Should we forget about growth?

Lord Skidelsky, emeritus professor of University of Warwick. Lord Skidelsky, emeritus professor of University of Warwick

Never mind the size, focus on the quality. That's always good advice when picking fruit.

Some say it should now be our economic mantra as well.

They say that our fixation with GDP and growth is threatening an environmental disaster. Or, as Lord Skidelsky argues in a book he's just written with his son, Edward, it's distracting us from what really matters, which is leading a good life.

That was our subject on Stephanomics on Radio 4, which is re-broadcast later on Tuesday.

You might not agree with everything Lord Skidelsky says. But he's not the only one who sees the global financial crisis as an opportunity to take stock of the way we've organised our society - and maybe re-think our slavish pursuit of economic growth. (Especially since we don't seem to be doing very well at getting it.)

That is certainly a common theme of the emails and letters I have received since the recession started in 2008.

In fact, some of you think I and other economic reporters at the BBC should be more impartial on the subject - and not treat every rise in GDP as such good news. We didn't get into that in today's programme, but I'd be interested to know what you think.

The years leading up to the crisis might look like a golden age to many of us now. But if you think about it, they didn't feel so great at the time.

Even then, there were millions of people living in households with no work - and millions of others working longer hours they would like.

We worried about people running up massive debts to buy things they could not really afford, and talked, even then about the middle class being squeezed. Many were also uneasy about the crazy salaries being earned in the City - where, it turned out serious imbalances were building up we would all live to regret.

Everyone - from Sir Mervyn King, to George Osborne, to Ed Miliband - says we need to come out of this crisis with a different kind of economy, one that is more balanced, less vulnerable to crises.

What if we need to have a different approach to economic growth as well? Another guest on the programme, Cameron Hepburn, an economist at LSE, favours a more quality-driven approach to growth that would put "sustainability" at the heart of our economic future.

It's a familiar argument, that you hear from many environmentalists. The idea of there being natural "limits to growth" was a also a big theme for popular debate in the 1970s.

But, as I've suggested, Lord Skidelsky's ambitions are much bigger. In fact, he's quite rude about environmentalists in his book.

He and his son also have little time for those who say we should focus on "happiness" instead of economic growth. That, they argue "is simply to replace one false idol with another."

The point is to stop thinking we have to maximise anything - whether it's some measure of "happiness" or GDP - and start focussing on how to live. He wants us to re-learn the distinction between what we need, in order to lead a good life, and what we simply want.

Among other things, Lord Skidelsky thinks shorter working hours, higher taxes on consumption and less advertising might provide a way to do it.

He also proposes that every citizen be given a small "basic income", so everyone has the financial security to pursue their talents, even if those talents are not very lucrative. That's a policy proposal that's been around a long time: it's sometimes been called a negative income tax.

It's not been implemented in the past - and you have to wonder, at a time when people are angrier than ever about welfare cheats, whether it could possibly be implemented now. Even in the unlikely event that the government had some extra money to spend.

Some of you will think the rest of Lord Skidelsky's argument is equally impractical, or naive. Others will consider him worryingly paternalist - or maybe, all of the above.

My third guest, Patrick Minford, the veteran economist from Cardiff Business School, thought it was downright silly.

But you won't be surprised to hear we had a meaty debate which strayed a long way from the typical subjects covered in this blog.

A big topic, perhaps. But we don't sweat the small stuff on Stephanomics - except, perhaps, the small fact that today's programme was the last of the current series. Boo hoo.

Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

So it's goodbye from me

After 11 years at the BBC, I'm leaving for a new role in the City.

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  • rate this

    Comment number 43.

    Patrick Minford uses a closed-circuit language about markets. He claims our desires are revealed by what we buy. He takes no account of the billions of pounds spent on advertising. So whose desires are we talking about? And the fact that we buy what is for sale because it's all there is when we would probably prefer something more intangible like the absence of bullying, which money can't buy.

  • rate this

    Comment number 42.

    Growth based on cheap credit fuelled consumer spending isn't real growth and should be forgotten.

    Consume less, enjoy more.

  • rate this

    Comment number 41.

    We need to concentrate on survival. The days of growth are now well behind us and will not return for at least a generation or two. I am afraid the future is very bleak indeed - certainly for us all in Europe.

  • rate this

    Comment number 40.

    Exponential growth cannot be sustained. If the UK continues to grow on trend then in less than 30 years we will be doing double what we are doing today. Twice as many: cars, people, landfill sites, economists, Tesco stores, hospitals, etc. For China the period is less than 9 years. Nobody says it more eloquently than Dr. Bartlett

  • rate this

    Comment number 39.

    As you correctly say, big and important stuff, worthy of debate.

