IN HIS 2006 book, “The Moral Consequences of Economic Growth”, Benjamin Friedman, an economics professor at Harvard, argued that steady economic growth “fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy”. But the flip-side is that when a nation’s economy stagnates, its citizens aren’t quite so nice. In a new interview in International Economy, Mr Friedman dwells on the dark side of his thesis:
[T]he argument was and is that when the bulk of the population loses its sense of forward progress in its material living conditions and loses too the sense of confidence or optimism that that forward progress will be restored any time soon, countries all too often not only make no forward progress but enter periods of rigidity and retrenchment, and all sorts of unfortunate things happen.
In his book, Mr Friedman argues that we track our progress through two kinds of social comparison. We compare how well we are doing economically compared to our parents at the same age, and compared to ourselves some years ago. Are we doing well relative to the past? We also compare ourselves with our neighbours and fellow citizens. Are we doing well according to those we consider our peers? Mr Friedman suggests that these two forms of comparison are partial substitutes. As long as we take ourselves to be doing well relative to our parents and our younger selves, we’re less inclined to check how we are doing relative to the Joneses, and will not feel threatened by the upward mobility of those below us.
But if we feel that we’re stalled relative to where we were in our past, we become protective of our relative position in the broader distribution of wealth, and may become disposed to consolidate our advantages and cut off opportunities for others.
