Growth

Growth Plot Summary

Introduction

For most of human history, economic growth simply did not exist. Our ancestors lived in a world where material conditions remained remarkably stagnant for thousands of years, with most people barely surviving at subsistence level. Then, almost like a miracle, something changed. Beginning around 1800, a dramatic economic transformation swept across parts of the world, eventually lifting billions from poverty and transforming human existence in ways our ancestors could never have imagined. This extraordinary story of humanity's escape from economic stagnation raises profound questions that affect us all. How did we break free from millennia of subsistence living? What price have we paid for this unprecedented prosperity? And as we face mounting environmental crises, technological disruptions, and social fragmentation, can we continue on this path of endless growth—or must we find a new way forward? By exploring the history, promise, and perils of economic growth, we gain crucial insights into the most pressing challenges of our time and the difficult choices that lie ahead for societies worldwide.

Chapter 1: The Malthusian Trap: 300,000 Years of Economic Stagnation

Imagine living in England in the year 1200, then fast-forwarding six centuries to 1800. Despite the passage of 600 years—a span that saw the Renaissance, the Reformation, the Scientific Revolution, and countless other transformations—your economic circumstances would have been remarkably similar. This extraordinary stagnation wasn't unique to England but represented the normal condition of humanity for roughly 300,000 years, from the emergence of Homo sapiens until the dawn of the Industrial Revolution. Evidence for this "Long Stagnation" comes from multiple sources. Historical wage records show that real incomes fluctuated but showed no sustained upward trend over centuries. Archaeological data reveals that average heights—a reliable indicator of nutrition and health—remained relatively constant across millennia. Life expectancy hovered around 30-35 years throughout most of recorded history, with high infant mortality and frequent premature death from disease and malnutrition. Even in the most advanced civilizations of their time, the vast majority of people lived just above subsistence level, one bad harvest away from starvation. The mechanism behind this stagnation was identified by Thomas Malthus in his 1798 "Essay on the Principle of Population." Malthus observed that population tends to grow geometrically while food production increases only arithmetically, creating an inevitable tension. Whenever living standards temporarily improved, people would have more children who survived to adulthood, increasing the population. With more mouths to feed but limited agricultural technology, the law of diminishing returns would kick in, driving living standards back down to subsistence level. This self-correcting cycle—the Malthusian trap—prevented sustained economic growth. The trap occasionally loosened following catastrophic events. The Black Death, which killed roughly one-third of Europe's population in the 14th century, temporarily increased wages and living standards for survivors. With fewer workers, each laborer became more valuable, and land-to-labor ratios improved. However, these improvements were always temporary. Within a few generations, population would recover, and living standards would decline once again to subsistence levels. Technological progress did occur during this period but was too slow to overcome population growth. New farming techniques, tools, and organizational methods were developed, but their benefits were ultimately absorbed by larger populations rather than higher living standards. Even major innovations like the printing press or gunpowder failed to break the fundamental economic pattern of subsistence living for the vast majority. This long period of stagnation helps explain why economic growth became such a revolutionary concept when it finally arrived. After hundreds of thousands of years of economic stasis, the escape from the Malthusian trap would transform human existence in ways our ancestors could never have imagined, setting the stage for the unprecedented prosperity that followed.

