Growth at all costs

James Fallows, discussing the Chinese economy and in particular its high savings rate:

Better schools, more-abundant parks, better health care, cleaner air and water, better sewers in the cities - you nake it, and it it isn't in some way connected to the factory-export economy, China hasn't got it, or not enough. ... [S]aying that China has a high savings rate describes the situation without explaining it. Why should the Communist Party of China countenance a policy that takes so much wealth from the world's poor, in their own country, and gives it to the United States? The $1.4 trillion question, 'The Atlantic', January/February

Growth at all costs seems to be the answer, in the hope that more jobs will reduce China's social tensions and generate jobs for the rural poor. It's hard to blame the Chinese government for this. Economic growth is the de facto target for most governments and, arguably, it tracks increases in wellbeing more accurately in China than in richer countries. But that's not to say very much. In China and the densely populated industrial countries the downsides of economic growth - environmental pollution and loss of social cohesion, for instance - may be uncertain, difficult to quantify but they are also very large. They might well outweigh the similarly incalculable positive-but-unmeasured effects of economic growth; including the alleviation of poverty. There's no way of knowing, and the results of governments' getting it wrong could be disastrous.

Another way might be to recognize that economic growth - even if it could be measured accurately - is not an end in itself. It's a means to various ends, many of them private, and best decided by individuals and households. Encouraging, and subsidising mothers to join the work force and send their children to childcare centres might boost GDP figures, but it should hardly be a matter for government policy. Perhaps government can best intervene by specifying public goals in terms of minimum levels: of poverty, pollution, health, educational achievement, employment, etc, and then to let people make their own decisions as to the necessary trade-offs. Social Policy Bonds lend themselves to this: government could issue bonds that would reward people only if minimum levels of (say) literacy or physical health were maintained.

In such a regime, government would be doing what it does best: articulating and paying for the supply of legitimate, measurable, public goods and services that correlate well with social wellbeing. Beyond those minima, people would make their own decisions about whether, for example, to subsidise profligate US consumers or big-box retailers.