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The Moral Consequences of Economic Growth
The Moral Consequences of Economic Growth
Benjamin M. Friedman
Knopf, 2005
592 pp., 35.00

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Kenneth G. Elzinga


Why Growth Is Good

Contra the anarchists.

Being asked to review a book by an economist that is 500 pages long and has over 1,000 endnotes is an unusual event in today's publishing world. Academic economists mostly write articles; few write books; even fewer write books the scope of Benjamin F. Friedman's The Moral Consequences of Economic Growth. Friedman is Maier Professor of Political Economy at Harvard University, and he merits the old-fashioned title, "Professor of Political Economy." Like Adam Smith and Alfred Marshall before him, Friedman takes readers far beyond the neoclassical paradigm and econometrics of contemporary economics and instead weaves a remarkable tapestry of economics, history, and politics, with theology and psychology also sewn in. So the question is: what does the resulting fabric look like?

The backdrop of the tapestry is the proposition that economic growth is a good thing. This proposition probably bears repeating because the majority of books written today (certainly outside the field of economics) contend that economic growth is a bad thing. But stitched into Friedman's contrarian backdrop are two different analytical threads that are rarely sewn together. The first is that growth is good because it means more goods and services. The second is that growth is good because it generates morality.

The first thread in Friedman's analysis is the conventional wisdom in economics. This idea goes back to Adam Smith: the wealth of a nation consists of its goods and services, not its gold. Today, an economics teacher might simply state what seems obvious (at least to economists): expanding a consumer's choice set necessarily makes the consumer better off (or at least no worse off, since the consumer can always choose the original choice set).

Today the conventional wisdom is often criticized. At one time, those opposed to what Adam Smith called the "obvious and simple system of natural liberty" faulted the market system for producing too little. That was the old-fashioned case against capitalism. Today, anti-growth environmentalists and small-is-beautiful advocates fault the market system for producing too many goods and services. Once scarcity was bad. Now abundance is. Once the market system provided too few choices; now it produces too many.1

The second thread in Friedman's analysis is that people generally behave in a more civilized and ethical fashion when economic times are good. As Friedman puts it, "Economic growth—meaning a rising standard of living for the clear majority of citizens—more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy." In short, economic growth "not only relies upon moral impetus, it has positive moral consequences."

Just as opponents of economic growth often couch their objections in moral terms, so Friedman makes the case for economic growth in moral terms, arguing (from history and contemporary data) that the moral positives of growth outweigh the moral negatives. Economic textbooks focus on the GDP data and personal income figures of a nation. Friedman calls attention to unpriced benefits that accompany economic growth, such as greater tolerance and the extension of democracy.

The Moral Consequences of Economic Growth is no libertarian tract. Stitched into the tapestry that Friedman weaves is a generous role for government through taxation, environmental protection, and welfare provisions. Benjamin Friedman is not to be confused with Milton Friedman. But both Friedmans can restrain their enthusiasm for the anti-growth protesters whose policies would deprive others of higher incomes, more education, more employment opportunities, as well as the prospect of a more humane and democratic society that is derivative of economic growth.

Friedman begins with an intellectual history of the idea of progress itself. Aristotle, Descartes, Smith, Turgot, Rousseau, Comte, Calvin, the Puritans, Augustine, Burnet, Edwards, Montesquieu, Carlyle, Ruskin, Marx and Engels, they are all here and more to boot. In Friedman's tour through the history of ideas, one is reminded that while there may be some new things under the sun, the writer of Ecclesiastes was not far from the mark: there is not a whole lot that is new.

Adam Smith wrote, "Before we can feel much for others, we must in some measure be at ease ourselves. If our own misery pinches us very severely, we have no leisure to attend to that of our neighbour." This is Friedman's point. He quotes Comte: "all human progress, political, moral or intellectual, is inseparable from material progression," which is a variation on Friedman's thesis as well.

Critics of Friedman's argument (that growth is good) did not arrive upon the scene in the 1970s with the small-is-beautiful counterculture. More than a century earlier, Carlyle wrote with distaste about the "cash nexus" that connected people in a market economy. John Ruskin, had he lived long enough, presumably would not even have taken a train to Davos to join the anti-free trade protesters in Switzerland. He considered train travel not "traveling at all; it is merely 'being sent' to a place, and very little different from becoming a parcel." What Ruskin would have thought about air travel in and out of LaGuardia, O'Hare, and Atlanta-Hartsfield today we can well imagine.

As I read Friedman's book, I wondered how many of my colleagues in the dismal science could differentiate between premillenialism and postmillenialism. Friedman can, and shows why it is important. Indeed, religion is important, if not central, to his survey of the idea of progress. (Friedman thanks William Hutchison at the Harvard Divinity School for assisting him in his research.)

The historical core of Friedman's book (chapters 5-8) involves a retelling of U.S. history (primarily from 1865 on), with an eye to whether periods of growth had positive moral consequences and periods of stagnation had negative moral consequences. These chapters are a mix of economic history and political history. (A reader unacquainted with U.S. history during this period would find these chapters an efficient way to become educated.) To further buttress his hypothesis, Friedman (in chapters 9-11) examines economic and moral trends England, France, and Germany.

Impatient readers may jump to chapter 12, "Economics and Politics in the Developing World," where Friedman shows that his hypothesis about the positive relationship between economic growth and morality is not confined to the Western world. Data shown in this chapter reveal that economic growth and political freedom are related, with some exceptions (such as Kuwait and Saudi Arabia). Friedman also reminds us that, because of the phenomenon of compound interest, policies that bring about only modest changes in economic growth rates can generate sizable gains in living conditions over time.

