Boom, Bust & Broke: The Efficiency Epidemic

We are living in a period of unprecedented economic growth. For most of human history, the world economy expanded only marginally, if at all. Even the shocks of the 2008 financial crisis and the COVID-19 pandemic, though severe, barely hindered our upward trajectory. Judged purely through the lens of growth, things should look better than ever.

The counterintuitiveness of this stage of marvellous growth is revealed through the contradictions we witness. We see how people starve, the world is heating up, and income inequality grows. This is difficult to reconcile with news that Elon Musk could qualify to receive a trillion dollars, with which he could resolve world hunger for twenty years, or give each Tesla employee in the world an eight-million-dollar bonus.

The question is: yes, the world is richer, but are our lives better? At what point do we say “stop!”, and is that even possible? We are in what I consider an efficiency epidemic. Humans have always invented things to make our lives easier, like the wheel and beer, but it seems like we are on a jacked-up technological race track that is crushing the underprivileged and wiping out jobs. If growth should be making life better, why doesn't it feel that way?

It's important to recognise that although world economies have grown, GDP is a very limited proxy for wellbeing. GDP does not consider income distribution, environmental deprivation, or work-life balance. It also ignores meta-externalities, like how a culture of consumerism renounces the social value placed on collective goods and non-market activities like going on walks through Wilhelmina Park or streaking the quad.

As I suggested with the Musk factoid, the income gap has become an income canyon. Although shared prosperity existed in the 1970s, contemporary middle and lower-class incomes have stagnated. This suggests that perhaps technological growth is not the problem, but rather the capture of its benefits. Corporate institutions are structured to perpetuate inequality, though redistribution is feasible. Even if Musk only got half of his bonus, he would still be one of the richest men alive, and all his employees could get a four-million-dollar bonus.

What strikes me the most is that many of the things that fulfil people don’t translate to growth at all. These are strong personal relationships, exercise, gratitude, and a sense of purpose. Once basic needs are fulfilled, seeking happiness through monetary acquisitions like cars and luxury clothes may only place people on a hedonic treadmill, where reaching a financial goal gives a surge of happiness which quickly returns to baseline. People continue to seek the next superficial spike, despite actual happiness not changing.

So then what is economics for? Our institutions prioritise efficiency, scale and accumulation, but these mechanisms crumble when, for the majority of people, growth is no longer subservient to wellbeing. Incorporating purposeful and consequential growth into economic policy and proxy would aid in resolving this misalignment. It is thus critical to consider not how to keep the graphs rising, but how to make the rise meaningful.