We need real growth not sustainable growth

3 12 2009
It is not clear how the UK will earn its living in the years to come        Financial Times  3/12/2009
A new survey of the state of the UK’s economy has drawn a bleak, if not surprising , picture of the weaknesses of the UK economy as we begin to come out of the recession. The survey, carried by the FT today and over the next few days, reveals that despite all the claims of New Labour to have turned the UK economy into something more dynamic the truth is that the long-term trends of sluggish growth and the disappearance of manufacturing have if anything gone faster under New Labour than before:
  • Growth since 1997 has averaged just over 2%, slightly less than in the previous 20 years
  • Manufacturing has shrunk from 20% of the economy in 1997 to 12% now
  • The growth areas of the UK economy have been business and financial services, real estate and public services-all financed directly or indirectly from the proceeds of the financial bubble.
  • Around 2/3 of jobs created under New Labour have been in the public sector-which bodes badly for employment prospects if public spending is cut
To add to the ominous character of this survey a timely piece of new research by two academics at Kent University has looked at the experience of recessions around the world over the period 1960-2000 and concludes that deep recessions such as the one we are currently experiencing have profoundly negative impacts on productivity for years after the recessions are over. 

Our main findings show that, cumulatively, from the last year of the recession up to fours years after, recessions have significant negative productivity effects. These effects, however, arise as a combination of different mechanisms. Recessions tend to increase the level of frontier TFP (technology growth and efficiency) but decrease the rate of technical progress. The combination of these two effects is a fall in frontier productivity relative to the one that would have prevailed without a recession. Recessions also increase significantly technical inefficiency in the economy. Finally, deep and long-lasting recessions tend to have larger impacts on productivity, although the mechanisms differ from standard recessions.

 There are key debates to be had still about to what extent the UK needs to restore manufacturing as opposed to services, and also whether cuts in public spending are necessary and in what areas. However, one thing is crystal clear, that whatever route the UK has to take to recover a growth dynamic it is going to be very hard work. The dawning recognition that this is the case, and the absence of any coherent plan to achieve it,  must be one reason at least why those arguing for a more sustainable (ie environmentally focused ) economy are influential today. For a clear explanation of what the sustainable economists have in mind for us this new report spells it out. 
   The traditional function of investment, framed around increasing labour productivity, is likely to diminish in importance. Innovation will still be vital, but it will need to be targeted more carefully towards sustainability goals. Specifically, investments will need to focus on resource productivity, renewable energy, clean technology, green business, climate adaptation and ecosystem enhancement. These are precisely the kind of targets that emerge from the consensus around a global Green New Deal. Foregoing consumption growth seems inevitable if we are to sustain this enhanced need for ecological investment. 

 The necessity of ‘foregoing consumption growth’ in favour of saving the planet is, in this context, a convenient way of also avoiding the issue of tackling the stagnation of advanced economies such as the UK’s. The question of how to create a turn around in the UK economy should not get sidetracked by the sustainable growth lobby. The solution to all our problems, including environmental ones, involves greater control over our environment, through scientific and technological breakthroughs and through greater productivity of labour, which creates more human time to focus on new challenges rather than slogging away at the old ones. 



6 responses

3 12 2009
Robert Hennecke


This is a working example of my previously stated idea: modernized guilds/Co-ops. I think it applicable to any western industrial nation in the face of excessive greed on the part of trans-national corporations with little or no concern for the welfare of the host nations that allowed for their initial existence.

3 12 2009

In my opinion we need to look at sustainable growth from a different perspective. Sustainability is making sure that our resources will be available to us for generations to come. It doesn’t mean we have to stop consuming and put the breaks on our economy. To the contrary, I believe that through innovation and slight mentality shifts we can maintain growth while ensuring we don’t reek havoc and obliterate everything before us. We need to break away from the “produce and throw” mentality and adopt a somewhat closed loop process where most of our products are recycled to reduce waste and raw material consumption.

No body wants to lower their life standards, but if we don’t take sustainability seriously we might all have to lower them eventually.

thanks for sharing.

Alexandre Boudreau

6 12 2009
julian dobson

Interesting post. I’ve been reading Tim Jackson’s ‘Prosperity Without Growth’, which, as you’d expect, runs absolutely counter to your view – but does acknowledge the difficulty of moving away from a growth-oriented economy.

I think there are two problems with your argument. The first is that you assume there will be ‘technological breakthroughs’ that will somehow excuse us from the hard work of saving the planet (as we currently know it) now; the second is that we can achieve that through greater productivity of labour, when all the trends show that we’re working longer hours than we used to, especially in the UK.

I think your point about manufacturing is well made. But again, there’s a problem: we have outsourced most of our manufacturing in order to get the stuff we want produced more cheaply. And what we do manufacture doesn’t create large-scale employment any more – my home city of Sheffield still produces significant amounts of steel, but requires very few workers to do it.

8 12 2009
Why climate change is a convenient excuse to justify economic stagnation « UK After The Recession

[…] growth  and redistributionist rather than developmental economic policies.  These calls for sustainable growth fit very nicely with the lack of dynamism that infects western economies. How convenient that there […]

16 12 2009
Robert Hennecke


My theory as to how production can be returned to western countries and prevent the PR China of taking over manufacturing completely. I believe it to be an existential threat. It must be because they are blocking the ability of finding it with a google search of the name of the title itself, only the exact address is able to bring a person to see what I am writing as they have hacked into my blog to prevent it’s being able to be viewed.

12 04 2010
Ten questions to ask your candidates about the UK economy « UK After The Recession

[…] 4. For the past ten years the financial sector has been the motor of the UK economy. Do you see this continuing,if not what will take its place? […]

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