Growing pains: the pros and cons of economic dynamism @Battle of Ideas

Panellists at this session were:
· Daniel Ben-Ami, finance and economics journalist
· Dr Ha-Joon Chang, University of Cambridge
· Paul Mason, TV broadcast journalist
· Martin Wolf, chief economics commentator, Financial Times

Takeaways:

• Dynamism is the most profound concept for our civilisation. It matters because it transforms people’s lives. It underpins our life expectancy, food, the expectations of the next generation reaching adulthood. It both signifies and generates change. It generates a range of opportunities unimaginable to previous generations. In agrarian societies, serfdom was normal, and the prosperous had to live from their labours. It has also transformed the position of women, with labour devices, contraception and so forth. Political democracy is both a natural expression and a concomitant of economic dynamism. A positive sum society – with the total number of goods and services rising over time.
• In the early 1950s the life expectancy of people in the third world was 41, whereas today it’s 63-4. This is a measure of the huge benefits of growth for developing countries.
• Ha-Joon Chang was born in South Korea in 1963, and has experienced phenomenal changes in the standard of living during his lifetime. It’s not just about having more money and things – it’s life expectancy, reductions in infant mortality and so on. In one and a half generations, South Korea has acquired the life expectancy of Switzerland! But this is unachievable without brutality and dislocation. Nevertheless, in undeveloped countries, there’s a lot more violence and destitution. Child labour was abolished in South Korea in the early 1960s, so there are labour rights and freedoms in place now. So the main problem with today’s liberal democracy is that growth is not executed well enough.
• Paul Mason maintained that it’s correct to question the conditions of growth. In early capitalism, it was believed that capitalism would collapse without the labour of 300,000 little girls in Lancashire. Then we saw that after the Factories Act, regulated capitalism was actually more dynamic. This is inimical to the Ayn Rand principle – that only selfishness can act as a dynamo for growth. A mature debate is needed around the distribution of wealth.
• Martin Wolf argued that the pursuit of GDP per se is meaningless. The biggest change in economics over the past 30 years has been the integration of Asian labour into the global economy.
• Up to the 1980s, a great proportion of the gains of capitalism went to the working classes of industrialised countries. This is partly because of the internal politics of those countries. The interests of the UK and Chinese working classes are directly antithetical. Paul countered this by saying that labour movements have been a fundamental part of capitalism since the first strike in Lancashire in 1818. China has just passed its own Factories Act – The Contract Labour Law was passed this year. Some factories have moved to Cambodia as a result, but the Chinese government is firm that labour regulations will be enforced.
• Local pollution will ultimately be fixed by local political processes. But are there global constraints, and if so how will they be handled? Drinking water is a real constraint to growth in both India and China. Ditto petrol. India can’t afford oil at $100 a barrel, and it’s forecast to rise to $500. Paul argued that the issue of water in China isn’t about quantity but quality. Why is the Yangtse so polluted? It’s because of a succession of paper factories killing everything in the river. Daniel argued that there is no inevitability of water shortage in India. They need infrastructural investment, that’s all. There’s always desalination if all else fails – look at Dubai, Arizona etc. There is a classic Malthusian confusion of infrastructural issues and god-given problems. The Stone Age didn’t end because we ran out of Stone. Martin argued back that over-dependence on fossil fuels is a problem – the water problem in India is exaggerated, but the fuel problem isn’t. India’s challenges are unique but unbelievably exciting.
• Daniel Ben-Ami argued that the problem with the term “sustainability” is that it’s used in so many ways. He opposes the idea that entire generations should hold themselves back because of the risk of damage to future generations. The real problem is unbalanced growth that is insufficiently productive.
• In Germany in the 19th century, the average number of working hours per week was 90, whereas now it’s 35. US work about 20-30% longer than us.
• In all countries, as soon as women start having a choice, they stop having the children they don’t want.
• In India and China the benefits of growth are ceasing to spread among the population – this is a significant problem.