The only goal that we really know that our Labour government has is growth, but no-one really knows why that is, and they have never explained. So, I've set out 14 questions they need to answer to explain just what it is that they think growth will do for us.
This is the audio version:
This is the transcript:
I sat down and wrote out a series of questions about economic growth that I wanted to ask Keir Starmer.
When I started, I thought there might be 5, or 6, or 7, or whatever, and I'm sorry to say that this video has no less than 14 questions on growth that I think Keir Starmer needs to answer because I don't think any of us really understand why he is so obsessed with growth as the only real goal that his Labour government has.
We know that a strategy for growth failed the Democrats in the USA. They delivered it, unlike governments in the UK, and they still didn't get re-elected. So why is it that Labour is so obsessed with this issue? Can it answer these questions?
The first is, “Why do you want growth?” And I think that's a really fundamental question to ask Keir Starmer, and I've never heard him answer it.
I know that he says that he will let Labour balance the books, but that's crazy because actually there are other ways to balance the books, and anyway, we don't need to balance the books.
And I'll tell you how I know we don't need to balance the books. Because he could, in fact, fund government without doing so, and not deliver inflation, because there's spare capacity in the economy, which means that inflation can't happen for reason of running a deficit.
And how do I know there's spare capacity in the economy? Because he thinks there's room for growth. And if there's room for growth, there is capacity that government spending could use, as well as the private sector, to deliver the growth he desires. So why does he want growth? I genuinely don't know.
What he doesn't also answer is the question, “What do you want to grow?” It appears that he doesn't want to grow the government. That's obvious because whatever Rachel Reeve says, they are sticking to austerity and are trying to cut every government budget that they can. So, it must follow that what he wants to grow is the private sector.
But he can't explain why that is the case and why we will benefit as a result because if he understood what most growth in the private sector delivers right now, it is more profit that is enjoyed by a very few.
And in fact, that leads to the third question, which is, “What will be the benefits of growth?” And again, we haven't heard that. Apart from this, “we've got to balance the budget, and growth will let us do that by increasing the amount of tax we'll collect whilst not increasing the level of government services” claim, which is going to seriously annoy people who are fed up with the quality of the service they're already getting. So, the benefits of growth aren't clear.
So, let's ask the next obvious question, which is “Who will get the benefits of growth?” This is where the Democrats fell flat on their face in the USA. The growth in the USA went to those who were already wealthy. It did not go to the middle classes, it did not go to the working classes, and those middle and working classes voted for Trump instead as a result.
It's not quite as simple an analysis as that as to why Trump got back into office, but it's a good enough explanation for most of what happened there. Because people did not feel better off despite the fact that there was growth, they rejected the party that delivered that growth, that made the rich richer, but had nothing to do with them.
And that's the risk that Labour faces here. If Labour doesn't know who's going to benefit from the growth they're talking about, the chance is they'll deliver it for the rich alone.
So, “If we're going to get growth, what is it that we're going to have to give up to get that growth?” Because we do, of course, live with constraints.
And let's be clear. That is a fact. We haven't got finite resources in this country, whether that be people who can work or whether that be physical resources that we have in the country already, or which we can import. There are limits as to what we can do. That is the whole basis of the economic problem.
So, if we're going to go for private sector growth, and that is the goal that Keir Starmer seems to have, what are we going to give up to achieve that? Well, the answer would appear to be the NHS, education, social care, the police service, the armed forces, and everything else that seems to be quite important to a lot of people in this country. Those are the things which are not going to be funded so that Labour believes that growth in the private sector can happen, which it's going to deliver through lower taxation and lower regulation on that private sector activity, which will then result in the rich getting richer. We're going to give up services for everyone so that the rich can get richer via the private sector.
“Why are those things worth giving up?” is my next question. And my answer is, I don't know. Why is it worth giving up on health care so that a few people can get richer? Why is it worth charging students more so that a few can get richer? What is that trade-off? And why have they decided to make it? Again, I just don't know. And I wish Keir would answer that question.
But he also needs to answer, “Who will bear the cost of those things that are given up?” And what we know is that that's going to be those who are on lower incomes. Let's be totally honest, of course it is. Those who depend upon the state are going to pay the price for the sacrifices that are going to be made so that resources can be allocated to the private sector to deliver the growth that Keir Starmer wants, but can't guarantee to supply.
