Friday, February 15, 2013

What would the end of growth mean for the quality of life? Lessons from Japan

There is a growing concern that economic growth, as we know it, is coming to an end. Economists, who tend to view growth as good, are uneasy with that idea. Many environmentalists, who are more prone to focus on the downside of growth, view a steady-state economy more positively. Richard Heinberg, author of the book The End of Growth, sees a no-growth economy as an immanent reality to which we must adapt whether we want to or not. In his view, whether the no-growth future works out well or not depends on how well we manage the transition. If we manage it well, we can maintain and even improve our quality of life without an ever increasing GDP. If not, he sees a much less pleasant future.

But rather than speculate about what a no-growth future might look like for the United States, why not see what we can learn from Japan, where a no-growth economy, or something close to it, has been a reality a generation already. (The Japanese population peaked in 2008, but as of 2013, it is still about 2.5 percent higher than in 1992, so per capita GDP growth has averaged even less than shown in the chart.) What does the Japanese experience suggest about the linkage between economic growth and the quality of life?

Growth vs. quality of life 

To answer that question, we need to do two things. First, we need a way of measuring the quality of life. Second, we need to distinguish between the effect on quality of life of a country’s level of income and the effect of growth per se. Putting these two things together allows us to formulate the following hypothesis:

If growth of income, independently from the level of income, is a necessary condition for maintaining a high quality of life, then slow-growing Japan should have a lower quality of life than other countries with comparable incomes but more rapid growth.

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