Susskind tackles today’s crunch question – should we continue to pursue economic growth, and if so, how to shape it?   He does so in an engaging and highly readable manner.  His conclusion is optimistic – although I have a nagging sense that he does not quite believe it.

The first part of the book describes the history of economic growth, arguing that prior to around 1800 there was no sustained upward trend in global GDP per head.   While this may be disputed to some extent, the evidence presented supports this in general terms.  The major reasons for the Long Stagnation are asserted to have been population rising with output and diminishing returns.

Why did economic growth per head get going?  The Harrod-Domar model attributed this largely to increases in physical capital.  As is familiar, Solow-Swan moved this on to ‘technological progress’.  Romer then placed emphasis on ‘new ideas’ building onto each other.  But this does not explain why growth took off when (or indeed where) it did.  Susskind adds to Romer’s view of ideas Mokyr’s cultural aspect, the shift to reason overcoming superstition and a ‘hunt for useful ideas’.

Growth, as measured by GDP, was given policy priority post WWII – it seemed to bring with it the other things we care about: higher living standards, longer life, jobs, etc.  It therefore gathered considerable political appeal.  And it was believed that although growth had costs these were not high.

Susskind, however, argues that the form of growth we have adopted is “climate-destroying, inequality-creating, work-threatening, politics-undermining and community-disrupting’.  Quite a list! But one that is easily illustrated – including the ill-effects from globalisation.

Where do we go from here?  One route would be to work on better definitions of growth by reframing GDP – fraught as the present measure is with many well-known problems of measurement.  It is also an amoral measure.  Attempts to create a moral GDP, or to seek to add other measures to create a richer dashboard, seem unlikely to prove able to resolve the issues.  He concludes that it would be better to settle for a technical, minimal definition – using GDP to measure taxable income, or market demand, without attempting to introduce morality or other important ends.

Susskind then turns to, and largely dismisses, the arguments for degrowth. He points out that the outcome argued for by the degrowthers is essentially a recession, though of a different kind with the pain differently distributed and less use of fossil fuels.  They may rightly have economists as their target because we focus too little on the costs of growth – but degrowthers focus too little on its benefits.

Lastly, he turns to the real challenge – how to pursue growth today.  The key route is held to be through the creation and unleashing of the infinite world of ideas.  Reform of the patent system, increased R&D (with less bureaucracy in universities), and deployment of technology are all put forward.  Some cold water is poured on the more familiar remedies of more infrastructure, of land-use planning reform and more education.  This is perhaps appealing as it does not imply shifting spending from consumption to investment – though that would not allow for the spending needed for the green transition.

How to shape growth?  If Britain’s role in the Industrial Revolution was spurred partly by the high cost of labour – that was ‘induced technological change’.  But incentives (via taxation, subsidies or culture) can push forward ‘directed technological change’.  The example of the pandemic causing a jump in technology adoption and behaviour is set out as a good example of how fast we can change.

Looking at what we might seek to do, Susskind sets out the key trade-offs.  On equity versus efficiency, he argues that we often lie below the frontier for the optimal point on this trade-off.  On growth versus the environment – he points to the tremendous decline in estimates of the cost of reducing or removing emissions (and in passing argues for an effective carbon tax).  A more difficult trade-off is between globalisation and the damage done to places – where he argues for ‘dynamic competitive advantage’ – a country should seek what is best for it at a given time.

Susskind does not consider the trade-offs can be avoided – rather that we should contend with them, and the moral issues involved.  He argues that the post-war pursuit of growth implicitly assumed that success here would resolve other problems- hiding the moral questions in a technocratic exercise.  A less strong version of degrowth is to move to acceptance that growth is only one of the ends for society which we might care about.  We might then impose a wealth tax even while believing that it would slow economic growth.

As he comments – his answers to dilemmas are often imprecise: ‘we should care about the future far more’, ‘we should care about other valuable ends far more’.  Recognising this, he proposes more use of collective deliberation – ‘mini-publics’ at which major issues are debated.  Susskind believes in the innovative powers of humankind to develop ways to tackle successfully the trade-offs we face; arguing that we should treasure the future and strike out into it with confidence.

This is an excellent book, developing a clear argument and not afraid to look really big questions squarely in the eye. It quotes my two favourite philosophers – Kant and Parfit. From the latter he takes his very refreshing optimism: ‘Life can be wonderful as well as terrible, and we shall increasingly have the power to make life good.’