A Change of Plans: Rethinking Rapid Growth in a Finite World
JULY 2012 | View the Full Report (PDF)
Population growth was once a key indicator of economic prosperity. Many economists continue to hold this view even though evidence clearly demonstrates that in recent decades, population growth has been associated with lower per capita incomes and higher rates of unemployment and poverty. What may have proven true in the past is no longer valid. This paper shows that in the U.S., there is an inverse correlation between a rising population and measures of local economic vitality.
Many economists evaluate economic health by focusing on the overall size of the economy (measured by GDP) and the net number of jobs created, divorcing these figures from any other consideration. These economists fail to consider that raw growth does not measure quality of life or the dynamics of local economies. When new jobs are created in a locality, more people are drawn to that area to compete for those jobs, tending to offset gains in overall employment while straining infrastructure and the local tax base. Although the economic data rightfully report job growth and increased economic output, the conclusions drawn from these statistics are often misleading.
Making matters worse, elected officials often offer massive subsidies and tax breaks to corporations to relocate to their jurisdictions. U.S. cities and states spend more than 50 billion taxpayer dollars each year on such location subsidies. In addition to wasting valuable revenue and causing corresponding tax increases and service cuts, these incentives result in inefficiency, reduced economic output, and no reduction in overall unemployment. These subsidies do not create jobs, but redistribute them. Typical state and local “economic development” initiatives benefit a select few while resulting in lower incomes, greater tax burdens, and eroded public services for everyone else.
Americans have been conditioned to believe that economic growth is always an indicator of economic prosperity, and that communities must grow in size to maintain their vitality. Locally powerful special interests like the real estate and construction industries promote and reinforce this idea. They lobby intensely for pro-growth initiatives that funnel tax money into development projects that benefit only a small minority of well-connected elites. This paper demonstrates that growth in size is not an effective way to promote economic wellbeing, and that the policies cities use to promote growth harm the economy even further.
Population growth also comes with enormous social and environmental costs. The scale of resource use continues to increase, damaging the environment. In the long term, rising rates of resource use will degrade living standards and ultimately prove unsustainable. State and local governments should stop prioritizing “job creation” and start prioritizing the creation and continuation of policies that actually improve the quality of citizens’ lives. Increasing the overall size of the economy is less important than improving the quality of life. Economic development should improve the well-being of all citizens, and should not be a code word for growth policies that favor powerful special interests at the expense of the majority.
Most Americans oppose pro-growth initiatives, yet many feel powerless to prevent seemingly-inevitable overpopulation and urban sprawl. Citizens should demand that their representatives worry more about living standards and sustainable economics and stop accepting grand promises of a gilded future. Political leaders in America’s federal, state and local governments should come together to break the addiction to growth, and to stop the senseless interstate economic competition over more jobs and more people. Instead, they should pursue improved living standards and population stability.
- Local and state economic development programs tend to focus on “creating jobs,” but adding new jobs to an area is associated with a proportional increase in the population. As a result, adding jobs and more people to an area does not reduce unemployment in the long-term, and often increases unemployment in other areas when businesses relocate.
- Higher rates of population growth are not associated with economic prosperity. In fact, places with higher rates of growth tend to have lower per capita incomes, higher unemployment rates, higher poverty rates, and lower rates of productivity. One analysis found that from 2000 to 2009, a 1 percent increase in the population growth rate was associated with a $2,500 drop in per capita income.
- Places with higher rates of population growth were hit harder by the recession. Slow-growth cities actually saw per capita income rise during the recession, while fast-growing cities saw it decline 2.5 percent between 2007 and 2009. This is because fast-growing cities become overly dependent on boom-and-bust industries like construction and real estate, a development strategy that some economists have compared to a Ponzi scheme.
- The conventional wisdom that population growth is desirable is pushed by a powerful subset of special interests in industries like real estate, construction, and land development. These special interests are well-financed, and have a large incentive to lobby for growth. In a classic collective action problem, average citizens have a difficult time defending their communities against these well-financed elites.
- Population growth is a major driver of environmental damage and receives little attention from the mainstream environmental movement. Resource use is equally determined by the amount of resource use per capita and the size of the population. For example, water conservation has greatly improved over the past thirty years, but population growth has cancelled out these improvements and kept water use at the same unsustainable rate it reached in the 1980s.
- Population growth is a major concern to people throughout the United States and most Americans do not believe that growth results in an increased quality of life. Residents of small towns and slow-growing cities are just as satisfied with their communities as residents of large or fast-growing cities.
- Immigration is the primary driver of U.S. population growth. The 2010 Census found that 13.9 million foreign-born residents had arrived in the U.S, between since 2000 and 2010. The Pew Research Center has estimated that 82 percent of the population increase between 2005 and 2050 will be due to immigrants and their U.S.-born descendants.