A new paper out of the University of Colorado Boulder argues that it may be time to stop being hyper-focused on economic growth as a leading indicator of a society’s success, because we may be headed for a long-run decline in growth this century whether we like it or not.
The paper, published in the journal Nature Human Behaviour, argues that slowing growth could bring challenges particularly in countries with multicultural democracies like the United States. To address these challenges, the authors call for a “guided civic revival” aimed at decoupling social capital and well-being from economic growth.
For developed democracies like the United States, economic growth has historically been a key measure of success and central to national identity, lead author Matt Burgess, professor of environmental studies and affiliate in economics at CU Boulder, said.
Economic growth is measured by gross domestic product (GDP), which is also what the U.S. uses to balance its federal budget. But the Congressional Budget Office projects federal debt to outpace GDP in the coming decades as growth slows, meaning the U.S. may need to look at other ways to offset budget deficits.
“In order to prepare for a slow-growth future, we might need to move away from the notion of a growing economy as central to national identity,” said Burgess, who is also a fellow at CU Boulder’s Cooperative Institute for Research in Environmental Sciences (CIRES).
Burgess and his co-authors argue that slowing growth gives rise to challenges not just in social solidarity, but also in opportunity and inequality, personal finance (retirement, savings), mental health and overall trust in government.
These challenges aren’t easily solved, but the paper identifies four key areas of focus as a place to start: strengthening democratic institutions; increasing social integration and reducing economic inequality; increasing the public’s return on investment by closing tax loopholes, reducing corruption and likely raising taxes; and improving non-economic aspects of people’s well-being.
One example Burgess offers to improve social solidarity and reduce inequality is to integrate communities more, rather than segregate them based on how much money people earn.
“Instead of building subsidized housing in a concentrated area, the government could give families vouchers so they can live where they want,” Burgess said. “Then families can become more integrated in the community. In experiments, this type of program has also been successful at reducing inter-generational poverty.”
The authors also point out that slow growth shouldn’t necessarily be avoided. Economists have previously noted that two of the main causes of slowing growth—aging populations and shifts from goods to services—actually reflect improvements in well-being.