The Growth Delusion
Of dollars and sense
This a repost of an article that originally appeared on Tangentially Speaking with Chris Ryan (with very slight alterations). Reposting because of the video I recently encountered which is featured at the end. Also, I just learned that Richard Easterlin passed away yesterday.
In the late 1980s, a group of economists working for the World Bank noticed that a lot of the world's poorest countries set their poverty line at around $370 dollars per year. They realized that if you divided 370 by the number of days in a year it would equate to approximately a dollar a day. And thus the famous “dollar a day” poverty metric was born1.
It's important to note that we aren't talking about U.S. dollars here. It's not showing up on a plane and giving people a U.S. dollar, which typically buys a lot more than the local currency. Instead, this “dollar” is adjusted according to what economists call “purchasing power parity” (or PPP) which is the equivalent of how much actual stuff you can buy in the local currency—sort of like an “imaginary dollar” (economists refer to them as 1990 international dollars).
The people who invented this metric later admitted that it was expressly designed to be catchy rather than on any sort of objective criteria (it has since been raised several times, making it somewhat less catchy). This is something that's rarely mentioned when this statistic is trotted out in articles about global poverty reduction.2
In an attempt to appear more “rigorous” and “scientific,” academic historians have adopted these same metrics to describe societies in the distant past. They talk about things like how many dollars a day ancient Greeks and Romans lived on, or how much purchasing power cavemen in the Pleistocene had (about $1.10 per day according to historian Ian Morris).
As Berkeley professor J. Bradford DeLong puts it: “Our standard of living back then? If we had to slot it into emerging-markets standards of living in the world today, then for typical people—not the élite—we might call it $2.50 a day.”3 Our World in Data proclaims that, “In 1820, only a small elite enjoyed higher standards of living, while the vast majority of people lived in conditions that we call extreme poverty today.”4
Oh dear! Imagine the misery of those ancient people, living on only $2.50 per day. How miserable their lives must have been!
Flintstonization
The obvious problem here is that most ancient people by-and-large lived in nonmonetized economies. That is, their societies were constituted on fundamentally different principles than the market-dominated societies we live in today. For the most part, people met their daily needs through different means than showing up at a job, working for (at least) eight hours a day and buying everything they needed—from food, to clothing, to shelter, to medicine—from anonymous sellers in the market who withheld those things the minute you weren't able to pay. That's generally not how most people lived in the past.
Instead, people lived in different arrangements. This could be forager societies with gift economies and open-handed generosity. It could be tribal societies which redistributed wealth among all its members and property was owned by clans rather than individuals. Or it could be societies where people lived in small-scale households which were largely self-sufficient. The economic historian Karl Polanyi described these as “reciprocity, redistribution and householding,” and argued that these systems were prior to, and existed alongside, markets and monetary exchange throughout history. It was only in Northwestern Europe, he said, where markets displaced every other type of economic arrangement by enclosing the commons and turning everything—including land and labor—into commodities for sale.5
Economists counter that they have accounted for all of this in their statistics. But is that really possible given the sheer variety and diversity of human societies across time and space? Can we accurately put a price on all aspects of ancient people's lived experience? In The Dawn of Everything, David Graeber and David Wengrow express skepticism, writing:
...if we're comparing this [$1.10] to daily incomes today, wouldn't we also have to factor in all the other things Paleolithic foragers got for free, but which we ourselves would be expected to pay for: free security, free dispute resolution, free primary education, free care of the elderly, free medicine, not to mention entertainment costs, music, storytelling and religious services? Even when it comes to food, we must consider quality: after all, we're talking about 100 percent organic, free-range produce here, washed down with the purest natural spring water.
