## We Must Change the Nature of Growth

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**Canonical URL:** [We Must Change the Nature of Growth](https://www.imf.org/en/publications/fandd/issues/2024/09/we-must-change-the-nature-of-growth-daniel-susskind)

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## Bibliographic details
- Authors: DANIEL SUSSKIND
- Published: September 3, 2024

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### New obsession: history and origins of growth as a dominant aim
- The pursuit of economic growth is a very recent preoccupation in human history; for most of humanity’s 300,000-year history life was stagnant.
- Classical economists (Adam Smith, David Ricardo, John Stuart Mill) assumed an impending “stationary state” rather than an active pursuit of growth.
- Reliable measures of the size of the economy emerged only in the 1940s; GDP as a statistic was developed during World War II (John Maynard Keynes and Simon Kuznets).
- The Cold War elevated GDP growth as a central metric: outgrowing an adversary signaled superiority in military capacity and the battle of ideas, inaugurating an era of “growthmanship.”

### Growth dilemma: benefits and costs
- Benefits associated with growth:
  - Extreme poverty fell from 8 in 10 people in 1820 to just 1 in 10 today.
  - Illiteracy shifted from 9 in 10 in 1820 to 9 in 10 literate today.
  - Growth lengthened and improved lives, changing major problems (e.g., obesity replacing famine in rich countries).
- Costs and contemporary problems tied to growth:
  - Environmental degradation and climate change: “the past eight years have been the hottest eight years in human history,” and climate change is described as a “climate emergency.”
  - Inequality: growth-promoting technologies have also been “inequality-creating.”
  - Labor-market and political disruption from technologies like AI.
  - Community disruption: some industries and sources of shared meaning have been decimated.
- The central dilemma: growth has been associated with many human triumphs but also many of our greatest problems; “It’s as if we cannot go on—and yet we must.”

### Degrowth critique
- Degrowth argument: less growth or no growth as a response to growth’s harms.
- Author’s counterpoints:
  - The slogan “infinite growth is not possible on a finite planet” is labelled wrong; growth derives from intangible ideas, not merely material inputs.
  - Degrowth would be catastrophic in distributional terms: “Freezing GDP per capita at current levels would… require either abandoning 800 million people to extreme poverty or slashing the income of the other 7.1 billion.”
  - The intangible realm of ideas is “as good as infinite,” so planetary finiteness is not the binding constraint on growth.

### How to generate more and better growth (four priorities)
- Reforms to intellectual property (IP):
  - Current IP regimes often “protect the status quo,” rewarding past discoverers at the expense of reuse and future innovation.
  - Example: the Berne Convention “hasn’t changed for over half a century.”
  - IP protections currently provide “too much protection for the material these systems are trained on—and without which they cannot function—and too little for the extraordinary material they create.”
- Much larger investment in R&D:
  - R&D expenditure trends are described as “discouraging.”
  - Examples: R&D as a share of GDP “has collapsed” in France, The Netherlands, and the UK since the mid-20th century; in the US the measure “has stagnated at late-1960s levels for decades.”
  - Israel invests 5.4 percent of GDP in R&D each year.
  - Leading companies (Alphabet, Huawei, Meta) spend “more than 15 percent of their revenue on R&D.”
- Reduce inequality and broaden participation in idea-generation:
  - Claim: “The US could, for instance, quadruple innovation if racial minorities, women, and children from low-income families invented at the same rate as white men from high-income families.”
  - Reducing inequality is framed as both a moral imperative and an economic efficiency imperative.
- Use new technologies to accelerate idea-discovery:
  - Example: DeepMind’s AlphaFold solved the “protein folding” problem in 2020 and “can now calculate the 3D shape of millions of proteins in minutes,” dramatically accelerating research that previously would take a human an entire PhD for a single protein.

### Changing the nature of growth: policy levers and evidence
- Redirect technological progress toward broader social ends by reshaping incentives (taxes, subsidies, rules, regulations, social norms).
- Case study: climate and cost of emissions reduction
  - 2008: Nicholas Stern concluded it would cost 2 percent of GDP to reduce carbon emissions by 80 percent.
  - By 2020: the UK’s Climate Change Committee estimated the cost of eliminating emissions had fallen to just 0.5 percent of GDP.
  - The “trade-off had collapsed” because two decades of interventions induced a technological revolution (example: a “200-fold fall in the price of solar technology”).
- Conclusion: growth can be “greener than ever” when incentives drive development of cleaner technologies; policy can shape both the quantity and the character of technological progress.

### Existential opportunity and moral renewal
- Thesis: we face an “existential opportunity” to redirect technological progress and “change the nature of growth” to make the world fairer, greener, less dependent on disruptive technologies, and more respectful of place.
- The author’s prescription combines promoting more idea-driven growth with active reshaping of incentives and institutions so growth advances multiple ends rather than only material prosperity.

- Key statistics and figures cited in the article:
  - 300,000-year (human history)
  - mid-1990s (Japan and Germany sputtered)
  - mid-2000s (United States and United Kingdom sputtered)
  - mid-2010s (China sputtered)
  - 1940s (reliable measures of the size of the economy emerged)
  - 8 in 10 → 1 in 10 (extreme poverty, 1820 to today)
  - 9 in 10 illiterate in 1820 → 9 in 10 literate today
  - “the past eight years have been the hottest eight years in human history”
  - Berne Convention “hasn’t changed for over half a century”
  - Israel: 5.4 percent of GDP in R&D each year
  - Alphabet, Huawei, Meta: “more than 15 percent of their revenue on R&D”
  - Quadruple innovation scenario in the US if underrepresented groups invented at same rate as white men from high-income families
  - AlphaFold (2020) can calculate the 3D shape of millions of proteins in minutes
  - 2008 Stern: cost 2 percent of GDP to reduce carbon emissions by 80 percent
  - 2020 UK Climate Change Committee: cost of eliminating emissions had fallen to 0.5 percent of GDP
  - 200-fold fall in the price of solar technology

*Article by Daniel Susskind, F&D Magazine, September 2024; opinions expressed are those of the author and do not necessarily reflect IMF policy.*

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_Source: https://www.imf.org/en/publications/fandd/issues/2024/09/we-must-change-the-nature-of-growth-daniel-susskind_