Saturday, July 05, 2014

The political Right and economic growth

The other day, I read one of the best columns in a long time. It was written by Nick Hanauer and published by Politico Magazine. The column made, what should be a fairly obvious argument, that the super-rich have the most to lose from growing inequality and political polarization. In line with simple welfare capitalist logic, the costs of inequality are two-fold, first the direct costs of having to fight crime and pay for benefits but, more importantly, the indirect costs of poor people not being able to fully develop their potential and productivity. Naturally, over time, these secondary costs dominate as they put the whole economy on a lower growth trajectory than it would otherwise be on, something that due to the effect of compounded interest, leads to substantial long-term losses in overall welfare that are significant also for those at the top.

I have written about all this before here on Rawls & Me so I should not tire my readers by repeating myself. As welcome as Hanuaer’s intervention may be, I am afraid that his views are still those of a dwindling minority. In retrospect, what has held society together for the last century or so has been a broad political coalition advocating economic growth and development. That coalition however is slowly beginning to crack, at least in some of the most advanced industrial economies. The perhaps most well-known assault on growth has come from Greens and people on the political Left who have failed to recognize how crucial economic growth is to lessen distributional conflicts, pay for retirement schemes and, most of all, to finance the kind of public research needed to meet the ecological challenges of our time. What is less discussed is an emerging anti-growth ideology on behalf of the political Right. First visible in the works of people like Tyler Cowen who talks about the “great stagnation” and how all the “low-hanging fruit” of economic development has already been picked in the United States.

If we go back to the Enlightenment, conservatives were of course against economic growth and everything associated with it such as urbanization, social mobility and meritocracy but, for the last century, they have for the most part traded their resistance for all the visible material benefits brought about by modernization. This might however by changing as the very brightest are beginning to realize that the debt-driven consumer economy (and reliance on consumers in other countries that have pursued welfare capitalist policies) is about to come to an end and that a return to high growth rates in the mature economies (such as Sweden) would require radical social investments of precisely the sort that they have always been vehemently opposed to. So, instead of abandoning for instance the voucher system for schools and ensuring that everyone gets access to quality education, people on the Right might prefer to simply abandon economic growth and rather shift resources to repression (a task which paradoxically has been made considerable easier thanks to general civilizing processes as discussed by for instance Steven Pinker). While the Right of course always in some ways has preferred repression to social investments, there has still been a silent acceptance of much of the welfare state machinery. It is that acceptance that might now be vanishing.


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