Category Archives: Growth and development
TURNING DOWN GROWTH
As economies strive to regain momentum after Covid 19, should growth of Gross National Product, as a national goal, be limited by stopping certain types of development?
Below are five initiatives against uncontrolled growth.
Costs of growth to a community can exceed the benefits to the developer. Governments should prevent a few people benefiting from development at the expense of others who have no legal redress. Winner-take-all is a development game won by wealth. Legislation is required to fully compensate losers. See: Does Growth Benefit Some Groups At An Equivalent Cost To Others? M P Knox 2020.
A steady state economy is the sustainable alternative to perpetual economic growth. Responding to an increasingly constrained world, the Centre for the Advancement of the Steady State Economy has policy goals of stabilized population and consumption.
Growth could be opposed. Disillusionment with societal development by technological and industrial systems has created interest in overthrowing it by popular revolution. See: Industrial Society and Its Future, Theodore Kaczynski, 1995.
Instead of setting happiness goals that would inspire their citizens, governments fix on GDP growth and increase in wealth. It is proposed that Maslow’s hierarchy of needs is a suitable template for government actions to achieve real happiness. See: A Plea For New National Goals That Inspire. M P Knox 2020.
Happiness Alliance’s mission is to improve the happiness, well-being, and sustainability of all beings on our earth. It has sought the replacement of GNP by Gross National Happiness as in the nation of Bhutan.
Control of growth could consider four other concerns.
Jobs and Happiness
Whenever a development is touted, the number of jobs to be created is stated first. Public perception of developments has favoured the creation of still more jobs when there has been near full employment. A surplus of jobs has choice: occupation, income, social status, sociality location that people value. People’s ultimate happiness’s vary: hedonism, eudemonia, flow and spiritualism are the main types. A person’s job defines the types of happiness achievable and what he or she will strive for. Thus the value of growth is partly the summation of employees’ happiness’s. Jobs that reward merely with income for superficial hedonism would be inferior to those bringing higher quality happiness.
Growth should be sustainable
When demand increases there can be growth in supply, or a chain of supply. The chains go back to primary production from natural resources, which may be abundant or possibly scarce and unsustainable. The supply chains often employ people in permanent jobs. Attractiveness of growth in a chain of supply depends on the overall multiplier effect, measured as the increase in GNP (including remuneration paid) or counted in jobs created.
Increased supply of cotton grown for export from Australia would employ few extra workers, require few supplies, take scarce land and water and devalue incomes in other sectors (Gregory Thesis).
The best growth is at the end of a long and variegated supply chain, with its output value added to by further local processing. It doesn’t matter whether the goods are machinery or fashion accessories, because the happiness generated depends on employment quantity and quality created. Growth from mining of non-renewable resources using scarce water, with low employment and loading them unprocessed into ships, could be turned down as of low benefit to the community.
Individuals and the Public Good
Adam Smith proposed that supply of goods to market buyers was all the public welfare society needed. Jeremy Bentham wanted the greatest good of the greatest number. In welfare economics, the public good is decided with money amounts. A development was good if the benefits exceeded the costs and whether the winners could compensate the losers, or perhaps the losers could pay-off the winners.
But in practice there are wider considerations in deciding whether to approve a development. Monetary gain, utility, resources use efficiency, humanitarian concerns and environmental impact all affect computation of growth. Keynesian priming of economic project ‘pumps’ with low value public works could be turned down if they do not overcome these concerns. Growth by digging holes and filling them in again should be turned down.
Personal goals and achievement
John Stuart Mill put responsibility for growth on individuals, who pursued liberty within the confines of societal laws required to protect other individuals. Simone De Beauvoir in her book The Ethics of Ambiguity has explained that true freedom cannot be obtained by walking over others’ freedoms. Growth that takes away individuals’ freedoms should be turned down.
In conclusion, growth should be regarded with rational scepticism as a sectoral interest. Cargo cults and cranes on the horizon are ideologies of past times and have no place in the present or future.
A PLEA FOR NEW NATIONAL GOALS THAT INSPIRE
A 3-min read.