Much contemporary income goes toward mortgages and rents. But consider the camping fees for prime Paleolithic locations along the Dordogne or the Vézère, not to mention the high-end evening classes in naturalistic rock painting and ivory carving--and all those fur coats. Surely all of this must cost wildly in excess of $1.10 a day.6
In other words, attempting to project modern economic metrics back onto the past fails to account for many of the qualitative aspects of life in nonmonetized economies. To be clear, I'm not against quantification. I am arguing, however, that using this data to assert that everyone, everywhere, was miserable for all of human existence before the last hundred years or so is a gross misuse of the data, yet one that is widespread. It’s a classic Flinstonization of history.
The ‘Tall-but-Poor’ Anomaly
Peter Turchin is a zoologist who has turned to studying historical cycles. One of the metrics he uses is biological data, which he argues is a much more accurate indicator for standards of living than cash income.
Turchin notes that in artistic depictions of Europeans meeting Native Americans, the Native Americans were always depicted as being at least a head taller than the Europeans. In fact, we have data from the “Father of American anthropology,” Franz Boas, which confirms this. What the data show is that the Native Americans were far healthier than their European counterparts, despite supposedly living supposedly in “poorer” societies. Of this fact, Turchin writes (my emphasis):
One of the founders of anthropometrics, John Komlos, refers to the observation that the Plains Indians were the tallest in the world in the nineteenth century as the “Tall-but-Poor Anomaly.”
But there is no anomaly here. It just shows that GDP per capita is a very poor measure of well-being. For example, between 1850 and 1890 GDP per capita, in inflation-adjusted dollars, increased by 130 percent, but the height of Americans fell by 2 cm. It’s not that Americans were becoming shorter as they were becoming richer. It was the top 1 percent who were becoming richer, while the 99 percent were becoming shorter.
So the Indians were nominally poor, but they lived in a way that only rich people can afford today. They exercised (riding them horses was a pretty good exercise!), ate grass-fed bison, supplemented by roots and berries (that’s paleo diet!), breathed fresh air, and drank uncontaminated water. Today this kind of living is only within the reach of the very wealthy...7
Echoing Graeber and Wengrow, Turchin uses the example of modern-day celebrities as the kind of people who can still afford to live like this today—with abundant leisure time, grass-fed bison meat, clean unpolluted water, and rigorous daily exercise. He also notes that, despite the their economies growing rapidly during the Early Modern period, Europeans were simultaneously becoming both shorter and sicker. By contrast, Native American “economies” weren't growing at all in modern terms (i.e. economic stagnation) but the people living in them were far healthier.
But surely living on less than $2.50 a day must have made people pretty miserable, right? Well, that doesn't seem to be the case, either. As Sebastian Junger describes in his book Tribe, and Christopher Ryan documents at length in Civilized to Death, Europeans very frequently went off to live among the Native American peoples—so much so that it was considered a major problem for early settlers. Why would people voluntarily choose to move from a highly sophisticated and complex (for that time) free market economy to a supposedly “primitive” and “impoverished” one?
The French farmer Hector St. Jean de Crevecoeur wrote about Europeans who were captured in raids and married Native women. When they got the opportunity to return to European society, he noted that all of them refused. Not only that, but Native people—even those exposed to the “riches” of European society—often chose to return to their ancestral tribal communities:
“…thousands of Europeans are Indians, and we have no examples of even one of those Aborigines having from choice become Europeans!…take a young Indian lad, give him the best education you possibly can, load him with your bounty, with presents, nay with riches; yet he will secretly long for his native woods, which you would imagine he must have long since forgot; and on the first opportunity he can possibly find, you will see him voluntarily leave behind him all you have given him, and return with inexpressible joy to lie on the mats of his fathers…”8
By all accounts, European settlers would have been living on many more dollars per day than the tribal peoples they encountered. Yet, despite this, clearly a lot of people preferred to live in “poorer” (at least in an economic sense) communities by choice.
