It goes without saying that the key policy objective of fiscal and monetary authorities world over is to achieve and sustain economic growth. This unthinking adherence to orthodoxy is very unfortunate. We cannot hope to solve society’s problems unless we formulate the problems correctly. And we can’t formulate them correctly if we set inappropriate goals.
A while back, Jeremy Grantham made an illuminating projection: suppose that in 3030 B.C. the total possession of the people of Egypt filled a box measuring 1 cubic meter. Suppose further these possessions grew at a rate of 4.5% per annum. How large should this hoard get 3000 years later, in 30 B.C.?
The answer: 10^57 cubic meters – something like 2.5 billion Solar systems.
People instantly grasp the point of this argument but then object how today, in modern times, economy is not only about material wealth, there’s intangibles, services, bla, bla, bla. But this reaction is little more than a desperate attempt to avoid thinking. All of the economy everywhere serves to support human needs for food, shelter, health, travel/communications, art/entertainment and security. That’s basically it. In one way or another most of these needs ultimately depend on material things.
So we can get back to Grantham’s one cubic meter of humanity’s possessions. We can play with the rate of economic growth and the from-to dates, but the insight of this exercise is inescapable: defaulting always to economic growth as the unquestioned policy objective is patently absurd and unsustainable; and that which is unsustainable must inevitably collapse – it is only a matter of time.
Thus, if economic growth isn’t the answer, we have to start thinking about what the appropriate objectives to solve society’s problems should be. To do that we have to start from ourselves and our needs as human beings: how do we want to live our lives? Or better, what would we want our children’s lives to be like? Better yet: if we were on our deathbeds, what might we regret about the way we live now, and what would we not?
If we fail to think things through, aren’t we a bit like hamsters running in a wheel, exerting ourselves daily yet moving no closer to any real solutions or the better, more beautiful life we’d want for our children?