The Urge To Grow

"Growth

By Daniel Susskind

Belknap/Harvard, 304 pages, $29.95

Is economic growth overrated? Since World War II, the growth of a nation's gross domestic product has become a central political desideratum and an important bellwether of economic success. Daniel Susskind's "Growth: A History and a Reckoning" charts the growth of growth as an economic idea, policy objective and source of anxiety. The author occupies the broad middle ground between the proponents of the practically antiprosperity "degrowth" movement and the unalloyed apostles of capitalism. I suspect he will have more success convincing progressives that there is some good in economic expansion than in persuading Milton Friedman's disciples to embrace this book's often-amorphous policy proposals.

"It is hard to imagine that a Stone Age hunter-gatherer would have had much in common with someone from the eighteenth century," Mr. Susskind writes, but he emphasizes that "both of them are likely to have lived stagnant economic lives, stuck in an unforgiving struggle for subsistence." Much evidence supports this claim. Long-term stagnation was not something new when it was observed by Alvin Hansen in 1939 or Larry Summers in 2014 -- it has been the reality for almost all of human history. Mr. Susskind explains this "economic stasis" with an assertion rooted in the work of the original dismal scientist, Thomas Malthus: "Any improvements would only ever be temporary, as populations inevitably grew to gobble up that new prosperity."

Most economic historians would follow this description of the preindustrial world with a narrative about the Industrial Revolution. Instead, Mr. Susskind cleverly shifts to the evolution of economists' ideas about what enables economies to take off. He starts with Roy Harrod and Evsey Domar, both of whom, in the 1930s and '40s, studied the accumulation of physical capital such as buildings, machines and roads.

In the 1950s, Robert Solow and Trevor Swan suggested that growth can come only from unexplained improvements in technology because capital accumulation runs into diminishing returns. The next leap forward occurred in the 1980s, when Paul Romer and Robert Lucas proposed that the accumulation of a special type of capital -- knowledge -- could generate increasing returns across the economy as a whole. Thinking about knowledge spillovers led Lucas to Jane Jacobs's writings about urban creativity, which directly pushed me to my lifetime study of cities. Economic historians, especially Joel Mokyr, also study growth, and their more granular findings generally support the Romer-Lucas view that ideas hop from person to person.

Mr. Susskind then pivots to the history of growth as a central political objective. It starts with Simon Kuznets, whose work on measuring output in the U.S. and throughout the world during the Great Depression resulted in the Kuznets curve, which documented inequality as having first increased, and then decreased, with national wealth. This suggested that growth is as likely to reduce inequality as it is to exacerbate it.

As Peter Drucker famously opined, "what gets measured gets managed," and Kuznets's attention to the course of national output led American policymakers to focus on delivering growth. This focus took on added urgency during the Cold War because, as Mr. Susskind reminds us, "how rapidly the U.S. and Soviet economies were growing" was considered evidence of "who was winning the Cold War."

Mr. Susskind then turns to the benefits of growth, including "unprecedented material prosperity," which are offset, he suggests, by "a huge price, one whose destructive consequences we do not yet fully understand." Climate change is allegedly part of that "huge price." Yet we have decades of evidence documenting an Environmental Kuznets Curve, in which environmental harm first rises, then falls, with national wealth. While carbon emissions would have been lower if our economies had remained in some dismal preindustrial morass, the Kuznets curve implies that already-wealthy countries will become cleaner as they grow.

Mr. Susskind briefly addresses other problems, which may or may not be related to growth, such as rising inequality and threats to democracy. Benjamin Friedman's "The Moral Consequences of Economic Growth" (2005) presented centuries of evidence supporting the view that "economic growth -- meaning a rising standard of living for the clear majority of citizens -- more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy."

Most of Mr. Susskind's policy recommendations seem intended to make growth more palatable to progressives. That is a worthy goal, and in some areas his proposals are clear and sensible. In other areas, his proposals' ambiguity makes it hard to assess their sensibleness. He ferociously denounces our current intellectual-property regime as being "far too protective of the status quo, coddling those who have discovered ideas in the past at the expense of those who want to use and reuse those ideas in the future." But his primary proposals are reasonably orthodox: "enforcing the existing rules," "more funding for properly operating the existing IP regime" and "offering prizes rather than patents in areas of known needs." As many authors have noted, prizes offer incentives for innovation without creating monopolies, although I have doubts that our political system is capable of implementing a fair, large-scale public-subsidy program that doles out significant cash rewards to private-sector innovators.

Mr. Susskind is also keen on expanding total R&D spending and on directing that spending toward innovation that protects the environment and creates jobs. I share both objectives, but good intentions often lead to hellish policies, and Mr. Susskind's policy proposals are murky. I agree with him strongly if he means supporting a carbon tax (which he does mention and which will encourage environmental innovation) and making the tax-and-benefit system more pro-employment, perhaps by reducing the payroll tax for the poorest workers. But if he means vast funding to support the Solyndras of the future, I am less sanguine.

"Growth" succeeds smartly as a history of thought, but it is less successful as a practical policy primer.

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Mr. Glaeser is a professor of economics at Harvard, a senior fellow at the American Enterprise Institute and a co-author of "Survival of the City."" [1]

1. The Urge To Grow. Glaeser, Edward.  Wall Street Journal, Eastern edition; New York, N.Y.. 13 May 2024: A.15.