Why is Economic Growth so important?

[Cutlass]

IIRC, China's communist economy has been growing faster than most/all lately.

Except for a couple of factors:

• It's debatable how "communist" the growth part of the Chinese economy is, since they've allowed millions of people to behave, and profit, as though they are capitalists
• The USSR had impressive growth for a generation or 2 as well. Didn't last. And the reason is that people weren't free enough to change things.
• It's easier to play catch up then it is to lead. What will they do when they can't copy any longer?

The growth is due to massively abundant fossil fuels. You can pull 40,000 pounds six or seven miles on a milk bottle fuel of liquid. In five or six minutes. As opposed to it taking either thousands of manhours or a whole caravan of horses (all requiring water & food).

There are other sources of energy made available by the science that came with modern economies.

This newfound ease with which we could grow crops, transport ourselves, create new materials (plastics & other synthetics) combined with new technology is what caused the growth (in rich countries, along with massive poverty elsewhere), attributing it solely to capitalism is intelligently dishonest at best (or ignorant).

What else can you attribute it to?

 

[Narz]

There are other sources of energy made available by the science that came with modern economies.

Still the vast majority of energy used in the 1st world are fossil fuels.

What else can you attribute it to?

Advancing science, education. I mean I do think "free" markets have helped fuel the economic explosion (which isn't necessarily a good thing since bigger & bigger houses & more crap don't necessarily make people happier, just basic freedom, safe & sanitary living conditions & a modicum of wealth, many of which are unavailable to the bottom rung keeping the "free market" propped up) but modern capitalism wouldn't have evolved to what it is or even survived without cheap energy, IMO. Cheap energy & the technology that stemmed from it allowed far greater concentration of wealth than ever before in history. Because of the massive economic abundance in modern Western society & the meme drilled into our heads that economic freedom of choice (72 TV's to choose from) is the ultimate human achievement most people have given up on ideals of justice or fairness. As long as they can have a thick, hearty piece of the pie they don't seem to mind that Bill Gates makes 10 million times as much as them or that 1 out of 6 people face some level of starvation.

 

[Cutlass]

Sure, cheap energy helped fuel it. So did lots of bright ideas and the opportunity to personally benefit from it. And all that new wealth fueled ever greater science.

 

[Narz]

But it's important to remember the building blocks of wealth (natural resources). I mean if you go to a party throw by an extremely rich man you can marvel at his creativity in organizing the party but you'll realize his creativity only was useful because his wealth allowed him to actualize it.

Ultimately all wealth comes down to control over resources (food, water, oil, human labor, information, etc.). And most of the most important resources we utilize on a regular basis today are finite.

Human ingenuity may save us every time, we may solve every crisis at the last minute, improvising with whatever tools we can grab, like MacGyver or Jackie Chan. But it's no guarantee. People treat the "invisible hand" as some omnipotent deity. There is no guarantee our modern globalized civilization will make it. We have a lot in common with past failed empires that grew too big for their britches. Economists act as if total systemic collapse is impossible & unthinkable & put "market forces" above natural forces, the conceptual above the real. This is why, as a general rule, I don't respect them (well, I try to respect everyone as a human being but I have little respect for their various opinions).

 

[Brighteye]

Like bacteria doubling every 20 minutes, there can be a full half of the resources left to consume, and it can look like everything's fine, but actually there's only 20 minutes of life left, no matter how long it took to get there.

 

[Cutlass]

But it's important to remember the building blocks of wealth (natural resources). I mean if you go to a party throw by an extremely rich man you can marvel at his creativity in organizing the party but you'll realize his creativity only was useful because his wealth allowed him to actualize it.

Ultimately all wealth comes down to control over resources (food, water, oil, human labor, information, etc.). And most of the most important resources we utilize on a regular basis today are finite.

Human ingenuity may save us every time, we may solve every crisis at the last minute, improvising with whatever tools we can grab, like MacGyver or Jackie Chan. But it's no guarantee. People treat the "invisible hand" as some omnipotent deity. There is no guarantee our modern globalized civilization will make it. We have a lot in common with past failed empires that grew too big for their britches. Economists act as if total systemic collapse is impossible & unthinkable & put "market forces" above natural forces, the conceptual above the real. This is why, as a general rule, I don't respect them (well, I try to respect everyone as a human being but I have little respect for their various opinions).

The USSR had vast natural resources. They never got rich off of them. Nor did Russia before or after the USSR. Japan has very sparse natural resources. They did get rich.

