Growth makes you happy: Peter De Keyzer is optimistic


BNP Paribas-Fortis economist Peter De Keyzer talks about his book, Growth Makes You Happy, in which he takes an optimistic view of growth in a free market

In praise of the free market

It’s been very unfashionable, since around the collapse of the banking system in 2008, to be optimistic about the world economy. Anyone seeing anything less than doom and gloom tends to be regarded with a sort of concerned condescension.

So it’s either an act of stunning naivety or revolutionary insight that has possessed Peter De Keyzer (pictured), chief economist at BNP Paribas Fortis, to write a book called Growth Makes You Happy, in which he seeks to prove the pessimists wrong, and spur us all on to a bit of economic optimism.

The book opens with an anecdote about flying into Brussels over the port of Antwerp, in which he’s struck by the way both a major seaport and an airplane are metaphors for the incessant human struggle to bend the world to our will, to overcome petty restrictions like oceans and gravity in order to achieve and guarantee our own prosperity.

From that point on, the book is a sort of primer of liberal economic theory, a paean to the free market and a clarion call for less regulation and more liberty. The title appears to be a rather categorical assertion.

A win-win situation

“We wanted to have something positive and something definite on the cover,” De Keyzer tells me, “and not something like Growth Has the Potential to Make You Happy Given the Right Institutions are Present Etc. We wanted to have something that would spark people’s interest.”

But the title of the book, published in both Dutch and English, really is a reflection of his view, he says: Economic growth in a free market is a win-win situation for everyone. “The reason I stand by the title is that if you look at our situation right now, compared to 30 or 50 or 100 years ago, we’re much richer and wealthier, we’re more educated, we live longer, we work less, we have more equality,” he says. 

People seem to have abandoned the optimistic view that life really isn’t that bad

- Peter De Keyzer

But, he continues, “people seem to have abandoned the optimistic view that life really isn’t that bad. In the 1950s, everybody believed in progress, and we’ve left that behind to some extent. I wanted to show that growth is what is needed to make the dreams of people and of societies come true.”

While that’s true, it’s been shown that people are more concerned about relative wealth than absolute. In other words, you won’t be as happy with your own pay increase if you know someone else is getting a bigger one. Economic growth benefits everyone, but it doesn’t benefit everyone equally. The rich get absolutely richer, and the poor get relatively poorer.

“Yes, that’s the case,” he admits. “The book is fairly individualistic; it never talks about groups. It sometimes talks about society as a whole but mostly looks from the perspective of the individual citizen. I do accept that extreme income inequality can be negative for a society; that’s very obvious if you visit some countries in Central and Eastern Europe or Latin America.”

But De Keyzer, who speaks next month at a symposium on expat financial affairs, maintains that equality increases as everyone progresses. “After some time, those societies start redistributing the proceeds of growth, and then you get a more equal society. So, for example, Brazil and China have become much more unequal over past decades, but everybody has become richer at the same time. At some point, people will start asking for a redistribution, especially when the average income is higher than the median income.” 

The value of redistribution

But he’s not saying, he emphasises, that the free market and growth will solve all the world’s problems.  “You need social security, you need the rule of law, you need democratic government and freedom and rights. But I think economic growth and free markets are often underestimated in what they can achieve for societies.” 

Economic growth is often under-estimated in what it can achieve for societies

- Peter De Keyzer

It was recently reported that Belgium is the most equitable country in Europe for personal disposable income. De Keyzer chalks that up to redistribution. “Taxation is extremely high in Belgium: 54% of everything that’s earned is spent by the government, which means that for every €100 that is made, the government entitles itself to make decisions on how €54 of that should be spent. The remaining €46 depends on the choices of individuals, citizens and companies.”

That, maintains De Keyzer, has its advantages. “You get a very equal society, but on the other hand it also takes away incentives for people to excel, to be ambitious, to undertake business, and that’s something Belgium is concerned about right now. We do score very poorly as far as entrepreneurship is concerned. People like safe jobs, stability, not too much uncertainty or volatility, so basically you stifle entrepreneurship, but you have an equal society in return.”

Peter De Keyzer is the keynote speaker at a symposium on expat financial affairs on 11 October at Vlerick Business School in Brussels. Growth Makes You Happy is published in Dutch and English by Lannoo