Posted by: mariannedc | March 6, 2012

Equity and Economic Growth

By Pamela Haines, Quaker social justice educator with a concern for economics and the environment

Policy Link and the Center for American Progress, two groups whose work I value and whose analysis I’m inclined to trust, have recently put out what they hope will be a ground-breaking position paper, “America’s Tomorrow: Equity is the Superior Growth Model.”   I find myself both totally on board and in fundamental disagreement at the same time.

I’m passionate about equity.  I join them wholeheartedly in their concerns: a growing wealth gap, increasing income inequality, rising productivity linked to stagnant wages, stunted economic mobility, more and deeper poverty, and persistent racial disparities. I’m totally on board with their concluding statement:  “Our future prosperity as a nation will depend on the people and places that have been left behind… we must begin to embed strategies that integrate the poor into the economy at every turn.”

I’m in total support of their strategies to increase employment opportunities and reduce income inequality: economic development, education, workforce development, infrastructure, and tax policy; local hiring, living wage policies, community workforce agreements, inclusionary zoning, local procurement, and minority contracting.

I have no quarrel with the four steps they suggest to secure our economic future that focus on equity and inclusion: reframing the national conversation about equity and economic prosperity; disseminating local innovations that advance equity; cultivating equity leadership in the economy; and prioritizing, measuring and tracking equity goals. The fifth step, a call for a policy platform for equitable economic growth, fits with their big idea: that a focus on the economic and social inclusion of those left behind is a superior model for economic growth.  And this is where alarm bells start going off inside my head—the conflation of economic well-being with economic growth.

There have been examples of equity and growth coexisting.  Research is cited indicating that welfare states designed to increase equality have not harmed economic growth, and that racial inclusion and income equality have been positively correlated with economic growth measures. I would add all the post World War II government policies that brought many working class families into the middle class during a time of economic growth—an increase in equity of income if not of race.

The authors are also clear that equity is not an automatic byproduct of growth—that a rising tide does not necessarily lift all ships, that growth in and of itself does not benefit the poor. Their conclusion is that growth is a necessary place to start, but we need more.

I shouldn’t be surprised.  Economic growth is, indeed, the altar at which we worship, the driver of many of our society’s biggest decisions. It’s the paradigm we’ve grown up with, the only one we know.  If equity, the thing we hold dearest, doesn’t damage economic growth or threaten it—and may even make it stronger—then the logic of attaching to its power and inevitability seems unassailable.

In a way, they’re saying that the picture we usually look at isn’t big enough, isn’t complete.  Growth is good, but if you add equity to growth, you get something even better. This would have been a worthy challenge for the 1950’s or 60’s.  It would be a new partnership worth fighting for in that time of serene confidence that economic growth was an eternal given, an unassailable fact to be counted on.  Those who are paying attention in this century, however, can’t recapture that confident unquestioning naïveté.  If you look at the trajectory of economic growth, and pan out a little farther in time and space, you get quite a different picture.  You see growth crashing against the limits of a finite planet.  Equity—infinitely more precious than economic growth—needs a stronger god to carry it into the future.  It would be a tragedy to hitch that wagon to a falling star.

It’s a bitter pill to swallow that the growth economy, which has accompanied rising standards of living for many in the industrialized world, should founder just as everyone else is getting a taste of that life and legitimately expecting more.  It would be easier to talk about adjustments to distribution with continuing economic growth as a given.  But to enter into a consideration of equity and economics in the 21st century with integrity, we have to also be talking about the end of cheap fossil fuel, and the impact of growing levels of production on the earth’s capacity to clean and sustain itself.

We don’t want to come to terms with this reality, that the economy is a wholly-owned subsidiary of the biosphere. None of the powers that be in our country has had the courage to acknowledge the implications.  All our goals are predicated on economic growth.  We continue to measure our whole country’s wellbeing by growth in GDP—the undifferentiated sum of all economic activity, good, bad or indifferent (and adding equity goals to such a deeply flawed measure, as the authors propose, would just mask the smell of a rotten measure, with an ironic likely result of making it more palatable).

We have to find a way to meet people’s needs without undermining the life support systems of the planet. Luckily this is not an impossible task.  Many things can still grow in a steady state economy—knowledge, technological innovation, whole new industries that take the place of old ones, just so long as there isn’t more total throughput.  There are no limits to the capacity of human ingenuity to better our quality of life—but we will have to move from economic growth measured by quantity to economic development measured by quality.

The issue of equity will still be with us, and, as the authors so rightly affirm, the pursuit of equity is essential to our economic prosperity and inseparable from our strength as a nation.  Perhaps more important, it is essential to our prosperity as a global community.  If we widen the lens one more time, their concluding statement would read: “Future global prosperity will depend on the people and places that have been left behind… we must begin to embed strategies that integrate the poor into the economy at every turn.”

We cannot use the frameworks that have guided the industrialized west to arrive at that future. Once we stop believing in the myth of continuous economic growth, and unhitch our dreams from that star, at least we’ll have our feet on solid ground.  Finding our way forward to increased equity without economic growth, in this country and across the world, will be a hard job, requiring enormous creativity.  But ultimately it will be a much more satisfying one. Once we’re no longer leading with economic growth, with its in-built tendency toward inequality and the concentration of wealth, maybe we can finally lead with equity.

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