There's another question. And Keir Starmer has not addressed this one, and nor has anybody else in his government. And that is, “Is the growth that Keir Starmer wants sustainable in the context of the planet on which we live?” We live on a finite planet, and a planet that is also subject to the second law of thermodynamics, which means that the more energy we release, the less we have available to release in the future. That's a process called entropy. And if that is the case, is going for growth for the sake of enhancing the well-being of the rich a tradeoff that we really want to make? I don't know.
Let me ask another question. “How will Keir Starmer know when he's achieved his goal of growth?” What is the measure that he's going to use? Is that an increase in GDP, which, of course, does not take into consideration the distribution or benefit of growth, and which is itself, anyway, deeply subjective and doesn't measure a lot of the things that we really value?
It doesn't measure our well-being. It doesn't measure happiness. It doesn't have a measure for the consequences of poverty and inequality. It doesn't measure the cost of the pollution that is created in the pursuit of growth or anything else. It just measures money and very little more. And even then, it measures money very badly. The accounting inside our GDP - gross domestic product calculations, or national income, if you wish to think of it that way - is exceptionally poor.
So, “Can you actually be sure that you've got your measure of growth right?” Are you actually certain that whatever you do will really deliver growth, or are you simply playing with a statistic? As I used to say to classes when I was teaching, we could increase GDP really easily. We could have a massive climate catastrophe. The cost of clearing it up would increase GDP. That was seen in Alaska once. The single biggest increase in GDP in Alaska's history was the result of the Exxon Valdez tanker crashing into its shore and spilling vast quantities of oil, which had to be cleaned up.
Or we could make the whole country unhappy by having people divorce because divorces are incredibly expensive and require people to move homes, and therefore buy new ones, and therefore furnish them. But the sum of human happiness would not rise as a consequence.
So, is this measure of growth right? Does Keir Starmer know that? I don't know.
And “When will he know to stop growth?” What is the indicator that says enough's enough, and now's the time to look at those quality measures rather than those quantitative measures? Does he have an answer for that question? I very much doubt it.
Nor do I suspect that he will have an answer to my next question, which I think is the twelfth, and that is, “What will happen when you give up on growth?” Will the economy then collapse? Do you have a plan for stability? Because actually, that's the natural state of life.
Think about your body for a moment. In your body, you want a steady state of replenishment. All the time that we live, our bodies are in that state of replenishment. We create new cells to replace those that are dying. They turn over. If, actually, our bodies start to grow too fast, we have one of two problems. We've either got a problem of obesity, or more worrying still, we have a problem with cancer. And we have to actually then do something to prevent the growth. The natural state of life is stability. How will he manage that stability when the time for it comes, as surely it will, because we are living on a finite planet? I don't know whether he can answer those questions.
And let's also just ask the obvious question that follows on from that, which is, “If you can't answer these questions, why can't you answer them?” Because before you chose to make growth a strategy, you must have considered the alternative, which was not growth, but which was stability, which instead chose to use the resources, the abilities, the capacities, and the whole desires of this nation to work in a different way from delivering growth by actually redistributing the resources it has to make people overall better off, which it would undoubtedly do.
“So what goal could you have instead of growth?” That's the other obvious question and the last in this series.
Could it be meeting need?
Could it be greater equity in our society?
Could it be sustainability?
Could it be enhanced well-being?
All of those would have been possible alternatives to growth, but we don't hear about them, even though, very obviously, they focus upon something much deeper than simply whether we can have another Mars bar or not. And yet, that's what he chose. He wants to increase the stack of things that we can consume, and consuming isn't the be-all and end-all of our well-being, as we all know.
So, Keir Starmer, answer my 14 questions, will you please? Tell us why you want growth, because I don't know the answers and I'm not sure that you do either, and that's why your government is in trouble.
These are the notes I made this from:
14 questions about economic growth
- Why do you want growth?
- What do you want to grow?
- What will be the benefits of growth?
- Who will get that benefit?
- What will you have to give up to get growth?
- Why are those things worth giving up?
- Who will bear the cost of those things?
- Is the growth you want sustainable on a planet?
- How will you know that you've achieved your growth goal?
- How can you be sure your measure of growth is right?
- When will you know that it's right to stop growth?
- What will happen when you give up on growth?
- If you can't ask these questions, why not?
- What goal could you have instead of growth:
- Meeting need?
- Greater equity?
- Sustainability?
- Enhanced well-being?