 

[Integral]

I'm just going to stop by and agree with Cutlass on the growth stuff. Should be mentioned.

on Galbraith:
Good economist in his fields: industrial organization, the macro implications of IO, and the income distribution. His writings were very suitable for its time, the 1960s and 70s, but lose much of their relevance today. He could have been a very good IO economist if he ever cared to write for an academic audience.

 

[Cutlass]

Once upon a time there were some political economists that thought land was the source of all wealth.

Some other people believe that gold is the only wealth. That God made gold for that purpose, and it is all that matters, and that is why only gold can be money.

Marx and some others said that only labor is the source of all wealth. Well, you've all seen the refutation of that, even if you don't beleive it.

Some other people say only resources are the source of all wealth. Disregarding that some places with lots of resources are dirt poor and other places with limited resources are rich.

But what really is the source of wealth? Here's a concept for you:

Ideas are the source of all wealth.

People ate food raw before someone had the idea to cook it. People hunted and gathered before someone had the idea to plant and harvest. People used what they found as tools before they learned to make them. People used wood and stone tools until someone thought of a way to make them of metal.

And that goes on and on and on until someone invents computers and the internet so we can sit here and argue about it without ever meeting.

What all of those inventions do is that they let people accomplish larger amounts of work in any given day. So because they are accomplishing more work, the value of the work in any day goes up. That's what we call productivity. And because we produce more, we can consume more. And that's what we call real wealth.

And it all came from ideas.

What capitalism does is wed ideas to the money needed to turn the ideas into products and services. And provides the profits needed to make it worth people's while to do nothing except develop ideas, or employ other people to do so. So we may stand on the shoulders of giants, but the reaching for the stars is something that we are doing also.

 

[Narz]

The USSR had vast natural resources. They never got rich off of them. Nor did Russia before or after the USSR. Japan has very sparse natural resources. They did get rich.

You need both creativity/organization/mobilization AND resources. Either is useless without the other.

But what really is the source of wealth? Here's a concept for you:

Ideas are the source of all wealth.

Naive. Plenty of people are far more creative than those who are rich but lack the funds to turn their creativity into cash. My old roommate for example, a small business owner, has tons of ideas but lacks financial investment. My sister in law is about as creative as a box of rocks but has money because she already had enough money to get thru law school & was willing to work 80 hours a week for many years.

Saying ideas alone are the source of wealth is basically saying countries & people who don't have money simply aren't creative enough. Typical libertarian stuff, blaming the economic victims to justify mass-discrepancies in wealth.

 

[Integral]

Cutlass is no libertarian, by his own admission! And I don't think he was saying that ideas are the source of *all* wealth, just that ideas are the most important factor.

Wealth (/production/consumption/etc) is the product of the interplay between natural resources, labor, capital and ideas; the continued growth of wealth per capita is driven by ideas. (As usual, there is a difference between levels and rates...)

 

[Brighteye]

New TED talk by David Cameron, our next Lord and Master, shows that even total fools now agree that measuring things by economic growth is outdated.

 

[Cutlass]

You need both creativity/organization/mobilization AND resources. Either is useless without the other.


Naive. Plenty of people are far more creative than those who are rich but lack the funds to turn their creativity into cash. My old roommate for example, a small business owner, has tons of ideas but lacks financial investment. My sister in law is about as creative as a box of rocks but has money because she already had enough money to get thru law school & was willing to work 80 hours a week for many years.

Saying ideas alone are the source of wealth is basically saying countries & people who don't have money simply aren't creative enough. Typical libertarian stuff, blaming the economic victims to justify mass-discrepancies in wealth.

That's individuals. Not societies. New wealth is created by ideas. That does not mean that every individual person who is wealthy is creative. Many of the people who are individually wealthy inherit it or just have an income providing some non creative service. And there is always some wealth seized by force.

But the wealth only exists in the first place because of ideas. No matter how it is distributed afterward. First you have to create it. And nothing has ever come even remotely close to creating as much ideas as market economies.

 

[Stylesjl]

Wealth is a combination of all things. Ideas are worthless without natural resources (just ask Japan before World War 2, they had to try and conquer East Asia before they could get resources, and once they had access to them after the war from the other resource rich nations ready to sell did prosperity come) and resources are useless without ideas, there are many nations even today that sit on enormous piles of resources but have no means of utilising them effectively

 

[Cutlass]

You can buy resources if you have ideas.

 

[Cheezy the Wiz]

You can buy ideas if you have resources.

 

[Cutlass]

That can work too. But some one still needs to have the idea in the first place.