The modern concept of Gross Domestic Product (GDP) only came into existence in 1934, but today it is something that every country uses as the benchmark for success. Since then, there have only been more indicators to understand how a country’s economy is growing, whether in terms of net exports, foreign direct investment or remittances. There is probably no dispute that economic growth is desirable especially when it is accompanied by human development, but several drawbacks have been identified when economic growth is pursued at all costs, including external environmental costs and increasing income inequality. Nonetheless, we cannot neglect the fact that the sustainability of economic growth itself is tied to social and environmental sustainability, and thus if continuous economic growth is to be pursued in its truest sense, it will be, to a large extent, desirable for society and the world.
It must first be understood that economic growth is actually a proxy for people’s well-being. It is assumed that the higher the level of economic growth, the more income people have in order to have better lives, in terms of material goods and services they can consume, such as healthcare and food. Thus, economic growth is often closely correlated with improvements in life expectancies and literacy levels while decreasing incidences of diseases or even crime. In China, more than 500 million people have been lifted out of extreme poverty since its economy started opening up from the 1980s, with a simultaneous 8.6 years increase in life expectancy. The countries with the highest levels of Human Development Index (HDI), which measures life expectancy and literacy rates, are also highly correlated with high economic growth. The Newly Industrializing Economies of the 1980s, or better known as the ‘Four Asian Tigers’ including Singapore, Hong Kong, Taiwan and South Korea, are all examples of how economic growth went hand in hand with improvements in people’s well-being. There are of course some countries which have not followed the same path due to a lack of investment from economic growth into development, such as Nigeria, which despite being the largest economy in Africa, also has the greatest concentration of poverty, with its HDI at 152 out of 188 countries. Nonetheless, economic growth is still largely a prerequisite for resources to be channeled to development in the first place.
However, while it has been argued by proponents of trickle-down economics that economic growth is good for everyone in the economy, economic growth is increasingly being held as the culprit for increasing income inequality and thus social injustice. How economic growth leads to increasing income inequality is posited to be through the increasing accumulation and concentration of capital by the wealthy. The growth pole theory supports this – rich people and rich areas have more resources to get even richer. This has also been observed on the regional level. In China, cities on the coast are growing much faster than those inland, and the disparities between urban and rural areas have been observed, with rural residents earning less than a third of the average per capita income of urban residents. Many other well-developed countries and cities, including Singapore and Hong Kong, are facing this issue. However, in a study examining economic inequality, it is discovered that economic growth does not have a direct correlation with income inequality. It is rather the policies put in place which affect the pathways in which economic growth contributes to, or mitigates, income inequality. Countries like Nigeria which are wealthy but do not invest in education and welfare lag behind, but many wealthy countries such as Sweden do see much lower income inequality. Thus, the blame lies not in continuous economic growth, but rather on inequitable policies.
Lastly, economic growth has been painted as the main driver of climate change problems, and this is for good reason. The rapid industrialization which led to exponential economic growth also caused an exponential increase in carbon emissions, driving our world towards ecological doom. And developing countries which wish to continue to grow their economy are going to follow in the footsteps of developed ones through generating carbon emissions as they power their manufacturing plants and burn fossil fuels. Other environmental harm is also caused in the process of generating economic growth, such as pollution of water bodies by manufacturing plants, the destruction of biodiversity due to overfishing and oil spills. However, there is a sliver of hope amidst all this doom and gloom – the concept of decoupling economic growth from fossil fuels is growing to promote green growth, which is economic growth that is also environmentally sustainable. For example, there has been increasing investment in renewable energy such as solar energy, particularly in developing places like Africa. Under the New Deal on Energy, more and more of the continent’s investment into energy infrastructure have been directed towards solar energy projects, which will emit less carbon emissions while still powering the economy. Hence, continuous economic growth, coupled with proper environmental policies, is needed and desirable for further development.
Yet, it is also crucial to note that income inequality and environmental issues both threaten the continuity of economic growth in turn. The former causes social instability which can lead to the collapse of regimes such as seen during Arab Spring, while the latter can also threaten it, as it causes disruptions to food supply or destroy existing infrastructure. In fact, with most economic activities concentrated on coastal cities around the world, coastal flooding and sea level rises will pose a huge threat to economic growth in those regions and the world. Thus, even for those who agree that economic growth must remain a priority, it must also happen in tandem with more equitable distribution as well as environmental protection. This is not impossible, as shown previously, through far-sighted and balanced policies.
Ultimately, economic growth is desirable because human well-being is desirable. It is thus hopeful that as humanity has learnt lessons on how economic growth, if unchecked, can threaten our initial goals, that it is important to choose a different path where all three kinds of sustainability – economic, social and environmental – are emphasized. This is why, if taken to the true sense of the word, continuous economic growth will be desirable, since it will also have to be sustainable.