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The delusion of growth

“Once again, we are the economic envy of the entire world”, with these characteristically modest words Donald Trump wasted no time in late July to take credit for the strong growth of the US Gross domestic product (GDP), 4.1 percent, in the second quarter of 2018. Reactions to this statement have mostly focused on one question: Is this growth sustainable? But this largely misses the point. The question instead should be: Is this growth useful?

The answer depends on what you know about growth in general and what you know specifically about well-being in the US. Growth, that is growth of GDP, measures only economic activity: goods and services traded on markets for a monetary value. Well-being on the other end paints a much more extensive, accurate and up-to-date picture of economic development using a plurality of indicators to answer key questions: is income fairly shared? Are workers healthy? Are institutions underpinning markets robust? Are ecosystems sustaining human well-being vigorous?

On all these counts for the last three decades, strong growth in the US has obscured the reality of weak well-being. Income inequality is at an all times high and second to none among the world’s comparable countries. Life expectancy is declining while scores of Americans have been dying of “social despair”. Trust in Congress and confidence in democracy is dismal with political polarization stronger than ever. Ecosystems are weakened and increasingly suffering from the loss of biodiversity and the impact of climate change. This is nothing to dream about.

True enough, in the mid-1990s, when all those predicaments were still brewing and not yet fully apparent, the European Union wanted to replicate the “new economy” boom fueling the US growth. Also true, no country in the world is fully prosperous: Nordic countries, which impressively combine economic dynamism, social justice and environmental sustainability currently find themselves caught in a cultural crisis which emboldens extremist parties.

But it remains that the fixation of the US public debate on growth data is not only misleading but perilous. Because it captures and reflects so little of what happens and matters in our complex societies, growth is now fake news: it is not progress, it is the illusion of progress. And the US has become the poster child of this deception.

So what should we actually be concerned about? Instead of growth, well-being (human flourishing), resilience (resisting shocks) and sustainability (caring about the future) should become our new collective goals. This is the meaning of the well-being transition under way in many countries and localities around the world. Because these three horizons have been overlooked by mainstream economic thinking in the last three decades, our social world has been mismanaged and our prosperity is now threatened by inequality and ecological crises. The most enviable policy in the world is to start measuring and managing what counts in order to protect what matters.

 

— Éloi Laurent is a Senior Research Fellow at OFCE (Sciences Po Centre for Economic Research, Paris), Professor at the School of Management and Innovation at Sciences Po and Visiting Professor at Stanford. He is the author of the newly released Measuring Tomorrow: Accounting for Well-being, Resilience and Sustainability in the 21st century, Princeton University Press.

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