Fertile Functioning, the Market, and Economic Growth
Relatively free and open markets have always accompanied liberal societies, and they have been most thoroughly suppressed by some of the most illiberal regimes. But the historical connection between liberal democracies and markets seems stronger than the theoretical connection, at least at first glance. Political liberalism builds in part upon the brute fact of deep, intractable disagreement among citizens about what society should look like. While my own vision of the good society is a thriving, cosmopolitan commercial republic aimed more or less explicitly at ever escalating economic prosperity, that vision is by no means universal, even among political liberals. In liberal democracies economic growth is often assumed to be a desirable and legitimate objective of policymakers, but is this not just a mere partisan preference?
Liberal socialism is a perfectly coherent concept: moderate socialist policies such as high taxes, government provision of education and healthcare, and worker ownership of significant segments of the economy are adopted for the sake of achieving the liberal aims of individual development and social peace. Liberal luminaries such John Stuart Mill and John Dewey advocated such regimes, and John Rawls thought liberal socialism was as legitimate as his preferred property-owning democracy. (Philosophers named John agree …) The liberal socialist desire to circumscribe markets may or may not be accompanied by a desire to constrain economic growth.
Certain environmentalists may affirm liberal principles but believe economic growth is fundamentally unsustainable given the damage done to the planet and to its various ecosystems. They thus insist that economic growth must be severely curtailed or even reversed. Likewise some religious reasoning regards economic growth as crass materialism that is damaging to the soul. Even if some of these perspectives aren’t fully liberal in that they seek to impose their standards on others without trying to appeal to broadly acceptable reasons, they are often “liberal enough.” Exponents of these views abide by democratic norms and are peaceful while out of power; there is no paradox of tolerating the intolerant. A liberal—and therefore diverse—society will have to contend with these and similar growth skeptics.
Given their relative controversy, do markets and economic growth have any claim to a privileged place in the liberal order? Like freedom of religion and speech, does the market institution, regulated at least in part so as to promote economic growth, deserve special priority among partisan perspectives and constitutional protection against antagonistic democratic majorities? In this essay I’ll defend the claim that such priority and protection are warranted on a pluralistic view of the human good (and the bad). Markets oriented toward growth are essential for fostering the conditions within which individuals can make lives for themselves. Effective access to growth-oriented market institutions qualifies as a fertile functioning, a kind of seed capability that tends to facilitate other valuable functionings.
Fertile functionings
The language of “functionings” is characteristic of the capabilities approach, a liberal theory that focuses on the individual’s effective ability to achieve the purposes that individual has reason to value. A “capability” refers to the ability to actualize a functioning, leaving open the possibility that an individual may with valid reason prefer to forego some functioning. The “effective” refers to capabilities within the person’s social context, and not just to formally enumerated rights; it refers to positive as well as negative freedom. It is a liberal theory in that the locus of value rests on the individual (rather than the group or gods) and the good is left to each individual to determine, within the limit of all individuals being accorded some critical level of human functioning. Capabilities liberalism is well-suited to accommodate socialist, feminist, and racial critiques as it allows ample room for social, economic, and political power in analyzing the effectiveness of capabilities.
Just as different worldviews offer different conceptions of the good, they also offer different ideas about the bad: What obstacles get in the way of living well? In Disadvantage, philosophers Avner de-Shalit and Jonathan Wolff develop a pluralistic theory of these obstacles, or disadvantages, beginning with common sense intuitions and adapting these in response to interviews with both social workers and individuals intuitively classified as disadvantaged. What they glean from the interplay of observation and theory is that disadvantages cluster, and some disadvantages are not only bad in themselves but tend to lead to other kinds of disadvantage. They call these corrosive disadvantages. An example of this is homelessness. Lacking shelter of course is its own kind of fundamental deficiency, but homelessness directly leads to other disadvantages. One cannot easily get a job or open a bank account without an address. Basic hygiene and access to utilities is made much more difficult. Homelessness is stigmatized, leading both to potential mental health problems and a frayed social network. And given vagrancy regulations, in many cases it’s difficult to live on the right side of the law as a homeless person.
The opposite of a corrosive disadvantage is a fertile functioning, some achieved functioning that facilitates the development of other important capabilities and functionings. An example used in the book is social affiliation. Affiliation—having friends and loved ones and being part of a community—has obvious intrinsic value. Many of our most important projects involve nurturing relationships with others, be they romantic partners, parents, children or lifelong friends, and we often define significant aspects of our identity as the communities we belong to. Being part of a social network also leads instrumentally to other advantages. It is a ready-made social safety net: in case of an emergency such as a sudden medical condition or loss of a job, home, or vehicle, one can turn to family for support, whether financial, moral—shoulders to cry on—or practical. Friends are often relied upon for smaller needs. The social safety net of affiliation is active as well as passive: a well-affiliated elderly person, for example, is more likely to be checked up on regularly by friends and family members. Affiliation can be a source of self-esteem. “[T]he disadvantaged who still feel affiliated take heart from feeling they are needed, respected, wanted, and from belonging itself.” [Disadvantage p139] Finally, a social network also presents opportunities, whether for work or diversion.
Economic growth as a Crusonia plant
The economist Tyler Cowen has likened economic growth to a “Crusonia plant,”
a mythical, automatically growing crop which creates more output each period. If you lay the seeds the plant just grows and you don’t have to water it or tend to it. Imagine for instance an apple tree, which each year yields some apples. The tree also produces apple seeds. The apple seeds germinate and there is a steady and indeed growing supply of new apples and also of new apple trees, albeit based on some sun and some rain. A Crusonia plant, measured in terms of its ability to produce apples, might grow five percent each year on net. At the same time, it looks like a modest apple tree, and it does not appear to resolve key ethical and political questions.
[…]
[I] see the Crusonia plant as an entry point for resolving aggregation problems. A Crusonia plant would be better than a plant which dies after one month and leaves no successors, even if this short-lived plant were quite lovely or brilliant. We could compare two plants in terms of various qualities, such as their color or their scent, but after a while the unceasing free yield of the Crusonia plant has to prove better. At some point the sheer accretion of value, from the ongoing growth of the Crusonia plant, dominates the comparison between the two plants. We thus have a principle of both ethics and prudence: when in doubt choose the Crusonia plant.
[…]
Economists cite the concept of gross domestic product (gdp) to refer to the total value of goods and services produced over some period of time, usually a year or a quarter. The rate of economic growth is then the rate at which gdp increases. As I will use the concept, maximizing the long run rate of economic growth refers to gross domestic product as it should be understood properly and not as it is currently measured by most governments. “Wealth Plus,” if I may use that term to refer to the accumulated gains from growth, accounts for leisure time, household production (valuable activities you do at home for free, whether mending socks or using Facebook), and environmental amenities, among other adjustments. Current gdp statistics have a bias towards what can be measured easily and relatively precisely, rather than focusing on what contributes to welfare. [Stubborn Attachments]*
The creation of wealth in some sense just is the creation of more possibilities for the same amount of labor and resources in society. With economic growth—hereafter referring to growth of Wealth Plus, however we wish to define it, and not economic growth as currently officially measured—individuals secure their basic functionings through less total labor and have additional resources and leisure to pursue projects and activities, both personal and social. Innovation, meanwhile, can expand even the kinds of projects we may pursue in addition to our ability to pursue them.
Cowen’s Wealth Plus is explicitly a kind of value pluralism, and is purposefully left incompletely defined. It can be rendered in the language of capabilities, where economic output is apportioned into constituent quality of life elements. An important feature of Cowen’s Crusonia plant—economic growth—is its incorporation of time, and especially long time horizons. We might surmise that institutions that foster economic growth may increase material inequality, but they could make the difference between achieving, say, Star Trek-level capabilities in a few hundred versus a few thousand years, with all the visceral differences this would make in the lives of countless thinking, feeling, and imagining human beings in the meantime.
But we mustn’t carry this too far. Wealth Plus rightly incorporates political, social, and environmental stability. Material and political inequality—in addition to the various ways in which they are either intrinsically unjust or derive from injustice—will always threaten to degrade the very political and economic institutions that encourage economic growth. One of the purposes of talking about Wealth Plus rather than GDP as currently measured is to deny “growth at all costs” market fundamentalism while still advocating for the ethical importance of sustained economic growth.
The dramatic expansion of human capabilities that accompanies economic growth suitably defined, especially over long time horizons, suggests a similarity with fertile functionings. But there are disanalogies. Growth is aggregate, whereas capabilities attach to the individual. The benefits of economic growth can skip over marginalized persons. Or worse, economic growth can be extracted from exploited labor. Even if slavery was not necessary to achieve modern economic growth, for example, it remains the case that slavery did contribute to modern economic growth. Exploitation—work or exchange where one party lacks agency—stifles the capabilities of the exploited victims even as it enhances the material position of the exploiters. Instead of aggregate growth, we should think of access to growth-oriented institutions as the valuable capability for individuals, and as a fertile functioning.
Access to growth-oriented institutions, like well-regulated labor and financial markets, must be effective. That is, merely living in a society with a growing economy doesn’t count as access if your own community is “under-banked” or deprived of entrepreneurial or career opportunities, as is the case in certain communities of color in the United States. Likewise, as with many capabilities, effective access means one has sufficient education and the socio-economic means to make use of such institutions.
Having effective access to high quality economic institutions is arguably a fertile functioning at the purely individual level, in that being able to build one’s own wealth provides security, independence, the psychological benefits of productive work, the direct means to achieving other important functionings with greater ease, as well as opportunities for affiliation and social interaction. Building one’s own wealth amid a prospering community and broader society, meanwhile, multiplies these effects. But from the perspective of the liberal policymaker, the real fertility of economic capability arises in securing such access broadly and sustainably, to achieve the Crusonia-like exponentiation of human capabilities.
These considerations do not invalidate the beliefs and practices of individuals and groups who criticize pervasive commerce and relentless economic growth and seek to limit their exposure to the same. But it is the nature of a diverse, liberal society that coordination on social rules must inevitably marginalize some conceptions of the good in case of conflict. The liberal institutions that foster economic growth—understood in the context of Wealth Plus and in light of the logic of fertile functionings—deserve their privileged place in liberal theory and practice.
*I read Stubborn Attachments on pdf and unfortunately cannot cite pages accurately.
Featured image is Eight Landscape and Flower Paintings, by Wang Xuehao.
