Whenever I talk about economic growth and why we might want to stop chasing it, the first reply is that to give up on growth is to give up on the poor. “We as a global society need more and more growth,” says Thomas L Friedman, “because without growth there is no human development and those in poverty will never escape it.”
I disagree. Poor countries need to grow, definitely, but those that are already rich ought to slow down and free up some biocapacity. Will that condemn the underprivileged in Britain to remaining poor? I’d like to turn the question round and ask how well economic growth is serving them at the moment.
Here’s Britain’s GDP since 1960.
With growth like that, absolute poverty has been swept away. The number of people without a roof over their heads and food on the table is very small. But bear in mind that poverty is relative. If you earn £12,000 in a country where the average person earns £5,000 a year, you’re very wealthy. Earn that in modern Britain, and you’re officially on a low income. A low income is defined as 60% or less of the median income at the time. Here’s the percentage of people living in low income households in the UK over the last 30 years:
There’s lots of analysis of this chart here, but there’s a couple of things that are immediately striking.
- The first is that despite all our growth, there are more people on low incomes than there were before the big economic boom. With over 1 in 5 people living in relative poverty, we have more a higher proportion of low income households than almost every country in Europe. (We come 23rd, right behind Romania.)
- The second is that although we were making very slow progress, the percentage has begun to creep up again. The 2008/09 figures aren’t in yet, but I suspect the recession will make it four years in a row of rising poverty levels.
- Third, the economy isn’t really doing anything for those at the very bottom. Take a look at the purple section – the number of the really poor, those living with less than 40% of the average income, is slowly rising.
- Reading some politics into it, you might notice that poverty grew for 10 out of the 12 years of the Thatcher government, and the Conservatives only managed to finally wrestle poverty levels into a plateau before losing to Labour in 1997. Labour has, until recently, lowered the percentage a little. Lord knows I have no love for the Labour party, but their track record is a whole lot better when it comes to poverty, and I am yet to be convinced that Cameron’s party is sufficiently reformed.
To summarise, the economy today is five times larger than it was when I was born, but the number of people living in poverty has grown from around 14% of the population to 22%. Poverty is relative, and growth is not equally distributed, so growth is no solution to poverty.
This is both good news and bad news. The bad news is that most politicians haven’t spotted it, and are still pursuing endless growth and hoping in vain that it will solve poverty. The good news is that the chief objection to slowing or stopping economic growth is actually a red herring. Poverty has always been about the distribution of the wealth, not the size of the economy. We can legitimately question endless economic growth without abandoning the poor.
Thanks for making my day! To find these words of sanity truly inspires hope. More and more people are realizing economic growth is not, and cannot be, a necessary component of efforts to meet the needs of people everywhere. Meeting basic needs ought to be our goal. Economic growth is not effective (thanks for the analysis) and not sustainable.
Dave Gardner
Producing the documentary
Hooked on Growth: Our Misguided Quest for Prosperity
http://www.growthbusters.com
Poverty is not relative. Standard of living is standard of living. 50% of people will always be below the median. And anyways the poorest people definitely seem to be always the worst effected when growth is reversed. So even if more growth isn’t good, less is definitely bad.
Matthew, I’d like to see us step out of the box and think more creatively about this. Your statement could almost be compared to an addict concluding that less crack is definitely bad because it temporarily hurts to cut back.
I think less growth does create problems, but that is only because we have such a screwed-up system. We’ll need to endure a little adjustment pain (like an addict does when s/he gets unhooked), but in the long term the benefits will be substantial.
Think about it, anyway!
Dave Gardner
Producing the documentary
Hooked on Growth: Our Misguided Quest for Prosperity
http://www.growthbusters.com
Yes Matthew, it is relative: the official government definition of poverty in the UK is 60% or less of the median household income.
And sure, 50% of people will be below the median, but the key question is by how much?
As for growth, if the only people who benefit are the ones who don’t need it, why carry on? The challenge is to find ways of slowing growth without it hurting the poorest.