Economic growth and its discontents

2 11 2009

Speech given by me at Battle of Ideas Conference 31 October 2009 in debate with Lord Skidelsky and others

Continued economic growth is important because it means that the productivity of labour increases, we get more for less, we get more control over our lives and we become less vulnerable to the vagaries of nature and of fortune.

The whole idea of economic growth is under attack from many quarters. Sociologists such as Richard Layard represent an anti-consumerist trend. Layard argues that economic growth and its consequent material benefits do not make us happy. I would like Layard to do a survey of the millions made unemployed through this recession to see how much happier they are now that they have lost the benefits of a wage. Do we really think that poverty will make us happier?

Environmentalists argue that economic growth is inducing climate change and irrevocably damaging the world around us. These people are in reality scientific progress deniers. They do not believe that we can grow our way out of problems. Yet it is China, the fastest growing economy in the world, which is adopting and developing alternative forms of energy at a faster rate than anywhere else. It is economic growth that is driving this and making it possible.

There are also those who argue that scientific and material progress are too prone to risks and dangers to pursue safely. They question whether such things as GM foods, nuclear power or the pharmaceutical industry are not doing more harm than good. Their campaigns against scientific progress slow down and discourage investment and development delaying the benefits that progress can bring.

All of these trends have one thing in common. They represent a loss of belief in humanity and its  ability to change, adapt and grow economically and materially. Why is continued economic growth so essential? I would argue that there is a necessity argument but also  philosophical and social reasons why we need to push for further and faster economic growth.

When is enough enough? Not yet! The average global wage according to the World Bank was around £5000 before the recession began. This means that were growth to stop now and everybody to receive the average wage we would all have the standard of living of a UK pensioner without any savings. Just to get to the reasonable but not luxurious average wage in the UK of £25,000 would mean a fivefold increase globally. This means that we need of necessity further economic growth to raise the average standard of living.

Of course, many millions of people in the developing countries are way below even the average wage and require a bigger leg up. But even in the developed western economies there is still a need for the creation of extra resources. Poverty, deprivation and lack of sufficient services exist in many areas of life. My father-in -law for example was recently refused a life saving operation from the NHS essentially because it was too expensive.

From a philosophical point of view it is important that we understand how inimical anti-growth sentiments are to the whole tradition of western civilisation. The Book of Genesis says that man shall have dominion over nature and urges us to ‘go forth and multiply’. We are turning our back on what has enabled us to crawl from the swamps and into the relative comfort of the modern world, our ability to tame the hostile environment we found ourselves in. David Attenborough made this about turn explicit when he blamed the Bible for climate change earlier this year.

Many of the discontents that people have with economic growth are connected to failures of the market economy rather than growth itself. The market is often an inefficent producer and distributor. It is a system based on production for profit rather than to meet the needs of society. The market can create environmental problems and pollution. It is unstable and contains within it continued recessionary tendencies as we are experiencing now. It is often wasteful and irrational and it produces and reproduces inequality because of the division between those who own wealth and those who do not.

But the problems of how the market economy works should not blind us to the benefits of continued economic growth. We could end up throwing away the growth baby with the market bathwater.

Anti-growth sentiments turn reality on its head. Far from creating problems all human civilisation, culture and progress have been built on economic development. The most economically dynamic and successful countries have always been the most innovative, the most culturally dynamic and the most progressive in every way. The alternative is also true, that economically stagnant or backward countries have less going for them across the board. Turning our back on growth means turning our back on what makes us most human, our ability to exercise dominion over the world we live in.

Advertisements




Sharing out the misery

22 04 2009

A recent study by Keep Britain Working has found that many workers have responded to the threat of job cuts by proposing that their own pay and benefits should be cut in order to save the jobs of others.  While I have no idea how sound the methodology of this survey is it does chime with anecdotal evidence.  How can we understand this apparently altruistic response, for which one struggles to think of a historical precedent?

There is a positive element of solidarity in not wanting to see your colleagues lose their jobs.  Perhaps there is even the fear that if you accept the redundancies of others then you may well be next.  However, whilst in previous recessions there has been a similar and quite strong tendency to fight for the defence of jobs, in the past people simultaneously fought to defend wages.  One need only go back to the UK Miners’ Strike in the early 80s to see that.  During this period, workers tended to focus on forcing employers to not make redundancies, cut pay or close businesses.  It would seem then that the virtual elimination of organised labour as an effective force in society today plays a significant role in fuelling a widespread mood of acceptance that cuts have to be made somewhere for us all to survive.

The prevailing popular reaction to the recession in the UK has been passive acceptance with underlying anger, where the anger has been directed mainly at bankers or foreign workers.  Very little active hostility or organised resistance has been directed at the government or at employers.  This recession is increasingly being seen as the product of greed in the City and perhaps also greed in general.  In light of that, we can see how the willingness to take cuts in living standards is the flip side of this diagnosis, in the sense that people now feel that a period of austerity is a necessary antidote to the age of greed.

The unwillingness of people to fight for what is in their best interests, which for many of us means the maintenance or improvement of living standards, shows how low our self-expectations have become.  Current discussion about the public sector and possible cuts in public spending will now take place within this milieu of virtuous and necessary austerity and prudence, in no small part influenced by our modern-day preoccupations with what is good for the environment. 

Perhaps it is time to focus our efforts elsewhere and create a different agenda which puts development and growth at the centre of our discussions on the recession, the economy and the future.  Let us put our time to better use and quit trying to work out how best to share out the misery.





Capitalism, anti-capitalism and the G20

30 03 2009

The fault line in politics today is not between capitalism and anti-capitalism. It is between those who favour economic growth and those who are opposed to it. The ‘anticapitalists’ who will be protesting this week against the G20 do not have any kind of coherent alternative to capitalism. They are only anti it in the sense that there are aspects of capitalist society that they do not like very much. What they do have in common is an opposition to economic growth. 

Marx’s critique of capitalist society was profound and all embracing, but it had at its heart a central belief that capitalism needed to be superceded because it could not consistently develop the means of production globally. It was prone to economic breakdown and even war. This analysis has proved to be correct over the past century and is true today. The current recession is a product of the declining productivity of the economies of the west and the tensions between global powers. But Marx never rejected the economic growth that capitalism can bring.  He understood that freedom from want was the basis of civilisation and that remains true today.

If it were just a ragbag of anti-capitalist who held these anti-growth views that would not be a problem. However the sentiments they espouse are  shared by large sections of society. There are people who back the anti-capitalist demos who believe that we need a permanent recession to combat global warming.  This may seem extreme but it is now commonplace to hear people argue that we have too much and need to cut back.

One consequence of the recession in the UK is that we face austerity in the years to come. Public services will have to be cut and living standards will decline. Our response to this should not be to rationalise it by saying it is good for the planet or good for our souls. It should be to look for more ways to invest and innovate in order to find solutions to the technical,  environmental and social challenges we have to face.