Wealth

Part 20 - ECONOMIC GROWTH

Author's note: the following is a summary of the work of Philip Cross, a senior fellow at the Fraser Institute, and professor Daniel Susskind.

In 2024, Philip Cross wrote an article explaining the necessity of sustained economic growth. When growth fails, politics revert to zero-sum games, where some people can gain only if others lose. The reflexive reversion to redistributing (cutting up the pie) instead of creating incomes (making more pies) bigger) resurfaces during periods of slow economic growth. 

But emphasizing redistribution drains life from what the German sociologist Max Weber called the optimistic "spirit of capitalism," something clearly evident in the malaise that infects much of the western world today. 

In the fast-growing 1950s John Kenneth Galbraith lamented that "inequality has ceased to preoccupy men's minds." You will know Canada's economy has regained its potential when inequality and redistribution fade from our public debate.

Common belief in the zero-sum model is self-reinforcing: the resulting focus on redistribution limits the possibility of sustained growth. Oxford University's Eric Beinhocker argues this is because "societies that believe in a fixed pie of wealth have a difficult time engendering cooperation and tend to be low in mutual trust," both of which are required for capitalism and trade to flourish. 

In addition, economic historian Deirdre McCloskey suggests, the denigration of rich people "as clever thieves or obsessive misers or lucky inheritors" discouraged people from striving to join their ranks.

Oxford economics professor Daniel Susskind's 2024 book, Growth: A History and A Reckoning, underscores both the historical novelty of the concept of sustained economic growth and why democratic capitalism needs it to continue to be a priority.

Susskind begins by explaining how new a phenomenon sustained economic growth is. For millennia before the Industrial Revolution, stagnation was the norm, with brief periods of higher living standards punctuated by setbacks due to supply constraints, population growth or pillage by thieves or invaders. In an image owing to economic historian Jonathan Levy, the result was economies that expanded and contracted like accordions, with no continuing progress overall.

Susskind emphatically rejects the recent "de-growth" movement's belief in shrinking the economy to save the planet. The permanent recession that would result would have enormous consequences. During the long slump in the 1930s, not to mention the slow growth of the last 10 years, in Canada, people became susceptible to the siren call of politicians, dictators and autocrats promising to deliver higher incomes even as they undermine the values supporting democratic capitalism.