We all probably are familiar with mythology. Usually we think it's something that was invented by the Greeks or Romans to explain natural phenomena that may have seemed inexplicable. But there are contemporary myths also, and one of the most influential in modern society is the economic growth myth.

Question: Would you prefer a guaranteed minimum income of, say, $30,000, adjusted for inflation, or would you rather take your chances on the job market? Most of us would probably hesitate to take the guaranteed income. We aspire to more, or have more financial obligations that $30K could meet. We're in higher education in part to improve our odds on the job market. We'd all like to do something professionally that either rewards us well financially, or in other ways.

Part of this is the economic circumstances in which we're raised. We live in societies where people subsist on income. In a subsistence society, an agrarian society for instance, income may not be the main source of people's livelihood--they're more likely to derive what they need to survive from their resource base, through farming, raising animals, using resources from surrounding forestland, aquaculture, or some combination of the above. Nature isn't always a sure bet, though. Rainfall varies, which can affect farming, fishing, animal husbandry, forestry (think fire here as well as drought). While in contemporary societies people generally pursue an economic strategy of accumulation and income maximization, many traditional societies have more redistributive strategies, based on minimizing risk. Since the impacts of crop failure may mean starvation, the stakes are high and survival is the goal. A farmer in the states who has a bad crop year may be able to get subsidies from the federal government. The bank may help bail him/her out, realizing that if the farmer is going to continue making payments on a mortgage, he/she needs to stay in business. For cultures where people rely solely on their immediate environment for survival, there is no reliance on other institutions.

Here's a quote from Karl Polanyi (1957:45), from his book The Great Transformation, that is telling:

'man's economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end . . . These interests will be very different in a small hunting or fishing community from those in a vast despotic society, but in either case the economic system will be run on noneconomic motives . . . (in other words, maximizing personal income may run against the culture, and decrease the odds of survival for both the individual and the collective group)

The explanation, in terms of survival, is simple. Take the case of a tribal society. The individual's economic interest is rarely paramount, for the community keeps all its members from starving unless it is itself borne down by catastrophe, in which case interetst are again threatened collectively, not individually. The maintenance of social ties, on the other hand, is crucial. First, because by disregarding the accepted code of honor, or generosity, the individual cuts himself off from the community and becomes an outcase; second, because, in the long run, all social obligations are reciprocal, and their fulfillment serves also the individual's give-and-take interests best. Such a situation must exert a continuous pressure on the individual to eliminate economic self-interest from his consciousness to the point of making him unable, in many cases (but by no means in all), even to comprehend the implications of his own actions in terms of such an interest . . . the premium set on generosity is so great when measured in terms of social prestige as to make any other behavior than that of utter self-forgetfulness simply not pay. Personal character has little to do with the matter. Man can be as good or evil, as social or asocial, jealous or generous, in respect to one set of values as in respect to another.

Thus it isn't that traditional society's members necessarily like each other better, but they do what they have to to survive, and this often includes arranged marriages to solidify relations between families.

Karl Polanyi was writing in the 1940s, about the transformation of economy and society, the former from servant to master (more on that later).

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Another Question: Why do we encourage a shift from subsistence to market economies?

This is what the western international development model has always been about--'modernizing' societies, mechanizing agriculture, increasing the productivity of food production so that less people are on the farm and there is a pool of laborers to work in industries that develop as a result of agricultural surplus and labor surplus. With less people producing their own subsistence, more people are dependent on income for a living, and income maximization seems entirely reasonable. We all want higher living standards, right? 'Development' is supposed to lead to

• Hgher living standards,
• Open trade, which gives countries revenue to import the goods they need to further development (e.g., oil, steel, pork bellies, more oil, automobiles, bicycles, rubber tires, oil)
• Higher productivity, allowing for a smaller agricultural labor force
• Mass production and consumption and industrialization, creating a consuming class.

This is the economic way: the growth machine. There are major multilateral institutions that enforce economic growth, including the World Bank, IMF (International Monetary Fund, WTO (World Trade Organization), various organizations of the United Nations. It also makes countries more dependent on world trade, and on income, which may encourage commercialization of natural resources (which multinational corporations like because it gives them more potential buyers to choose from).

Economic growth is seen as the route to increased standards of living. The 'West' did it, and their 'success' is put forward as a model for the rest of the world. So how do we measure economic growth? Often we use broad, national measures such as GNP, or Gross National Product, which is the total value of final goods and services produced in a year by domestically owned factors of production. A similar measure is GDP (Gross Domestic Product), which measures the total value of final goods and services produced within a country's borders in a year (i.e., it may include foreign companies). Another way we often measure growth is in average incomes. Sometimes these can be misleading, especially in agrarian societies where people often produce their own subsistence.

