Growth provides the oxygen for organisations, whether start-ups or national governments, to breathe. If they feel confident, creative and committed, they use any 'surplus' (AKA profit) to fund the development of innovative, often risky, projects; projects that can bring about a more brilliant world. Whether led by governments or corporations, innovation can transform lives for good, whether medicines, technologies or digital services that empower us and enable us increase our quality of life and longevity.
As company profits and individual salaries grow, we pay more taxes (unless we use sketchy havens and dodgy loopholes), which is supposed to help government (and non-profits) ensure other people's wellbeing improves too. This has been the comfortable cultural narrative for at least half a century. There is certainly some truth to this. The World Bank reports that in 1981, more than half those living in the developing world lived on less than $1.25 a day. The rate dropped to 21 percent by 2010. Growth does make a difference.
For many years, this narrative has really been the only one in town. So much so, that I imagine few people sincerely doubt that we need productivity, GDP and salaries to grow. Since the political triumphs of Reagan and Thatcher, we have been fed a 'meme diet' that growth is, universally, good. The pernicious belief in Trickle-Down Economics - where the success of the rich trickles down to everyone through jobs, wages and investment - remains stubbornly present in the minds of the masses. Yet the pursuit of growth of GDP, productivity and profit fails to account for the impact of the growth agenda on the complex web of interdependent systems that we all live, work and play within.
Far from unmitigated benefit, growth often causes and exacerbates serious mental, physical and environmental problems. Research shows that as wealth increases, so does obesity, diabetes, heart disease and depression. The WHO declares the latter will be the No.1 burden on global health in 15 years. Depression is diagnosed in Millenials - the generation born in times of sustained economic growth - more than any other group; double the Baby Boomers. Depression increases the risk of heart disease, stroke and, of course, suicide. Suicide is between first and third leading cause of death in most countries in the West. Globally, it kills more than war and murder put together. It is the leading cause of death in the US for 15-24 year olds. We also know that economic growth drives the extraction and usage of energy and raw materials - like the stripping of forest to plant palm oil for hair products and the like. This can lead to loss of species and biodiversity, destabilisation of water cycles and increased global warming, among many other things.
Most of those driving forward the growth agenda - entrepreneurs, marketers, strategists, advertisers, business owners and politicians - tend not to include any of these issues in their accounting. These costs have been called by economists 'externalities' (they are external to the way we account for profit and loss, performance and productivity). By removing these externalities from the picture, leaders are freed to focus on what they have been told is the one thing that really matters: Growth! Yet, even if we ignore all these annoying externalities that impact all of us and just focus on the idea that growth alleviates poverty through Trickle-Down Economics, growth becomes even more equivocal. For example:
- In Nigeria over the last 10 years, GDP grew 6%; yet extreme poverty grew from 56% to 61%
- In India, GDP growth has been a whopping 9%; yet the number of people in extreme poverty has stayed roughly the same as it was in 1981; and as a proportion of the total people in extreme poverty in the world, they went one fifth to one third
- Even in the USA, during the (mainly) boom years from 1996 to 2011, there was 156% rise in extreme poverty in children although house prices rose by 300%
Here are three countries that have reportedly enjoyed 'economic miracles' in their growth rates over the last few decades. Yet given the growth in extreme poverty too within their borders, perhaps it is time to realise that the theory that wealth always trickles down to those at the bottom of the pyramid is, frankly, wrong.
All is not lost though. In the last decade, within many of the most 'advanced' countries on the planet, there are millions of inspired people focusing on growth of a different kind. They are part of a grass-roots movement gathering steam that recognises that, left disconnected from the systems they are part of, organisations tend to grow in ways that do not increase the thrivability of the world.
These leaders want to recalibrate capitalism through new forms of enterprise, that I collect together under the name 'switched on enterprise'. More on this in my next post.