Growth makes you happy

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Growth for me is not accumulation, it’s not having 7 cell phones per person. It’s not having 5 cars, 2 swimming pools and 7 houses — that is not growth. Growth is a better life. If that means a more sustainable car, or a better house, or better education, or better hospitals-that is growth for me. It’s not accumulation.
People in 1950th in Europe, in the Soviet Union, in the US saw progress as a lot of activity, there are ships and cars everywhere, caws being transported-that was how we saw growth. Progress for everybody. In the mean time we’ve given up lots of this positive thinking about growth, it is now associated with pollution, exploitation, with child labor, with abuse of power, etc. I tried to show that people need growth to be able to progress. If you want to have more hospitals, better schools, more nature, etc., it needs to be paid for by something. And growth is what it takes for all that stuff.
The second thesis is that if you want to have growth, the best way to achieve it is to have competition. The government will not legislate economic growth, will not declare economic growth or create prosperity-that’s individuals doing that. In the US the government didn’t say, well, I want to ride a tender to somebody to invent a product which replaces a phone, a camera, a record player, a dictaphone and have an interesting name for that. No, it was a private sector which came on with iPhone and put Polaroid, Kodak and others out of business. The government can facilitate the process, but the prosperity, the growth-the private sector is doing that.
I can summarize my idea in three words: Optimism + Free Market = Progress. I talk to people and say: «Look, where we’re now. Look, where we were a hundred years ago, fifty years ago.» We’re richer than ever, we’re very prosperous, we know much more than 50-100 years ago. Why is this a case? It’s is not because the government legislated progress, or richness, or wealth. It’s because we became smarter, we did stuff, we invented, stuff, produced stuff. That’s why we progressed and for that you need free market as well as optimism. If you have free market, but nobody wants to undertake business, do stuff and compete with existent monopolists or cartels, nothing is going to happen. You need the both.
Let’s talk about free market. If you distilled it down to the essence, it is two individuals who voluntarily agree to engage a transaction. This is a free market for me. A lot of people associate it with the way the USA works or Europe works. It is not necessarily so: there is a lot of cases when free market doesn’t apply there. The free market is basically me making deal with somebody. I need a cab drive to the station, are you willing to do that in exchange for some money? If both of us agree and not forced to do a transaction. that’s a free market transaction. But the government often subsidize what it likes, what it thinks people should like: coal industry, steel industry, or, say classical music. For me subsidies are superstition, it is a way government says: I know better what is good for you then you do yourself. I don’t believe in that. Also government may limit the top price for some products or services, not allowing you to express their real value. I think that government shouldn’t intervene, shouldn’t hinder or force you to make certain choices.
One objection you always hear against the free market is that if you follow it, everything becomes the same, people in India will go to McDonald’s, people in Ukraine start wear H&M and Europeans will buy American cars and shoes. But who we are to say that people in India shouldn’t wear Nike and go to McDonald’s twice a week? Cultures change, cultures evolve. Also, in India (and in Ukraine) IKEA is not allowed to install itself. Because, If IKEA with it’s cheap furniture and an enormous amount of choice install itself in India, all those little furniture makers will go out of business. This might be a case, but the same time hundreds of millions of Indians and millions of Ukrainians are paying too much for their furniture for too small a range of products just to be able to protect the number of other businesses. That is a crucial point. Capitalism, free market have process which is called «creative distraction» which means all bad, unprofitable businesses, businesses with bad ideas go out of market and the new one takes over. That is competition. And the big thing is that if you prevent the distraction, you’ll never going to see the creation. If you prevent those little shops going bankrupt, you’ll never see new initiatives these people could have taken. That the crucial point-creative distruction.

05.01.2013
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