Chapter 2: The Great Escape: How the Industrial Revolution Changed Everything

In the late 18th century, something extraordinary happened in Britain that would eventually transform the world. After millennia of economic stagnation, sustained growth in living standards began. This "Great Escape" from the Malthusian trap started modestly—average incomes in Britain grew by less than 1% annually in the early decades of industrialization—but this seemingly small change represented a fundamental break with humanity's entire economic past. The Industrial Revolution began with a series of technological breakthroughs in key sectors. The mechanization of textile production through inventions like the spinning jenny and power loom dramatically increased output per worker. James Watt's improved steam engine, patented in 1769, provided unprecedented power for factories and later transportation. New techniques in iron production made this crucial material more affordable and abundant. Coal replaced wood as the primary energy source, providing concentrated power that didn't deplete with harvesting. These innovations spread to other sectors, creating a cascade of productivity improvements that outpaced population growth for the first time in history. What made Britain the birthplace of this revolution? Several factors converged to create the perfect conditions. Britain had relatively high wages compared to competitors like China, creating incentives to develop labor-saving technologies. It possessed abundant coal resources near manufacturing centers, providing cheap energy. Its political institutions protected property rights and contracts, encouraging investment and entrepreneurship. The country's naval power and colonial empire provided access to raw materials and markets. Perhaps most importantly, Britain experienced what economic historian Joel Mokyr calls the "Industrial Enlightenment"—a cultural shift that valued practical knowledge and technological innovation. The economic historian Deirdre McCloskey emphasizes the importance of changing social attitudes toward commerce and innovation. In previous eras, merchants and inventors were often viewed with suspicion or disdain by elites. The new "bourgeois dignity" that emerged in northwestern Europe, particularly Britain, celebrated commercial success and practical innovation, creating social incentives for entrepreneurship. This cultural shift helped overcome traditional barriers to economic change. Economist Paul Romer explains why these innovations could sustain growth in a way previous technologies couldn't. Ideas, unlike physical resources, are "non-rival"—they can be used by many people simultaneously without being depleted. Once the steam engine was invented, its design could be replicated and improved upon indefinitely. This property of ideas allows them to overcome the curse of diminishing returns that trapped earlier economies. As Romer puts it, using a culinary metaphor: the ingredients in a kitchen may be finite, but the number of possible recipes is nearly limitless. The Industrial Revolution spread from Britain to continental Europe, North America, and eventually worldwide, though at different rates and with varying patterns. This diffusion process was not merely about copying British technologies but adapting and improving upon them in different contexts. The revolution continues to this day in developing economies, where industrialization is still transforming lives and lifting millions out of poverty. The Great Escape from the Malthusian trap has now become a global phenomenon, though billions still await its full benefits.

Chapter 3: Growth as Policy: The Cold War and GDP's Rise (1945-1980)

In the aftermath of World War II, economic growth transformed from a historical phenomenon into an explicit policy objective. This shift occurred not through careful deliberation about societal goals, but largely as an accidental byproduct of war, depression, and geopolitical competition. The period from 1945 to 1980 saw the institutionalization of growth as the central aim of economic policy across the developed world, particularly in the United States. The Great Depression cast a long shadow over post-war policymaking. With unemployment having reached 25 percent in the United States during the 1930s, preventing another economic collapse became the overriding priority. The Employment Act of 1946 formally committed the federal government to promoting "maximum employment, production, and purchasing power," establishing growth as an explicit policy goal. Politicians and economists increasingly saw economic expansion as the solution to unemployment, believing that a growing economy would naturally create sufficient jobs for all who wanted them. The measurement of economic growth became standardized during this period through the development of national income accounting. While earlier attempts to measure national income had existed, it was during and after World War II that Gross Domestic Product (GDP) emerged as the standard metric. John Maynard Keynes and other economists refined these measurements to help governments manage wartime production. After the war, international organizations standardized GDP methodology, allowing for global comparisons. By the 1950s, GDP growth rates had become front-page news and a primary metric for evaluating political leadership. The Cold War intensified the focus on economic growth as competition with the Soviet Union took on an economic dimension. When Soviet Premier Nikita Khrushchev declared "We will bury you" in 1956, he was referring not to military conquest but to economic outperformance. American textbooks of the era frequently predicted when the Soviet economy would overtake the American one, creating anxiety that fueled growth-oriented policies. President Kennedy explicitly framed economic growth as essential to winning the Cold War, stating that "economic growth is the means to freedom and security." Growth politics offered a seemingly elegant solution to distributional conflicts. Rather than engaging in zero-sum debates about redistributing existing wealth, growth promised to create new wealth that could benefit everyone. As President Kennedy put it, "a rising tide lifts all boats." This allowed politicians to sidestep contentious questions about fairness and equality. Growth became what political scientist Aaron Wildavsky called a "meta-policy" that could unite otherwise divided constituencies. The policy toolkit for promoting growth expanded during this period. Keynesian fiscal policy—using government spending and taxation to manage aggregate demand—became standard practice. Monetary policy evolved with more sophisticated central banking techniques. Investments in infrastructure, education, and research aimed to boost productivity. Trade liberalization expanded markets and intensified competition. These policies varied across countries but shared the common goal of maximizing GDP growth, which had become the primary measure of economic and political success by the 1970s.

