Is Growth always the answer?

In a widely televised interview, the Prime Minister of Singapore reiterated the need for continued economic growth in order to "improve lives". Undoubtedly, many of us do not question the assumption that growth is always good, after all it was what had brought Singapore from Third World to First, and its citizens are now enjoying the fruits of decades of increase in GDP and material standard of living.

However like all physical phenomenon, there will be limits to growth eventually, since we live on a finite planet. Today, resource scarcity and climate change are manifestations of the physical constraints the world faces. Singapore can be seen as a microcosm of the world in that the island-state is severely limited in land size. As such it will more quickly run into problems of overcrowding compared to most other countries. Already as Mr Lee Hsien Loong pointed out, the nation is finding it very difficult to maintain the rapid pace of expansion enjoyed previously due to currently low population and labor productivity growth – the twin drivers of GDP growth. This is natural for any mature economy, as is the case with developed countries in the West and Japan for example.

Instead of always agonizing over how to further expand an already well developed economy, perhaps we should be asking if more growth is always beneficial. Singapore’s per-capita GDP has been among the world’s highest for some time now. Research has shown that beyond a certain level, people generally do not become happier from further increases in income. Just as in a growing person, there is an optimal level when further expansion becomes excessive and detrimental. We become overweight and suffer from the associated health problems if we overeat. Living organisms also naturally go through the stages of youth, maturity and old age. Similarly with our economies, when the marginal costs of economic growth exceed the marginal benefits, we should rationally stop growing. Congestion in all its forms like public transportation breakdowns, overcrowded roads and hospitals, shrinking living spaces per family, and pollution, from the ever expanding islands of garbage we need to the destruction of wild places to make way for property and infrastructure development, are all signs that growth is doing more harm than good. They also show that there are diminishing returns to growth, when it becomes more costly to obtain the same increase in GDP or well-being, or even just to maintain the status quo.

Singapore should focus on creating an optimal living environment given its limited size, rather than relying on growth to improve lives. Economic inequality cannot be resolved through economic growth alone. Better redistribution of existing resources should be tried. The appetite for unabated growth has to be curbed at some point as we have long overshot the Earth’s capacity to support us sustainably. Continuing on its present path of business-as-usual expansion, by planning for seven million or more people on the island will leave its population even more vulnerable to an increasingly volatile and resource constrained world. Rather than fostering the attitude of current and future generations that more is always better and to always expect a bigger economy, our leaders should face up to the reality that perpetual growth is neither possible nor desirable and prepare the country to be more resilient to setbacks as we head into tougher times ahead.