What does economic growth mean?

It is Time to Put Wellbeing Ahead of Growth

January 13, 2020

What do the prime ministers of New Zealand, Iceland, and Finland have in common?

In a word, wellbeing. 

I gave a speech last week on inclusive economic growth. 

Over the centuries, kings and ministers have steered their policies towards different goals. 

Pharaoh Ozymandias put his realm to work building monuments to impress his rivals.  Ancient Biblical tribes appeased their gods to secure their prosperity.  Medieval theocracies imposed religious purity, to secure rewards in the next world. 

Early industrial European nations focused on expanding empires.  More land was better – or so their political philosophy said.    

The pre-war Soviet bloc was obsessed by industrial output; it would solve all their problems.  For the past few decades, economic growth has been our  Holy Grail.  All public and corporate policy is subservient to getting people to spend more and more money. 

In every century, those who question the received wisdom are heretics.  But I have to question the wisdom of endless growth on a finite planet. 

What does growth mean to a thirteen-year-old, choosing her GCSE subjects, while worried about the climate crisis destroying civilisation?

How would we explain the necessity of economic growth to the people we see sleeping in shop doorways?  

What does growth mean to a care worker juggling two jobs on minimum wage who never gets to read her daughter a bed-time story? 

Or the owner of a small business who is about to go bust because a large corporate customer still hasn’t paid their invoice, 120 days after it was due. 

Or to parents who are financially secure, but worried about their son being the next victim of knife crime?

I’m growth agnostic.  Growth can achieve a lot – but it must be a means to an end, and not an end in itself.  The economy has grown in the last ten years.  So has homelessness. 

I’m not agnostic about profit.  I want businesses to be profitable.  It’s what you do with that profit that counts.  If it’s reinvested in the productive economy, that’s good.  If firms are using their profits to look after their people, and develop their talents and morale and productivity, that’s great.  If firms are using it to innovate and develop cleaner, more sustainable ways of working, that’s brilliant.  But if it’s disappearing off into a tax haven, then that’s unsustainable.  It’s bad for the workforce, it’s bad for the environment, and it sucks money out of our region.   

That’s why devolution is so important.  It is only by working closely with a place-based approach that we can really influence lived experience.  Our proximity informs our judgement. We have to talk to the people who are affected.  We have to see the places day by day.  Above all, we have to co-design our policies with the people they affect.   That cannot be done from Whitehall. 

We must stop worshipping growth.  We must start making policy by wellbeing.  Does it make people happier?  Safer?  Does it give us security?  Does it make us healthier?  Can the future sustain it?

There’s whole books on this subject – I’d recommend Kate Raworth’s Doughnut Economics.  But in a short newspaper column, a story might be better.  

Two economists, Sue and Joe, are out for a walk in the wilderness. 

“Sue, I’m hungry,” says Joe.  “I’ll give you £50 if you climb that tree and see if any of the fruit is ripe.”

Sue accepts.  None of the fruit is ripe.  A branch snaps and she comes plummeting down, collecting bruises along the way. 

Ten minutes later, they see another tree.  “Your turn, Joe,” says Sue.  “This time I’ll give you £50 if you climb up to see if there’s any ripe fruit.” 

Joe climbs, gets scratched and scraped, but finds no ripe fruit. 

“Well that was a waste of time,” says Joe.  “We both got hurt, we damaged the trees, and we’re still hungry.” 

Sue replies, “At least we grew the economy by £100.” 

This article was first printed in The Journal and The Chronicle on Monday 13th January 2020

Donut economics? WooHoo!