Chapter 4: The Promise Fulfilled: How Growth Transformed Human Welfare

The decades following World War II delivered on the promise of economic growth in ways that transformed human life across the globe. From 1950 to 2000, world GDP per capita more than tripled, creating unprecedented material abundance and improving human welfare across multiple dimensions. This period demonstrated the extraordinary potential of sustained economic growth to address age-old human challenges. Perhaps the most dramatic achievement was the reduction in extreme poverty. In 1950, more than half the world's population lived in extreme poverty; by 2015, that figure had fallen below 10 percent. While poverty remains a serious problem in many regions, the speed and scale of this reduction represents one of humanity's greatest accomplishments. China alone lifted over 800 million people out of poverty between 1981 and 2015, demonstrating how rapid economic growth can transform living standards within a single generation. Similar though less dramatic progress occurred in India, Southeast Asia, and parts of Latin America as economic growth spread globally. Health outcomes improved dramatically during this period of sustained growth. Global life expectancy rose from about 45 years in 1950 to over 70 years by 2015. Child mortality plummeted, with the global under-five mortality rate falling from 214 deaths per 1,000 live births in 1950 to 38 by 2019. Many infectious diseases that had plagued humanity for centuries were brought under control through vaccines, antibiotics, and improved public health measures that economic growth made possible. These health improvements were not limited to wealthy countries but spread globally, though significant disparities remain. Education expanded enormously as economies grew. Global literacy rates rose from about 36 percent in 1950 to over 86 percent by 2019. Average years of schooling increased worldwide, and higher education became accessible to far more people than ever before. This educational expansion both contributed to economic growth through human capital development and was made possible by the resources that growth generated, creating a virtuous cycle of development. Material comforts that were once luxuries became widely available. Indoor plumbing, electricity, refrigeration, and other basic amenities spread to billions of homes. Consumer goods proliferated, with innovations like washing machines and microwaves freeing people (especially women) from hours of domestic labor. The cost of artificial light fell by a factor of 10,000 over the 20th century, allowing people to read, work, and socialize after dark at minimal expense. Transportation became faster, cheaper, and more accessible, connecting people and places as never before. Work life improved substantially in developed economies. Working hours declined from around 60 hours per week in 1900 to about 40 hours by the 1950s in most advanced economies. Workplace safety improved dramatically, with fatal accident rates falling by over 90 percent in many industries. Child labor, once common throughout the world, declined sharply as families could afford to keep children in school rather than sending them to work. Retirement became a normal life stage rather than a luxury for the few, as pension systems developed and wealth accumulated. These material improvements contributed to broader social progress. As societies became wealthier, they could afford to invest in environmental protection, workplace safety, and social insurance programs. Women's participation in the workforce increased, partly enabled by labor-saving household technologies and partly driven by expanding economic opportunities. While growth alone did not guarantee social progress, it provided resources that made many forms of progress possible.

Chapter 5: The Hidden Costs: Environmental Crisis and Social Disruption

Despite its many benefits, economic growth has imposed significant costs that have become increasingly apparent in recent decades. These costs are not merely incidental side effects but structural consequences of how growth has been pursued. Understanding these costs is essential for addressing the growth dilemma that now confronts societies worldwide. Environmental degradation represents perhaps the most visible price of growth. Carbon dioxide concentrations in the atmosphere have risen from about 280 parts per million before the Industrial Revolution to over 420 parts per million today, driving climate change that threatens ecosystems and human welfare. Global average temperatures have already increased by more than 1°C since pre-industrial times, contributing to more frequent and severe weather events, rising sea levels, and shifting climate zones. Beyond climate change, growth has accelerated biodiversity loss, with species extinction rates now 100 to 1,000 times higher than natural background rates. Deforestation, soil degradation, water pollution, and plastic waste have all increased with economic expansion, creating planetary pressures that cannot be sustained indefinitely. Rising inequality has accompanied growth in many countries, especially since the 1980s. In the United States, the share of income going to the top 1 percent more than doubled between 1980 and 2020, while wages for the bottom half of earners stagnated after adjusting for inflation. Similar patterns emerged in many other developed economies, though to varying degrees. This growing inequality contradicted earlier expectations that growth would naturally reduce economic disparities. Instead, technological change, globalization, and policy choices combined to concentrate the benefits of growth among those already advantaged, leaving many behind despite rising aggregate prosperity. Technological disruption, while driving productivity improvements, has created significant labor market challenges. Automation has eliminated many middle-skill jobs, contributing to labor market polarization where employment grows in high-skill and low-skill occupations but shrinks in the middle. Digital technologies have enabled new forms of precarious work in the "gig economy," where workers lack traditional employment protections. While new jobs have historically replaced those lost to technology, the transition has often been painful for affected workers and communities, and the pace of change has accelerated in recent decades. Globalization, accelerated by growth-oriented policies, produced both winners and losers. International trade expanded markets and reduced prices for consumers but also displaced workers in industries exposed to foreign competition. Studies of the "China shock" following China's entry into the World Trade Organization in 2001 found that affected communities in the United States experienced not only job losses but also increases in poverty, family breakdown, and deaths of despair from suicide, drug overdose, and alcohol abuse. The economic gains from trade were real but unevenly distributed, with the costs concentrated among those least able to adapt. Community cohesion has suffered as growth transformed social structures. Traditional communities built around stable industries dissolved as economic change rendered those industries obsolete. Geographic mobility, while economically efficient, separated families and weakened local ties. Consumer culture, fueled by growth, sometimes displaced other forms of social connection and meaning. These changes contributed to a sense of alienation and loss of belonging that economic statistics failed to capture but that manifested in rising rates of loneliness, mental health problems, and social distrust in many developed economies. Political systems have struggled to address these costs effectively. The influence of money in politics has often tilted policy toward growth at all costs rather than balanced consideration of growth's benefits and harms. Democratic institutions designed for slower-moving times have had difficulty responding to rapid economic and technological change. These governance challenges have compounded the other costs of growth, creating a crisis of legitimacy in many developed economies as citizens question whether the system is working for them.