Economic growth in the 20th Century

Since 1950, there has been an approximately five fold increase in global output, as David Korten writes (he has a nice website, by the way). So, where has most of the growth been in the last 50 years?

1. Petroleum/petrochemical
2. mining
3. chemical intensive agriculture
4. metals
5. road-building, transportation

Do these areas of growth suggest anything? I.e., how did we grow so fast? You should have noticed that most of these industries involve intensive resource extraction. The growth of the last 50 years according to Korten and others has largely been built on the drawing down 'natural capital.' We're creating income and wealth by exploiting non-renewable resources that won't be there for future generations to use. What will they use?

Another thing that has 'boosted' growth is the way we measure it--through the formal economic sector. In other words, if you clean your own house, it doesn't really register as part of GNP. If you have someone else clean it and you pay them and they report the income, it may show up, however. Is there more work being done? Likely not, but it looks like growth when you add up al the numbers. Shifting productivity from the domestic, informal, subsistence or volunteer sectors into the formal sector of economies makes it easier to measure and incorporate into GNP. In addition, when something bad happens, like the Exxon Valdez spill, the clean-up produces jobs, and these jobs count as part of economic growth, despite the fact that the oil spill created an economic and environmental nightmare. Same with the Florida hurricanes this year. Most of the jobs created in the period before the election were the result of clean-up efforts in Florida because of a natural disaster. It all counts as growth, though.

In the U.S., we have tripled the size of the economy in the last 40 years, yet the number in poverty has remained relatively constant (from approximately 40 million down to 35 million today). Yes, there are more people now (280 million or so) than in 1960, but still many below the poverty line when you think of the economic growth over that period--in other words, not everyone is benefiting from that growth. And because the way we calculate poverty no longer reflects the realities of household budgets (the rising costs of housing, the declining wage structure), there are probably millions more people actually living on sub-minimum wages.

However, in the aggregate, even if we get increased average incomes, maybe even more jobs, growth does not equal distribution. The pie may be bigger, but different groups' share of it may actually have decreased over time. Economic growth in the U.S. and the world has been accompanied by increasing economic inequality.

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According to philosopher John Locke-

Humans legitimate use of private property was limited to what one can use before it spoils. Lock wrote in the 18th century, so cut him some slack for thinking of wealth in terms of perishable goods. However, Locke observed that money doesn't spoil. Thus wealth can be converted into money, and grow in perpetuity. Interest compounded until the end of time.

Why do we use money? The inconvenience of barter is a good reason. But because real wealth can spoil, even in a money economy, accumulating money balances doesn't equate exactly with accumulating wealth. Consider the Stock Market crash of 1929, or the dotcom boom of the 1990s. Both were built on paper wealth, and in the former case, when the bottom fell out and people made a run on banks, the banks closed. At some point, as economist Herman Daly says, accumulation of money becomes a lien against future production, not a claim check to currently existing goods

Money fetishism

Ecological economist Herman Daly says that many economists take the abstract symbol and measure of exchange value (which in our economy is?), and apply them to the concrete use value, the commodity itself. In other words, they equate money with the commodity, money becomes the representation of the value of a commodity. This certainly facilitates exchange, but can commodities grow as fast as money? If they can, we can have unlimited economic growth. If they have upper limits, for instance because nature doesn't grow exponentially, and only produces so much biomass or wealth over a year's time, then after a while we end up with more money in the economy than we have wealth. Economist Julian Simon, author of The Ultimate Resource, has this to say in rebuttal:

The length of a one-inch line within the endpoints contains an infinite number of points; these points cannot be counted, because they have no defined size. Similarly, the quantity of copper that will ever be available to us is not finite, because there is no method (even in principle) of making an appropriate count of it (Simon 1981: 47).

So, wealth is infinite, as the wise users say? Or is Simon confusing infinite divisibility with infinite amount? Remember, the endpoints are fixed, right? But in general, economists use money as their currency of measurement, and thus measures of average income, GNP and GDP take on great importance in debates about economic growth.

Next time you hear about phenomenal economic growth rates, in the U.S. or elsewhere, be skeptical, keep in mind how they're likely being achieved, and how unlikely it is they will be able to sustain themselves. You think Growth Mythology will engage readers a couple of millennia from now as Greek and Roman mythology have?