The Diseconomics of Growth

H.V. Hodson


Chapter I.

On Diseconomics

Diseconomics is a constructive operation, not an essay in demolition. Applied to economic growth, it looks objectively at both the good and the bad in a dynamic process which has transformed the life of mankind. John Stuart Mill thought that the industrialised world had had enough growth a century ago; but would anyone, however conscious of its dangers today, want to return to the poverty and squalor of the masses of mid-Victorian England, or to have so small a national economic cake as there was then to divide among all sorts and conditions of men? The world’s capacity for further economic growth holds out still more promise, as well as baleful threats. Unless a community or nation or the whole human race is capable of growing economically in a proper sense, it will not be able to grow in many desirable ways—in health, in comfort, in education, in the defence and enjoyment of its habitat, in cultivation and diffusion of the arts, in good use of leisure, in care for the old, the handicapped and the needy.

This book’s arguments are aimed, not against growth itself, but rather against the identification of economic growth, as ordinarily measured and publicised, with increase of economic welfare, or with full employment, or with business prosperity, which are all quite different things; against false claims to growth which in reality is spurious; against the misuse of growth, through behaving as if its potential were all to be reaped in personal consumption or business investment; against the sanctification of growth and the treatment of other economic aims (like stability of prices or conservation of resources), let alone supra-economic aims, as mere acolytes serving the altar of Almighty Growth, or even as anti-gods.

It is an essential part of the argument that the measure of growth derived from “Gross National Product” is no index of increase in well-being. If we considered what we meant by higher well-being, and made, it our object, capacity for growth would fall into its proper place as a means, not an end. Growth is not a value in itself. It can be the servant of values; it can also be their jailor.

Growth is a biological term. Living things grow. Their growth may be good or bad: cancers are growths, so are dropsical swellings. A child may grow in height and weight while not growing in mind and understanding, or in mind and understanding while not in physical strength or proportions. The growth of a national economy; fully understood, is like the growth of a living creature: it is made up of many elements, and is not to be measured only by one set of money-expressed statistics.

Regrettably, the phrase “economic growth” has become so firmly set in its current meaning that we need another to convey the true growth. We might call it “development”, if that word too had not become a term of art, closely linked with the same exercises as make out the husk of growth to be its kernel. Development of a country has come to be identified with raising its national income, or national income per head—national income that can be reckoned in money. This not only warps the objectives of public policy but breeds a false scale of values in comparing country with country or community with community. We talk about “less developed” and “more developed” countries regardless of what they have developed from and what they are developing into. Thus India, because its average income is low, is rated a “less developed country” compared with Britain or America. What an extraordinary use of words that is! India is poorer, certainly, but her civilisation is far older, and may well prove more durable. India was “developed” when our northern countries were forests and bogs and the home of savages.

Or we might choose “progress” as our term for real growth, but this has rather an old-fashioned and moralistic flavour: some have discarded the idea of progress as part of “the liberal illusion.” “Betterment” is virtually a technical term, meaning an increment of land value; otherwise it would serve well. Can we do better than “improvement”? This is surely what we want, and economic improvement is what we ought to mean when we talk about economic growth. Unhappily we often do not.

What then is meant by the diseconomics of growth? The prefix “dis” has a somewhat melancholy and negative overtone, as in “disenchantment” or “discredit”. Webster’s Dictionary gives as one of its meanings “deprive of (a specified character, quality or rank),” and certainly diseconomics may try to dispossess economics of pretensions to rank beyond its inherently limited nature; but if diseconomics expects to discomfit, it does not seek to disprove or dishonour.