Chapter 6: Beyond GDP: Redefining Progress in a Complex World

The Gross Domestic Product (GDP) metric has dominated economic policymaking since the mid-20th century, but its limitations have become increasingly apparent. GDP measures the market value of all final goods and services produced within a country in a given period. While this provides valuable information about economic activity, it fails to capture many aspects of human welfare and social progress that matter deeply to people. GDP's technical limitations are substantial even on its own terms. It excludes non-market activities like household work, which means that when someone hires a cleaner, GDP rises, but when they clean their own home, GDP is unaffected despite the same service being performed. The underground economy—including illegal activities and unreported transactions—is largely missed by official GDP statistics, creating significant measurement gaps in countries with large informal sectors. Quality improvements in goods and services are difficult to account for properly; a smartphone today is vastly more capable than one from a decade ago, but GDP calculations struggle to reflect this enhanced value. More fundamentally, GDP ignores many aspects of well-being that people value. Environmental degradation doesn't reduce GDP; in fact, cleaning up pollution actually increases it. Income inequality is invisible in aggregate GDP figures; a country where a small elite captures most of the gains from growth looks identical to one with broadly shared prosperity. Social connections, mental health, and leisure time—all crucial components of a good life—find no place in GDP accounts. Even destructive events like natural disasters can boost GDP through reconstruction spending, highlighting the metric's moral blindness. Robert F. Kennedy articulated these concerns eloquently in 1968 when he said that GDP "measures everything in short, except that which makes life worthwhile." His critique resonated because it captured a widespread sense that economic statistics were missing something essential about human flourishing. This concern has only grown as societies have become wealthier but not necessarily happier or more cohesive. In response to these limitations, economists and policymakers have developed various alternative or supplementary measures. The Human Development Index combines GDP per capita with measures of education and life expectancy to provide a broader picture of development. The Genuine Progress Indicator adjusts GDP by subtracting costs like environmental damage and adding benefits like volunteer work. Happiness surveys directly measure subjective well-being rather than using economic output as a proxy. Dashboards of indicators track multiple dimensions of welfare simultaneously, avoiding the oversimplification of single measures. The "dashboard approach" has gained particular traction because it acknowledges that different aspects of well-being cannot be meaningfully reduced to a single number. Rather than trying to create a perfect alternative to GDP, this approach maintains GDP as one important indicator while explicitly recognizing its limitations and complementing it with other measures. The OECD's Better Life Index, for example, tracks eleven dimensions of well-being from housing and income to community and life satisfaction, allowing for a more nuanced understanding of social progress. Moving beyond GDP requires not just new metrics but a deeper rethinking of what constitutes success for a society. Economic growth remains important, especially for developing countries where material deprivation is still widespread. But in wealthy societies, the relationship between additional growth and improved well-being becomes more complex. Questions about the quality of growth—who benefits, at what environmental cost, with what impact on communities—become at least as important as the quantity of growth measured by GDP. This shift in perspective doesn't mean abandoning economic analysis but enriching it with insights from other disciplines and forms of knowledge. Psychology helps us understand subjective well-being, sociology illuminates community dynamics, and environmental science clarifies planetary boundaries. By integrating these perspectives, we can develop a more holistic understanding of progress that acknowledges both the promise and the limitations of economic growth.