These epidemiological findings hold even for more modern times. In the United States, there is phenomenon known as the Hispanic Paradox. The “paradox” is the fact that Hispanics/Latinos in the United States experience better health outcomes and longer lives than their non-Hispanic counterparts, despite having on average less education and lower socioeconomic status and experiencing more risk factors like obesity and diabetes. This is attributed to sociocultural factors such as extended families and multigenerational households and less social isolation.9
Similar outcomes were discovered as far back as the 1960s in what was dubbed the “Roseto effect.” Researchers found that first-generation Italian immigrants who lived in close-knit communities like Roseto, Pennsylvania had reduced rates of heart disease, hypertension and strokes compared to their neighbors in surrounding communities, as well as their more affluent descendants who moved away. This was attributed to their strong social relationships, equality, and lack of stress. According to researchers, “The [Roseto] community was very cohesive. There was no keeping up with the Joneses. Houses were very close together, and everyone lived more or less alike.”10
So what can modern-day econometrics divorced from any context tell us about what life was actually like for people in the distant past? My answer is: not much. In fact, the size of an economy and the number of economic transactions are often orthogonal to its quality of life.
Money and Happiness
The World Happiness Report comes out every year and rates people's overall satisfaction with their lives rather than how rich they are or the size of their economy. Finland typically ranks as the world's happiest country, followed by the rest of the Nordic countries, and then pretty much everyone else.
The report so far has only looked at nation-states. But what if we were to apply the same criteria to isolated and traditional indigenous communities around the world where money isn’t necessary for survival and people meet their needs directly from nature rather than markets? In other words, societies more like the ones our remote ancestors lived in?
Remarkably, no one thought to do this until recently. A study by the Institute of Environmental Science and Technology of the Universitat Autònoma de Barcelona (ICTA-UAB) surveyed people in indigenous and local communities around the world and found that, on average they were as happy—if not happier—as the average person in high-income Western nations.
The study…found that people in the 19 isolated communities reported an average “life satisfaction score” of 6.8 out of 10…roughly the same as the 6.7 average life satisfaction score for all countries in the Organisation for Economic Co-operation and Development (OECD).11
Remarkably, four of the societies surveyed scored even higher than Finland—the happiest country in the Global Happiness Report! The article notes that one of those communities—the Western Highlands of New Guinea—has a mean average of per capita assets of $560 compared with a mean average per capita in the United States at $551,347 (and $179,986 in Finland).12
The report notes that most of the surveyed households had incomes of less that $1000 per person and only 64 percent of them had any cash income at all.13 As the lead author of the study concluded: “The strong correlation frequently observed between income and life satisfaction is not universal and proves that wealth—as generated by industrialised economies—is not fundamentally required for humans to lead happy lives.”
A non-profit called Sapien Labs has published a “Mental State of the World Report” every year for the last four years. The report includes data from 400,000 respondents in 13 languages across 71 countries.14 Among the results are that Anglo-Saxon countries have the lowest overall mental health quotient (MHQ), and Latin American and European countries the highest. It also found that mental health is deteriorating in general, especially among younger generations, and that less developed countries report higher overall levels of mental well-being indicating an almost negative correlation with standard measures of national wealth. The 2021 report states (my emphasis):
Surprisingly, MHQ scores of countries were significantly negatively correlated with cultural indicators such as Performance Orientation and Individualism as well as economic indicators such as GDP and GNI per capita. This stands in stark contradiction to the belief that economic growth enhances societal wellbeing. Thus we are left to ponder the following: That perhaps a system that relentlessly sorts us into performers and non-performers in the singular service of economic growth is not the path to human wellbeing…15
So not only is monetary income and GDP a poor indicator of how healthy people are, it also seems to be a poor indicator of how happy they are, too. I’m beginning to wonder what it’s really measuring at all.
The dubious connection between economic growth and happiness has been known since 1974 and is known as the Easterlin Paradox after Richard Easterlin, the economist who first described it. Easterlin noted that the biggest differences in happiness was within countries rather than between them, despite vast gulfs in wealth between the world's richest and poorest countries. Happiness and GDP do not correlate, at least not very well. Furthermore, even in the richest countries, life satisfaction tends to plateau after a certain level of economic development is reached, and sometimes even declines with further growth (as seen in the United States).