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Once again you fill the gap left by our atrocious media. This is one of the reasons why I come here, being that you ask the right questions.
I suppose Labour are thinking that if the economy grows they can tax it and pay for services because that is what they wrongly believe.
They pretend to have not known things were so bad after 16 or so years of Tory misrule. Even the United Nations Rapporteurs made it quite clear what was happening and raised this issue with the Tory government a number of times. And we ignore it – even Labour ignores it – what does that tell you about the state of politics and where we are going.?
This is an economy that needs money, investment, base money and the right taxes to curb any inflationary effects on those that can afford it.
That is the only recipe we need at the moment – my local authority is making more redundancies this week – the public services are dire let me tell you, we are floundering. AI is being used to make people give up asking for help.
The truth is summed up in one word: Austerity.
That is the tool they are using to break us into a new mould of living, nasty, British and short. Those post war gains are being consigned to the dustbin. Capital has won the long game. Capital caused 2008 but we are left holding the bag. Someone remember, has to pay. So it us through our public services.
It is Jerusalem for the rich only folks.
Truly excellent article. I have reconciled myself to the fact that our politicians are venal self-serving hypocrites, but what still makes me seethe with anger is the fact that our journalists are so compliant and the chance of Keir Starmer actually being asked these questions is zero. My new year wish is that you Richard can be the replacement for Jo “how are you going to pay for it” Coburn as the host on Politics Live on the BBC then perhaps we could see some progress.
That would require a commitment that would definitely end this blog…..
Your very last line “enhanced wellbeing” is, surely, the ultimate aim of all we do. Even Keir Starmer and Rachel Reeves would acknowledge this. Part (and only part) of enhancing our wellbeing is a growing economy because it means that, each year, we are creating more of what we want than we did last year….. but there is the rub “more of what we want”, not just “more”. GDP merely measures what we spend – whatever we spend it on. I genuinely suspect that Starmer (who is no economist) does not understand this – or, at least, refuses to demonstrate that he understands this.
If he did he would realise that delivering better education and health and transport and housing and…. and… (in fact ALL government spending) would be “growing the economy”. So, if it is such a priority why doesn’t he do it?
Equally, we know that poor people spend, rich people save. If you redistribute you will grow the economy. If growth is such a priority why doesn’t he do this if growth is truly such a priority?
Growth will get a boost from all the money spent clearing up after the floods. If growth is such a priority why is he not wishing for more flooding?
If we have to spend more to eat and heat our homes and borrow to pay for it growth increases. Why does Starmer cheer when credit card debt goes up?
I could go on…. and on….. and on.
In conclusion, I accept that if “well being” is the goal, it may be a good idea to introduce intermediate goals that are more easily measurable. But GDP is a poor choice and beware Goodhart’s Rule “when a measure becomes a target it becomes a poor measure”.
Much to agree with
“Who will bear the cost of those things that are given up?” In your answer to this you mention those on low incomes as those who depend on the state. It reminded me of your recent post about the state, that the private sector cannot function without the state for many reasons you explained. It’s also the case that the private sector, corporates especially, are in constant contact with the state, lobbying for favours, and receive vast subsidies through either direct payments or tax breaks, survive via govt contracts (water, utilities, NHS, PFI, etc.), get bailed out as a matter of routine (2008 demonstrated that the banking sector only survives because of the state, without it, the sector would no longer exist). It struck me that when we think of the state’s dependents, our attention is directed to those in poverty, on low pay, who receive “handouts” and “benefits”, seemingly in order to cast them as lazy, undeserving, and so on. But, as you’ve written about so often, these people are not the concern if govt, of the state, that it is the corporate sector that is the focus of govt largesse. As noted, any gains from growth will be felt by the rich only. The refusal to nationalise all natural monopolies (of which there are many more than most of us think), only benefits the already wealthy at the inescapable expense of those with the least – we have to pay up. It seems to me that, if we’re to decide who is truly dependent upon the state, we need to look at for whom the state enacts legislation and creates policy – we know that the private sector is directly involved in this (as we know that the monarchy routinely amends legislation in its own favour). We know that it is wealthy people who have the ear and acquiescence of govt, not the low-paid. Successive govts have dreamed up schemes to hand cash over to corporates (tax loopholes, deferments, grants, subsidies, PFI, long-term contracts, lower rates of tax on capital gains, inheritance tax dodges, the list is endless). I’d argue, that it is those who claim to be independent, self-sufficient, the “wealth creators” (now there’s a lie if ever there was one), that are the state’s true dependents. When, as Prem Sikka noted in a recent article, those paid the least pay the most in tax (as a percentage of income), they’re clearly also the least dependent upon the state because they’re benefitting the least from the state. And we can see this in terms of the overall net gain of anyone in a society. The question we can ask is, what is my net gain (after tax paid, which never belonged to me anyway, and all money is govt money after all) from participating in society. It is those who end up with the most we can say are the state’s true dependents. It’s often repeated that there is capitalism for the poor and socialism for the rich. We should start talking about corporations as dependent upon the state, because they are, and that is what they want, if they didn’t they would shun the govt, wouldn’t lobby, would instead direct their amazing wealth creation abilities at wealth creation instead of wasting their time. The poor have to be the least dependent because they get the least. The most dependent is probably Charles Windsor, or maybe one of the other billionaires we could well do without.