Strictly, the diseconomics of growth is but the shadier side of its economics: the analysis of diseconomies that are associated with the growth of an economy as professionally defined and measured. In this sense, therefore, diseconomics is still hemmed in by the confines of economics itself, which is the study of processes measurable in money. Included in the scope of economics are objects and activities which are not actually bought and sold for money—they may, for instance, be bartered—provided that they are capable of being measured in money terms. An example is the produce that a peasant family consumes off its own land. Such things can still be labelled with numbers of dollars or pounds or pesetas or pice which can be added and subtracted and combined mathematically with other economic measurements. But there are many aspects of human life and welfare which cannot be measured in money; attempts to do so are arbitrary and the results often ludicrous, for such efforts involve judgments of value foreign to the science of economics. We cannot tag prices upon peace, tradition, tranquillity or beauty, or upon fear, noise, novelty or ugliness.

This points to another sense of diseconomics—the study of non-economic outfall from the economic system. A large part of this book will be concerned with the interplay of economic and non-economic values in such arenas of turbulent controversy as conservation, population and the growth of cities, and their relationship to economic growth. Like economics, diseconomics is also concerned with the future as well as the present: indeed it is more concerned, for it is less confident than the economist or the businessman that it can adjust the future to the present by a factor of discount like the rate of interest. Since straying beyond strict economics involves judgments of value—better or worse, rather than cheaper or more costly—a subjective, personal factor enters in. With it comes a temptation to preach, to tell others what is good for them and what their values ought to be. Diseconomics must not, therefore, wander too far from its parent economics, or it will develop into another cult, a new corpus of myth and dogma. Its claims are more modest. It is a critique, not a manifesto. In face of certain economic pretensions, it is the child in the story of the emperor’s clothes. Innocence is all; one dreads to think what a prig that child may have become.

An exponent of diseconomics is, I suppose, a diseconomist. One would not repudiate the title. Thorstein Veblen, author of The Theory of the Leisure Class (1899), whose books demolishing some of the myths of free-enterprise America are still good and stimulating reading, was an early diseconomist. Kenneth Galbraith might not disown the name today. When a theory becomes a doctrine, a doctrine becomes a cult, a cult becomes a mass illusion, it is time for a critical voice to be raised. Such is the present state of the theory, doctrine, cult and illusion of economic growth.

The calculation and analysis of growth, as we shall see, entered only lately into received economic theory. The concept should thus be as bright as a new coin, but in truth is cloudy and tarnished with controversy. Not enough time has passed, not enough variety of experience been recorded, not enough “economic models have been constructed”—to use the economists’ jargon—to test and prove theoretical explanations by comparison and induction: economic science cannot be advanced in laboratories, but must await the assay of decades. Such, at least, is the plea of those economists who recognise how thin is our understanding of growth, how varied and contradictory are the views of their profession on such practical questions as how monetary policies affect national economic growth, or whether growth and high employment march together.

To judge from the confidence with which politicians, journalists, trade-union leaders, television oracles and the like talk familiarly about economic growth and its blessings, one would think that they and we knew all about it and, as God did with Creation, have looked upon our handiwork and seen it was good. In fact we know very little about the way growth happens or what it does to the total economy, and that which we do know is by no means to its simplification nor all to its credit. As in other matters, the less the economists know, the more the publicists pretend they know. Where induction fails, intuition has free rein. Economic growth, a very complex notion, has come to mean, for the vast majority of those who use the term, no more nor less than increase of Gross National Product (or of GNP per head), a crude index which ignores or muffles many changes in real economic out-turn, such as improvement or decline in the quality of goods and services, let alone changes in non-economic directions. Above all, this over-familiar GNP makes no allowance for two giant companions of economic activity and growth—the running-down of the world’s natural resources, and the damage done to man’s habitat whether rural or urban. It is time a little diseconomics were brought to bear on the subject.

Total exhaustion of essential natural resources, or some final ecological disaster, may yet be a long way off. But the fact that we do not know how far off, because we cannot foretell what may happen along the road between here and there, does not mean that it will never happen, or that there is plenty of time before we need act. In man’s life-story, death-bed repentance will not wash away past sins. The further we go on a wrong course, the harder the effort to turn back, until it may become impossible. Environmental damage done now may never be undone. Resources used up now can never be reconstituted. It is never too early to mend.