People are of different types, from high achievers to vague drifters. They all benefit from purposeful government, because without purpose and goals, often little of real value results. Goals motivate achievement. Motivated humans can achieve greatness.
The Egyptian pyramids are evidence of unequalled human accomplishment. The pyramid builders probably valued the pyramid as a cultural icon. NASA’s Apollo programme had a man-on-the-Moon goal. The work meant more than collecting one’s pay. Humans can strive in cooperation if goals are well-defined, their challenge is accepted and achievement is by overcoming difficulties, not by winning.
Happiness is the main purpose we have. We need it for our health and well-being. Suppose a government could make a new beginning and wanted happiness for its people. What types of happiness should that government seek? There are four kinds of happiness according to The Happiness Alliance they are: eudaimonic help to others (making a difference; community; altruism; levelling); psychological flow (existentialism; freedom); hedonistic consumption (sociality; acquisition; travel; sport; arts); or spiritual escape and religion.
Although these types of happiness can be produced by government actions, they are too embedded and indeterminate to be planned and budgeted. This is a problem, because precise a priori happiness goals are needed to inspire achievement. Neither wealth nor GDP growth promote the happiness of enough individuals for surrogacy.
Psychologist Abraham Maslow in his 1943 paper ‘A Theory of Human Motivation,’ identified many types of satisfaction: physical; emotional; social; psychological and spiritual in a hierarchy cumulating satisfaction from provision. For example, a person won’t be able to satisfy self-esteem needs while they are starving. It is proposed that a government should plan and budget for its people to achieve satisfaction of the needs categorized by Maslow, beginning with basic physical needs, then progressively higher needs, which would be satisfied with cumulating happiness.
What if each of safety, belonging, esteem and cognition was adopted as a programme goal? Could elaboration of Maslow’s goals inspire and prioritise government spending? Please tell someone who could use this approach.
If the donkey knows what is required and the carrot inspires it, no stick is necessary. Sticks don’t drive us these days. Goals are carrots when they achieve happiness.
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KNOW IF GROWTH IS GOOD OR BAD?
Australia's GDP growth was 0.2 percentage points for the quarter ending September 3rd, 2019, bringing the annual pace of GDP growth to 1.2 per cent. It has been higher in the past and is almost at the zero growth rate favoured for a steady state economy. It is a half of the US rate of 2.3 percent for the 4th quarter in 2019. Australia's production is growing slowly. Are we to suppose there has been improvement in something else? Unlike Bhutan, Australia does not record happiness. If there has been an increase in happiness, or a decrease, we wouldn't know. Media reports of growth and its effects provide only a partial picture.. To appreciate what growth is occurring and how beneficial it is, I will switch my viewpoint to individual developments, the criteria for identifying winners and losers, and what they can expect. This is investigated in my paper DOES GROWTH BENEFIT SOME GROUPS AT AN EQUIVALENT COST TO OTHERS? For developments where this occurs, there are several possible philosophies of compensation. A conclusion is that development proposals should be audited for their attention to: markets; the public good; resource use efficiency; disadvantaged people; and conserving environments. Careful development will ensure that growth, although it may be slow, will be fair. My novel Presumed Dead is a crime fiction story that illustrates a government decision process for a casino development involving a sassy woman city councillor.
growth-benefits-and-costs-160819.docx
DOES GROWTH BENEFIT SOME GROUPS AT AN EQUIVALENT COST TO OTHERS?
REVIEW OF GOALS NEEDED
Post-Covid development could aim to restore previous conditions, renew them or start afresh. Earlier models of development may need to be reconsidered for new demographic, economic and aspirational demands. Growth’s goal posts may have shifted and developers may have a more critical public and governments to obey. Not least is the redistributive effect of a proposed development: who will be the winners and losers?
When a developer’s project moves like a ship through the economic media of humanity and technology, it pushes aside existing activities and displaces a bow wave of increased value expected by the community, while in its wake are reduced values opposing the motion, such as devalued properties and reduced amenity. When movement is in the direction of increasing GNP, or of a Gross National Happiness Index, it is called growth (1). The developers propel their progress by taking a lead in obtaining support, investing and trading. These power the project along their assumed right of way. Losers suffer diminished lifestyles but lack representation and are without power to have the disadvantages they suffer acknowledged, considered or prevented.
