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, Economics editor 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 63.

    Intangibles, are also being commoditised. It was obvious that Hepburn is in favour of costing & taxing water, trees, mountains, coast & air ignoring all the problems that will bring.

    This model, of making the middle pay for everything, including the profits for and taxes on behalf of the high earner & wealthy together with subsidies for the poor, is the one where apathy will take us.

  • rate this

    Comment number 62.

    By measuring the real gap between contracted value and real value, the scale of problem can be measured effectively. Because a time frame of 20 years is involved, cynical minds play havoc.

  • rate this

    Comment number 61.

    If a large population in the UK which cannot be supported without eternal growth is the problem, why not consider a policy of slowly encouraging population reduction to a sustainable size? This would assist quality of life and environmental issues simultaneously. We are heading the other way at the moment due to misguided short termism.

  • rate this

    Comment number 60.

    Let's take a look at the latest scam dressed up as trying to boost the economy:
    The government give low interest loans to banks
    The banks take low interest loans and charge high interest to the public and business
    Result: public and business, who are the ones who need the low interest rate loans, pay the same high interest rates
    Banks make fortune

  • rate this

    Comment number 59.

    maybe re-think our slavish pursuit of economic growth. (Especially since we don't seem to be doing very well at getting it.)
    Most people with money work for the government

    Lord Skidelsky argues in a book he's just written... what really matters is leading a good life

    double lol

    A Lord eh?
    Leading a good life eh?
    No money worries eh?

    As useful as a chocolate teapot eh?

  • rate this

    Comment number 58.

    The situation we are in reminds me of Harold Macmillan's speech when he became Lord Stockton, he warned about selling off the family silver and the wisdom of building the economy based on services, how right he turned out to be. We must start to listen to some of these elders, not those whose policies caused our demise, they have the experience of history on their side.

  • rate this

    Comment number 57.

    There is an unfortunatly simple flaw in modern economic models. Money is a commodity. Property is a commodity. Contracts are not. Property value fluctuates according to the market, unless the economy grows consistently, property values must decline but contracts derived from property value, ie mortgage and loan debt are constant. There are many different ways to explain the problem.

  • rate this

    Comment number 56.

    As a businessman having survived three significant periods of downturn since the late 70s I could not agree more with Lord Skidelsky. It is amazing that the illusion of constant growth is still at the heart of financial planning.We need to pay our own way and stop stealing the next generations future.

  • rate this

    Comment number 55.

    just because govts targeting reducing defects reducing their net spend into the economy have clearly abandoned their commitment to growth does not make it right!
    sustainable yes govt can direct spending into sustainable projects
    quality absolutely growth is measured in money and better quality costs
    more and proves succesful for iPads German cars
    a 9 year low in disposable income
    firms need custom

  • rate this

    Comment number 54.

    Yes. But on the other hand, no.

    I think we should be a bit more relaxed about it. Quite a bit of the last two decades of growth was illusory anyway; due to immigration and inflation and debt. It wasn't real, true growth.

    Do we want to chase more of that?

  • rate this

    Comment number 53.

    Without Growth Mr Osbourene and the Torys can kiss goodbye to reducing the deficit. It will mean a huge reduction in goverment spending and things will never be the same again. The best way to go is a massive change in the tax systen which will force the rich to pay there fair share. Lets have that EU referendun and start fresh from there.

  • rate this

    Comment number 52.

    In simplistic terms, if governments didn't keep over spending,our world economic problems would be much smaller. When an individual bases ones lifestyle on credit card overuse, then sooner or later the chickens come home to roost. Populist governments spend our kids future with gay abandon, while politicians have retired on massive pensions

  • rate this

    Comment number 51.

    I wish I could find the guy who said Fractional Reserve Banking is the problem. It isn't. No more that Capitalism is the problem.

    If you want to return to the Dark Ages then abandoning FRB (or capital adequacy rules) is a sure way to do it.

    Blame the Nixon Shock or the City Big Bang, or Brown, or the Sub-prime crisis, or bankers, or Mervyn King (that gets my vote) or the Euro - but not FRB.

  • rate this

    Comment number 50.

    Nil or small growth may be viable here in NZ or Aust, countries with small populations and the rule of law but sadly I think that time/option for Britain has long past. With 80 millions in the land with virtually no agriculture and 3 weeks food on hand, "laws" made in Brussels by weirdos - I think a UK Mad Max scenario more likely. A taxpayer sinecure for all is silly and exacerbate your agony.

  • rate this

    Comment number 49.

    No; we shouldn't forget about growth.
    We should accept that the UK is on a long slow decline no matter what happens in The City and to manufacturing - and has been for decades.

    Therefore we should figure out how to successfully manage our economy (which is still large) with very low growth. If we don't we'll become the new Portugal, which was also once a world power.

    (& we can't afford green)

  • rate this

    Comment number 48.

    Should we forget about growth?
    Isn't the right question: How much more damage can the economy withstand? is nearer the situation the UK finds itself in. let's have a look at the recent indicators...
    Income levels at nine-year low
    Growth, 0.7% decline
    The UK government borrowed more than expected in June
    Financial sector corruption still unchecked
    Mortgage lending fell in June

  • rate this

    Comment number 47.

    "Should we forget about growth?"

    Why don't we ask someone who should know?

    The Chancellor.

    OK. I know. - We cannot ask him because he is a simpleton.

  • rate this

    Comment number 46.

    Growth, growth, pffff...

    what's wrong with staying the same size?

    From my perspective, it supports the same number of people...

  • rate this

    Comment number 45.

    "Global growth is projected to grow at 3.5 percent in 2012, then accelerate somewhat to 3.6 percent from 2013-2016, and then show a further slowdown to 2.7 percent from 2017-2025. At 3 percent, on average, global growth will still be somewhat higher than the period 1980-1995 but between half and a full percentage point below the growth rate from 1995-2008." Not good at growth?

  • rate this

    Comment number 44.

    This article and the comments made about it are wide of the mark. The impression is given that this is the end of growth and that growth only benefits the "the 1%" or the "evil capitalists". Both these assertions are simply wrong
    The world economy is still growing overall - especially in Asia lifting millions out of poverty. The crisis we face is a crisis of European welfarism - simple as that.


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