Monday, November 21, 2005

Why the rich should get richer

The Economist reviews The Moral Consequences Of Economic Growth by Benjamin Friedman.

The book is an interesting look at how morality is influenced by economic growth. A viewpoint often expressed is that in the rich world further economic growth is, at best, morally ambiguous. However, Adam Smith made the point that a society that is experiencing economic growth will be happier than one that is economically stagnant. This is true of any society, no matter what their current level of economic development is.

According to Mr. Friedman, history shows (and this seems like a very logical perspective) that when prosperity is increasing, people are more likely to be tolerant, favourable of democracy and inclined to settle disputes in a peaceful manner.

On the other hand, economic decline leads to intolerance, strife and dictatorship.

Mr. Friedman gives his idea that the cause of this is that people's sense of well-being is relative. It can either be relative to their previous standard of living, or to other people's standard of living.

If economic growth is happening, people will relate their increased prosperity to their own previous circumstances and be less bothered about other people's. On the other hand, during economic stagnancy or decline, people will tend to care more about their placing in relation to others, and this leads to intolerance, frustration and the tendency for social breakdown and incresing criminal activities(it's interesting to consider the recent riots in France with this in mind).

Consequently, economic growth is always a good thing from a moral standpoint, even in wealthy Western countries.

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