A GROWTH CULT
Growth tends to be welcomed in most places because it is assumed to be a panacea for economic and social ills. When a freighter bringing supplies docks in some undeveloped countries, it may be mobbed by a ‘cargo cult’. Project proposals in Australia are often welcomed by governments and local populations in the same way, with enthusiasm. When there are several, there can be the excitement of a ‘boom.’ Growth is believed to be an economic panacea, with potentially disruptive and even harmful effects on the community. ‘Growth’ in 2019 is a fantasy that propels development in Australia
GROWTH PROPELLANTS
Growth is caused by births, immigration, gambling, financial risk taking, insecurity, subsiding babies, keeping people alive, government spending on infrastructure and Keynesian kick-starting of the economy by digging holes in the ground, to be filled in again. Growth is needed to stave off recession, they say, by development.
HOW GOOD IS A DEVELOPMENT?
Authorities evaluating developments do not have to declare their methods. Five moral philosophies have survived in practical use to describe how a development is good or bad.
- A MARKET FREE-FOR-ALL
Good developments make a large profit. Capitalism is based on the he laissez faire philosophy of Adam Smith in his book: Wealth of Nations (2). The baker who seeks a profit by selling bread in his community serves it well. But the community may be exploited by greedy developers who collude and are corrupt, obtaining higher returns on investment than free market competition would afford them. Smith required buyers and sellers to act from independent self-interest. Governments have tried to impose this by regulating developers but they have been powerless to prevent more than a few of the worst excesses. Governments have betrayed public trust by selling public property to developers, without calling tenders, to gain donation to a political party. The developers’ gain is the public’s loss.
In industries that are constrained by scarce resources, paying Peter can rob Paul. When one industry makes high demands on labour, capital, land, water, energy or government favour, another industry could starve. The Gregory Thesis in the 1970s was that the growth of the mineral sector decreased the international competitiveness of manufacturing and agriculture (3). This was because mineral sales increased the value of the Australian dollar. This competition was apparent in currency exchange rate change but other inter-sectoral competition within Australia also occurred but was less noticeable. Sector growth does not invade an allegorical ‘terra nullius’ and can displace ‘indigenous’ occupations e.g. pioneering industries, when economic competition has no respect for heritage.
Governments should ensure that conditions of free and open competition prevail.
2. GREATEST GOOD
For the philosopher Jeremy Bentham in the 18th Century, the pursuit of profits was not enough to guarantee happiness. He advocated he Greatest Good of the Greatest Number, to avoid pain and achieve happiness. When a public park was to be extinguished by a private development, the economic benefit that would accrue to the developer may hold less sway than the losses in amenity that would be suffered by the community. In making such a calculation, Bentham applied another important principle: ‘Everybody to count for one, and nobody for more than one.’ This ‘utilitarian’ philosophy is much liked in democracies. Governments should ensure everyone has a say of equal value.
3. EFFICIENT USE OF RESOURCES
Another philosophy is that production from resources of finance, skills, land, space, transport access, water, energy and finance should be sustainable. Efficiency of resource usage is paramount when a developer is licensed to access public resources. Governments should require technologies make efficient use of resources. For example, a government might subsidise technologies such as renewable energy to promote sustainable energy supply, if there would be no disadvantage.
The human workforce is a national resource to deployed efficiently. Unemployment in Australia was 5.2% in July 2019. This level has been described as ‘full employment’ because Structural reduction to the job searching component is unlikely. Because there is ‘virtual full employment’, development brings workers from other jobs rather than from unemployment. Development benefits may be offset by skill shortages elsewhere and the collapse of uncompetitive sectors, such as manufacturing. Governments should sustain the human resource.
4. PROVISION FOR DISADVANTAGED PEOPLE
A humane society meets demands of disabled, disadvantaged and poor people altruistically, with handouts to needy people to spend as they like, or by allocation of facilities subsidised by government. Governments should require developers to make such provision.
