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Growth Pangs

In nature, animals typically grow until they reach a point of maturity. Some plants tend to grow indefinitely but ultimately are limited by the annoying facts of reality like gravity or the availability of local nourishment. Infinite growth is not the most natural concept then. Even viruses are limited in their capacity to spread. Reaching equilibrium is the natural norm.

I have lived in the UK for a bit over twelve years now. But I grew up in Australia. Every now and then the news runs a story here about how the UK is in drought. As an Australian, from a country that frequently endures periods where no rain falls in years, such news in Britain always makes me laugh. Perhaps the best headline I have ever read was “Wettest drought on record”. The UK, as I explain to people, does not have droughts – it has a water management issue. In other words, it is very poor at managing something that it has a hell of a lot of.

So what do these anecdotes about the maturation of animals and the failures of British water management have in common? If you can tolerate one more anecdote, I hope this will become clear. I recently watched a television show discussing the week’s politics with a studio audience. An audience member asked why the UK should continue with foreign aid contributions when those at home were facing massive government spending cuts that would affect the welfare of many people. It is a fair enough question for those who are most likely to be adversely affected by the cuts. But at another level, there is a profound absurdity about this question. The UK is not a poor country. In fact, it has considerable wealth. But nevertheless it also has considerable poverty, as well as all of the usual social symptoms that go along with it.

Since the start of the rolling crises in 2008, politicians around the world have repeated the same formula. We should focus on stimulating economic growth so that “the economy can get back on its feet again”. And all will be well again. But is it not possible that the developed countries of the world are “all grown up”? Is it not plausible that the UK, the US, and many other countries have reached a stage of economic maturity where character and quality rather than size should be the focus of development? If so, why do we keep insisting on the need for teenage growth spurts?

The UK is a wealthy country – no sane person can deny this. But despite the overall level of wealth, and in the face of very local inundations of extreme wealth, we can still claim to suffer the “drought” of poverty. The problem, like British water management, is simply one of distribution. The wealth is pooling in places that already have more than enough while other areas that are in desperate need go dry. In fact the water is drawn to the wettest places through the drainage of market society. As the saying goes, it takes money to make money. And common sense, as well as an understanding of compound interest, tells us that the more money you have, the more you can attract. Our model of transient and durable benefits from my previous blog post formalises this notion, taking it beyond mere money, and, additionally, suggests that money is repelled by poverty and disadvantage.

Economic growth is undoubtedly of great value to developing nations. But its value to developed nations has come under serious doubt. The study presented by Richard Wilkinson and Kate Pickett in The Spirit Level pulls together a wealth of research that shows that while economic growth correlates to increases in life-quality factors for poorer countries, there is no such correlation for wealthier countries. Their results show that, beyond a certain quite low level of wealth, the degree of equality is the determining factor. Their data correlate equality levels in a broad range of countries with levels of mental illness, life expectancy, trust, obesity, incarceration rates, educational performance, teenage pregnancy, and social mobility. These correlations apply across the spectrum of wealth within the studied societies and not just in specific socio-economic classes. Their findings are consistent with other social studies such as that of Avner Offer in The Challenge of Affluence, as well as numerous reports by organisations such as the OECD. Further correlations between equality levels and political equality, participation, and the vulnerability of government to individual purposes are also there to be found and are very important.

The apparent credibility of economic growth as a solution is tied in part to the notion of progress. Markets inspire competition which leads to technical innovations that make production cheaper. But this, in turn, leads to the reduction of wages for workers or, more commonly, worker redundancy and unemployment. Economic growth fills the job gap by creating more jobs. Employment, then, is the number one political draw card for growth and it is easy to understand the compulsion this has over the public. But economic growth doesn’t just magically happen. It can only come about by more spending. In other words, we need to buy more and more “things” in order to keep more or less the same number of people employed. Somewhere in recent decades we crossed a line: before that time we had to increase worker productivity to meet our needs; now we have to increase our needs in order to work. The notion of ever-increasing doses to achieve the same result is recognisable to anyone familiar with drug addiction; the opiate that got us through surgery has become our addiction. The idea that we can indefinitely and exponentially increase consumption is both a physical and a mathematical absurdity – a contradiction that lies at the heart of environmental economics and should lie at the heart of social economics too.

