Busting popular myths of economic growth

   Debra Efroymson 

By Malik Gunatilleke

Tackling some of the major myths pertaining to modern day economics, Debra Efroymson, Regional Director of Health Bridge, a Canadian public health NGO, launched her latest book – Beyond Apologies: Defining and Achieving an Economics of Wellbeing.

In her book, she deals with 13 of the most popular economic questions including the importance of economic growth and whether GDP really says anything meaningful about public wellbeing.

Efroymson is also an advisor to Work for a Better Bangladesh and the Institute of Wellbeing (Bangladesh) and has a long history with Sri Lanka.

She first came to Sri Lanka in 2007 to work with the National Authority for Tobacco and Alcohol on their tobacco control work. Having frequently visited the country thereafter, she claims that she fell in love with the island and later retreated to Sri Lanka for about two years to complete her book.

In an exclusive interview with the Daily FT, Efroymson spoke in detail about the damaging effects of current economic growth models as well as its effects on corporations, the middle class and the poor. Highlighting some of the key arguments in her book, she stressed the importance of people rigorously questioning the information given to them by the media and governments who often peddle corporate interests that in turn stoke the flames of poverty and environmental degradation.

Following are excerpts:

Q: Could you tell us about the book you are launching?

A: My background is in public health. I’ve worked on different public health, environmental and urban planning issues. When working on these issues we repeatedly have to apologise for possibly slowing economic growth. When tackling some of these issues we have to say: let’s stop looking at the GDP and look for a moment at preserving health or maybe the environment. We are very humble about it. I thought this was wrong. Presumably what people should value most in life should be health and wellbeing. We’re the ones trying to preserve that and therefore we should be trying to speak more strongly. I also realised when the economic questions come up, we don’t know how to answer them; ‘we’ meaning my colleagues and different NGOs. So I thought maybe I should do some research and learn about some of these issues.

It partly started after I saw an interview with Marilyn Waring, a New Zealand MP and economist, and read her book – If Women Counted. That opened up my eyes to a lot of economic issues.

I’ve been living in Asia for over 20 years. I’ve lived in Latin America and have also travelled to many countries including some in Africa. What I saw and what was being reported by the media did not seem to mesh. The solutions we were supposed to pursue were never going to get us to where we wanted to be. That is why I decided to write the book.

The book is more about Asia but it is about economic ideas in general. So I go through 13 myths about economics. For example, one of them is that GDP tells us something important about how the country is doing. My examples are mostly from Asia but overall it is indented to give an overall understanding of economic issues and particularly what we tend to hear in economic classes or in the media. Everyone thinks that this is how it is supposed to be but when you look closely, it stops making sense.

Q: Poverty is a pertinent subject in the South Asian region but governments tend to get hung up on economic growth with the idea that issues such as poverty would thereby be ironed out. This is obviously not the case. What do you think governments in this region should focus their attention on in order to achieve meaningful growth?

A: People assume that if they have economic growth, poverty will go away. It is a nice idea; it sounds good. So we’ll encourage new businesses, we’ll have more jobs, everyone will get a job, they’ll be able to work their way out of poverty. I understand the attraction to that idea. Unfortunately, when we look at the reality, it doesn’t work.

I grew up in the US. It is one of the richest countries in the world but we have an extremely large problem with poverty. We have growing homelessness, our middle class is starting to disappear, we have hunger, a large portion of our population is in jail; we have all the major problems that the poorer countries have, basically. Our infant mortality rate is high, maybe even higher than Sri Lanka. It is a little embarrassing considering the resources at our disposal. Our life expectancy is the same as Cuba’s but our GDP is 30 times higher than Cuba. It’s clear that a) economic growth alone doesn’t alleviate poverty and b) there are shortcuts. You can achieve the goals of better wellbeing without having to grow the economy so much. One problem with focusing on economic growth too much is that you get more billionaires, fuelling inequality and with that you lose democracy because you have some very wealthy, powerful people who have way too much power. So you can see how Donald Trump can ‘trump’ the media in the US because he owns so much of the media. We hear a lot about Trump but it’s not because he has anything intelligent to say obviously but it is because he has so much power and that’s wrong.

Another problem with the economic growth model is seeing through GDP. GDP is basically production; it doesn’t matter what is produced or who it is produced for. You can have increasing GDP with more tobacco, alcohol, weapons and prisons but the population isn’t doing better though the GDP is going up.