5. CONSERVATION
If developers adopt a philosophy of conserving natural environments and heritage properties, it could ameliorate them for user and community benefit, by preventing their rundown and destruction. Again, governments should require developers to conserve properties.
Few projects could measure up to all the requirements of this handful of philosophies. Development would cease and employment would be concentrated on consumption and maintenance. The government should require transparent presentation of projects for scrutiny. Breaches of normal protocols, e.g. pollution prevention, could be traded off against the project’s benefits e.g. cheap electricity supply.
WHAT MAKES A DEVELOPMENT FAIR?
Issues of who benefits and who loses from a particular development can be related to three criteria:
i)The Pareto principle is that:
‘(a) legitimate welfare improvement occurs when a particular change makes at least one person better off, without making any other person worse off.’ (5)
This criterion, from welfare economics, requires a developer to make full compensation to all those who would be disadvantaged. It seems reasonable, there may be no developments where it has been applied. Critics point out that it treats developers severely according to traditions of absence of compensation, within the law.
Council development assessment officers would probably have some examples of where objectors have been compensated by a developer. For the most part, developments are approved without objectors getting any compensation.
ii) The Kaldor-Hicks criterion
‘Winners should be able to compensate all losers.’ (6).
Would a loser be consoled, mired in disadvantage, that the winners are getting more than he’s losing? It’s called winner take all. Winners don’t have to compensate losers, the basis of modern law and economics. The winners profit at the expense of the losers.
Residents’ are often losers from construction of accommodation in their neighbourhoods and resulting increase in population that could cause a decline in lifestyles. The winners would be developers, banks, suppliers, businesses and property owners. Losers lose their views, quiet, freedom, space, access, journey speeds, parking and many others. Losers who are ratepayers may also be required to pay a developer’s infrastructure costs, because in Queensland they pay only 65-70% of the infrastructure delivered (4).
iii) The Little criterion
‘Potential losers could not profitably bribe the potential gainers to oppose the change (7).
Again, losers do not actually get compensated. It seems a poor consolation that losers must accept gainers can go ahead when they would benefit too much to be paid off.
Of the three criteria above, Pareto’s is fairest to everyone, but winner take all is the protocol in Australia. The Little Criterion condones an extortive view of good development.
iv) Development approval
By the above criteria, costs to the community can exceed the benefits to the developer. It behoves governments to ensure developers are considerate of the community and impose legal responsibility for their consequences, rather than myopic preoccupation with creating jobs, attracting customers and returning profits to their owners.
Before a development is approved, a comprehensive evaluation of its benefits and costs is desirable. Governments should check that a developer meets obligations for all five philosophies mentioned. Shrinkage of an adjacent economic sector due to the development should be deducted from its benefits. Governments should prevent a few people benefiting from development at the expense of others without legal redress. Winner take all is primitive and won by wealth. Legislation is required to fully compensate losers.
References
1 Zhong, Raymond, ‘In Bhutan, Gross National Happiness Trumps Gross National Product,’ The Wall Street Journal, December 15, 2015.
2 Smith, Adam. ‘An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
3 Gregory, R, G,, “Some implications of the growth of the mineral sector.”, Australian Journal of Agricultural Economics, 20(2), 1976, pp.71-91.
4 Coutts, J Executive Director, Planning Services, Planning Group, Department of Infrastructure, Local Government and Planning. Public Briefing – Planning Bills 2015, Transcript of Proceedings, 30 November 2015, Brisbane.
5 Pareto, Vifredo ‘Cours d’économie politique,’ University of Lausanne, 1896.
6 Stringham, Edward ‘Kaldor-Hicks Efficiency and the Problem Of Central Planning,’ 2001, https://mises.org/files/qjae423pdf/download?token=7T2JY0RK
7 Little, Ian M.D. ‘A Critique of Welfare Economics’, 1949, Oxford, 1950, p273-275.
My novel Presumed Dead is a crime fiction story set in a context of city development. https://martinknox.com
