With all our handwringing about the ills of modern life, it’s easy to forget that our relative prosperity is a shockingly new phenomenon. According to Oxford University economist Daniel Susskind, most of humankind’s 300,000-year history is a story about subsistence living and just scraping by.

Roughly 200 years ago, the engine of economic growth suddenly sputtered to life, improving the lot of many people all over the globe in a short period. But while growth can be seen as an unfettered good for humanity, it has negative consequences, too. The most serious challenges our planet faces today—from climate change and rising income inequality to the question of how to handle powerful disruptive technologies like AI—can be laid directly at growth’s door.

This tension makes economic growth “one of our most important ideas and one of our most dangerous ideas,” says Susskind, author of “Growth: A History and a Reckoning ” Some economists and others believe the solution is to pivot to “degrowth:” to not only put a lid on it but to shrink instead. But Susskind argues turning away from growth would be folly on a grand scale.

Rather, he offers good news: Growth does not come from using more and more finite resources, but from technological progress driven by discovering new ideas. We asked Susskind to elaborate.

SAP Insights:  What was your goal when you decided to write this book?

Susskind: There are very few things today that policy makers agree upon, but one of them is that we desperately need more economic growth. In all countries around the world, there's a feeling that more growth is a good thing associated with almost every measure of human flourishing.

If only the problem were as simple as that, because at the same time, growth is also associated with many of the greatest challenges that we face as well, which disrupt work and politics. We are now facing a growth dilemma, this tension between the promise and the price of growth. So, I wanted to spend some time writing about it and how we ought to respond.

Q:  The first half of the book covers the history of growth and traces the evolution of growth as an economic concept. Why do readers need to know that history?

Susskind: I included it partly because it’s fascinating and partly because it’s revealing and useful for thinking about how we ought to respond, which I cover in the second half.

A lot of questions are still unanswered. Why did growth suddenly begin 200 years ago? Why do we still know so little about it, despite how important it is? Why did policymakers and economists only start talking about the idea of economic growth in the 1950s with the introduction of the concept of gross domestic product (GDP)? Why are many of the conventional ways in which we think about growth often based on misunderstandings about how growth actually works? I try to address these questions in the book.

Q:  You argue that prior to the advent of widespread technological breakthroughs, the law of diminishing returns tended to reduce the positive effects of growth. Would you explain that?

Susskind: One of the insights about growth is that what holds humanity back is this law, or some economists have said this “curse” of diminishing returns. Each additional factory worker or acre of land might increase output, but it’s likely to be less than that of the factory worker or acre that came before. So, if you want to get sustained increases in GDP per capita with sustained increases in living standards over time, you need something that will offset those diminishing returns, and that something is technological progress.

Technological progress is the hero of the story. We rely on technology to get sustained increases in living standards.

Q:  If you oversaw global economic policy, what would you do to balance the need for growth with the cost of growth?

Susskind:  My starting point would be that we need more growth, not less. To go into reverse would be one of the greatest acts of self-harm that humankind could inflict upon itself. “Degrowth” would be a complete tragedy.

When you look at what we often do to promote more growth, however, we don’t do the right things. Often people view big, impressive things we can see and touch as driving growth: faster trains, more houses, wider roads.

That isn’t where growth comes from. If you want sustained increases in living standards, in GDP per capita, they’re going to come from the intangible world of ideas. It’s new ideas about the world that drive technological progress. And, in the end, it’s technological progress that drives economic growth.

So, I would be focusing on things like reforming our intellectual property regime, investing vastly more in research and development, and getting far more people into the parts of the economy that generate new ideas about the world. I think AI must play a very important role as well, in helping us generate new ideas.

We also have to do everything that we can to change the type of growth that takes place, so it doesn’t cause as much damage to the environment; it doesn’t widen inequalities in society; and it doesn’t lead us to develop technologies when we can’t properly control their disruptive effects on work and politics.

Q:  Let’s talk more about that. AI, particularly generative AI, will be highly disruptive. What can be done to steer how we develop and harness it for human good versus evils like widespread job loss?

