THE EFFECT OF ECONOMIC GROWTH ON SOCIAL STRUCTURES

If economic growth actually resembled the 'extended reproduction' coined by Marx and implicit in the steady state regimes of many contemporary growth models, one would not expect growth to have major social consequences. All economic magnitudes, including the standards of living of individuals or social groups, would be kept in the same proportion to each other so that only the scale of the economy would be changing over time. Of course, economic growth is something more than a mere uniform change of scale of economic magnitudes. For a host of reasons, it is in the very nature of growth to modify economic structures and, because of this, to affect social structures and social relations. For instance, growth may modify the sectoral structure of an economy leading firms in one sector to close down and firms in other sectors to be created or expand. Growth modifies the structure of prices, thus affecting the standard of living of households in a way that depends on their consumption preferences. In other cases, growth will call on some particular skills, increasing the remuneration of those endowed with those skills and also, possibly, their decision-making power within society. Finally, growth may reduce the availability of public goods like clean air or water, requiring public intervention in order to maintain the adequate supply of environmental goods. In all these cases, it is not only the economic structure - i.e., the relative importance of sectors, labor skills, remuneration of factors, and size of the public sector - that may be modified by growth. It is also the whole social structure, that is the relative weight of socio-economic groups or the way in which individuals define themselves with respect to the rest of the society, that is affected. As a consequence, social relations that govern how individuals in a society interact with each other through explicit or implicit rules may also be modified by economic growth and may in turn affect the growth process itself. Rough evidence of such changes is provided by simple comparisons of economic and social structures and institutions across countries which have reached different levels of development. At the risk of caricaturing, it is sufficient to compare poor sub-Saharan African countries today with some highly developed countries in Europe, North America or in the South Pacific. At one end of the spectrum, one observes largely rural societies dominated by household farms, few wage workers except in the limited urban sector, social protection ensured by an extended family system and a relatively small public sector often controlled by an unstable oligarchy. At the other end, one finds almost exclusively democratic urban societies with salaried employment and private ownership of capital as the main economic organization, with sophisticated redistribution system run by governments the size of which is 3 to 4 times that observed in poorer countries.download