Economic growth: Is it an Aqueduct or an iPhone?

In the neighborhood where I grew up, everyone had one bathroom and one garage. I’m pretty sure those who moved away now have at least two bathrooms and garages.

That’s growth.

As a nation, the U.S. is very much worried about growth. We’re worried because we don’t have enough of it. Still, knowing I could live with a single bathroom and garage makes me wonder if growth really is necessary.

According to the latest reports, the U.S. economy grew at a 2 percent annual pace from July to September. This is good news, the reports said, because from April to June growth had only been 1.3 percent.

While I’m unsure about the inner workings of growth, I think it safe to say that growth involves increased economic activity and – ideally – increased profits.

Back in my old neighborhood, a new bathroom might have been added to some of the homes. If the family used additional income to hire a contractor, this would register as economic growth. It might even if the family borrowed the money.

There would be no economic growth, I think, if the family had no additional income and spent its vacation money that year on wood, drywall, plumbing and fixtures and installed the bathroom themselves.

If this type of activity were the only “growth” in America, stockholders would see little or no year-over-year improvement.  Stock prices would fall.

Yet people overall might be happy, especially those with new bathrooms.

In its Oct. 22 edition, Bloomberg Businessweek cites some interesting new studies on economic growth. It mentions that economic historians have determined there was virtually no growth in Britain from the 13^th to the 18^th centuries. In other words, no growth was the status quo, even through the Renaissance and the age of exploration.

Growth apparently didn’t come to England until the Industrial Revolution in the 19^th century, with the advent of steam engines and railroads.

In the U.S., growth had been around 1 percent until the 20^th century, when it was boosted by the effects of (surprisingly) indoor running water, the internal combustion engine and electricity.

Economist Robert Gordon, in a paper for the National Bureau of Economic Research, said growth has been downhill since 1950.

If the trend continues, Gordon says, by 2100 annual growth will have fallen to 0.2 percent.

Judging by the standards of 300 years, he doesn’t see this as anything unusual.

While some cultures require growth, others do not.

I recently attended a conference on water. Several speakers told of good-intentioned projects designed to help villages where the tradition was for women to do daily “water walks.” That means traveling five to 10 miles a day on foot to fetch water that was carried back in containers balanced on their heads.

Wanting to help, outsiders installed wells and irrigations systems. Too often, the speakers said, the villagers would return to the water walks after parts failed or things broke down through lack of care and maintenance.

The outsider sought growth and improvement. The villagers seemed content with the way things were.

For myself, I’m partial to cultures that say, “Our population is growing. We need water. Let’s build an aqueduct and bring it in from the Alps.”

But I don’t see the necessity for an increasing number of bathrooms and garages, or for a new iPhone every six months. If employment is at proper levels, I don’t know why strong, efficient companies like IBM, Google and others are required to show consistent year after year growth.

Can you image a world where prices don’t change much; where you buy something and use it for decades; where basic needs are met and life is not a struggle to maintain and acquire things unessential to happiness?

I enjoy progress, and this seems like it to me.

Growth actually may be a trick, the result of debt. With $16 trillion of debt, Americans has experienced great growth. As we eliminate debt, life and growth are bound to change.

The future could return us to historical norms, and maybe we all will be able take a deep breath and begin to relax.

By Lanny Morgnanesi

Tags: $16 trillion debt, bloomberg businesweek, economic growth, iPhone, Robert Gordon, Roman aqueducts, water