The World Bank touts a reduction in global poverty due to economic growth, but when you dig into the statistics, the big reduction in poverty between 1990 and 2015 was mostly due to China (from 750 million to 10 million).16 However, during that same 20-year time period, there was essentially no change in China’s life satisfaction! Furthermore, it has also been found that people living in rural villages in China are generally more satisfied with their lives than city dwellers in an echo of the Roseto effect.17
But should we really be that surprised? After all, we have literally hundreds of happiness research studies by now which confirm what makes people genuinely happy, and it’s never things like working longer hours, increasing purchasing power, shopping, scrolling on smartphones, getting a promotion, commuting, or accumulating more stuff. Instead, it's usually things like:
Maintain close personal relationships with family and friends.
Spend more time outdoors.
Get plenty of physical exercise.
Eat nourishing food and maintain a healthy weight.
Avoid addiction and overindulgence.
Do work that you enjoy.
Express gratitude.
Get plenty of sleep
Keep your stress levels low.
And while we can’t hop into a time machine and give happiness surveys to ancient peoples, it seems reasonable to conclude that, on average, there were probably happier than we are given that their lives were more closely aligned with what mountains of psychological evidence has shown makes us happy and satisfied with life: close personal relationships, physical exercise, closeness to nature, and abundant leisure time, despite their dearth of purchasing power and creature comforts. This makes sense—obviously what makes us happy would conform with the environment we evolved in, just as it would for any biological creature.
This is consistent with what anthropologists working in traditional communities have long observed. Daniel Everett—the former missionary turned linguist—was astonished at how happy the Pirahã people he lived among were. Indeed, they have been called “the happiest people on earth,”18 despite living in what are essentially “Stone Age” conditions (and on probably even less than a dollar a day).
The reason Finland consistently tops the national happiness surveys is attributed to a strong sense of community, generous social safety net, egalitarianism, and overall feeling of solidarity—in other words, all the things that “traditional” societies had in abundance but which modern societies strip away in their pursuit of endless growth and efficiency at all costs. As one academic speculated about Finland's high ranking:
Finns derive satisfaction from leading sustainable lives and perceive financial success as being able to identify and meet basic needs, Arto O. Salonen, a professor at the University of Eastern Finland who has researched well-being in Finnish society, explained. “In other words,” he wrote in an email, “when you know what is enough, you are happy.”19
If we evolved on less than $2.00 a day (or whatever) for most of our evolutionary history, then do we really believe that everyone on earth before the invention of video games and smartphones walked around sad and miserable their entire lives? Well, according to mainstream economists and most people on the internet, in any case, the answer is clearly, “yes.”
Obviously, this is contingent on the circumstances. People living through the Black Death, the Great Famine, or the Thirty Years War were no doubt pretty miserable, as are modern-day people enduring disease, starvation and war. Yet our modern societies—full of sick, lonely, anxious, isolated, overworked and stressed-out people—seems increasingly like it’s going in the wrong direction, and it’s unlikely that further growth will solve these problems, many of which have been caused by unchecked economic growth in the first place.
The Zen road to affluence
In recent years there's been a proliferation of articles describing how much money it supposedly takes to be happy in the United States. Several years ago viral headlines put the figure at about $60-90,000 U.S. dollars. Since then, it’s only gone up, and is now well over six figures20. Not only that, but the correlation between money and happiness is increasing. As The Conversation puts it, “Money buys even more happiness than it used to.”21
How is it that people in wealthy societies need to make literally hundreds of times what people make in indigenous communities just to have the exact same level (or less) of life satisfaction? Could it be that the only reason money buys happiness is because you now need money to get the things that pre-modern societies offered all of their members for free?