    Mr Osborne clearly sides with Prof Minford. He launched the SME guarantee scheme last year and tomorrow will re-announce "Funding for Lending" for the 3rd time.

    A positive change of structure to the UK economy: capital ownership by banks of SMEs.

    Einstein's view of repeating the same mistake "insanity". Change of Chancellor?

  • rate this

    Comment number 38.

    I argued in better times that gdp/growth were poor economic measures however in the current circumstances growth is very important for making it easier to pay the debt & our current -ve growth is near disasterous. In normal times, employment is a better measure but Govts would have to give up blaming unemployment on the unemployed & accept it is largely the result of their economic policies

  • rate this

    Comment number 37.

    "Some of you will think the rest of Lord Skidelsky's argument is equally impractical, or naive."

    Some of us think the current system (where many people are better off on benefits rather than working) is utterly impractical and naive.

    Constraint 1- a minimum acceptable standard of living. Constraint 2 - make the labour market as efficient as possible. You end up with a "basic income" system...

  • rate this

    Comment number 36.

    "No economic growth" + "the rich taking a bigger and bigger share of wealth and income" = "bad news for the rest of us".

    We need to spend less time worrying about the sum total of GDP and more about how it is distributed. That's not just on moral grounds but on economic grounds. We have developed a rich elite who earn far more than they no how to consume - that's the root of the debt crisis.

  • rate this

    Comment number 35.

    Do we have a choice between going for growth or having a no growth strategy?
    In a world of finite resources, western economies will be squeezed out by the new emerging economies.
    Perhaps we should accept the new reality and figure out how to run our society with nett zero growth.

  • rate this

    Comment number 34.

    As long as we have fractional reserve system, growth is required. There is no escape. Growth, Inflation & Interest are the drivers of fractional reserve system.

  • rate this

    Comment number 33.

    Our society has become so inneficient that there's still a lot of growth to be squeezed out of this lemon.

    Consider the low durability of today's products, the tight new product cycles, the tendency to throw away rather than repair, the mis-fitting to specific personal needs (especially in medicine).

    The other day I re-dyed some faded black clothing just because I could: it felt liberating.

  • rate this

    Comment number 32.

    Wow! Is Patrick Minford still going?

    He goes back to the good old days when Milton Friedman was advising us to do "absolutely nothing" with North Sea oil revenue and Clive Sinclair was predicting we would all be "as rich as Croesus" by now, in a TV series just before Thatcher took over.

    LOL Mr Minford!

  • rate this

    Comment number 31.

    GDB measures all economic activity including the growth of the past 10 years much of which was asset inflation fuelled by debt. Needless to say this is not the type of growth we need. If however we move from an economy based on unsustainable consumption to one on sustainable production we will be in better shape.

  • rate this

    Comment number 30.

    Only one of these economists mentioned advertising which must be approaching totalitarian status in our consciousness. Brainwashing is by no means an absurd description of the onslaught of the shapers and persuaders of our buying decisions and indeed the way of life. Advertising is the new economics. Economists burn your books you have only your illusions to lose (oh! and some royalties!)

  • rate this

    Comment number 29.

    I think instead of growth consider values such as employment, sustainable pricing i.e if I buy a house the price I buy it at will be the price it will sell for. The price could be set by state powers. The only thing that you can rely on is the more people in work the jobs will be created as employment creates employment.

  • rate this

    Comment number 28.

    The only thing to make life worth living is being able to look toward a brighter future. The prospect of long term poverty,austerity and an inststence on capitalist fired growth is nothing like a bright future except to the 1%

    We wonder why our poorer young turn to rioting? Why nihilism is on the rise? Why anarchy is on the streets. Look at the dystopia polticians have given people.

  • rate this

    Comment number 27.

    Economic growth is indeed a chimera. People buy a flashy car so they can drive to work to work long hours to pay for their flashy car. Beyond subsistence level, we are no happier with increased "wealth".
    Quality is ignored. Externalities - natural resource depletion, damage to the ecosystem - are excluded.
    Think of bacteria in a Petri dish, madly growing up to its limit and then - collapse.

  • rate this

    Comment number 26.

    There should be a Progression Index announced at the same time as GDP figures so we can see if an increase in growth is benefiting a tiny minority or the majority of people.

  • rate this

    Comment number 25.

    Should we forget about growth?
    Better we should forget about Stephanie Flanders.

  • rate this

    Comment number 24.

    Growth will always continue through invention and efficiency, but not through financial engineering.

    It is the financial engineering which has made us loose all values.

    I am for paying people to do nothing, funded from taxes on consumption.

    If nothing else it will abolish our current form of slavery.

    Not enough space here to reform the economic system, and bring it back into balance, & value


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