Photo: Martin Pettitt (Flickr)
Our politics remains transfixed by growth in our gross domestic product, but it is only a half-baked measurement of success, writes Sam Boyd.
Amidst the ever-gloomier backdrop of an ensuing debt crisis in the eurozone, the highest unemployment levels in seventeen years, average wages likely to be no higher in 2015 than they were in 2001, and living standards falling at a rate unseen since the 1930s, politicians of all stripes unite in their unyielding desire for one thing.
The mystical elixir is referred to daily, with a fretful yearning. It is assumed as a panacea, uniquely capable of disentangling all our economic and social woes. If only we could achieve it, then unemployment would be all but eliminated, living standards set back upon their rightful upwards path, poverty alleviated, inequalities smashed and social mobility unlocked.
That thing in question, of course, is growth. Sustained growth in our gross domestic product (GDP), to be exact. And since the collapse of the global financial system in 2008, we’ve had very little of it – only 0.5 per cent in the twelve months to November 2011. 0.7 per cent is all that’s predicted by the OBR for 2012, and that’s their best-case scenario.
Politicians and commentators haggle and sneer over why we are not growing. The right blames extraneous global factors, the left blames austerity. The right continues to espouse “expansionary fiscal contraction” alongside further quantitative easing and the weakening of workers’ rights. The left cries out for a halting of austerity and a fiscally stimulating ‘plan B’.
The debate dominates political discourse. Yet, the crucial assumption on which it is based receives close to no examination. Namely, that growth is a desirable end in itself.
For growth, we are told, improves living standards. This may be so, especially when our population is expanding. But the reality is far more complicated. Since the late seventies, when the policies of free-market neoliberalism were adopted, unprecedented growth was celebrated on both sides of the Atlantic. But who really benefited?
Overwhelmingly, it was the very richest. In the US, productivity increased by 119 per cent between 1947 and 1979, and by 80 percent between 1979 and 2009. In that first period, incomes across society rose largely in line with growth: the bottom fifth saw a 122 percent income rise, the middle fifth 113 per cent, and the top fifth 99 percent. After 1979, however, gains were almost entirely gobbled up by the top. The richest 1 per cent increased their incomes by a whopping 270 per cent, whilst median wages stagnated entirely in real terms. The bottom fifth even saw their incomes decrease by 4 percent.
In the UK, a similar – if less pronounced – picture. Since 1979, GDP almost doubled in real terms. Yet only the richest tenth saw their incomes grow accordingly – twice as fast as the middle and four times as fast as the poorest tenth. In 2008, inequality reached its highest ever level since comparable records began in 1961, having increased faster since the 1970s than any other rich nation.
In a 2010 survey of twelve major developed economies, the OECD found that the UK ranked last in terms of social mobility.
Recent trends are more worrying still: research by the Resolution Foundation indicates that despite GDP growth of 11 per cent between 2003 and 2008, median incomes, as in the US in the decades before, flat-lined completely. For men, they fell by 0.2 per cent. Jobs, too, remain portrayed as a solution to various social ills, particularly poverty. Yet, thanks to punishingly low wages, 60 per cent of adults in poverty live in working households, as do 57 per cent of our four million children in poverty.
Of course, in both the US and UK, thirty years of growth resulted in advancements that have improved all our lives, especially in technology. But it also brought stagnating living standards for many, soaring inequality and heavily entrenched social immobility.
Surveys show we’re less happy than we were fifty years ago – a trend replicated across the Western world. Whilst growth and jobs may well be necessary, these patterns show they are certainly not sufficient for across-the-board improvements in our collective well-being What’s more, in our ever-lasting quest for growth, few stop to question the very practicality of the notion: namely, can we grow forever? The International Energy Agency suggests that world oil supplies, the lifeblood of our capitalist economies, will meet global demand only until about 2030. Over the next two decades, then, either we must cease our drive for everlasting growth, or instead fuel it in a sustainable way. Which will it be? Neither option is seriously considered.
A more equitable capitalism demands the exploration of more substantive – and less monetised – measurements of success: well-being, happiness and access to opportunities. Ways must be found to achieve these social goals by means of a sustainable economy balanced away the City and the consumption of fossil fuels, and towards new innovations and technologies. Growth may well retain a key role in this new economy, but as an end in itself it is wrong-headed.
David Cameron, in 2010, said: “It is high time we admitted that, taken on its own, GDP is an incomplete way of measuring a country’s progress”. At his behest, the Office for National Statistics is establishing some key indicators of well-being. Ed Miliband, too, has noted, “a focus on growth is important, but not enough”. The New Economics Foundation think tank, meanwhile, has created a National Accounts of Well-being, mapping 22 different countries. These are some welcome steps. But, on the whole, politicians and the media remain consumed by percentile changes in the value of goods and services we produce.
In 1968, Senator Robert F. Kennedy, brother of John, gave a speech in which he said that gross national product “measures everything, in short, except that which makes life worthwhile”. “It counts napalm and the cost of a nuclear warhead, and armoured cars for police who fight riots in our streets”; but it “does not allow for the health of our children … the intelligence of our public debate or the integrity of our public officials.”
Such words have never held more relevance. If the last thirty years of economic expansion – culminating in the largest global financial crash since 1929 – should teach us anything, it is that moving beyond our fetishisation of growth would mark a vital first step towards a new, fairer and sustainable breed of capitalism.
As Kennedy’s words reflect, it is something that should have happened a long time ago.
Sam Boyd
This article featured in the first issue of NuPolitics Magazine, which you can read here.
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