Chapter 7: Directing Our Future: Balancing Growth with Human Values

As we confront the growth dilemma, we face fundamental questions about how to shape technological progress and make the moral choices that will determine our future. Rather than passively accepting whatever direction technology and economic growth take, we have the capacity—and responsibility—to influence their course. This requires understanding both the technical possibilities and the ethical dimensions of the choices before us. The environmental movement has increasingly called for "degrowth"—intentionally reducing economic activity to stay within planetary boundaries. Climate activist Greta Thunberg captured this sentiment when she challenged world leaders: "We are in the beginning of a mass extinction and all you can talk about is money and fairy tales of eternal economic growth." This perspective highlights the physical impossibility of infinite growth on a finite planet and the urgent need to address climate change and other environmental crises. However, simply stopping or reversing growth globally would create enormous problems. With hundreds of millions still living in extreme poverty, freezing the global economy at its current size would either condemn these people to permanent deprivation or require massive redistribution from the world's middle and upper classes. Moreover, many environmental challenges require technological solutions that depend on continued innovation and economic resources. The question is not whether to have growth, but what kind of growth and for whom. Technological progress is not predetermined but can be directed through deliberate choices. Economist Daron Acemoglu has developed the concept of "directed technological change," showing how economic incentives shape which technologies get developed and adopted. By changing these incentives through taxes, subsidies, regulations, and social norms, societies can influence the direction of technological development. For example, carbon pricing can shift innovation toward clean energy, while labor market policies can encourage technologies that complement human workers rather than replace them. The COVID-19 pandemic demonstrated how quickly technology can respond to new incentives. When in-person work became dangerous or impossible, remote work technologies that had existed for years suddenly saw massive adoption and improvement. The development of effective vaccines in less than a year—far faster than historical precedent—showed how technological progress can accelerate when priorities shift. These examples suggest that many of the tradeoffs we face between growth and other values might be weakened through directed innovation. Environmental challenges provide a compelling case for directed technological change. For decades, many argued that reducing carbon emissions would require sacrificing economic growth. Yet renewable energy technologies have improved so rapidly that in many contexts, clean energy is now cheaper than fossil fuels. This "green growth" path emerged not by accident but through deliberate policies that created incentives for low-carbon innovation—carbon taxes in some countries, renewable energy subsidies in others, and regulations that forced companies to develop cleaner technologies. These technical possibilities, however, ultimately confront us with moral questions that cannot be resolved through expertise alone. How much should we value environmental protection relative to material prosperity? How important is preserving community cohesion compared to economic efficiency? What obligations do we have to future generations? These questions involve tradeoffs between different values and interests that cannot be reduced to technical calculations. Democratic deliberation offers the most legitimate way to address these moral questions. New forms of citizen participation—from deliberative polls to citizens' assemblies—can engage ordinary people in thoughtful consideration of complex issues. These approaches recognize that while experts can provide information about the likely consequences of different choices, the weighing of values inherent in those choices belongs properly to citizens. By combining technical expertise with democratic deliberation, societies can navigate the growth dilemma in ways that reflect their deepest values and aspirations.

Summary

The story of economic growth represents humanity's most remarkable transformation—a journey from 300,000 years of subsistence living to unprecedented prosperity in just a few centuries. This dramatic escape from the Malthusian trap, where population growth always consumed any economic gains, began with the Industrial Revolution and accelerated through the 20th century. As growth became the central goal of economic policy during the Cold War era, it delivered extraordinary improvements in human welfare—reducing poverty, extending lifespans, expanding education, and creating material abundance that would have seemed miraculous to our ancestors. Yet this prosperity has come at a significant price. Environmental degradation threatens the very planetary systems that sustain us, with climate change representing the most urgent challenge. Rising inequality has concentrated the benefits of growth among those already advantaged, while technological disruption and globalization have undermined stable employment and community cohesion for many. These costs reveal the limitations of GDP as our primary measure of progress and call for a more nuanced approach that balances economic growth with other human values. Moving forward requires directing technological innovation toward solving these challenges rather than exacerbating them, and engaging in democratic deliberation about the kind of society we wish to create. The growth paradox cannot be resolved through technical solutions alone, but through moral choices about how we want to live together on our finite planet.

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Daniel Susskind

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