I often write on this blog about the importance of economic growth. We have just learned that U.S. GDP growth is continuing to soar, increasing at 3.2% in the first quarter of 2019 (see chart). Growth is so important because it keeps the unemployment rate, now at 3.8%, very low, which in turn is responsible for creating better paying jobs. Ultimately it is better paying jobs for the American worker which will reduce inequality in American society.
But faster economic growth may cause problems of its own which need to be dealt with as separate issues. For example:
- Global warming. Although U.S. carbon emissions are dropping overall in line with the 2015 Paris Accord standards, they did rise in 2018 which was a year of faster (2.9%) GDP growth. This makes it all the more important to take the threat of global warming seriously. In fact, we should adopt the most economically sound and efficient way of doing this, namely a (refundable) carbon tax.
- Residential diversity. The New York Times has pointed out that suburban areas of many big cities are growing more diverse as minorities are more and more capable of affording houses in these areas. On the other hand, minorities are being displaced in poor inner city neighborhoods as middle class whites are able to pay higher prices for available houses and vacant lots. In other words, increasing prosperity is leading to more residential integration even though it happens differently in different parts of town. The economic progress and increasing diversity should be celebrated rather than constantly focusing on racial inequality.
- Two wage earner families are becoming more unequal. As two professional wage earner families want to have children, it is usually the wife who takes a leave of absence or goes part time, rather than the husband. Our vibrant economy puts a premium on the willingness to work long hours and it is more likely the man than the woman who is willing to do this. This is a small sacrifice for couples to have to make compared to the rewards of being part of a dynamic economy.
Summary. Americans are incredibly fortunate to live in a dynamic society with so many opportunities for advancement. There are costs to pay for such a satisfying environment but they are well worth it.