In other words, money doesn't buy happiness; it allows you to live more like indigenous people—secure in the knowledge that you will be taken care of, with plenty of time to spend with friends and family and the freedom to not do work you would rather not do. You know, the same things that literally hundreds of psychological studies by now have shown to actually increase people's happiness and well-being! As Turchin noted above, only celebrities (and other well-off people) can afford this kind of lifestyle today. In our modern, pay-to-play society, we need to buy all those things back—health, leisure, relationships, security—for a price. This is summed up succinctly by blogger Ran Prieur: “Money only buys happiness after the ability to be happy without money has been destroyed.”
So the notion that the lack of purchasing power in previous societies meant that everyone was living in constant, unmitigated misery, or that “poverty is the natural state of man,” are highly dubious. I’ve always suspected a political agenda behind it. That narrative is necessary to portray free markets and trade as “rescuing” people in the Global South from their lot by herding them into mines, factories and sweatshops to produce cheap goods for Western consumers.
In fact, as Marshall Sahlins pointed out long ago in The Original Affluent Society, it is abundance which is the natural state of man, and poverty which is the artificial creation. The necessity of money to purchase a modicum of health, security, happiness, and life satisfaction is byproduct of the highly monetized capitalist economies we live in today and not some basic, fundamental feature of the human condition. And it is only under these circumstances where economic growth as we know it is absolutely necessary for human flourishing. After all, if an economy—any economy—is not designed to increase human happiness and well-being, then what the hell is it for??? Making abstract numbers in a database go up forever? As Sahlins wrote:
For there are two possible courses to affluence. Wants may be “easily satisfied” either by producing much or desiring little. The familiar conception…makes assumptions peculiarly appropriate to market economies: that man's wants are great, not to say infinite, whereas his means are limited, although improvable: thus, the gap between means and ends can be narrowed by industrial productivity, at least to the point that “urgent goods” become plentiful.
But there is also a Zen road to affluence, departing from premises somewhat different from our own: that human material wants are finite and few, and technical means unchanging but on the whole adequate. Adopting the Zen strategy, a people can enjoy an unparalleled material plenty with a low standard of living.22
According to the data presented above, clearly this “Zen road to affluence” seems to be a far more effective and sustainable strategy than the conventional growth-at-all-costs model, not to mention fundamentally necessary on a planet with finite resources which is already facing multiple, existential environmental catastrophes.
So perhaps those Pleistocene cavemen living on a few dollars a day weren't so miserable after all.
Jason Hickel discusses the shenanigans with this number here: https://www.jasonhickel.org/blog/2021/3/28/extreme-poverty-isnt-natural-it-is-created
Karl Polanyi, The Great Transformation.
David Graeber & David Wengrow; The Dawn of Everything, p. 527
https://peterturchin.com/the-tall-but-poor-anomaly/. See also: https://www.sciencedaily.com/releases/2001/05/010529071125.htm. Grass-fed bison meat alone costs north of $10.00 a pound where I live, which makes me wonder how they come up with a figure of less than $2.50 a day for these people.
For reference, Angus Maddison calculated that Western European GDP per capita increased from $798 to $1032 between 1500 and 1700. Adult stature was much the same in 1400 as in 1700. Ian Morris, The Measure of Civilization, p. 48
https://mentalstateoftheworld.report/msw-2021/. The report blames lower scores on 1.) access to smartphones 2.) ultraprocesed foods, and 3.) the breakdown of social relationships. Consider how much the first two (and arguably the third) contribute to GDP.
https://think.iafor.org/chinas-paradox-of-wealth-and-happiness/. And, in fact, increasing job competition, unaffordable housing and long work hours (among other things) are causing increasing dissatisfaction among younger Chinese citizens leading to popular movements like “Lying Flat,” and “Let it Rot.”
The Finnish Secret to Happiness? Knowing When You Have Enough https://www.nytimes.com/2023/04/01/world/europe/finland-happiness-optimism.html
Marshall Sahlins, Stone Age Economics, p. 1-2