Excellent analysis, David Willetts, but there is one additional way in which big business is dependent on the state.
Many of the ‘lazy scroungers’ in receipt of benefits such as Universal Credit, Housing Benefit, Council tax benefit are in work. But they are not paid enough by their employers, so the state makes up some of the diference. But the real beneficiaries of those payments are the businesses who pay their staff too little and whose profits are enhanced by the government paying their staff for them, and the landlords whose rents are too high for working people to afford, so the government helps pay some of their rent, benefitting those landlords.
I looked up the cost of housing benefits
It says £30 billion a year,
That’s quite a sum.
Ian
I am old enough to remember when Thatcher ended rent controls in the 80’s. She insisted they were not necessary because no landlord would charge more than the tanant could afford to pay. Yeah, right.
Quite so….
Excellent questions Richard. Just unfortunate that about 4 minutes in you say (and write – I’ve reread it several times!) “We haven’t got finite resources in this country” when you surely meant to say ‘we haven’t got infinite resources ….”.
I missed that….sorry
The fact you can find 14 such questions is a measure of the failure of our ‘public service broadcaster’ to exercise even a minimal of journalistic curiousity about what he means by growth. where it comes from , who benefits, and ‘do we really have no money’, do we really have to balance the books. etc.
Just another aspect of the ‘manufactured consent’ ‘ignorance is strength’ ‘democracy’ we are living in.
But BBC is getting so Russia-Today-like – so overt that it may not be believable to enough people any longer – and the subsequent disilluion may lead to ….what we do not know – fascism?
“So, let’s ask the next obvious question, which is “Who will get the benefits of growth?” This is where the Democrats fell flat on their face in the USA. The growth in the USA went to those who were already wealthy. It did not go to the middle classes, it did not go to the working classes, and those middle and working classes voted for Trump instead as a result.”
This is an excellent explanation for the first reason “wage-earning reliable Democrat voters” voted for Trump.
The second reason is that “wage-earning reliable Democrat voters” did not care for Kamala Harris who is viewed by many “reliable Democrat voters” as a “California Limousine Liberal”.
According to Polly Toynbee everything is coming up roses!
Of course. The rose tinted glasses of Camden.
Are you referring to the London Borough of Camden????
Was not Polly Toynbee’s grandfather a socialist wannabe political anarchists?
I am referring to the comfortable life of some in that Borough now
I think she is a denizen of the place
Toynbee has forgotten her anger these days
“Was not Polly Toynbee’s grandfather a socialist wannabe political anarchists?”
I had time to research today and it was her father not her grandfather.
She is also related to the Stanley family of Alderley so the idiosyncrasies she holds she came by honestly.
@BayTampaBay: Polly Toynbee’s grandfather was the historian, Arnold. Some of his views (including perhaps racial?) are debatable, but he has some quotable comments, such as the idea that when a civilization responds to challenges, it grows. When it fails to respond to a challenge, it enters its period of decline. Toynbee argued that “Civilizations die from suicide, not by murder.”
I suggest globalised financialized capitalism is failing to respond, badly. Mostly at present denying the real challenges.
Thank you for this, Mr. Murphy.
I see that 30-year gilt yields are back to 1998 levels this morning, a 27-year high.
