growth is all that matters

There is only one argument to have about the economy. It is about how this country is to grow. Get that right and the existential threat to jobs, living standards and public services will start to lift. Get it wrong and some of the extravagant warnings from some in the international investment community – Britain’s economy rests on a bed of nitroglycerine and so on – will be amply justified.

Will Hutton, The country’s renewal is being betrayed by cheap, paltry politics

There is only one point of view represented in the media. It is about economic growth. It tells us that only by making the pot as big and full and fat as we possibly can, will some of it will dribble down to those in need. Only when the rich get even richer can the poor hope to be rewarded with a bit of dribble-down. Any other method will lead to economic collapse, chaos and disaster. So don’t even try it.

Well here are some reasons why making the pot bigger is not all that matters (and may not even matter at all). A few of the points depend on believing that relative poverty is a form of deprivation, and that, being human beings, we might want to address it in our own society. Although I would not expect a Daily Mail or Telegraph journalist to go along with that, until recently, I thought it would not be too controversial for a Guardian employee1 - particularly one who claims to have a social conscience (and even writes about it).

I was wrong even to believe this, apparently. So I have asked my Guardian journalist to try living for 6 years, or even 6 months on an income of £115 / per week (after housing costs). I have asked her to imagine bringing up 2 children on an income of £195 / week – remembering that she will need to put enough aside to mend the fridge when it breaks, send the children on school trips, pay for childcare while she’s out at work, buy a pair of gym shoes when their feet grow, buy them Christmas presents and pay the telephone and electricity. And they won’t be living in Notting Hill Gate.

About 13 ½ million people in this country live on that amount or less. About 6 million bring up 2 children on £130 / week or less. Try it, if you think it’s easy.

So here are the reasons:

1. Size is not all.

It doesn’t matter how big the pot is if you only share it out (or most it) among your friends. A smaller pot – as long as it is not too small - may actually do a better job of addressing real need.

This is how we share it out in this country. Red slice of cake represents about 6 million people. Look at how much is trickling down their way.

2. Others do better than us.

With the same size, or even a smaller pot, other rich countries do better than us in terms of sharing it out. The UK has a higher proportion of its population in relative low income than most other EU countries. Of the 27 EU countries, only 6 have a higher rate than us.

In other words - redistribution does not necessarily mean that economic growth stops. You can even go on making the pot bigger – if that’s what you think is important - while sharing it out more equally. The Netherlands, for example, is slightly richer than us (per person), but has inequality levels half of ours. They also give more per person in international aid.

3. Inequality breeds other social problems

There are other costs (both economic and social) in failing to address inequality directly. The excellent Equality Trust has shown that inequality levels are strongly related to levels of homelessness, violence, drug use, mental illness, infant mortality, education, teenage pregnancies, life expectancy, obesity, social mobility – and lots more. Every one of these indicators is worse in societies which are more unequal (however big the general pot is). The graph shows some of the evidence. There are more at http://www.equalitytrust.org.uk for the other indicators. Or read Spirit Level.

In other words, making the pot bigger without paying any attention to how it is shared out may not lead us towards the kind of society that we want to be a part of. Of course, we can always fence ourselves off (which is exactly what is happening).

4. The measurement of growth is narrow and short-termist

There are costs – besides those listed above – of unfettered capitalism which the market does not even factor in. When we add up the size of the pot, we add up only those things which are given a monetary value, here, now, and according to whether or not they contribute to economic activity. The most obvious example of such ‘externalities’ is pollution: an airline company can whack up enormous profits – thus adding to the pot – but the cost of the noise pollution for people living in neighbouring villages, poor air quality, and (later on) of the carbon emissions, are borne by society as a whole. These costs are mostly carried by the least well-off because such groups are less vocal, have less influence over power, and are less able to move away to a desirable location if they lose the battle altogether.

Other externalities include some of the risks associated with financial activity: bankers take risks, swallowing the profits when the risk pays off. Later on, when it becomes clear that they miscalculated, society bails them out - and then suffers the cost of the bail-out, plus other costs associated with the recessioni2 Arms companies profit from sales of bunker buster bombs, and that’s very good for the size of our pot. We are growing, and the pot is getting bigger. But as a result, children in other countries die (and not only), buildings have to be rebuilt, limbs have to be amputated – and none of those costs are carried by the arms company (or even by the UK as a whole).

The point here is that there are things that are ‘valuable’ (or not valuable) which are not necessarily counted as contributing to the pot3 Quality of life is not only measurable in economic terms.

