Mary Dejevsky: Our irrational preoccupation with growth

Higher GDP, shared out unequally among more people, will not produce greater wellbeing

Share

Growth, growth, growth... The regrettable lack of it and the imperative to encourage it were the guiding themes of the Chancellor's Autumn Statement, as they have been of practically anything anyone has said about the economy for years. Higher growth boosts national wealth and national morale; falling growth pushes countries into recession, which makes them feel, deservedly, very bad. So runs the consensus.

But maybe it is time to end this preoccupation with economic growth as the measure of success, stop chasing high growth that is unrealistic, and apply some ingenuity to making the best of low growth or even decline. With the overall size of the UK economy unlikely to return to its 2008 level until, at the earliest, 2014, might we not feel better about ourselves if, instead of pursuing growth, we were able to improve living standards as a nation by doing more with less?

The fetishisation of growth seems to stem in part from a misconception: that the industrialised world cannot compete with China, India and other emerging economies – as it should in this age of globalisation – unless our growth rates can somehow be made to approach theirs. But these are emerging economies, which are defined by their rapid development. We passed this stage long ago.

To those who then hold up Poland, the Baltic States and others as exemplifying the possibility of high growth closer to home, there is a different answer: these essentially European economies were artificially repressed under Communism. They are now settling back into the slower growth that characterises the Continent's western half. Their growth pattern was abnormal.

The economic rise of China, in particular, has somehow fostered another misconception: that the bigger the economy, the better, and that size is something all should strive for. Of course, a time is coming when the overall size of China's economy will overtake that of the United States. Just look at the comparative population figures. But so what? The more telling comparison – between the US and China, or indeed between any two or more countries – is between their per capita GDPs. China is a poor country, and will remain one for many years, even in the unlikely event that its current growth rates are sustained.

The rich world cannot and should not expect to compete with the emerging world on growth rates – or, in the future, on economic size. The competition, such as it is – and as the Arab Spring has illustrated so clearly – is for higher living standards, for which per capita GDP and purchasing power comparisons are the gauge. No country, Britain included, should beat itself up for not being China.

The reason why Britain – and the US – should be wearing sackcloth to this day is for the fervency of their belief that high economic growth is intrinsically superior to low growth, however it is obtained. Thus we watched the US boasting about its growth rates to the rest of the world in the mid-1990s – President Clinton at the G8 summit in 1997 – and "vibrant" Britain lecturing France and Germany not a decade later about how "old Europe" should emulate Britain and "grow".

Two harsh truths have since emerged about that Blair boom. The first was highlighted by George Osborne for his own political purposes this week, when he cited evidence from the Office for Budget Responsibility showing that "an even bigger component of the growth that preceded the financial crisis was an unsustainable boom". In other words, it was fuelled by –irresponsibly – easy money; it was more of a bubble than a boom.

The other is that, to the extent there was a boom, it did precious little for living standards across the board. It may have looked good, averaged out nationally, in comparison with what was going on in, say, Germany. But, as in the United States, the actual effect was to drive pay at the top into the stratosphere, allow some professional groups just about to hold their own, while excluding and even penalising middle- and lower-income groups. What is more, it is these same groups that now suffer most from the higher inflation and squeeze on credit which are invoked as part of the remedy. If the UK's growth in the early 2000s was not a complete mirage, its effect was not to make Britons more prosperous, but to exacerbate income inequality. What price economic growth if it fails to spread its benefits beyond a fraction of the top one per cent?

The way Britain followed the United States in elevating economic growth to an article of political faith had another pernicious effect, too. It encouraged the vilification of those countries that were growing only slowly or not at all – without requiring any examination of the particular reasons. Thus Germany was condemned for tolerating almost static growth, while it was, on the one hand, bearing the considerable costs of unification, and, on the other, deliberately slowing the growth of wages and benefits to make its industry globally competitive – a long-term objective that it has achieved in enviable style.

The "Great Satan" in the demonology of growth, however, has been not Germany but Japan. Western experts of every stripe have offered their growth recipes to Japan: from increasing the relatively low proportion of women in the labour force, to encouraging immigration, to a thorough overhaul of its business practices.

What is rarely mentioned, except in highly negative terms, is that Japan's is an ageing population, and that its long "recession" goes hand in hand with falling numbers of people. Given the alarm bells that rang when the global population passed seven billion, with forecasts of overcrowding, food and water shortages and the like, why does the reverse not hold? Why cannot a falling population, with static national GDP, not be hailed as the modest success that it is?

The Japanese enjoy some of the highest living standards in the world; their workers are productive, and their universities are at the forefront of researching solutions to the maladies of ageing: from medical and social care to high-tech domestic aids. Static growth need not mean falling living standards. It depends on the circumstances.

And there is a corollary in Britain. Our population is increasing, which in part reflects the country's appeal as a place to live, and a bigger population is likely to have the effect of increasing overall GDP. But higher national GDP, shared out unequally among more people, is hardly calculated to produce a greater sense of wellbeing. Instead of lauding growth for its own sake, we should try to use what we have more rationally, and accept that, in terms of living standards, the erstwhile growth laggards might have something to teach.

m.dejevsky@independent.co.uk

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Read Next
Mosul falls: Talk of Iraq retaking the town, held by IS since June, is unconvincing  

Isis on the run? The US portrayal is very far from the truth

Patrick Cockburn
Photo match: Nicola Sturgeon on the balance beam on 27 April. Just like that other overnight sensation, Russian Olympian Olga Korbut, in 1972  

Election catch-up: SNP surge, Ed Balls’s giraffe noises, and Cameron’s gaffe

John Rentoul
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk