Growing the Economy

This podcast, entitled “Growing the Economy”, is one page from my much larger website entitled The Norman Environmental Primer. It’s link is This is not my actual voice – but one from Spotify.

Growing the Economy.

This subject might not seem appropriate in an “environmental primer”. But it is. It is one of the major stumbling blocks in designing sustainable living strategies for humanity. Read and see if you don’t agree…

Few phrases I hear send up a red flag more than “grow the economy”. Almost every politician states that “growing the economy” is a goal of our local community, city, state or country. It’s like motherhood and apple pie. How could anyone be against it? It’s a no-brainer. So let’s proceed to discuss how we can best “grow the economy”.

But wait just a minute! I said that growing our economy is a no-brainer. But I didn’t mean it in the way you might think. What I mean is that those who espouse such a viewpoint are not using an important part of their brain. Growing the economy without limit is absolutely unsustainable on a finite planet. Hence the well-known quote that anyone who believes otherwise is either a madman or an economist. Yet politicians use this phrase all the time. Why?

The phrase “Grow the economy” is widely used by people who choose only to think in the short term. Getting that new overpass built will help the local community get across those nasty railroad tracks without delay. And encouraging that new manufacturing plant to move to our town will increase the number of good paying jobs. Those jobs will support the struggling restaurants along Main Street. And the new property taxes on the houses of the employees of the plant will help build that new elementary school. So how could anyone be against growth and growing the economy?

First, we should define what the phrase “growing the economy” means. It means increasing the economic activity of a community. There are two straightforward ways to do this; an example illustrates the two.

One way to grow the economy is to increase productivity. Suppose you are the owner and only employee of your sandwich shop and can make and sell 10 sandwiches per hour. If you buy a machine that allows you to make 20 sandwiches per hour you will have doubled your sandwich output per hour. But there are usually limits to what one person can do, even with automation.

A second way to increase your productivity (as measured by sandwiches per hour) is by hiring more employees to make the sandwiches for you. You can grow your business this way (if there is sufficient demand for your sandwiches) – and this is the most common way for businesses to increase their output. This requires more employees. What is the downside of doing this?

One common problem with a “growing the economy” mentality is that it does not consider the indirect costs of such growth. The downside of expanding a business by adding workers is that these workers must come from somewhere. If they come from your town they may result in a local shortage of labor and this may drive up the cost of local labor – your town’s workers will justifiably demand a higher salary since labor is now in short supply. This is good for these workers – but not so good for those buying the product of your town’s businesses. More often additional workers will come from somewhere other than your town and your community grows in population as a result. Eventually, your community will need larger schools, wider roads, more stop lights, more restaurants, better stormwater drainage and better trash collection – and more employees are for all of these activities. Your community grows not only via your new sandwich shop employees but through the other people in your community who need to support them. Depending on the availability of land for development, the cost of housing may increase – great for sellers of property but not so good for buyers. And rents may increase for everyone in your community if there are not enough apartments available for the new workers moving to your community.

In summary, “growing the economy” means spinning-up the entire economic activity of a community. While this sounds good to both businesses and employees (more jobs, more sales etc) this doesn’t automatically translate to an improved “quality of life” for the community. Competition between businesses may prevent your business from growing. What if more sandwich shops open and compete directly with you? Larger communities usually have a greater diversity of restaurants and other businesses. But does Norman really need seven McDonalds? Larger communities have more facilities like art museums, larger public libraries and larger shopping complexes. But their residents also suffer more traffic congestion, longer commutes, more city noise, usually more crime and a host of other undesirable urban issues.

What do most people think about “growing the economy”? I asked at the end of a talk I once gave whether my audience wanted Norman to be a larger city than it was presently. No one raised their hand. Most wanted Norman to be smaller than it was… Why then did it grow? For the answer to this question please re-read the section of this Primer on the commons.

The only sustainable way to grow any economy is to the increase the productivity of workers – not to add to their numbers. Even this has limits since the available resources may ultimately limit any productivity increases.

In summarythe next time you hear someone suggest we grow the economy ask them how they plan to do this sustainably. They will probably be surprised by your question – because so few people appreciate the full implications of growing the economy.