On our small globe, and in our world-embracing system of production and trade, economic growth anywhere—has effects everywhere. Available resources used in one place cannot also be used in another. Any critique of growth must have a universal message. Nevertheless we have to admit that the balance of its benefits against its injuries may differ between poor and rich countries. The poor need growth more, to escape from their poverty; growth among the rich costs the world more, because their base-standards of consumption are so much higher. This last comparison hasp an immediate bearing on the population problem, which is obviously bound up with that of economic growth. Even if consumption levels were to stand still, the prospective increase of the advanced nations of the world would hold more menace for global resources and environment than the prospective increase of the populations of the less developed nations, immense as those populations are. So the population growth problem, like the general problem of economic growth, is universal, and we cannot pass off either as someone else’s business.

Nowadays one would have to be blind and deaf not to be aware of the world’s population problem. The horrors of having six or seven billion people alive on this globe by AD 2000 (which has crept one year and 80 million people nearer even while this book has been planned, written and published) are a commonplace, and as a remedy birth control is accepted even by those who reject, as sinful, “artificial” means of practising it. Yet the expected increase of human kind, at a rate of 2 or 2 and a half per cent compound, will levy a far smaller toll upon the world’s resources and natural environment than the expected economic growth, at twice that rate or more, of even its present numbers. If that is a proposition in diseconomics, let it be so. Where are the pill, the vasectomy, the condoms and the intra-uterine devices for checking economic growth?

Those who preach birth control for economic growth, by contraceptive or abortive methods, must bear the onus of demonstrating how a nil-growth economy would work. The present diseconomist accepts the challenge, aided by a distinction drawn between potential and realised economic growth. While the latter shrinks, the former can and will go on expanding; for technical progress and efficiency neither should nor could be ordered to stop. The national economic problem shifts its weight from production to distribution or division of the product. We would no longer be able to fob off the issue of fair shares by distributing to the less advantaged some of the ever-growing increment of total physical income. The question, how we distribute the aggregate National Product—or International Product for that matter—is inseparable from that of the disposal of potential growth which is not turned into actual output of goods and remunerated services. Where do we put it? Into more leisure, more voluntary, unpaid service? Into less pollution on the way to economic output? There are other alternatives.

One of the hardest tasks which potential growth could ease, and actual growth could only worsen, is that of reforming our monster cities and con-urban warrens. They put men and women out of scale not only with their physical surroundings but also with their socio-political communities. They are forcing-houses of strain, alienation, monotony and ugliness: crime and drugs are morbid symptoms of the urban sickness. Cities are the creatures of economic forces—but economic forces are not incapable of public control. In this sphere, economic calculation can itself be diseconomic: the real cost of putting urban land to better use (in terms of total human welfare) may be very different from the financial cost to the public authority. A rational costing of urban rehabilitation, if we were not obsessed by the cult of growth of purchasable output, would open the way to great improvement of the urban environment in which, come what may, most of the citizens of the developed countries and rising millions of the less developed are bound to dwell.

Another major diseconomic calculation affects the automobile and road transport generally. If this had to bear all its associated social costs, both through the exhaustion of resources and the pollution of our habitat which it entails in production and action, and through the dereliction, degradation of other capital, and loss of land—that manifestly inexpansible asset—resulting from road construction, we should be rapidly mounting a counter-revolution against that erstwhile revolutionary liberator, the internal combustion engine.

We should also be undergoing a revolution in our ways of life. Whether we approach from the starting-point of growth-checking, or from that of population, or that of natural ecology, or that of urban environment, we fetch up with the question of how we live. There is no ideal way of life. Every man has to make his own: so does every community and nation. Man is a social being, and the nature of the society in which he finds himself conditions his life as much as do his physical surroundings, if not more. But he has a right to a fair chance of creating and enjoying a way of life that is consistent with his high nature. This is where diseconomics enters, in all humility, into supra-economics, the study of true values.


Created from a nineteenth or early twentieth century text by Athelstane E-Texts