Jon Moynihan has a useful Critic piece on the problem of economic growth in the UK.
A real plan for growth
A series of simple economic blunders has led to self-defeating policies that strangle any chance of prosperity for all
Growth, growth, growth. Everyone’s talking about growth. All the Conservative party leadership candidates have said we must achieve it. All the major parties in the last election said it was their number one objective. Our new prime minister has stated that he will focus “laser-like” on growth. And not one of them seemed until recently to have a clue what they meant by the word; prescriptions as to how to achieve it there were none.
Well, okay: I think we all understood that what they were talking about was economic growth. But how to define that metric? The politicians, media and commentators use the simple measure of Gross Domestic Product. That leads them into grievous error, coming from their not really understanding what the simple purpose of achieving economic growth is: to make the lives of our citizens better.
Which means that GDP is the wrong measure: we should be targeting growth in GDP per capita; that latter metric is what makes it possible for each citizen — each capita — to pay for their needs, to take care of their families, to achieve their dreams and ambitions of a better life.
The whole piece is well worth reading because growth in GDP per capita isn't what we are likely to see under this Labour government. A decline in GDP per capita seems more likely at the moment.
Moynihan gives a number of familiar reasons for the problem, one being mass immigration as a politically favoured way to raise GDP as opposed to GDP per capita. Another is the vast size and increasingly intractable nature of government itself.
Why is it that it should be seen as so difficult for our country, our economy, to revert just to a size of government, a size of taxes, and indeed a level of regulation, that existed just a couple of decades ago? Why is it, for example, that the number of civil servants has shot up by 100,000 since 2019 and by over 4 per cent in the last year alone, and that’s impossible to reverse?
Is it just that the civil servants now run things, and the politicians have no ability to rein them in? Is it that Professor Adolf Wagner, who in 1865 enunciated Wagner’s law, roughly saying “in any democracy, the size of government inexorably expands and expands”, has been proved correct? Is Britain still equal to the task of electing politicians, if they can be found, who will take us to a more sensibly structured, growth-promoting economy?
5 comments:
If you were to judge success by GDP per capita then you *should* be obliged to stop illegal immigration as that dilutes the GDP by increasing the head count.
Which is probably why politicians avoid that particular measure.
As I understand it to increase GDP, it is not necessary to actually make, grow, or in any way produce anything. All that has to happen is that "money" in any form has to be passed about. Inflation helps. Just so long as the money gets noticed by government, and probably taxed ( which also increases GDP), and spent (ditto).
So standards of living can call while GDP increases.
This is worthy of Swift and Douglas Adams saw the madness. But not the Golgafrinchans lucky enough to be on the B Ark.
“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich. [...]
"But we have also," continued the management consultant, "run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying on ship's peanut." [...]
"So in order to obviate this problem," he continued, "and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and...er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances.”
Yes, an excellent piece.
What a recipe has been copied out! Import millions of unproductive people from low-skill, low-trust societies. Give them benefits raised from general taxation. Inflate the size of the Civil Service. Tax businesses more to pay for the immigrants and for the Civil Service. Close down our capacity to extract coal, oil, gas, and to make steel. Set up a "National Wealth Fund" like oil-rich countries have, but base it on borrowing. Prioritise solar and wind power, when our industry is lagging behind the Chinese in these. Tax people so they can't buy stuff. Make the most expensive electricity in the world.
Well, there's the recipe. What do we think the meal is going to be like?
DJ - yes, GDP per capita would sharpen the immigration debate to such an extent that politicians have to avoid it.
Doonhamer - yes, as I understand it GDP does have weaknesses in terms of real life, but GDP per capita might give it a sharper political focus. Too sharp for politicians so they would probably fudge it anyway.
Sam - and as Tim Worstall says, it's all so obvious. Daunting really, because in a social context, any explanation along these lines would feel like telling adults to come in out of the rain.
"What do we think the meal is going to be like?"
Cheap. If we didn't have grandchildren I probably wouldn't bother about it, but the incompetence is quite worrying at times.
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