Economic growth is not the answer
According to Charles Seaford, Head of the Centre for Well-being, growth should not be the primary objective of economic policy.
Growth should not be the primary objective of economic policy. Rather, it would be far more practical to discuss the targets that economic policy makers should use.
At the Centre for Wellbeing at the New Economics Foundation (nef) we have been arguing for some years that we need a new measure of progress for society. (Almost) everyone knows about the deficiencies of GDP as a measure of welfare, but in the absence of an alternative it becomes the default option, and growth becomes the primary social objective. In the last couple of years this position has become orthodoxy, at least in Europe, and officials are now working on an effective new measure.
Meanwhile the growth/de-growth debate rumbles on. I have to say I find myself rather bemused by it. It often takes on a curiously ideological character – and while there are some arguments to be had about values, I think it helps to present some facts as well. These are that:
- Increased material consumption increases wellbeing. While there are sharply diminishing returns as income rises – just how sharp and at just what point in the curve varies from society to society – for the least well off this statement is entirely uncontroversial.
- Increased economic activity (GDP growth) does not necessarily translate into increased income for the least well off, or even for the average family. In the US and UK, for example, median earnings have stagnated in the last decade despite continuing growth.
- There are a range of things that for many people are as (or more) important than income to wellbeing (although for the poor, income may well trump everything else): employment, stable communities and social trust, relatively equal societies, the opportunity to do fulfilling work, time to spend with friends and family and to take part in community activities, a pleasant environment.
- Growth is currently associated with growth in carbon emissions (and other threats to sustainability), although this is a reflection of the present pattern of resource consumption rather than a necessary feature of the economy.
What this shows is not that growth is a good or bad thing, but that it should not be the primary objective of economic policy. To discuss whether you are for or against growth seems to me to be rather pointless. To discuss what targets economic policy makers should use is more practical.
The evidence just summarised points to the following as better targets than growth:
- A decent income for everyone – perhaps even maximising the proportion of the population with an income between a lower and upper band
- Low unemployment
- Stable employment
- Working hours in line with people’s preferences
- An economy that is environmentally sustainable – both globally and locally – and resilient to potential future shocks.
Of course there will be trade offs between these objectives. Working out how to manage these is a central task for the new economics of wellbeing.