5.Growth is anyway unsustainable

In 1961, the UK’s consumption patterns were roughly aligned with one planet living – that is, one planet’s worth of resources would be needed to support the whole global population at the UK’s level of consumption. By 2009, this grew to 3.1 planet living. In other words, we would need an additional 2.1 Earth-like planets if every human were to replicate the same levels of consumption in the UK.’

NEF, The Consumption Explosion

Unless you think we can manage to find the equivalent of 2 more planets, or you think we can continue to prevent other developing nations from consuming at the same rate as we do, there is a problem with constant growth. (The US, still growing, uses nearly 5 planets’ worth. Both these estimates are conservative – there are far higher ones around)

Our ‘growth’ (in the purely economic sense) is not any longer contributing to our happiness or well-being as a nation4, but it does both depend on, and lead to increased consumption. If you accept that the earth has limited resources (oil, gas, metals and minerals for computers and mobile phones, capacity to absorb carbon dioxide and other greenhouse gases, agricultural land etc) then by continuing to grow, we are continuing to deprive others – including future generations - who are not merely relatively poor, but absolutely poor.

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In summary

There are lots of ways of organising society, and even of organising the economy. It’s not capitalism or bust – which is where the argument always goes when you try to question the system we have now.

Capitalism merges into socialism, and we have a great deal of socialism even within our extreme and obsessively capitalist system. Completely unfettered capitalism doesn’t exist, not even in the US (yet). If it did, it would be a society where there was no publicly funded education, no NHS, no state pensions, no potholes being filled in by the council, no courts, no (state-funded) elections, no bank bailouts, no army. No police service, just a few private security guards to put our criminals into the privately funded gaols which have sprung up as a result of private initiative and market forces. No government regulations to make sure the vigilantes don’t pull out the fingernails of political activists or nuisance-makers – unless the private corporations thought it was in their interest to have some rules made not by themselves.

So part of my argument is of course about where the balance should lie; but it is hard even to have that argument in today’s climate because the ‘balance’ has swung so far to the right that people will barely recognise it as a legitimate question. The discussion takes the form: ‘Well if we don’t make the pot bigger, we can’t do anything. And: ‘We can’t tax people more, because the economy will collapse’. And: ‘The hidden hand of the market is best suited to sort out these questions’. Fact. Science. Rubbish. Even economists don’t agree.

Within our own country, we can improve the lot of those worst off – through government intervention, and without waiting for it to trickle down as recycled debris from those who didn’t need it to begin with. Look at other countries which do it much better than we do. Part of the reason why we ‘can’t’ seem to do it in this country is that even the ‘left-wing’ media continues to perpetuate the myth that capitalism is a one-stop off the shelf loosen all controls let the market rule formula (or else you’re a communist). It isn’t. Economics is not a science. And any economist, except perhaps the whacky way-out Friedmanites who have taken over the thinking organs of the western world would agree.

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Diagrams taken from http://www.poverty.org.uk/ for points 1 and 2; from the Equality Trust for point 3)

Two postscripts:

1.This is all about the UK, and making a system slightly fairer for those who live here. I would obviously extend it to the poor in other countries, but this will be far too radical for Guardian journalists even to contemplate. As a country, we are fabulously rich already, our lives are fabulously luxurious and fabulously greedy. While we consume and grow, others die around the world from lack of food. To argue that we can’t do anything about it because the economy would collapse is a pretty sick reflection on our ‘civilised’ society. And our thinking organs. And, I would say, our moral consciences.

2.Even if there weren’t other countries which had tried out less unequal systems, and made a success of them, aren’t there strong moral arguments for fiddling a bit with the system we have now, trying out a bit less inequality to see if we can cope with it? In fact we try out less and less, convinced that it is the focus on looking after the disadvantaged which is responsible for any minute reductions in the size of our oscenely bloated overflowing pot.

• 1. This does not refer to Will Hutton. The conversation was private
• 2. Of course the cost of the bail-out does feature in economic statistics – but only long after the event. When the banks are making profit, those (later) costs are invisible
• 3. An example of the idiocy which results from an incomplete ‘valuation’:

  • Every year, we export 5,000 tonnes of loo paper from the UK to Germany, but then import over 4,000 tonnes back again
  • 4,400 tonnes of ice cream gets exported from the UK to Italy, and 4,200 tonnes is then imported back
  • We import 22,000 tonnes of potatoes from Egypt and export 27,000 tonnes back the other way
  • 116 tonnes of ‘Sweet biscuits, waffles and wafers, gingerbread and the like’ (the official category for trade statistics) comes into the UK, rumbling passed 106 tonnes headed in the opposite direction.

  Taken from The Consumption Explosion

• 4. There are various studies on this, even from mainstream economists - eg ‘Happiness: Lessons from a new science’ by Richard Layard