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.