Friedman's discussion of international trade (especially in chapter 14, "Growth and Equality") is a thoughtful response to the opponents of globalization. Most economists have long known that the poorest countries typically are the ones with the least amount of trade with other countries, undercutting the argument that trade extracts wealth from underdeveloped countries and transfers it to the West. Friedman's analysis and evidence is in the mainstream. Regarding child labor, he concludes: "The evidence . . . shows that most child labor . . . is used not in manufacturing, but in agriculture, where the work is harder and the opportunities for schooling even more limited." As a consequence, Western-imposed restrictions on child labor may have perverse consequences; indeed, economies that trade tend to have less child labor. Friedman concludes that globalization benefits countries that trade. The recent strategy of China and India to open their borders will do far more to help their citizens than the strategy of Myanmar and North Korea to isolate themselves from trade.

Friedman also devotes a chapter to economic growth and environmental issues (chapter 15), which is a readable and persuasive exposition of the "Kuznets curve" (that economic growth reduces, not increases, environmental degradation). It was no surprise to most economists that countries behind the Iron Curtain had low environmental quality: their national incomes were low. This chapter is full of fun facts: did you know that forests in the U.S. now contain 40 percent more wood than fifty years ago? Simon Kuznets would have been pleased.

The final chapter is a summing up, with a prescription for advancing economic growth and avoiding stagnation. Once again, it is evident that Benjamin Friedman is not Milton Friedman. The policy medicine to promote economic growth and prevent stagnation calls not only for the invisible hand of the market but the visible hand of government intervention. I was disappointed to see Friedman avoid discussion of the flat tax, even as more and more countries adopt this option (our tax code is now three times the length of the King James Version of the Bible). And in stressing the importance of educational opportunities, Friedman does not clearly endorse the merits of vouchers and school choice.

Only in rare circumstances is a reviewer pleased with every page of a book. Let me close with three quibbles about The Moral Consequences of Economic Growth.

Most readers of Books & Culture would applaud Friedman's use of religious scholarship and welcome his emphasis on the importance of religion in the promotion of economic change; and most readers of this journal would commend an economist who cites John Calvin, Richard Baxter, Saint Augustine, and Saint Jerome, among others. And I do too. Still, it was (for me) disconcerting that among the more than 1,000 endnotes, there was no reference to the writings of E. Calvin Beisner, Brian Griffiths, Donald A. Hay, Paul Heyne, Peter J. Hill, John D. Mason, Ronald H. Nash, Michael Novak, Ronald J. Sider, Robert A. Sirico, and other Christian scholars who have made important contributions to the study of the morality of markets and economic growth. Their inclusion would have meant more text and more footnotes, to be sure. But I was left wondering whether the Harvard Divinity School library lacked the output of these authors.

My second quibble involves the economics of public choice, or rather the lack of its influence in The Moral Consequences of Economic Growth. Friedman writes as an economist who, at least implicitly, understands the Adamic Fall. Friedman is well acquainted with the evils of racism, intolerance, human deprivation, and want. He obviously believes that economic growth will thwart or at least reduce these evils. But Friedman's enthusiasm for some government prescriptives seems to ignore the prospect of the Fall affecting governments, or the representatives of government. The Moral Consequences of Economic Growth is written almost as though the economic field of Public Choice did not exist. Public Choice is that field of economics that examines the behavior of governments through the rational actor model. The work of James M. Buchanan, Mancur Olson, George J. Stigler, Gordon Tullock, and Barry Weingast (and others) about how governments work (and don't work) is neglected here (see p. 336 for an exception). My preference would have been to have fewer pages devoted (say) to the history of the New Deal and more wrestling with how governments can be induced to promote growth, instead of engage in rent-seeking activity.

My last quibble is with Friedman's moral taxonomy.

I do not doubt for a moment that as incomes rise and unemployment falls, there will be less racial discrimination, and I would agree with Friedman in a heartbeat that this would be a desirable cause-and-effect consequence of economic growth. But some of his moral categories seem tethered to the academic environs of life in Cambridge rather than life in other parts of the country. For example, Friedman seems to correlate anti-immigration views with moral backwardness. I am unpersuaded. My hunch is that farmers and ranchers in Cochise County, Arizona may not be opposed to Mexican immigrants because of racial prejudice or xenophobia. They would be opposed to 3,000 people crossing into their county every night, cutting their fences, killing their livestock, and trampling their fields whether the interlopers were Mexicans or members of the Harvard faculty.

But let me state what I trust is obvious: The Moral Consequences of Economic Growth is an important book on an important subject. Alfred Marshall, the great Cambridge economist of an earlier generation, left the study of mathematics as a young man and turned to economics because he wanted to help the poor. Benjamin Friedman continues in this grain. The Moral Consequences of Economic Growth deserves to be widely read, and no doubt will be. The next time the world's capitalists and the anti-capitalist protesters gather in Davos, Freidman's book could be distributed and read with profit by those in the streets and those in the conference rooms.

Kenneth G. Elzinga is Robert C. Taylor Professor of Economics at the University of Virginia.

1. Readers of Books & Culture may recall the reviews of Barry Schwartz, The Paradox of Choice: Why More is Less, and Edlar Shafir, ed., Preference, Belief, and Similarity: Selected Writings of Amos Tversky, by Andrew P. Morriss (July/August 2005) on modern objections to large choice sets. Friedman is more concerned about people who have too few choices, not too many.

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