Is it time to stop praying to the God of economic growth?

Is it time to stop praying to the God of economic growth?

In the UK policymaking world economic growth is viewed as the holy grail that will solve all of society's problems. Poverty? Run down towns and cities? High unemployment? Economic growth will solve them all... apparently.

So what is economic growth?

At its most basic economic growth is an increase in the value of goods and services produced over a certain period, usually at a country level. Traditional economics tells us economic growth is vital as people earn more, spend more and therefore have higher standards of living. Local and National policy makers use economic growth as the foundation for many (if not all) of their strategies, funding bids for money from central government and policy design.

Hasn't economic growth raised living standards?

Over time the value of the UK economy has increased vastly from around £10,000 per person in 1955 to nearly £33,000 in 2022 and life expectancy has increased by 8 years for men and 6 years for women between 1980 and 2020 suggesting a link between economic growth and health. However; over the past few years the economy hasn't seen much growth. Productivity has flatlined and incomes are struggling to outpace inflation leading to the current cost of living crisis and improvements in life expectancy have slowed. Once you start to look past the averages there are also stark differences between key economic and wellbeing indicators when considering gender, ethnicity and geographic location.

but isn't this just a blip?

Well, no. The past 15 years have been some of the most turbulent in economics terms since the 1950s, with the financial crisis in 2007/08, uncertainty following Brexit, Covid-19 and now climate change disruption. What this demonstrates is that our current economic system is fragile and dependent on growth. If economic growth slows the economy begins spiralling downwards and the people most at risk are the poorest in our society.

The Joseph Rowntree Foundation estimates that around 1 in 5 people, or over 13 million people in the UK were in poverty in 2020/21. Of these, nearly 4 million were children, but the child poverty rate varies hugely by local area with four local authorities in London exceeding a 45% child poverty rate.

If economic growth is such a force for good how, in 2020/21 can we still have 20% of UK citizens living in poverty?

Conversely, research from the Equality Trust shows billionaires have enjoyed 1000% increase in wealth since 1990, and between just 2020 and 2022 billionaire wealth increased by £150bn in the midst of Covid and an ongoing cost of living crisis.

At this point you could argue that this is just about redistribution. UK Government could raise taxes on the wealthy to redistribute the gains from growth more fairly but this is a sticking plaster for a system that's fundamentally broken.

Let's get back to economic growth.. and the Climate Crisis

Under capitalism, global output (GDP) needs to keep growing by at least 2-3% per year to maintain rising aggregate profits. This means a doubling of the global economy every 23 years and a corresponding increase in energy, resources and waste. We already know that the UK is overshooting 5 out of 7 planetary boundaries, so how can an economy planned to double in size manage to stay within planetary boundaries when it's already exceeding them? In short - it can't. And whilst governments around the world are focussed heavily on carbon emissions, even if we met our Net Zero targets (which currently seems unlikely) this does nothing to reverse deforestation, overfishing, soil depletion and mass extinction. This is about so much more than carbon.

So where does this leave us?

Citizens, policy makers and governments around the world are slowly waking up to the news that scientists have been telling us for years; we cannot continue with our current economic model. EF Schumacher was a pioneer in this space, identifying back in 1973 that the modern economy was unsustainable due to natural resources being treated as expendable income.

Ireland, Scotland and Wales have all started to make progress in thinking beyond economic growth and the UK Office for National Statistics is also looking at more holistic approaches to measuring economic progress. Whilst this is a positive step I believe the UK government is completely blinkered by a focus on economic growth. I'll cover this in my next blog "why is England lagging behind on Wellbeing thinking?"

If this blog got you thinking and you want to discuss any of the topics raised, please get in touch.