By Wodzislaw Kicinski, member of the St. Gallen Symposium's global Leaders of Tomorrow community
Since 1991 Japanese annual GDP rose on average by a mere 1.1%. Yet in the same period GDP per capita grew in line with those of other advanced economies, life expectancy has increased to a record high, Japanese students remained in the top 10 best performing countries in PISA quality of education study, while air pollution decreased in the country. This does not mean that we cannot call the last two decades lost for Japan, but surely GDP growth does not paint the whole picture.
Economic growth is so strongly engrained in our civilisation's idea of progress that even despite concerns related to it, such as environmental damage or economic inequality, we find it almost impossible to imagine general wellbeing without growth. A cult of economic growth has made GDP growth into an objective in itself and marginalised more qualitative features of progress with the current economic system being structured towards "more" instead of "better".
One way to change this is to prioritise development, which encompasses qualitative aspects such as education, health and environment as well as economic growth, instead of growth itself.
Development as understood by Amartya Sen in "Development as Freedom" is "a process of expanding the real freedoms that people enjoy", which means that people gain valuable opportunities to improve their wellbeing. Even though economic nomenclature distinguishes between "developing" and "developed" nations and despite the fact that studies of development focus only on the former group Sen's definition does not make development pertinent only to "developing" nations. Even if political, social and economic freedoms are usually available in "developed" countries there is always scope for their enhancement. Development does not end with attainment of "developed" status.
As an approach towards progress development has significant advantages over economic growth. It provides a more strategic, more holistic and finally more responsible approach to progress than the economic growth approach.
Firstly, development is a better strategy towards wellbeing than growth, because instead of aiming just for "more" its comparative character requires making value judgments and contemplating them in order to choose the best course towards progress. This works both in case of "developing" and "developed" nations.
For the "developing" nations focusing on development goals can render economic growth more efficient. Gains from economic growth can be directly channelled into expansion of basic freedoms and reinforce virtuous cycles of development and growth. An excellent example of maximising development given available conditions is Sri Lanka, which through government's provision of health care and education as well as subsidies on basic foods is a country with the largest difference in its rank according to Human Development Index compared to its rank according to Gross National Product (+45 places higher in HDI ranking).
Also in case of "developed" nations focus on development goals prevents from a blind reliance on economic growth and rising economic abundance. This is particularly important because relationship between growth and development becomes much more complex for advanced economies. Easterlin's Paradox describes a phenomenon that in countries with sufficiently large income increases in income per person do not translate into increased happiness level.
Secondly, development is a more holistic strategy than economic growth, which can take into account only factors with an assigned value or price. People's wellbeing consists of not only material values such as wealth or employment status but also of opportunities such as education, health or political freedom and spiritual values like relationships with others or religion. Of course these things are often related to economic growth, but development contrary to economic growth directly aims to assess and improve these factors. A great example of GDP accounting shortcoming are parents who raise children at home. Though they do not contribute to economic growth in a direct sense their impact on wellbeing of children is of paramount importance. Acknowledgment of such features introduces a more humane dimension to the idea of progress. People become central consideration of development and are not treated just as labour force and consumers in economic models.
Thirdly, broader understanding of features that contribute to wellbeing and critical awareness of set objectives makes development a forward-looking, responsible strategy.
By focusing on opportunities available to people development concerns primarily those deprived of them, who are most vulnerable in the society. It enables creation of equal opportunities across the society reducing inequalities. This is very important, as while income inequality across nations has finally started to decrease, economic growth in recent decades has been accompanied by a widening gap between rich and poor within countries. It seems that in a market driven economy risk has shifted towards individuals, and more specifically towards the least affluent ones. Those are the poorest citizens in the US who are deprived of access to universal healthcare, they are the group amongst which unemployment rate is the highest and unemployment spells the longest. According to the Federal Reserve most of them constitute 15% of US households who can expect their income to fall by as much as 50% within a year. Focusing on development prevents from leaving their problems covered up by a seemingly successful growth performance.
Finally, it is worth noting that economic growth operates through two channels. As an idea it shapes our way of thinking about wellbeing. Then through its embodiment - GDP, the Index of Indices around which the economy evolves it shapes incentive structures followed by the agents. Thus the challenge of introducing the alternative is twofold. While Copernican revolution required "just" to convince people of faultiness of geocentrism a shift towards development would require not only to win the ideological debate but also to change the entire dynamics of the economic system from growth-centric to development-centric. It is thus encouraging that discussing the Symposium's main theme we will able to question the ideological dominance of economic growth and perhaps even suggest how to challenge it.
Growth - The good, the bad, and the ugly will be debated in the light of the 46th St. Gallen Symposium (11-13 May 2016).