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The Crazy Theory that is Destroying our Societies

Robin McAlpine

There is a problem underlying our other problems. The current plan to solve all our problems is to use the initial problem which caused our other problems to solve our other problems. If we don’t snap out of this stupidity we’re in big trouble, yet instead we’re accelerating our belief that the solution to the problems is the initial problem. This is how civilisations decline.

So quiz question; what’s the difference between ‘inclusive growth’, ‘sustainable growth’, ‘levelling up’ and ‘green growth’? I don’t mean the rhetorical purpose. Each of these words attached to growth (with the exception of ‘levelling up’ in which growth is assumed) is a modifier. It is intended to modify the meaning of the word ‘growth’ to indicate a different characteristic of the growth.

It doesn’t and can’t mean ‘other stuff you do with the growth afterwards’, because all of those things have their own name, like ‘public investment’ or ‘redistribution’ or ‘regulation’. So it can’t be what you do after the ‘growth’ has happened, because by modifying the word ‘growth’ you’re indicating something different about the nature of the growth itself.

So what is it? What is different about the growth which is ‘sustainable’ and the growth which is ‘green’? And what is the difference between them and good old common and garden variety growth? Do you have any ideas?

Well you won’t find it in the Jeremy Hunt’s Budget, Rachel Reeves’ speech to the City of London or the SNP’s sprawling smorgasbord of nice adjectives and vague sentiments added to the same thing the other two are doing.

It is 2024 and everything all of them are proposing is exactly the same as they were all proposing in 1994. I mean almost literally; it’s the same action programme give or take some contextual changes. Basically they’re going to ‘manage the market’ with a ‘light touch’ and the market is going to deliver ‘growth’ which can then be invested in public services.

Why are we engaged in national culture wars? Because the ruling classes (in Britain and Scotland) have settled on a unanimous position on an unchanging underlying policy approach to government so they need something to fight about in the staged theatre put on now and again when the polling stations are looming.

Let’s just get fired into this then; it shouldn’t take long to dismantle the whole stupid idea (you just need to present the basic facts and some basic data). First, growth doesn’t fund public services, tax funds public services. How can it be that personal tax take is at its highest in many decades in a period where we’ve had 40 years of pretty sustained growth and yet we’re struggling to pay for public services?

It’s because the thing that growth theory did to the tax base more than counteracted the impact of the growth. Tax is efficient when wealth is spread fairly evenly and highly inefficient when it creates wide disparities.

What I find interesting is that this fact is as certain as any of the science we were told we must follow during the pandemic, yet our national politics prevents anyone ever, ever mentioning this truth. You can see it presented beyond reasonable doubt in seminal book The Spirit Level. You can see it in practice in Common Weal’s work from about ten years ago (£5bn of extra income from Nordic levels of equality without altering GDP or tax).

You can just say it out loud and it becomes clear; if wealth is in the hands of those who can avoid paying tax and if large proportions of the public have so much wealth redistributed away from them that they can’t afford to pay any tax anyway, increasing the total volume of wealth can actually reduce your tax take.

And the thing that created the massive inequalities in wealth is the growth theory which is still there presenting itself as the solution to the problem it created. ‘All growth is good growth and anything that stops growth is bad’ is still the theory. Except all growth isn’t good and taking away regulations to prevent deeply harmful behaviours that make people rich is the cause of the inequality.

Next, growth theory is deeply harmful to investment. Why is Europe’s economy in such an overwhelming crisis (especially Britain)? Because we don’t invest in industry and infrastructure at anything like the rates we need to. Why? Because that kind of investment is a barrier to growth (in the immediate term), and growth theory does not believe in patience.

If you post £100m in profit as a business and you reinvest that into your company, for example by investing in new machinery, that £100 million is effectively tied up until it creates productivity growth of a sufficient value to repay it. If instead that business leader takes it out and invests it in property, the GDP impact is immediate.

Investing in your business harms short-term growth but strengthens long-term performance; stripping your business of available assets creates short-term growth but weakens the business. So when do we measure long-term growth? Now, we’re measuring it now. So why don’t we value it? Because we measure it in the short term.