Q: Do you think the capitalist system is inherently flawed or do you think that the solutions to these issues can be found within that structure?

A: It depends on what you really mean when you say capitalist. I am not anti business. I’m a very strong believer in small, independent businesses. An individual can be a capitalist. I have an idea, I want to be an entrepreneur, create jobs – that’s great. But if you’re talking about an unbridled capitalism where you believe – and I heard this recently from a government official – that the private sector is always more efficient than the government sector and that we should hand everything over to the private sector and let it control what happens, that’s a big problem. That form of capitalism is extremely destructive and it is not going to improve things. Some people will get extremely rich but there will be a negative impact on the poor and middle classes as well as the environment.

Q: Would you say that this mentality has resulted in governments abdicating in the form of privatisation?

A: It’s funny because the same officials who are saying that the government sector is more efficient come from private sector backgrounds. So while they’re working for corporations, they are very hard workers but as soon as they move into government, they are no longer able to do anything positive. 

The idea is that government somehow drags them down and businesses somehow support them. This belief is however not supported by facts. Just look at the subsidies that corporations manage to get from governments. If corporations are so efficient, why are they receiving subsidies from their inefficient governments?

You can have governments that work towards public interest. The reason it’s far easier to attain that than a private corporation that does the same is because private companies are motivated by making money. Governments don’t have that incentive. When governments are corrupt, when you don’t have enough public oversight, when they become too entrenched in bureaucracy, you have problems. The solution is not to burn the whole house down but to have various policies to improve transparency and involvement from general public.

Q: Do you think that governments feel like its social responsibility restricts them from running certain sectors efficiently?

A: It’s a little sad if that’s the case because the role of government should be to improve the situation of the population. Part of the reason we need government is to ensure worker’s rights, ensure that companies don’t destroy the environment and ensure people have access to education and healthcare; there’s no reason that any business will ensure the rights of the poor or be concerned about the environment. So the role of government is to work in the interest of the people. It may hold them back in terms of operating as a company would but that’s a good thing. We have to have someone working in the interest of the public.

I have to say I’m a bit shocked because the whole idea of government being the problem began in the 1980s with Thatcher and Reagan and now you see people in Sri Lanka repeating it. We’ve been through that and we’ve learnt a lot since then. Look at Greece right now with these austerity programs. It’s very clear what happens when you listen to the IMF, when you follow these neo-liberal political economic ideas. Sri Lanka has a strong past in terms of its education system and healthcare; it’s a pity if you lose that chasing a dream that is only going to benefit the very wealthy while harming everybody else.

Q: What should a country like Sri Lanka look at in order to bring about meaningful growth?

A: Firstly, you need to get over the idea that subsidising businesses is going to benefit the population. When you subsidise businesses, you benefit the businesses. 

The businesses that get subsidies seem to also be the ones that have the power to lobby. It’s not helping the population. If you want to support small local businesses, that’s great. I can’t help but notice the lack of vendors in Colombo.

The main thing is investing directly in the people, so healthcare and education. You can improve people’s income on average and if the middle class gets more money, they’re going to buy a car. As they buy more cars, they get to sit in traffic longer. It’s not helping the quality of life. If you improve public transit and you improve the education system so that people don’t have to pay for tutors for their children, you would greatly benefit the lower and the middle classes. Those are some of the areas I would focus on.

I would look at the countries with greater equality, such as the Scandinavian region, and look at their budgets to see how they’re allocating their resources.

Q: What about the sentiment that public handouts create a dependent society?

A: If you look at dependent societies you have to look at the big corporations that are also dependent on the government for subsidies. So the idea that it is only the poor that are taking handouts is pure nonsense. If you want to cut people off you have to start with cutting off the people who are getting much bigger subsidies. You can say that a man is lazy and doesn’t want to work and should suffer for it but the question really is – is it fair to punish his entire family for his unwillingness to work? Part of my problem is that you are allowing people to live in subhuman conditions based on some idea that they are not willing to work. 

The idea of a humane society is that we do not accept subhuman conditions of existence for any member of our society. If we truly believe in that, then we have to have provisions to help the poor.

In the US, the Republicans say that people stay on welfare for generations and they love welfare, which is utter nonsense. Most people don’t stay for longer than three years because staying on it is truly awful. 