In practice, economic growth cannot escape the gravitational forces of advantage and disadvantage. Down in the school of transient benefits, would-be workers compete ever more fiercely with each other for the diminishing opportunities to work and to earn an income. The transience of their benefits – their inability to get ahead – is greatly reinforced by this process as they capitulate on wages, security, and worker rights in order to nab the job. In the middle, the competition to increase consumption in order to fulfil our duties to economic growth and to compete with other consumers simply raises the threshold above which durable benefits can be had – greater consumption simply makes lives more precarious and encourages short-term viewpoints. Meanwhile, at the top end of the spectrum operates the relentless logic of compounding advantage, pulling wealth upwards. And the calculus of supply and demand ensures that demand is increasingly monopolised by the wealthier classes, directing productive resources to their ends rather than to the needs of the greater community.

Part of the problem is in the measuring. Economic growth is typically measured in GDP amounts. But GDP is a crude and, as is increasingly recognised, dysfunctional measure. It includes “bad” economic activity (cleaning up oil-spills, security costs) equally with the good. And it says nothing about distribution: GDP per capita is not what each capita has, and the more unequal the distribution the greater percentage of people will have significantly less than that amount. In short, it conflates the flood and the drought and makes both appear as fair weather. Some economists are becoming aware of these problems. The New Economics Foundation, for example, has created what they call the “Happy Planet Index” that combines a variety of well-being and welfare measurements. Recommendations for a similar approach were made by the committee convened in 2008 by French president Nicolas Sarkozy that included the economists Joseph Stiglitz and Amartya Sen. Their findings drew heavily on the work Sen had done in development economics. Indeed, much of the best of development economics is applicable to developed nations, and the failure of GDP as a measure across both is a demerit against it. By measuring well-being factors rather than the sheer amount of spending that is going on we can monitor the character and qualities of a society rather than just its size. And in an adult economy, that is what should matter. Developing countries need to closely monitor both economic growth and qualitative factors: they need to monitor growth to assure that they are, in fact, moving towards economic maturity; the qualitative measures tell them whether they are maturing toward a healthy society.

Having measured the economy in ways more useful than GDP, there remains the problem of how to shape the economy to improve the desired measurements. The extreme individualism of the neoliberal model offers us little here: the rich and the poor are so because of their own choices and there can be no acknowledgment of any relationship between the two. In the Thatcherite version, we cannot measure society or social effects because there is simply no such thing. In practice, such politics are committed to the fantasy equation of never-ending consumption-driven growth – increased reliance on raising government revenue through sales and consumption taxes lock governments into such patterns ever more deeply.

But in reality the results of wealth and poverty in a mature economy are deeply related through the compounding nature of the property system and in the malnourished social institutions that might counter its excesses. Progressive taxation can do much to soften the exponential curves of advantage and create more equitable bargaining positions within a society. But redistributing wealth through means-tested benefits also creates social division and stigmatisation which are characterised by marking out the recipients as exceptions to social norms. More promising paths lie in universal benefits that are considered benefits of citizenship. Universal health care is empirically more effective and efficient, and can provide a source of social pride and unity, although these facts are routinely buried in the politics of individualism. Universal education marks one of the greatest achievements of the last century and underpins much of the technical progress of that era. But in an era where everything is fought for through competition it should not be surprising that the most privileged have sought to weaken this in order to gain advantage for their own children. A most promising approach is the Universal Basic Income which affords everyone a subsistence income or above. This corrects a number of problems with bargaining positions by reducing the element of transient benefit from wage negotiations.

The bargain by which the wealthiest only agree to allow their wealth to be used in productive purposes in exchange for even more wealth must also end: it has no place in a mature economy. An economy that can only improve by increasing inequality and increasing the concentration of wealth in fewer and fewer hand is not a healthy economy and certainly not a healthy democracy. A steady-state economy cannot co-exist with such inefficient flooding and the corollary existence of droughts. Such an ownership model is parasitic and the source of much of the current instability. Nor can the opting-out of the owner classes from the responsibility for the effects of their own risk-taking be considered appropriate. A commitment to worker- and community-ownership of production is long overdue on this score. More than anything, we need to reassess the equation of productivity. A steady-state economy does not imply a lack of progress. But the progress that needs to be sought must be conceived more broadly than what appears in an accountant’s ledger book. Having passed the point where work was necessary to meet our needs we now need to ensure that work itself meets our human needs. This means putting much more control in the hands of the workers themselves. It may also mean working less efficiently in the traditional sense in order to re-humanise labour. All of this is anathema to the free-market ideology, but perfectly natural in an adult economy.

It is time for our societies to grow up and become mature societies. We have achieved the raw ingredients of prosperity and now we must focus on character formation – on making the best of these ingredients. We have reached full-size and now we must act like adults.


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