Press "Enter" to skip to content

I just don’t get Economic Growth

I have been trying to understand Economic Growth for quite a while and I think I have reached the point where I give up. There are a lot of people on the radio who talk about how important it is and they can’t all be wrong so maybe it is me.  Here is how my logic got me to this point.

Wikipedia describes Economic Growth today as:

Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

If I look at the change in real GDP in my lifetime till 2010 and compare it with how I feel society and my own fortunes have changed I should get a feeling for why we need to have economic growth. I was born in 1965 so I’ll take my lifetime as a guide. This site give GDP figures for the UK for the years 1965 and 2010. This site gives an inflation converter. Between the two I can draw a table like this.

Year GDP – Billions Population Millions GDP Per Person At Today’s Value
2010 1,458.45 62.262 23,424 23,424
1965 35.888 54.034 664 8,989

UK GDP per person (inflation corrected) has increased in my lifetime by 2.6 times or 160% over 47 years which is an average growth rate of 5.5%! From the noises people make on the radio 5.5% would be a very good thing to continue. These figures may be approximate but looking at the numbers on other websites I think an increase of about 2.5x is good enough for my arguments.

Famously Bobby Kennedy said GDP:

measures everything except that which is worthwhile

I wouldn’t have expected a doubling of GDP to have made us a Utopian heaven but I would have expected great increases in our ‘real’ standard of living. If there were a linear relationship between GDP and standard of living I would expect it to have more than doubled – though how one calculates the doubling of a quality (rather than a quantity) is debatable. It is like saying one book is twice as good as another.

So what is different since 1965?

Health care has improved a great deal though it is plateauing now with the onset of diseases of affluence. Most married women (certainly in middle class households) did not work but now they do – which means more people in the labour market. Childcare now appears as a ‘service’ but didn’t when done by a family member. I am not aware that we get double the holidays of our parents generation or will retire sooner. Back in the late 1960’s we would go on camping holidays in Devon and my father would have a beer and by the 1970’s we were a two car family. Nowadays people expect foreign holidays but they probably don’t get double the pleasure from them. I have just been on a camping holiday to the English Lakes with my children. Did we have double the standard of holiday of my parents generation?

In the 1960’s there were a large number of council houses and an on-going building programme so people who could not afford to be owner-occupiers at least had the hope of secure housing for life. University education was restricted but if you got in it would be grant aided. There were technical colleges for vocational education and real long term apprenticeships so you didn’t have to get a degree to get a job in a call centre.

I am not saying the sixties were heaven but many of the changes that have made the UK a better place to live, such as the increase in rights for woman and the decline in racism and homophobia, do not require economic growth. More women in the work force is a good thing but wouldn’t it have been better if that had been achieved by more men staying at home to look after their children rather than sending the little ones into care from 8am to 6pm?

A lot of this has been said more elequently by John Gray on his BBC Point of View The revolution of capitalism. The separate point I am wrestling with here is the overwelming sensation that society is just making up work to fill people’s time. The endless consumption, the multitude of pointless choices, the endless wrestling with overly complex financial products. None of this is making our lives better. On top of this is my concern that things have become more efficient. We are actually better at growing food, building houses and dealing with poo than we were in the 1960’s. We can do it with fewer resources so we should be able to make things ‘better’ without increasing the “amount of the goods and services produced” at all. We need fewer people working on the land or going down mines than we did in the past so why don’t we have more people enjoying leasure? We have got something terribly wrong.


Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.