They are badly treated, they get very little money and it’s miserable. Most people use it as a bridge to get over difficult times; maybe their children are sick or they don’t have a job at that moment. But to allow people to live in inhuman conditions because of the belief that otherwise it will encourage laziness is utter nonsense. Again we use desperation and poverty as the motivation for the poor while for the rich the motivation is earning even more money.

Q: In Sri Lanka there has been much debate about the poverty line and statistics pertaining to the cost of living. Do you think that the manner in which governments and officials spin economic statistics and numbers help legitimise the way they operate?

A: It’s a common practice with governments to play with the numbers. The US for example keeps unemployment low by taking off the people who are chronically unemployed from the unemployment list. So the percentage of unemployment in the US is not the people who are unemployed but the people who were looking for jobs recently. So people who’ve given up looking for jobs are not on the list.

There are many ways to look at poverty. Are you eating all three meals a day? Are your children in school? One thing I object to, and I’ve gone into it in my book, is the idea that the poverty line is $1.25 a day. It is a nonsensical measure. Poverty is not merely about consumption, it is also about a stronger community and protection from violence. If we have a more comprehensive definition of freedom of poverty then we can achieve it with a lot less damage to the environment and creating a lot more happiness than simply ‘can I buy more?’ which is the capitalist approach.

Q: What sort of role do you think the private sector does play in terms of growth?

A: The private sector encompasses a very large group. My main issues are with transnational corporations. Coca Cola for example, apart from the recent issues they had with polluting the water, are selling a product that has been linked with causing diabetes, so they are directly causing harm; it is the same with the Ceylon Tobacco Company. If you are selling a product that is harmful to the country, it is creating poverty; if the product is causing harm to the environment, it is creating poverty.

If you look at the private sector as small local independent businesses, that’s great. We need that and they are definitely part of the solution.

I see no problem with governments contracting certain services to the private sector as long as the government retains control. It’s when the privatisation takes place and the government relinquishes control that we have problems.

Q: In terms of multinational corporations, how do governments go about policing them?

A: That’s a hard one. The problem with multinational corporations is that they are often more powerful than any individual government. When I was in Sri Lanka helping with tobacco control, our major struggle was that the tobacco companies essentially have more power than the government itself. That’s where you need to have international cooperation. Most of these corporations have no physical base and in order to force them to pay taxes the cooperation of different countries is needed. That’s where Sri Lanka needs to be part of global treaties.

Q: When speaking about ‘prosperity’, do you think there needs to be a redefining of the term?

A: Absolutely. Part of our problem is that we take things for granted; we hear things in the media and we swallow it without thinking about it. It’s only when we stop to think that we realise that it doesn’t make any sense. I was in Austria recently, where they’re certainly better off than the people in Sri Lanka but they don’t feel that they are wealthy. What is our goal and what do we mean by prosperity? Even without the problems in Western Europe, when you look at the impact on the environment with that level of consumption, it’s simply not sustainable. 

If we just try to replicate the lifestyles of some of these countries, we are going to need six or seven planets to live on. So how do we achieve something that is sustainable within the limits of our natural resources but also achieves wellbeing? Because you can consume more and more and still be unhappy. Basically, people compare themselves to their neighbours. If I have more than my neighbour, I’m happy but you obviously can’t have everybody richer than everybody else. If you define prosperity in a way that is good for the environment and that actually brings about more happiness, it would obviously make more sense.

Q: Should personal prosperity be conducive to collective prosperity?

A: Yes. You have to look at what wealth really means. You can feel wealthier because you have time; time for your family, for your own interests, you’re not constantly running around to make money. 

There’s prosperity in having a community where people know each other and look out for each other. If my child is sick and I have to go to work, I can leave my child with my neighbour and know that the child will be well taken care of. I’m not worried about someone breaking into my home because I know my neighbours are looking out for me.

If we look at what people truly value, we think that people value having a nice car, having a house and having better clothes, but it’s really knowing that their children are doing fine, it’s having connections with other people and some time to relax – all that we can achieve without having to have a lot of consumption.

I would encourage people to question what they hear. People need to learn to question and think logically. Is economic growth really going to get us to where we want to be and if so why does America have so much poverty? If large businesses own the media should I believe what the media tells me? If people learn to question, then we’ll have an easier time getting to where we are all better off.