What can possibly go wrong? Just one example of the craziness:-
In spite of the relentless rise in US stock markets, 40% of companies in the Russell 2000 index are unprofitable. Alarmingly, 25% of all stocks in this index compromise of Zombie companies: i.e. operating income doesn’t even cover interest expenses. The huge gains of major indices over the past few year have been largely driven by a fairly narrow cohort of tech companies, which are very richly valued.
Hmm..
Indeed
There is a video coming on this…
We can ask all the sensible questions possible, but there is only 1 question he needs to answer.
“Why, as an obvious slave to Neoliberal thought, did you put on a red tie and pretend that you’re a labour politician?”
I am a respectful follower of Indian Punchline, the blog of retired Indian career diplomat M. K. Bhadrakumar. His current post (January 7th: Europe isn’t the real threat to Ukraine peace but UK is) has an answer to that question. Alternatively, your answer is contained in the question itself: he is a slave to neoliberal thought (also suggested by Mr Bhadrakumar’s analysis).
Another Richard, Richard Douthwaite wrote The Growth Illusion pointing out the limits of GDP and as you both point out many things that are good for GDP are not good for the wider community.
I have a copy, well thumbed, but not for a long time, I admit
Thanks to you for your 14 questions to Mr. Starmer.
Here is a shorter set of questions about policies, actions and the restraint of them which is intended to be generally applicable, no matter when:
1] Who really gains?
2] Who actually loses?
3] Who really understands and why?
4] Who does not understand/is kept under/uniformed and why?
5] How much of what is used, not only in money terms but in other terms too?
Thanks to Cyndy Hodgson for drawing attention to what appears be our contemporary, expanded version of the Speenhamland System. The Speenhamland System was intended to mitigate poverty in England and Wales at the end of the 18th century and the beginning of the 19th. by supplementing insufficient incomes with money coming from the parish/relatively collectively.
In 1834 a Royal Commission called the Speenhamland System a “universal system of pauperism” as it allowed employers to pay insufficient wages because the parish would make up the difference. [From Wikipedia]
Might it benefit the generality of our society if students learned deeper, more critically questioning socio-economic history and less of the current, shallow, “power groups focused”, propaganda influenced, history?
Quick question, on the basis of GDP measurement are we going to see any growth this year?
Maybe
But not enough that anyone will notice much, and the distribution will mean many might be worse off
In other words, as a basis for generic performance assessment, GDP is useless
Great questions!
Especially 8. and 11. – which highlight our existential crisis of living on average (ie per capita across 8 billion people globally) with a ‘footprint’ equivalent to 1.7 Earths. And the average (!) British person’s footprint being about 4 Earths’ carrying capacity.
(‘Ecological footprint analysis’)
Perhaps you also know “The Economics of Arrival” by Trebeck and Williams, which explores the idea of ‘enough’.
As to “When will it be time to end growth?”: Answer (imo) About 30 years ago! With all policies from then on devoted to well-being, equity and sustainability, using relevant metrics not GDP. So it’s high time to start (ie. stop growing).
Yes – GDP is a very crude metric.
But if we separate that out from the issue of economic growth and efficiency then, yes, growth is a good deal better than decline. I don’t believe the middle ground works – no examples of a static economy that have been socially successful in the longer term.
So, we need to innovate
There may be no examples of ‘static economies’ that last long term – although that’s perhaps debatable: some societies, it seems, did live in at least long-term if not infinitely-long balance with their environment, but were destroyed by colonisation from the growing economies elsewhere. However, human history of the past four or five millennia is littered with societies that grew, overshot the carrying capacity of their resources, declined (usually not catastrophically, but progressively) and finally went extinct. We are already in ecological overshoot on a global scale, a process that began with the Great Acceleration starting in the 1950s. Innovation can help slow the decline or soften the shocks through mitigation and adaptation, but I don’t think we can rely on technology: there’s tech-NO-fix. It’s symptomatic of anthropocentric exceptionalism, that ‘others’ everything else and sees it as exploitable.
Brilliant!!! thanks.
Once again, you put vital questions so clearly that even I, an economic illiterate, can understand them. What I want to know is, is there not one interviewer on any of the mainstream channels that will ask any of these urgent questions? Jeremy Paxman and earlier still, Robin Day, could have had a field day with these. We are so badly served by our national broadcaster and by the mainstream media that the chances of a real discussion being had either on television or in the press is infinitesimal. More’s the pity, because the planet simply can no longer deliver the goods to ensure this growth Reeves is so obsessed with.
Thank you.
No one seems to have noticed the questions.