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What does 'growth' in the 'Asian Century' even mean?

By Charles Berger - posted Friday, 2 November 2012


The Government's White Paper, "Australia in the Asian Century", sets a single overarching goal for our nation: "By 2025, Australia's GDP per person will be in the world's top 10, up from 13th in 2011, requiring a lift in our productivity."

Underneath that goal, the paper goes on to list 25 more specific objectives that represent a recapitulation of current policy plus a few new initiatives. Many of these are sound ideas the Government can rightly take pride in, like a price on carbon, marine protected areas, and the NDIS.

But it's also fair to say that most of the objectives and initiatives are framed in terms of their contribution towards economic growth. That is, education and environmental policies are not seen as independent, intrinsically worthy objectives, but rather as a means to achieving a desired level of GDP growth.

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Suppose we achieve our goal of being among the richest ten countries on the planet, will Australians be better off, on the whole? Not necessarily.

Consider this: of the current ten wealthiest nations, seven, including the USA, Qatar and Singapore, report lower levels of 'experienced wellbeing' (the degree to which people express satisfaction with their own lives) than Australia, according to the New Economics Foundation.

Conversely, three other OECD countries – Canada, Denmark, and Sweden – report higher wellbeing than Australia, despite having lower GDP per capita. At a minimum, this tells us that the relationship between wealth and wellbeing is not straightforward. Increasing our GDP is plainly not the only way of improving the wellbeing of Australians.

There is growing dissatisfaction with mainstream economics and the use of GDP as a proxy for wellbeing. Nobel laureate Joseph Stiglitz noted that, "if a few bankers get much richer, average income can go up, even as most individuals' incomes are declining. So GDP per capita statistics may not reflect what is happening to most citizens."

Even the Business Council of Australia recognises the need for something better than GDP. BCA chief executive Jennifer Westacott recently said that "true wealth" can not be measured by GDP per capita, but should be based on a much broader notion of "community enrichment, as opposed to getting rich."

In light of these comments, the government's stubborn adherence to GDP as the main national goal starts to look out-of-date and out-of-touch with 21st century thinking.

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Long-term research by bodies in the UK and here have found that mental health and wellbeing equally depend on things like strong personal connections, physical activity, personal reflection and curiosity, learning and generosity.

Personal reflection, building personal relationships, being physically active? Government can't do these things for us, much less mandate them, but it can create the conditions that allow us to pursue these life-enhancing activities more easily.

That's not likely to happen if our government is obsessed with maximising its standing in the global GDP league table.

Ultimately, the White Paper's obsession with GDP rankings is based on a false premise. Lack of national wealth is not what is standing in the way of a better quality of life for most Australians. Working even longer hours so that we can pip Switzerland or Kuwait in the global GDP race won't improve our lives. Encouraging more deliberate and sustainable consumption patterns, and a more connected, time-rich lifestyle just might.

The other major shortcoming in the White Paper is its failure to grapple meaningfully with ecological decline, in Australia and in the Asia-Pacific region.

True, the paper identifies climate change as both a challenge and an opportunity, even going so far as to identify environmental technologies as a potential growth industry. And the government's record contains real advances. The price on pollution and the CEFC have created the framework through which Australia might make a real difference on climate change. And the introduction of national environmental accounts, heralded in the White Paper, would be a major advance.

Yet the paper does not seek to resolve any of the tensions inherent in its discussion of sustainability issues. It recognises the need for large-scale investment in sustainable industries and infrastructure, but refuses to countenance any increase in our tax-to-GDP ratio that might generate the needed investment. It acknowledges climate change and biodiversity loss, but the policy responses outlined are far from being up to the task of turning them around. What consequences would a significant melting of the Himalayan ice mass have on water supplies for India and China, for instance, and what flow-on effects might that have on Australia?

A different vision for Australia's future was set out by Senator Christine Milne in her speech to the National Press Club in September. In it, she focused on explicitly identifying things the economy is meant to deliver, such as worthwhile jobs, human wellbeing, and a healthy environment. This discussion of the ultimate purpose of economic activity is exactly what is missing from most economic conversations in Australia today.

"If economic growth as it is currently measured isn't actually making us happier, healthier, cleverer or safer then it isn't real growth. If we are growing our economy in defiance of physical limits, that isn't real growth: it's a confidence trick.

On the other hand, if people are getting happier and healthier; if we're protecting and restoring the environment which sustains us; if our schools, universities and research institutions are thriving; if we're helping unemployed people find worthwhile jobs and we're addressing structural inequities such as illiteracy; surely that is real growth, regardless of what our GDP numbers show."

Simon Kuznets, the economist who devised the GDP, cautioned against its misuse as a measure of human progress. "The welfare of a nation can scarcely be inferred from a measurement of national income. … Goals for 'more' growth should specify of what and for what," he said in 1962. Senator Milne has done exactly this, whereas the government's White Paper has fallen short.

These are two versions of growth up against one another. It boils down to this: start with the economy, and ask how people can best contribute to increasing production. That's the government's approach. Or start with people and the environment, as Senator Milne does, and ask how the economy can best serve their interests.

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About the Author

Charles Berger is the Director of Strategic Ideas to the Australian Conservation Foundation.

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