Susskind:  Only a few years ago, if you asked people what areas of human activity they thought were the most protected from automation, one area would have been creativity. And you know, what’s so unsettling and intriguing about generative AI is that, among the other things it’s good at, it’s particularly good at doing creative tasks.

White-collar workers need to take these disruptions seriously, just as blue-collar workers did in the past. Very broadly, technologies like AI can have two impacts on the world of work. Either they can substitute for human beings, displacing them at particular tasks and activities, or they can complement us, making us better, more productive at tasks that have not yet been automated.

If policymakers think work is to be valued and treasured, then they should seek to steer technological progress away from technologies that substitute for human workers and toward those that complement them.

For one example, think about the U.S. tax system. In every single year since 1981, the effective tax rate on hiring a human worker has been higher than the effective tax rate on buying a machine. There’s a pretty strong incentive for employers to develop and adopt technologies that replace rather than help human workers. So, you might say, in designing the tax system, we ought to be taking account of these sorts of misaligned incentives they create.

That’s the kind of practical thing I explore in the book, how we might—through taxes and subsidies, through rules and regulations, through social norms and customs—change the incentives people face. So, they’re not just incentivized to develop new technologies, but to develop technologies that don’t cause as much harm to the environment, don’t disrupt the availability of good work, don’t lead to widening inequalities, and so on.

Very often when policymakers and business leaders think about growth, they use the metaphor of being like a train driver. They can push forward on the throttle and go faster or pull back and go slower, but their direction of travel is fixed by the rails set down in front of them. That’s wrong.

A better metaphor is a nautical one. You’re more like a sailor. You can raise the sails and go faster, lower them and go slower, but you’ve also got an immense amount of control over the direction you take. The question is not simply do we want more technological progress and more growth or less technological progress and less growth, but what kind of technological progress do we want?

Q:  Who is going to provide the smart thinking and policies, with everything balanced perfectly? As you say, it’s such a complex topic and there’s a lot of uncertainty. How are regular people supposed to know if the policymakers are thinking of the right things?

Susskind:  There are three groups that matter. The first is policymakers—what the government is doing about the technological changes that are taking place. The second is business leaders. Their decisions about what technologies to develop and adopt affect the scale and nature of the challenges we’re talking about. And the third is, as individuals, we have a responsibility for thinking about how we prepare for a future that looks quite different from the present.

One of the big lessons for business leaders is that what you choose to count becomes what counts. That’s what happened with the GDP in the 20th century. We decided to count GDP, and that became one of the most important measures.

But as a result, we neglected many of the things we chose not to count, such as the state of the environment, the level of inequality in society, the availability of good work—work that is well paid and meaningful—the functioning of our politics, and the health of local places and communities.

Q:  You include some hopeful examples of how developing the right types of technologies will enable us to continue to grow.

Susskind:  The question isn’t simply should we develop and adopt more technologies or less technologies, but what kinds of technologies should we develop and adopt? Automation is a good example. Are business leaders looking at technology to try to reduce headcount and substitute for the work human beings do? Or are they instead asking, ‘how can we use automation to improve the productivity of our workforce and promote the availability of well-paid and meaningful work in our organizations?’

Sir Nicholas Stern, the author of The Stern Review in 2006, was the first to report on the economics of climate change. Stern thought the cost of eliminating carbon emissions by 80% would be about 2% of the GDP per year. In other words, you had to pay a very high price in terms of economic growth to protect the climate. Fast forward to 2020 and the UK’s Climate Change Committee, a panel that briefs the British government on climate change, concluded that the cost of completely eliminating emissions—not simply reducing them by 80%—had fallen to just over half a percent of GDP.

That’s because the two decades or so of changes in taxes and subsidies, rules and regulations, social norms and customs, completely transformed the incentives business leaders face. What drives economic growth while addressing climate change is developing particular types of technologies, namely those that are green rather than dirty. The rise of renewable energy, solar energy in particular, is a great example. Over the past few decades, there has been an almost 200-fold reduction in the cost of solar energy.

My argument is fundamentally an optimistic one. We can continue to grow, while at the same time encouraging the development of technologies that allow us to also protect other things that we value and care about. And we can do so from a position of strength, looking into a future that is far more technically able and materially prosperous than we have ever been in human history.