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IZA Tower Talk - Report
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Meinhard Miegel at IZA Tower Talk: Abandon the fixation on growth rates |
| Meinhard Miegel, Director of the Institute for Economics and Society (IWG Bonn) was the invited speaker at the IZA Tower Talk on April 26, 2006. His speech and the subsequent discussion with Hilmar Schneider, IZA Director of Labor Policy dealt with the question whether there are limits to economic growth and continued welfare gains in the Western industrialized countries. |
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Ever since the 1970s, the West has been preoccupied with achieving high growth rates – at the price of debt accumulation, Miegel argued. As a result, economic growth no longer increases our wealth, but only serves to maintain our “façade of prosperity” and secure the status quo in the best possible way. In addition, vast sums are needed to finance the treatment of modern illnesses, military operations, the fight against terrorism and drug trafficking, and the protection of property rights. At the same time, the cohesion of Western societies has been eroding, giving rise to such phenomena as child poverty.
Against this background, Miegel called for efforts to curb the ubiquitous waste of resources and abandon the fixation on continuous material gains. As “hundreds of millions” of people in such countries as China and India are beginning to catch up with the West in economic terms, this process will inevitably force the developed nations to give up “a noticeable share” of their wealth, Miegel anticipated. Given that the 200,000 new workers in emerging economies who enter the global labor market every day can easily compete with Western labor in terms of training and motivation, but are willing to work at a lower wage, the consequence will be a gradual convergence of worldwide income levels at a rate significantly below the excessive Western standard.
According to Miegel, the industrial nations have left behind a historically unique period of growth and entered an era of “new normality”. While people have not yet internalized this trend, everyone can feel the effects in the form of stagnating wages, falling pensions, and rising prices for natural resources. No wonder then, Miegel argued, that Germany’s “hypertrophic” welfare state, owing to its excessive expansion in the wake of favorable growth prospects in the 1960s and 70s, can no longer function under altered economic conditions. Miegel underscored the need for further economic policy and labor market reforms, but he warned that it would be an illusion to believe that these reforms could restore the old status quo. While the emerging market countries are still decades away from facing the same problems as the West, the aging and declining industrial societies must utilize their scarce resources more wisely lest they lose too much of their wealth. But this, Miegel said, would require fundamental changes in our notions and attitudes – as well as a move towards new, more immaterial social values. |
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