Nine Reasons Why A Company Tax Cut Won't Create 'Jobs And Growth'
Expert knowledge Transitions and Trade in ‘Financial Services’

The Hegemony of Growth

by Matthias Schmelzer on July 1, 2016

Recently, economic growth as a policy goal has (again) become highly controversial. Not only are welfare economists increasingly questioning the universal merits of maximising growth, since more GDP does not seem to lead to better lives for most people, but environmentalists and ecological economists are questioning with strong arguments whether humanity will be able to achieve its collective goal – now enshrined in the Paris Agreement – to limit global warming to 1.5°C without curbing economic growth in the richest countries. Moreover, industrialised countries experience what some economists call a trend towards “secular stagnation.” 

In spite of these considerable problems, economic growth has become and largely remains what scholars from a variety of fields, including renowned historians, have described as a “fetish” or “obsession”, an “ideology”, a “social imaginary”, or an “axiomatic necessity”. In light of these current critical perspectives on growth, the pervasiveness of GDP as a measure of social well-being and of growth as a policy goal seem rather peculiar – a “puzzle” or “paradox” in need of explanation.

Schmelzer Hegemony of GrowthIn my book The Hegemony of Growth I took up this challenge by asking the simple question: How did economic growth come to be almost universally seen as a self-evident goal of economic policy-making and how was this constantly reproduced in changing circumstances? While growth is at the centre of both public and academic debates, the question how economic growth attained its status as an overarching priority in the first place has not received much attention by historians, nor by researchers in other disciplines.

Digging deep into history and analysing growth thinking at the transnational level and at the interface of academia, national bureaucracies, and international organizations reveals the complex and contested history and politics behind the emergence, functioning, and evolution of the “growth paradigm.”

In order to answer my question in a transnational context and grounded in historical and institutional developments, I focused on the emergence and evolution of knowledge about economic growth within the OECD and its predecessor, the Organisation for European Economic Co-operation (OEEC), one of the least researched international organisations. I researched the archives of this organisation and of some of its key member countries, read texts by key protagonists on growth theory, growth debates and the critique of economic growth, and discussed my arguments with colleagues around Europe, North America, and Japan, linking these to humanities’ current predicaments.

The resultant book is both profoundly historical – retelling in detail the making and remaking of the growth paradigm in the second half of the twentieth century – and topical for current discussions. It argues that the pursuit of economic growth is not a self-evident goal of industrialised countries’ policies, but rather the result of a very specific ensemble of discourses, economic theory, and statistical standards that came to dominate policy-making in industrialised countries under certain social and historical conditions in the second half of the twentieth century. Thus, I aim to analyse the idea of economic growth in its historical genesis in a similar way to that done by cultural anthropologists of the so-called Post-Development school with regard to the idea of “development”, focusing on the close nexus of power and knowledge. It rests on the thesis that the exceptional position of economic growth as a core policy goal is based on the hegemony of what I call the “economic growth paradigm” and cannot be adequately understood without taking into account the complex structure and historical evolution of this paradigm.

The making of this core feature of the religion of capitalism has to be situated within longer-term developments that reach back to the onset of intensified capitalist industrialisation in the early eighteenth century or even further, to colonial expansions. At that time, a secularised conception of economic progress and a first generation of classical growth theories emerged, which, however, fell into oblivion with the rise of econometrics and neoclassical economics in the later nineteenth century. Building on statistical developments in the early twentieth century, it was only in the context of the Great Depression that a renewed interest in macro economic questions gave rise to the modern conception of “the economy” and to interventionist economic policies geared toward stability and employment. Yet it was not before the late 1940s and early 1950s that in the context of World War II, European reconstruction, and Cold War competition that economic expansion became a key policy goal throughout the world.

The growth paradigm emerged as part of what has been called “high modernism,” a system of beliefs and practices aimed at increasing the power of the state in line with what were believed to be scientific ideas in order to reshape societies by maximising production to improve the human lot. To analyse this final phase of the making of the growth paradigm and its contested evolution, I used the OECD as a particularly meaningful “observation platform”.

