MILAN – Markets and capitalist incentives have great strengths in promoting economic efficiency, growth, and innovation. And, as Ben Friedman of Harvard University argued persuasively in his 2006 book The Moral Consequences of Growth, economic growth is good for open and democratic societies. But markets and capitalist incentives have clear weaknesses in ensuring stability, equity, and sustainability, which can adversely affect political and social cohesion.
Obviously, abandoning market-capitalist systems, and implicitly growth, is not really an option. Collectively, we have little choice but to try to adapt the system to changing technological and global conditions in order to achieve stability, equity (in terms of opportunity and outcomes alike), and sustainability. Of these three imperatives, sustainability may be the most complex and challenging.
For many people, sustainability is associated with finite natural resources and the environment. The global economy will probably triple in size in the next quarter-century, largely owing to growth in developing countries as they catch up to developed-country incomes and adopt similar consumption patterns. Thus, there is a well-founded fear that the planet’s natural resources (broadly defined) and recuperative capacities will not withstand the pressure.
To some, this logic leads to the conclusion that growth is the problem, and that less growth is the solution. But, in developing countries, where only sustained growth can lift people out of poverty, limiting it cannot be the answer. The alternative is to change the growth model in order to lighten the impact of higher levels of economic activity on natural resources and the environment.