Skip to main content

Economic growth is good, but is it sustainable?

UK Gross Domestic Product (GDP) is estimated by the Office of National Statistics to have grown by 0.6 % in the second quarter of 2013. Good news for the economy? I hope so; but is it enough and is it the 'right sort of growth'? The problem is that there is no sign that this growth represents any fundamental change in the structure of the economy.

I make this point not to be churlish. If growth leads to recovery then that must be good, but only if it is sustainable. This is not simply a left wing  point. It is also the caveat voiced by the right-wing think tank, The Centre for Policy Studies. As their Ryan Bourne comments:

"Only by raising the productive growth path of the economy with a proper supply-side agenda (to increase expected returns to businesses when planning investments) and re-aligning policies over the coming years towards more of a savings culture will we able to generate the kind of long-term sustainable prosperity which policymakers pay lip service to. The alternative is continuing to live beyond our means – relying on cheap money, government borrowing and an inflated housing market to create the mirage of prosperity before an eventual adjustment."

In other words, the fear is that the recovery will have all the hallmarks of previous growth fuelled by unsustainable debt levels.  There really isn't anything in the government strategy to avoid this. Nor is there anything so far from Labour  that they have answers to this conundrum, how to get sustainable supply side driven growth. 

One problem is political. A strategy for sustainable growth doesn't work with the electoral cycle. It requires a long term structural change  and solid investment. It also requires policies to ensure that such growth is shared through the economy and the regions. Distorted, asymmetric growth will still leave many regions struggling with high levels of unemployment. A long term strategy would seek to build new skill levels in hard-pressed regions to help businesses grow. It is a strategy for at least a decade and not the five year election cycle. Structural change is often painful as there are winners and losers. We would need a strategy to help those badly affected  by such change. Structural changes in  the past have ignored this side of the strategy. This was true in the Thatcher period and the consequences were dire with regional decline. 


Comments

Post a Comment

Popular posts from this blog

Prioritising people in nursing care.

There has been in recent years concern that care in the NHS has not been sufficiently 'patient centred', or responsive to the needs of the patient on a case basis. It has been felt in care that it as been the patient who has had to adapt to the regime of care, rather than the other way around. Putting patients at the centre of care means being responsive to their needs and supporting them through the process of health care delivery.  Patients should not become identikit sausages in a production line. The nurses body, the Nursing and Midwifery Council has responded to this challenge with a revised code of practice reflection get changes in health and social care since the previous code was published in 2008. The Code describes the professional standards of practice and behaviour for nurses and midwives. Four themes describe what nurses and midwives are expected to do: prioritise people practise effectively preserve safety, and promote professionalism and trust. The
Post a Comment
Read more

Ian Duncan-Smith says he wants to make those on benefits 'better people'!

By any account, the government's austerity strategy is utilitarian. It justifies its approach by the presumed potential ends. It's objective is to cut the deficit, but it has also adopted another objective which is specifically targeted. It seeks to drive people off benefits and 'back to work'.  The two together are toxic to the poorest in society. Those least able to cope are the most affected by the cuts in benefits and the loss of services. It is the coupling of these two strategic aims that make their policies ethically questionable. For, by combining the two, slashing the value of benefits to make budget savings while also changing the benefits system, the highest burden falls on a specific group, those dependent on benefits. For the greater good of the majority, a minority group, those on benefits, are being sacrificed; sacrificed on the altar of austerity. And they are being sacrificed in part so that others may be spared. Utilitarian ethics considers the ba
7 comments
Read more

When Finance Drives Destruction

Tackling climate change means stopping the funding of rainforest destruction, says a significant study commissioned by the World Wildlife Fund.  The UK's financial services have provided directly over £8.7 billion to 167 different traders, processors, and buyers of forest-risk commodities (cocoa, rubber, timber, soy, beef, palm oil, pulp & paper) from 2013 to 2021.   With direct and indirect investment,  the figure rises to a staggering £200 bn.  Whilst not all that investment is in destructive projects,  the study concludes there is little transparency on the risk.  Finance is the oil in the economic machine.  But it also drives decisions. We all know the importance of money. We borrow to invest. So much depends on it, such as company pensions.  Do we really know what our pension pots are doing? We invest for the future. But what kind of future? Is all investment good?  Much investment is bad. Investment drives the nature of our economy. It drives our decisions as individuals,
1 comment
Read more