
B.F. in Bensalem Pa

If you’re not producing finished goods for trade, you have to sell something. It’s nice to have a lot of iron ore, coal, and uranium when the world is long on people and short on steel and electricity.

Hi DR,

I’d like to know your thoughts on why growth is generally perceived as altruistically benevolent? Obviously inflation is a very bad thing and we all want more (as I do) of everything. But beyond that, philosophically, should Australia pin its compass on gross growth being good?

I don’t see that progress and economic growth are one in the same thing, nor absolutely dependent on each other. I’d be happy for a plateau in GDP and doing our best to maintain the current standard of living for the populace. I question why we want to bring more and more people in to solve skill shortages. Let the market sort that out. We don’t have a sustainable approach to water at the moment and diminishing farming land, more people isn’t the immediate answer I don’t think. Given our strong terms of trade, aren’t we better off thinking that maybe we’ve hit peak Australia and that’s OK. Growth’s great for the stock market, which I thoroughly enjoy gambling on, but as a society, I don’t see it. What are the macro economic implications if we did plateau for a few years?

Ta,
MG

Where to begin? First, growth is not the same as inflation. Inflation is always and everywhere, as the Friedmanites point out, a monetary phenomenon. If you grow the money supply faster than the natural demand for money (lowering rates) then you stimulate a kind of growth we would call unnatural. You also get grossly misallocated resources, vacant homes, empty commercial space, and the whole boom-bust aspect of the credit cycle.

Growth? What else can we do as human beings but grow? The alternative is what? Zero growth? Death? Death is natural too. But it is not natural to wish for it, or try to bring it about (for yourself or others) through policy.

The heart of the question, though, is whether or not there are physical limits to growth. Won’t we run out of living space eventually? Or food? Or water? Or energy?

As Julian Simon once wrote, people are the ultimate resource. People have brains as well as mouths. More brains, you would reckon, would be good for the species. It would improve our chances to survive the challenges we face. And now, we don’t mean eventually we will end up eating each other’s brains.

The alternative to more brains is fewer mouths. That happens naturally anyway. War, famine, pestilence, and death. Those four always ride high. But we are deeply suspicious, though, of people who believe that the final solution to an intellectual dilemma like the limits of growth is a reduction or restriction on human life.

These people claim they are thinking about the future. But what they are really thinking about is themselves. They believe they know what the future will hold. Hubris. Because of that, they will create policies that actually determine how many people will be born in the future, or, perhaps, how long people are allowed to live before they’ve consumed their resource quota.

We wouldn’t go so far as to say all people who believe in limiting population growth are species-loathing totalitarians. But the thought had crossed our mind. Is growth progress? That’s a different story for a different day. Until then…

Dan Denning
The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
Reddit

Comments

  1. Dan, there is no ‘good for the species’, natural selection works on the individual.

    Reply
  2. I am of the opinion that there are only a few ways to limit the growth of a population.

    Unnaturally
    Stop people being born – Abortion, Contraceptive
    Kill people after birth – War, Euthanasia, Culling, Genocide ect

    Natualy (More likely because as a race we realy don’t have much self control)
    Famine, Pestilance, plague, natual disaster (global warming or meteor)

    The question is not if it will happen but if we, as a race, survive afterwards (I have history on my side, look at the collapse of the Roman empire)

    Reply
  3. I find the DR a good read but I do find Dan’s comment on population control a bit surprising. Now I am not sure what has been written on this in the past and I am aware that population growth rates slow as countries develop but isn’t it obvious that the flaw with most economic models is that they require a never ending increase in population? Now even at a growth rate of 3%pa you are looking at 34% increase in the population every 10 years. Why is it so wrong to adopt a policy that encourages (but does not force)people to only have say 2 kids per family? Is 6bn people too many people for the earth? Should we put in place population policies to slow the growth rate to more sustainable levels?

    The DR has plenty to say about what is wrong with the world. That’s the easy path. How about some solutions???

    Reply
  4. Luke, you forgot to list education, greed and apathy under natural growth limitations. More developed economic societies on this planet have sucessfully limited growth in population unintentionally through the expansion of ‘selfish’ leisure time, and the empowerment of women and greater participation of them in the workplace.

    Once the baby boomers have dropped off there aren’t too many others to take their place within these richer nations.

    Reply
  5. Well, there is definitely a negative correlation between population growth and standard of living. Many first-world countries are experiencing negative population growth. From one point of view, we might want to considering worrying more about population decline in a few decades than population growth. Population decline would be disastrous from an economic point of view, as an aging population is very unproductive yet consumes the most resources.

    Reply
  6. Hey has anyone seen the film Idiocracy (Democracy) with Luke Wilson?

    It portrays an UHmerica (America) in the future where everyone is obsessed with sex, cant read cant write, dumb, and creating a lot of babies. The president is a Pro-wrestler who drinks and rides his motor bike and gives the congress and the people the ‘finger’ as a gesture. All water has been replaced by a sports drink cause everything needs electrolytes…

    Haha no child left behind…

    Back to the topic.. The death of the baby boomers and maybe (a) world war (three) will hopefully right everything and advance us. Hopefully republicans and right wing thinking people will be chased and burned at the stake. And hopefully those left behind will have removed our useless religions (that created the current policies and thinking of all of us, especially our politicians it seems), as the species and most others (e.g. cats and dogs and chimps) are coincidentally altruistic.

    However, most of us will wake up tomorrow to the sun shining, or the clouds raining, some will survive the day, soldiers will be killed, some people will contraception some will not, some will use abortion some will not, you will go to bed (some may not), some will die in our sleep, and then it will happen all over again the next day.

    Its nice day outside where I am, I think I’ll enjoy it, for the next day could bring rain.

    Reply
  7. I watch these movies years ago it is called MAD MAX and MAD MAX II was the movie where the fuel ran out, Good movie

    Reply
  8. Even Adam Smith accepted that at some point point growth must stop. From an ecological perspective, as an intelligent species maybe we should restrict population growth. Of course there are inherent dangers in this as an earlier poster noted, but the alternative is to follow what happens in other populations of animals to have huge growth followed by a sudden, drastic decline once resources are consumed. A good example of this is the Maoris in NZ. There population grew and grew relying almost exclusively on the Moa bird for food, and they were often wasteful even with that. Once this bird went extinct there became the most warlike nation on earth, even eating their slain foes as protein sources were so limited.

    It is possible the Australian aborigines went through a similar cycle, the extinction of our mega-fauna around 30,000 years ago may be evidence of this. However, they did develop a sustainable population through the use of controls that allowed about 500 people per tribe, just enough to prevent mass starvation during the droughts.

    In our society, given that affluence leads to lower birth rates, perhaps we should be encouraging more selfish (to quote reader above) activities. That is preferable to popoluation controls which would be likely to lead to Eugenics. It would probably only take
    a short time after the living memory of WWII is gone before this idea gains momentum agian.

    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au