Economic growth is normally seen as the most important long-term macroeconomic objective. Without economic growth, so it is argued, people will be unable to achieve rising living standards. But, according to Nicholas Stern, Professor of Economics and Government at the London School of Economics, former head of the Government Economic Service, former World Bank chief economist and author of the 2006 Stern Review on the Economics of Climate Change, countries will need to reconsider making growth the goal of their societies.
Speaking to students at the People’s University of Beijing, Lord Stern warned that unless substantial cuts were made in carbon emissions, the effects of global warming would have devastating effects on people’s lives. As the Stern report stated, “Climate change will affect the basic elements of life for people around the world – access to water, food production, health, and the environment. Hundreds of millions of people could suffer hunger, water shortages and coastal flooding as the world warms.” The implications are that countries must making cutting carbon emissions a priority and must reconsider their growth strategies. In his speech he said that “Beijing should shift the economy away from heavy industry, manufacturing for exports and other high-emission activities. Instead, it should focus more on domestic consumption, service industries and low-carbon technology.”
So should countries rethink their economic objectives? Is economic growth either a necessary or sufficient condition for an increase in human welfare? Read the articles and then consider the questions below.
World must help China shift to clean growth-Stern Reuters (11/9/09)
Stern Truths: Some Parts of China Have Western-Style Emissions Wall Street Journal (11/9/09)
Stern: Rich nations will have to forget about growth to stop climate change Guardian (11/9/09)
Stern words in Beijing Hot Topic (New Zealand) (13/9/09)
Questions
- Are the objectives of economic growth and tackling gobal warming necessarily incompatible?
- What would a low carbon growth strategy look like?
- What would you include in the opportunity costs of maintaining a high growth strategy compared with switching to a lower carbon, lower growth one?
- Consider whether economic growth is (a) a necessary condition; (b) a sufficient condition for a growth in the wellbeing of the human race.
This podcast is from the Guardian. The first part consists of a report by Anna Dixon, Director of Policy at the King’s Fund (an independent ‘think tank’). The podcast considers “the economics of healthcare. Why are the Americans so opposed to adopt a system of socialised medicine? Does the NHS make economic sense? And how will the squeeze on public finances impact upon our most cherished of services?”
The Business: The NHS and economic recovery Guardian podcast (19/8/09)
Questions
- How do the UK and US healthcare systems differ?
- Why does the US system result in greater healthcare inequality than the National Health Service system in the UK?
- For what reasons may Americans resist healthcare reform?
- What lessons can be learned by the NHS from the US healthcare system?
- Compare the issues of monopoly power of drug companies, doctors and hospitals in the two systems? In which system is the countervailing power of purchasers likely to be greater?
Imagine putting together a dream team of economists to tackle the current recession. Who would you choose? Larry Elliott, the Guardian’s economics editor considers this game of ‘fantasy economics’ in the linked article below. In the process, he makes a number of criticisms of economists for saying little about what caused the current crisis and how such crises could be avoided in the future.
As students studying economics you might want to defend economists against this attack. After all, virtually every time you turn on the radio or television or open a paper, there are economists explaining what has happened and what should be done about it. So see if you can mount a defence against this attack – and maybe put together your own dream team of economists!
It’s a funny old game: where is the dream team of economists to tackle the slump? Guardian (1/6/09)
Profiles of many the economists referred to in Larry Elliott’s article can be found at the History of Economic Thought website. You can access this from the Sloman Hot Links tab above and then click on site C18.
Questions
- Explain why economies with deregulated financial markets are likely to experience macroeconomic instability (‘boom-bust cycles’).
- What are the benefits of studying perfectly competitive markets and general equilibrium theory?
- Write a brief defence of the use of mathematics in economics.
- Does experimental economics allow economists to take a ‘more nuanced and relevant approach’ to studying economic behaviour and devising appropriate policy?
The origins of all economic activity lie in barter. Barter is the exchange of goods directly without the use of money as a medium of exchange. A barter economy is one that uses just barter to organise economic activity. Many subsistence economies will use barter as the main method of trading. We might be forgiven for thinking that, given the sophistication of a modern economy, barter is a long-dead medium of exchange. As the article below shows, we would be wrong. In fact, ironically, the very sophistication that has brought us this economic growth and technical development may also be bringing barter back into fashion. There is a wide range of web sites dedicated to swapping goods and services. Seedy People may not be a website you would immediately think of visiting, but in fact, it is an exchange for gardeners and allotmenteers to swap seeds. The author of the article (John-Paul Flintoff) may have failed to pay his council tax through bartering, but in these cash-strapped times, there may be lots of other opportunities to bypass the conventional market economy.
Money is dead – long live barter Times Online (11/1/09)
Questions
- Identify two weaknesses of organising economic ativity through barter.
- Explain why barter may be coming back into fashion.
- Identify the various functions of money.
- Discuss the implications for economic efficiency of more economic activity being organised through barter.
An ongoing debate in economics for many years has been the extent to which governments should intervene in the economy. The debate has re-emerged in recent months with the global financial crisis as many commentators have arged that had a tighter regulatory system been in place, it could have helped to prevent some of the poorer lending practices of banks internationally. Even the recent G20 meeting (dubbed Bretton Woods II by some analysts) discussed regulatory reform of the international financial system. The two articles below look at this debate about the extent of government intervention from two very different angles. The first is from the perspective of Victorian England and Little Dorritt, while the second (by Peter Mandelson) looks at how globalisation and the financial crisis have informed the debate about state intervention.
So much for ‘late’ capitalism Guardian (24/11/08)
The future active state Guardian (4/12/08)
Questions
- Examine the advantages and disadvantages of greater state intervention in an economy.
- Discuss the extent to which globalisation has changed the need for the amount of state intervention in an economy.
- “Strong social welfare systems and redistribution can be contributors to economic growth.” Discuss the extent to which this statement will always hold true.