The Magazine

Growing Pains

Can economic progress coexist with moral decline?

Aug 14, 2006, Vol. 11, No. 45 • By JOEL SCHWARTZ
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The Moral Consequences

of Economic Growth

by Benjamin M. Friedman

Knopf, 592 pp., $35

Benjamin Friedman is an eminent economist--arguably the world's second-most eminent economist named Friedman. A liberal Democrat, he is best known to general readers as the author of Day of Reckoning, a prize-winning 1988 critique of Reaganomics. In this new, highly ambitious book, Friedman attempts to make an original argument on behalf of economic expansion.

Belief in the desirability of increased wealth leads Friedman, like almost all economists, to favor economic growth. The novelty of his argument, though, is that he principally advocates it for moral reasons: "The familiar balancing of material positives against moral negatives when we discuss economic growth is . . . a false choice. . . . Economic growth bears moral benefits."

At the very beginning, Friedman makes it clear that he is not defending economic growth because it promotes the good behavior of individuals. Instead he explores how "economic growth--or stagnation--affects the moral character of a society." Economic growth yields a morally improved society, in that it "more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy."

Economic growth has this effect because we act more generously when we are gaining economically than when we are falling behind: "People in a growing economy will be willing to accept enhanced mobility," he writes, "and they are willing to accept measures like anti-discrimination laws, or special education programs for children from low-income families, designed to make social mobility greater." Conversely, "when an economy stag nates, . . . the resulting frustration gen erates intolerance, un generosity, and resistance to greater openness to individual opportunity."

Roughly half of the book consists of extended explorations in the economic history of America, Britain, France, and Germany, in which Friedman tests this hypothesis against the empirical evidence. Does economic growth promote openness, and economic stagnation intolerance? For the most part, yes, he maintains. To Friedman's credit, he is honest enough to acknowledge the evident counterexamples. To pick only the most obvious, the depression of the early 1930s in Weimar Germany, ushering in Hitler's rule, is consistent with Friedman's thesis: The depression of the 1930s in the United States, which ushered in Franklin Roosevelt's presidency, is not.

The book concludes with a chapter discussing ways in which public policy can spur American economic growth, thereby promoting the openness of American society. Friedman advocates measures designed to encourage saving and to reduce government borrowing. Developing themes from his earlier critique of Reaganomics, he focuses principally on seeking to reduce the deficit by "undoing much of the tax reduction that Congress has enacted since 2001." Such a change would not only make "a large contribution to addressing America's saving-investment problems," it would also do so in a way "that does not further skew the distribution of benefits toward the already advantaged."

Friedman's attempt to show how economic growth generates society's moral improvement is ultimately unsatisfactory, because his exclusive focus on social morality, as he defines it--and abstraction from considering the behavior of individuals--is untenable.

The limits to his approach become apparent when you consider his treatment of that much-discussed decade, the 1960s. Friedman portrays the '60s as a time of moral advance, facilitated by a prospering economy. He hails the decade's "movements toward openness, tolerance, mobility, fairness, democracy." In particular, he commends the '60s for the "active effort" that was made "to share the perceived prosperity with those who were being left behind"--i.e., for launching and conducting the War on Poverty.

To be sure, Friedman is not wholly wrong to praise the '60s, an era in which "blacks had rights, . . . individual citizens' freedoms were stronger, . . . women composed a large and growing share of the labor force, . . . immigrants were welcome, not just from northern and western Europe, and domestic prejudice against Americans other than white Protestants was in retreat."

Nevertheless, it is odd to present the '60s unequivocally as a time of moral advance. If, unlike Friedman, you look at the era from the standpoint of individual behavior, the '60s ushered in a host of worrisome trends. To mention only a few relevant statistics, the crime rate was more than twice as high in 1970 as it had been in 1960; the percentage of out-of-wedlock births was more than twice as high in 1970 as it had been in 1960; and the percentage of Americans receiving welfare was more than twice as high in 1970 as it had been in 1960.