Or let me put that another way; the failure to invest ten years ago is measured as a business failure today. We lose the GDP today because we banked it ten years ago – except we lose it again tomorrow and forever because the thing that was generating the wealth (the business) is gone. Yet tomorrow the GDP will still have been banked a decade ago. Next year it will have been banked 11 years ago. 

Eventually a business that might have been there has been gone so long that it becomes impossible to think in terms of ‘if only we hadn’t done that thing 30 years ago that killed the thing generating wealth 20 year ago then our GDP would actually be higher today’. Why? Because we’re a stupid species which forgets things.

How do you balance this? How do you balance growth theory with long-term investment? You can’t. You cannot maximise wealth extraction today while facilitating wealth in the future that would have been based on investing the wealth you extracted today. You killed the future. You can incentivise long-term investment, but only at the expense of short-term GDP.

The third idiotic thing about growth theory? It refuses to measure its negatives, only its positives. Since I was writing about it a couple of weeks ago, let’s pick food as an example (but it applies just as easily to housing or the environment or town centres or dozens of other things). 

Let’s do this with a thought experiment which is only marginally fictional; if you could substitute bread with another product that resembled bread but from which you can extract more profit, growth theory demands you do it. But what if that bread contains a chemical which induces extreme lethargy so the people who eat it can’t work? 

Growth theory says ‘we have an inactive workforce that cannot be made active so we need increased immigration and we have an overwhelmed NHS so we need to privatise it’. The idea that perhaps they should stop selling the profitable-but-poisonous bread is more or less against the primary tenets of growth theory. It is these ‘externalities’ which are sinking our public services.

I could keep going like this; GDP growth as a sole measure of economic success has failed in loads of ways – and regardless of what they all say, it is the sole measure of economic success. It is the non-negotiable policy position with which all other policy positions have to negotiate.

But those are the big three. We’re all screwed because we’re at the far end of the period where the value of the future was banked by the chancers in the past. We have no money today because they took it yesterday. People not able to pay tax today are in that position because someone else redirected that person’s share of the economy to themself.

We’re hopelessly unproductive because we effectively disincentivised businesses investing for the future in favour of maximising a theoretical number that politicians like. And our public services are decimated because we removed the restrictions on the way big business can devastate society for the same reasons; maximising growth. So we pay for the devastation.

It was an economic theory as threadbare as miasma was as a theory of how disease was communicated or phrenology was as a medical diagnosis tool. Yet the politicians either can’t see this or don’t have the courage to see it. Our problem is assuredly not lack of growth, it is inequality, lack of productivity and enormous social and economic failure resulting from the externalities inherent in growth theory.

So a last piece of science for the ship of fools that is modern politics; there is one period in the last 150 years where both economic and social development actually improved and the ability to invest in public services increased. You can graph it, count it, measure it, see it in practical outcomes – the whole ‘scientific method’ used to define the meaning of ‘true’.

It is 1945 to 1975, the period of public investment, redistributive taxation, careful, cautious, patient regulation of the financial system and an industrial policy. Now go and look at the data again and tell me when that period came to an end? Yup, it came to an end with growth theory.

So let’s be honest; we’re all Liz Truss now, we just won’t admit it. The growth fairytale lives on in every broken public service, every starving family, every failed Scottish business. Yet we cling to it like scared children. 

14 thoughts on “The Crazy Theory that is Destroying our Societies”

  1. Alasdair Macdonald

    This is Private Fraser in Dad’s Army, saying, “We’re doomed! Doomed!”

    The analysis of the problem is very well done, if, unfortunately, blurred by prolixity and bitter self-recrimination. The analysis is something that a great many people within the population actually grasp. A significant chunk of the population actually recognise what needs to be done and much of this was expressed in the policies put forward by a Corbyn-led Labour Party, with substantial success, in 2015. And this, coupled with the election of 56 SNP MPs caused panic in the relatively small clique who operate the most of the levers of power in the UK and their servant class, which includes people in the higher echelons of the Labour Party and, indeed, in the SNP.

    What this article lacks is the response to Private Fraser that we can do things to avoid being doomed.

    Now, to be fair, over the past decade and more, Commonweal has produced reams of plausible, practical policies. The issue is how we get sufficient people into positions of power to implement the policies. It is about encouraging people to accept and actually implement the term ‘unity is strength’. It is about empowerment and the distribution of power more widely amongst the population.

