Do governments put too much emphasis on economic growth? Winton Bates pumps his own moral intuitions and satisfies himself that the answer is no
In the latest edition of Policy, economic consultant Winton Bates takes on Clive Hamilton’s anti-growth arguments (pdf). After agreeing that GDP is a flawed measure of well-being he dismisses the idea that governments should pursue either economic growth or well-being as ends in themselves. Bates argues that what really matters is consumer sovereignty. People should be allowed to make their own decisions and encouraged to take responsibility for the consequences.
Despite all the graphs and statistics, the dispute between Hamilton and Bates is about philosophy rather than social science. Hamilton says the most important things in life are inner freedom and personal development while Bates says they are negative liberty and personal responsibility.
Hamilton believes that many people want the wrong things. Instead of pursuing the things which will enable them to flourish as human beings, they want what the advertisers manipulate them into wanting. In his 2003 book Growth Fetish he argues:
Consumers’ preferences do not develop ‘outside the system’: they are created and reinforced by the system, so that consumer sovereignty is a myth. The question is not one of personal consumer choice versus elitist social engineering; it is one of corporate manipulation of consumer behaviour versus individuals in society understanding what is in their real interests (p 65).
When Hamilton writes about people pursuing their ‘real interests,’ or ‘happiness’ he doesn’t mean some Brave New World of philistine comfort and pleasure. He’s not a Benthamite. Instead he follows Aristotle in arguing that happiness or well-being is about "the full realisation of human potential." Ideally, citizens would be able to choose how they lived their lives. But to be able to choose freely they would have to be released from the coercive influences of advertisers and their "unreasonable attempts to influence people to act in ways that are contrary to their considered interests" (pdf).
Hamilton’s idea of a free society is one where the distractions of marketing and consumerism are replaced by a clearer sense of what’s important in life. He hopes that when the market is cut down to size people will learn to want things that enable them to grow as human beings – things that are truly in their interest. People will decide to spend more time with their families and in education and less time in paid work. They will learn to care more about their communities and the natural environment and less about status and competition. Not all of these things would make life more pleasurable but all, according to Hamilton, they would make it more worthwhile.
Winton Bates has a different ideal. In his Policy article he writes that:
When people have the mental competence to accept responsibility for their actions, it seems to me that it is good that they should get what they want, in so far as this is possible within the constraints imposed by other people being free to get what they want.
Bates draws on Robert Sugden‘s reformulation of the concept of consumer sovereignty. In his paper ‘The Responsibility Criterion‘ Sugden assumes that taking responsibility for one’s life as a whole is a virtue. A morally integrated person "treats her past actions as her own, whether or not they were what she now desires them to have been. Similarly, she treats her future actions as her own, even if she does not yet know what they will be, and whether or not she expects them to be what she now desires them to be." Such a person would not blame the government for allowing them to get what they wanted in the past. Nor would they want to a government to restrict their choices now so they wouldn’t regret them in the future (for example, by forcing them to save for retirement).
For Sugden and Bates a good society is one which fosters both personal responsibility and opportunity. But as Sugden admits:
Not everyone believes that more opportunity (for himself, or for anyone else) is better than less. Not everyone believes that taking responsibility for one’s life as a whole is a virtue. These are moral positions that belong to the tradition of classical liberalism.
This is as much argument as you’ll get in Sugden’s paper while Bates’ argument for consumer sovereignty is to say "it seems to me" before writing down his personal moral intuitions. Most people think that choice and personal responsibility are important but few would stop there. For example, many people are willing to sacrifice economic freedom if it means that people are more likely to get what they deserve. Part of the reason for the unpopularity of Milton Friedman’s negative income tax (NIT) proposal was that it would take money from people who worked for it and give it to other people who had no intention of working. Even if the NIT was cheaper than the current system of mutual obligation and would allow taxpayers to keep more of their earnings, it would still be unpopular.
Bates supports economic growth because it goes hand in hand with free markets, and free markets are the best way to promote freedom and personal responsibility. But if greater growth could be achieved through government interventions which limited freedom and responsibility then Bates would opt for less growth. He makes this clear in his discussion of compulsory superannuation (p 15). Even if a compulsory super scheme promoted economic growth he says this would not justify interference with individual freedom. Less growth and more old-age poverty would be preferable.
It seems likely that Hamilton might take a similar position on subjective well-being. While he argues that stagnant levels of subjective well-being are a sign that economic growth has failed to deliver, he would not favor policies which limited ‘inner freedom’ or personal development just because they increased subjective well-being.
This dispute can’t be settled by appealing to survey data or other statistics. Hamilton and Bates have very different ideas about human nature and about what makes life worthwhile. Both writers spend most of their time preaching to other people who share their moral intuitions.
Andrew Norton reviewed Growth Fetish in the Spring 2003 edition of Policy: "Ironically, one of the first Australian books to draw heavily on the burgeoning international research into subjective well-being ends up with policy proposals that would undermine it… Far from being a handbook for happiness, Growth Fetish is a manifesto for misery."
Winton Bates sets out his case for smaller government in his 2001 paper ‘How Much Government’ (pdf). He considers the effects of economic growth on social cohesion in his 1996 paper ‘The Links Between Economic Growth And Social Cohesion.’
Clive Hamilton expands on the idea of ‘inner freedom’ in his 2004 paper ‘The Disappointment of Liberalism and the Quest or Inner Freedom (pdf).
You can read some of my criticisms of Hamilton’s work in my old blog Wealth for Toil. In ‘The Other Growth Fetish‘ I explain why Hamilton isn’t really all that interested in subjective well-being. See also ‘Freedom and Pornocracy‘ and ‘I’m From a Think Tank and I’m Here to Help‘.