The limits of our way of life

Keith Hudson

What growth-economists can’t get into their heads is that most of us in the advanced countries have now reached personal limits in the way of life that is characteristic of our times.  In our urban and suburban locales we have a limited amount of time, energy, space and perceptions with which to work, . . . raise a family and relax in leisure pursuits.  After about 250 years of rapid change in every aspect of our immediate antecedants’ way of life in the countryside, we have now arrived at quite different, but now largely-stabilised, daily habits.

What this means is that, from now onwards, any goods we buy will either be cheaper or improved versions of those products we already buy and use.  They won’t change our way of life to any significant extent.  If there are any entirely novel goods (which is doubtful) then they will only find a place in the market place by displacing existing goods — that is, they will cannibalize on the time, energy, space and perceptual attention that previously attended the use of former products.  GDP per capita in real money terms thus cannot possibly rise.  At the present time, advanced country governments can only increase their taxation inputs by encouraging immigration — by making hay while the sun shines — and forgetting the more distant unemployment that looms as automation continues to make humans redundant in the productive process.

This being so it is difficult to see where a growing per capita GDP — so much desired by politicians — is going to come from except by improvements in productive efficiency by automation which will save on the application of energy (human and machine combined). But this can only produce a stream of declining profits. Although individual firms can achieve high profits for short periods of time because of the immensity of the consumer market all round the world, profit margins overall in the advanced countries, commensurate with declining employment in production, will continue to decline because of intensive competition.  The widespread saving-investment-production cycle of the last 250 years — its principal innovation — will gradually dry up.

Obviously enough, economists have been glibly saying for some time that we are now moving into a post-industrial services-based economy but that, otherwise, we have nothing to worry about in the advanced countries.  All we have to do is to adjust the educational curricula for the masses. The trouble is that the populations of the advanced economies are now dividing between those who provide increasingly humdrum lowly-paid services to one another for which high levels of education and training are not required, and a smaller body of those increasingly highly-educated personnel who provide highly-paid services.  As automation proceeds, then the total consumer market will dry up and only those who are highly-paid will be able to continue enjoying the repertoire of goods that we are used to.

2 thoughts on “The limits of our way of life

  1. I don’t see how increased automation in the production of goods and services can be a bad thing if it increases productivity and production. Productivity increases translate to labor savings. That is, less labor is required to produce the same amount, or even larger amounts of stuff. Production is of course just the means, not an end. The end is consumption. Most stuff produced means more stuff to go around.

    I am one of those much-maligned “growth economists.” I believe that there are no practical limits to growth. All claims that humanity has reached some kind of limit to what it can produce and consume is analogous to the claim that whatever needed to be invented has been invented and therefore the patent office can be shut down.

    I also believe that new products and services keep being produced constantly. Not just that but the rate of production of new stuff keeps accelerating. Certainly much of the old stuff will continue to be around albeit modified and improved. But entirely new stuff is always coming to life.

    GPS and online maps serve the same function as the paper we used to have a couple of decades ago. But they are not the same old maps. GPS and online maps are categorically superior. They are cheaper, better (accurate) and faster. That is because they have “knowledge” embodied in them. Embodied knowledge is another name for technology.

    It is the growth of technology that pushes the boundaries of what is possible. Nobody needed a handheld device with a high-definition display which could access a significant portion of global information. Nobody needed it because it was inconceivable. But now that it exists, a significant segment of humanity would feel deprived if they had to give up their smart phones.

    It is a lack of imagination that lies at the root of beliefs that nothing novel will ever be discovered, that we have reached a pinnacle of this or that. This lack of imagination is quite natural and common. We really cannot imagine anything that does not currently exist. It may be argued that I can imagine a winged horse — something that clearly does not exist. But that is wrong. I can only imagine a winged horse because wings exist and horses exist.

    I could not have imagined a GPS system in 1900. None of the components that make it possible were there — including the special theory of relativity, without which the GPS is a non-starter.

    It will always be too early to declare the death of growth.

    1. Atanu, I am all in favour of economic growth — but it can take place only in those cultures which have the freedom to inculcate the necessary innovations that are the starting blocks of economic growth. In England the industrial revolution would never have got off the ground if independent thought and freedom to innovate had not permeated all classes in 17th and 18th century. Thus, rich landowners were building libraries in their mansions and doing chemical experiments in their turrets which they had never done before, and village carpenters were trying to improve their wives’ spinning machines and weaving frames which, previously, hadn’t been changed for a millennium or more.

      Whenever I use the term “growth-economists” I use it in the same sense that they themselves see economic growth. This is that, by attending to a few simple guidelines such as the rule of law, democratic institutions or sufficient investment, then any country can hook into economic growth and develop. This just isn’t so as the World Bank must know very well, since it has been trying to encourage this ever since it was instituted in the 1940s — and more recently the IMF, of course. Economic growth — that is, having a hgh standard of living by being able to break into the high-value consumer goods and services trade of the world — depends on the existence of individuals or teams of people who are at the forefront of thinking and research in at least one or two sectors of the modern economy in any country. Arriving at this happy state is quite another matter than observing the simple guidelines of post-war orthodox economists — growth-economists.

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