    That is what the essays in this weekly newsletter ought to be doing. Please stop adopting the defeatist, blaming, dehumanising terminology we get daily in the mainstream media. Start using a different register.

    1. Robin McAlpine

      Absolutely Alasdair – Common Weal has dedicated itself to producing material that is positive and solutions-focussed for a decade and I write about it all, oh, half a dozen times a month. We need a strategy for ‘predistribution’ linked to a green industrial policy. We need to look at Green Import Substitution Reindustrialisation (I know…). We need to regulate better. We need to utterly change public procurement to use it as a development tool. We need to get local economic development out of the hands of centralised agencies that favour multinational over local. We need much better industrial relations – this is outside Holyrood’s power but there are things that can be done to induce it. We need more public (or at least collective or mutual) ownership of the economy and we need to produce a much, much more effective strategy for land usage – and that’s just some quick starter stuff.

      But that’s not where we are. Where we are at the moment is that none of these policies are being listened to or considered. In fact things are going sharply in the other direction. That’s why I wrote this. There is now no political party in Scotland seriously advocating for any of the solutions we’ve proposed and sadly all of them have moved in the other direction. The Greens have used neoliberal growth theory to get trees planted. The Scottish Government is lobbying for the oil industry based on neoliberal growth theory. Neoliberal growth theory is about to take St Fitticks park away from the residents of Torry. Far from our economic circumstances prompting new thinking, they are currently driving us further and further into the arms of old thinking.

      That is precisely why I wrote this. I was prompted to do it by an article by Larry Elliot in the Guardian pointing out how threadbare Labour’s ‘growth plan’ is. Because it isn’t a growth plan, it’s another deregulation plan. Everyone is in the same situation. I could write you another piece on the solutions if you want, but unless we take a more concerted attempt at breaking the current political consensus, it will continue to have no effect.

      Robin

      1. Alasdair Macdonald

        Thanks, for taking the time to respond at length.

        Having had experience of the doom mongering of the Uk media all my life, I have a knee-jerk hostility to articles which emphasise the negative in places, even when these are to raise an issue.

    2. Robin Woodburn

      Hi Alasdair
      Speaking personally, I find the register of the article just fine, and I didn’t find the terminology defeatist, blaming or dehumanising. I can of course sense the author’s frustration, which many people in Scotland me included share, that we are trapped in a political culture that its supporters can’t defend even on its own terms, never mind against the objections outlined here. In general, I find the articles on the commonweal website cogent, well argued and illuminating, even though I sometimes disagree with the conclusions or even think they are … [whispers] wrong! That makes them several standards above what passes in the mainstream as “debate”. And, as you say, Common Weal has already produced a lot of evidence-based, plausible and practical policies. On the “issue [of] how we get sufficient people into positions of power to implement the policies”, that is a bit of a $64,000, or should that be $64 trillion, question, since our political system is expressly designed to prevent that happening. Again, speaking personally, I am stumped how to achieve this, short of a pitchforks-and-torches solution on which I am not entirely keen. There are lots of really great, local ideas kicking around, but translating them into some national movement looks very difficult to me. There may be answers, but I just can’t see what they are. If you’ve been thinking along the same lines and have even a partial solution, please share it. Even a few strands of straw from which a brick might be made would be very welcome. I’m desperate for a bit of inspiration.
      Best wishes
      Robin Woodburn

      1. Robin McAlpine

        And since I’m here – our political system is designed to prevent that happening at the UK level. It need not be the case at the Scotland level – one of the reasons I’ve been critical in my writing of late is that the elites in Scotland are taking steps to shape Scotland in a way that change here is blocked too. The key thing to remember is that the alternative to all of these approaches are popular with the public. Generally it is the media and the political elites which then close that down – but in Scotland both our media and political elites are weaker and less formidable to challenge. This is where my remaining optimism about Scotland’s near-term future lies – I don’t know if we can overturn poor economic thinking but I know that if anyone can we’re in a good position to be them. The alternative to believing that is despair, and I work hard to avoid despair.

        I’ll tell you what though – us, wrong? Surely some mistake… You’ll need to email me and tell me when it happens.

        Robin

      2. Alasdair Macdonald

        Robin,

        As I set out in my response to the other Robin, I have a conditioned response to what I perceive as doom-mongering, even when it is there for a reason!