Four discourses were specifically relevant in reinforcing the hegemony of growth and collectively rationalised, universalised, and naturalised the growth paradigm. These assumed that GDP, with all its inscribed reductions, assumptions, and exclusions, adequately measures economic activity; that growth is a panacea for a multitude of (often changing) socioeconomic challenges; that growth is essentially unlimited, provided the correct governmental and inter-governmental policies were pursued; and that GDP-growth is practically the same as or a necessary means to achieve essential societal goals such as progress, well-being, or national power.

Eagleton IdeologyThe growth paradigm became hegemonic in the sense of justifying and sustaining a particular perspective – these propositions – and the underlying social and power relations as natural, inevitable, and timeless. Growth came to be presented as the common good, thus justifying the particular interests of those who benefited most from the expansion of market transactions as beneficial for all. The hegemony of growth depoliticised key societal debates about what societies value, how they interpret their current position historically and within the globalised economy, and how they conceptualize the good life and future developments. Growth turned difficult political conflicts over distribution and what should be the goal of policy-making into technical, non-political management questions of how to collectively increase the economic output of the nation state. By thus transforming class and other social antagonisms into apparent win-win situations, it provided what could be called an “imaginary resolution of real contradictions”.

And by transforming contested and changing societal goals into technical economic problems, growth discourses have deeply colonised our imaginaries: they not only reinforced the dominance of economic thinking and arguments by turning political or social questions into economic problems (what could be called “economism”), but they also strengthened the privileged positions of economic technocrats within modern societies and underpinned the primacy of the economy over politics.

Furthermore, growthmanship was mutually reinforcing with the increasing importance of economic knowledge production as a key justificatory basis for policy-making within the modern state. Their ability to measure, model, and steer growth made economists increasingly indispensable for managing modern societies based on growth and thus reinforced the “superiority of economists”; and the expansion of economic approaches also strengthened the growth paradigm. Even though the mid-twentieth century saw the proliferation of growing armies of experts, ranging from international relations theorists to demographers, anthropologists, sociologists to agronomists, economists were the only ones who managed to claim they had mastered what had become a fetish throughout the world, economic growth.

These arguments – and others – are weaved within the various case studies discussed in the chapters of the book, which focus on issues such as the international standardisation of national income accounting, the transnational harmonisation of growth policies, how growth became a universal yardstick, the replication of growth policies in the context of decolonisation and the ‘development of others,’ the OECD-Club of Rome nexus, the birth of environmental politics and social indicators, as well as the more recent turn to neoliberal growthmanship.

To conclude, the book seeks to disentangle historically the complex relationship between what in current OECD-parlance is discussed as the “triangle” of economy, society, and nature. In this vein, in March 2016 I was invited to present the book in the context of the OECD’s New Approaches to Economic Challenges (NAEC) seminar, resulting after a comment by former OECD director Ron Gass in an interesting discussion that revolved around the various ways this triangle could be rethought in the face of globally mounting inequality, secular stagnation and climate change. Which role the “economic growth paradigm” might play in reshaping the relationships of society, economy and nature might become one of the key questions of the twenty-first century.

Matthias Schmelzer
Matthias Schmelzer is postdoctoral researcher at the Center for Social and Economic History at the University of Zürich, Switzerland, and he also works at the Leipzig-baded think tank Konzeptwerk Neue Ökonomie. He is author of "The Hegemony of Growth. The OECD and the Making of the Economic Growth Paradigm" (winner of the best dissertation prize by the World Economic History Congress (WEHC) 2015) and has written on 20th century social and economic history, monetary politics, international organizations, and degrowth. He is also active in various social movements and has recently been involved in organizing the international degrowth conference 2014 in Leipzig and the degrowth summer school in the Rhineland in 2015.

Leave a Response

Developed by Cemal Burak Tansel // Powered by Wordpress