The Irony of Economic Growth – More Deaths?

Everyone wants economic growth, right? It's part of every politician's package of promises. Expanding economies make people richer, and study after study shows that the wealthier lead happier, healthier lives.

Yet in recent years, accumulating evidence suggests that rising incomes and personal well-being are linked in the opposite way. It seems that economic growth actually kills people.

Christopher Ruhm, an economics professor at the University of Virginia, was one of the first to notice this paradox. In a 2000 paper, he showed that when the American economy is on an upswing, people suffer more medical problems and die faster; when the economy falters, people tend to live longer.

Rising fortunes haven't always been linked to increasing mortality. Data from less-developed nations show that in places where farming is still the main economic activity, growth is associated with better, not worse health. The same is true when you look backward in history, before many countries fully industrialized. For instance, economists have shown that in the Sweden of the 1800s, economic growth was associated with longer lives — but in the 1900s, the relationship reversed, and growth became associated with death.

The turning point, comes when the wealth of societies increasingly starts to depend on factory output. Economists believe that pollution is a major culprit in increased mortality rates. To show this, they used data on carbon dioxide emissions, which are correlated with industrial activity and air pollution.

The data show that when economies are growing particularly fast, emissions and pollution are also on the rise. “As much as two-thirds of the adverse effect of booms may be the result of increased pollution,” they write.

This helps to explain why children seem to be particularly harmed by economic expansions — or benefit from recessions. The first years of life are precarious. Studies have shown that the very young are highly sensitive to pollution.

A booming economy spurs death in other ways too. People start to spend more time at their jobs, exposing them to occupational hazards, as well as the stress of overwork. People drive more, leading to an increase in traffic-related fatalities. People also drink more, causing health problems and accidents. In particular, the economists’ data suggest that alcohol-related mortality is the second-most important explanation, after pollution, for the connection between economic growth and death rates.

This is consistent with other studies finding that people are more likely to die right after they receive their tax rebates. More income makes it easier for people to pay for health care and other basic necessities, but it also makes it easier for people to engage in risky activities and hurt themselves.

Does all this evidence mean that we should celebrate recessions and fear economic expansions? Well, no.

It’s best to think about economic growth as a double-edged sword. On one hand, it leads to more pollution and risky behavior; on the other hand, the additional income allows people to invest in education and health, which yields tremendous payouts, just not always right away.

In the short term, or when the economic fluctuations are small, the harmful effects of growth dominate. But in the long term, or when the economic fluctuations are big, those harms are counterbalanced by the positive effects of having more income.

The lesson here is not to be wary of growth, but to manage the downsides. The economists find that countries with better social safety nets are particularly good at buffering their residents from the health consequences of booms and recessions. It may also be that these kinds of countries are stricter about managing pollution levels.

All of this should have us thinking about inequality as well. If growth is not wholly good, we should pay attention to who secures its blessings and who suffers the health consequences. That is why other macroeconomic aims, such as redistribution of national wealth must be on top of any country’s economic agenda.