It is the professed belief of almost every economist, business person
and politician that Australians require governments to achieve maximum
improvement in their material standard of living. I'm not sure that's
true - but we're about to find out.
Of late the econocrats have been
warning that, unless we undertake major reform, national income will
grow a lot more slowly in the coming decade than it did in the past one.
According to Dr David Gruen, of Treasury, gross national income per
person grew at an annual rate of 2.3 per cent over the past 13 years,
but may grow by only about 0.9 per cent over the coming 10 years.
This
projected slowdown is explained mainly by the switch from rising to
falling prices for our mineral exports - that is, it focuses on income
rather than production. It implies only a small slowdown in the
underlying rate of growth in gross domestic product (GDP) per person,
being based on the assumption that we maintain our long-run rate of
improvement in the productivity of labour - an assumption some may
question.
Reserve Bank deputy governor Philip Lowe says that, if
we don't achieve a substantial improvement in productivity, "we will
need to adjust to some combination of slower growth in real wages,
slower growth in profits, smaller gains in asset prices and slower
growth in government revenues and services".
So far, these
supposedly dire warnings have met with a giant yawn from the public.
And, assuming the slowdown comes to pass, I'm not convinced the public
will notice it, let alone care. I doubt that we will retain the national
resolve to implement the reforms economists say we need to keep incomes
growing strongly, nor am I sure the economists' favourite prescription
would work. As for myself, I think slower growth could be a good thing.
Would
the punters notice? Maybe not. Despite a decade of above-average growth
in real income per person, most people would swear that, whoever had
been benefiting from the resources boom, not a cent of it had come their
way.
For at least seven years, the popular perception has been
that people are struggling to keep up with the cost of living - that is,
living standards are slipping. And get this: politicians on both sides,
who profess to believe that rising living standards are governments'
raison d'etre, have fallen over themselves to agree - contrary to all
the objective evidence - that times are tough.
Clearly, they
believe failing to agree that times are tough is more likely to get them
tossed out than falsely confessing to have failed in their supposedly
sacred duty to keep living standards rising.
You may object that
the punters' failure to perceive that their living standards have been
rising may not stop them correctly perceiving that living standards are
now rising only slowly. But consider the United States, where real
median household income has been flat to down for the past 30 years
because almost all the real income growth has been appropriated by the
top few per cent.
Have decades of failure to enjoy rising material
comfort caused the American electorate to rise up in revolt? Not a bit
of it.
It's significant that the advocates of eternal growth never
promote it in terms of rising affluence, but always in terms of the
need to create jobs. Barring recession, there's no suggestion production
won't be growing fast enough to hold unemployment at about 5 per cent
over the decade.
Of course, a recession that led to rapidly rising
joblessness would undoubtedly cause great voter disaffection, but
that's not what we're talking about.
While it may be possible for
the economic, business and political elite to agree their precious
materialism has sprung a leak and that something must be done, that
doesn't mean they could agree on major reform; it's more likely to lead
to continued rent-seeking at the expense of other interest groups. If my
share of the pie is bigger, what's the problem?
Economists have
no evidence to support their fond belief that the burst of productivity
improvement in the second half of the 1990s was caused by micro-economic
reform. But even if you share their faith, it's a dismal record: if you
undertake sweeping reform of almost every facet of the economy then, 10
to 15 years later, you get no more than five years of above-average
improvement. What's more, all the big reform has already been done.
With
the global ecosystem already malfunctioning under the weight of so much
economic activity, it's time the age of hyper-materialism came to an
end and we switched attention from quantity to quality.