        I subscribe to Commonweal, because it comes up with plausible solutions and I would prefer if the articles focussed on these and omitted the bits – “Scotland is pure mince” – I can read daily in the Scottish press or hear on radio or TV.

        While there are more things Holyrood could do under its devolved powers, I think the fact that the ‘Sewell Convention’ is just that – a convention, and not a consitutional power – means that the lack of real financial clout is a severe inhibitor. With the passing of the Single Marlet Act Westminster can deploy it however spuriously to stop any Holyrood legislation and I think an incoming Labour Government will be as likely to use it as the Tories are. Indeed, I think that their English/British nationalist dirigisme is likely to have them use it more frequently to have the deveolved administrations ‘dae whit their tellt’.

        I remember a former Lord Provost of Glasgow sneeringly dismiss public consultation with, We don’t need it. Labour knows what people need.

        Keep well, keep optimistic.

  2. “If you post £100m in profit as a business and you reinvest that into your company, for example by investing in new machinery, that £100 million is effectively tied up until it creates productivity growth of a sufficient value to repay it. If instead that business leader takes it out and invests it in property, the GDP impact is immediate.”

    I don’t follow? Investment expenditure is part of GDP, whereas purchases of property that either just transfer ownership or maybe bid up prices are not, so I think you have this backwards.

    1. Robin McAlpine

      I shouldn’t be replying today – so late with work. Perhaps I could have phrased it more clearly; if you spend on a profit-generating asset it will generate profit immediately. If you invest in productivity it will generate profit only as the productivity works its way through. It is almost certain that investing in capital in a business will see all of that income leave the economy. The GDP impact from the profit generated by the business is immediate either way. That’s the profit of the preceding business operation. The profit generated by what is done with that £100 is different. If you invest it in expensive capital the money will almost certainly leave the domestic economy (we don’t produce a lot of machinery these days, and a lot less software than you’d think). It will take time for that to return to the company and the machinery doesn’t have that much intrinsic value in itself (you can’t really sell it on again). The property generates rental income immediately, appreciates in value continuously and remains at all times an easily saleable asset. The idea that short-term value releasing is counterproductive to long-term investment just isn’t a controversial view. Most analysis of the economic woes of Europe just now will immediately cite the failure to invest in productivity in comparison to competitors like China.

      Robin

  3. GDP =G+C+I+(X-M)
    Where G is government spending, C is consumer spending, I is private sector investment, X is exports and M is imports.
    Private sector investment contributes to GDP.

  4. Please don’t publish 1/2 sentence sequence speech rants from upper-middle class nit-wits with a socioligy spatter-gun. I think he could go on about pretty much anything and he is very tiresome and pointless.

  5. florian albert

    I have some sympathy with Robin McAlpine’s critique of government’s reliance on GDP as a measure of progress.
    However, a period of GDP growth is likely to leave more money for public services than a period of stagnation; compare 1992-2007 with 2008 to the present. Alternative routes to financing better public services, e g redistribution, fall at the hurdle of electoral support.
    ‘we don’t invest in industry and infrastructure’
    This has been a recurrent problem in Scotland for most of the past century. Again, there is opposition to public investment in industry. Voters lack confidence in their elected leaders and the oligarchy behind them,, to spend money wisely. The Edinburgh trams fiasco and the ferries being built in Inverclyde suggest that this is well founded.

    Robin McAlpine looks back fondly to the period 1945-1975. Having lived through most of it, I see it a bit differently. It was a time when the collapse of industrial Scotland was clearly underway. The ‘Red Paper on Scotland’ was produced in 1975. It was a response to very obvious economic failures.

    When the next Westminister and Holyrood elections take place, there will clearly be an opportunity for any party proposing radical change – and an end to the growth model – to seize the day.

  6. Growth in GDP needs to occur at a higher rate than the growth in population or GDP per head will decline – effectively meaning less wealth is being produced per person so less is available to spend per person.

  7. Donald McPhillimy

    I don’t think our dysfunctional political system, the obsession with growth or the grip of the neo-liberal strait-jacket will change until a new fresh politics sweeps in, like a tidal wave, supported by younger people, finally totally exasperated by the way the older generation has screwed them over. I’m only surprised it hasn’t happened yet.

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