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

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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Read Next
Yvette Cooper campaigning in London at the launch of Labour’s women’s manifesto  

I want the Labour Party to lead a revolution in family support

Yvette Cooper
Liz Kendall  

Labour leadership contest: 'Moderniser' is just a vague and overused label

Steve Richards
Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine