Happiness and The Moral Consequences of Economic Growth

There has never been a better time to be alive in Britain than today, no generation more blessed, never such opportunity for so many. And things are getting better all the time, horizons widening, education spreading, everyone living longer, healthier, safer lives.

However, it doesn’t seem as if all of these "[u]nimaginable luxuries and choices" have increased our happiness levels: it is also not clear that the opportunities and benefits that she describes with such approbation are available to all. Many people are involuntary participants in the postcode lottery that governs whether or not you are eligible for a variety of procedures on the NHS (e.g., cardiac catheter ablations). And the increase in foreign travel and holidays is limited: the number of British people who did not take a holiday over the course of a year has remained stable at 41 per cent over the last three decades.

Brad DeLong has posted an extensive and interesting review of Ben Friedman's thought-provoking The Moral Consequences of Economic Growth.

Friedman argues that economic growth is essential to moral, social, political and cultural progress. He writes that the financial and social anxieties created by living in a stagnant economy lead people to look for explanations and answers in intolerance and fear. Furedi expands a form of this argument to argue for its role in the widespread internalisation of conspiracy theories: "[t]oday, acts of misfortune are frequently associated with intentional malevolent behavior".

Friedman outlines the comparisons that underlie the influence of income on well-being. For the first, we contrast our present and past circumstances: if we are better off financially that we used to be, and we can buy more with that money, then we feel better off. For the second, we use our present circumstances as a yardstick to compare ourselves to our notional peer group: if we are more prosperous then we feel better; if we are worse off, then we feel worse.

Friedman makes a compelling argument that prevailing circumstances can substitute one comparison for the other. In a reliably growing economy, if almost everyone is prospering more than they were previously, then our self-referential satisfaction is enough to slake our need to competitively contrast our prosperity with that of others. However, when an economy stagnates and there is a widespread perception that people are financially no better off than they used to be, or have experienced a drop in their income (in the U.S., there has been a 15 per cent drop in average full-time income since 1975), then there is a greater tendency to compare our conditions to those of others. The latter circumstances have grave political and social consequences.

...when the average income for an economy is stagnant, people who allow others to get ahead of them are not only falling behind in relative terms but also losing ground compared to their own past living standard. They lose out from the perspective of both benchmarks. When an economy is growing, however, and per capita income is rising, those who fall behind compared to others can still be moving ahead-and if growth is sufficient, moving ahead solidly-by the standard of their own experience.

The logic of Marie Antoinette economics asserts that if consumption is linked to happiness, and we believe in the sustainability of a consumer culture as a stimulus for economic growth, then consumption is a moral good and we have never had it so good. However, Friedman is concerned that the benefits of economic growth are disproportionately concentrated in those social groups at or near the top. He argues persuasively that unequally distributed prosperity is not really prosperity. A recent summary of the U.S. economy claims:

Income inequality is now near all-time highs, with over 50 percent of 2004 income going to the top fifth of households, and the biggest gains going to the top 5 percent and 1 percent of households. The average CEO now takes home a paycheck 431 times that of their average worker.

Friedman is apprehensive that the moral consequences of unequally distributed prosperity bear an uncanny resemblance to the those of economic stagnation. While admitting that “the past generation has been a distributional disaster for America”, DeLong is more optimistic that technological advances will drive U.S. economic growth and improve the standard of living for the working and middle classes.

So, depending on your preferred economic model, it may prove, at some unspecified time in the future, that “we never had it so good”. For those of us who feel that we have missed out on the current range of Toynbee’s blessings or fear that we will experience downward social or financial mobility, then we may need to cultivate other sources of happiness and well-being.

Copyright 2006, Tony Plant Happystance Project