Over the past two years, as Covid-19 swept across global society and governments imposed lockdowns, the greatest economic disruption in the history of capitalism’s peacetime has occurred.
Gross domestic product (GDP) — which we’re so used to growing year after year — suddenly doesn’t seem as important as the immediate demands of a public health emergency.
In practice, the relevance of GDP growth has been questioned for so-called developed countries such as the UK and the US. In the decades since the end of World War II, the steady rise in GDP in developed countries has been matched by a steady rise in living standards.
stand still
From the late 1940s until the 1970s, real wages actually grew faster than GDP. As a result, Western capitalist economies have become more egalitarian, with workers and middle classes increasingly divided.
In the late 1970s, this relationship reversed: the economy tends to grow faster than real wages. Inequality has risen markedly as the upper classes of society seized more and more of the total wealth in advanced economies. Even so, living standards have generally improved over the three decades — albeit at a slower pace than before.
Then, after the 2008 global financial crisis, the link between GDP growth and rising living standards broke down. Since then, growth in advanced economies has typically been weak, as has been the case in the UK.
But real wages for working people stagnated, and inequality continued to worsen. The promise of GDP growth—improving living standards for most people over time—no longer holds true in developed countries.
Outside of that glamorous circle, the story is different.
Efficient
It is worth noting that China has experienced the longest and longest-lasting boom in human history over the past 40 years, transforming from a deeply impoverished country to the world’s second largest economy — or in some ways, the largest economy .
Some 700 million people there have been lifted out of the worst poverty. But unlike the boom in the West from the late 1940s to the 1970s, China’s extraordinary growth led to an extraordinary increase in inequality. China today is one of the most unequal societies on earth.
What ties the experience of the West and the East together is that widespread economic growth has provided a higher standard of living for most people that previously required a massive consumption of the planet’s resources, especially in the form of fossil fuels.
Those pushing for “green growth” claim the relationship isn’t necessary: it enables growth, shares its benefits more equally, and breaks the link between growth and environmental damage.
