Economic growth is no longer enough

The growth rate of a nation’s gross domestic product, or GDP, has long been heralded as the automatic solution to all of society’s ills.

The concept is simple enough to grasp: employment usually increases in tandem with economic growth, with labour being required to drive such growth. With increased employment and a competitive labour market, wages increase, as do living standards.

This has largely proven true for nations transitioning to and developing industrialised economies, with relative affluence spreading amongst the population, establishing the exalted middle class.

However, for today’s most developed nations, economic growth is increasingly becoming a facile obsession for those who extol free market ideals with little substance. The standards of living that we, in the developed world, have rightfully come to expect, are no longer being met by the automatic effects of growth.

Instead, society is becoming stagnant. Wealth inequality shows no sign of receding from its horrendous level, the megre minimum wage leaves millions of workers earning less than the living wage, and dismal zero-hour contracts have proliferated in many sectors of the economy.

The combination of a meagre minimum wage which is nowhere near the living wage and the ascendance of workfare policies which in essence force the unemployed out of the welfare state and into underpaid jobs produces a situation worryingly analogous to a modern, subtle, concealed and quasi-voluntary form of slavery.

I am aware that such an assertion, with all the very negative historical connotations of the term “slavery”, sounds strong. But, take a step back for a moment and think about the lives of the lowest paid in our society.

Their jobs often entail menial and demoralising tasks. They are paid well below the living wage. There is often minimal prospect for finding a higher paying job in the future. They suffer the stress and anxiety incurred as a result of high living costs for food and bills, the continuous spectre of overwhelming debt, and the disheartening position their life is placed in. Further, the state, stung by the misguided populist stigma of “scroungers and skivers”, has effectively abandoned them.

Clement Attlee’s welfare and public services consensus established following Allied victory in the Second World War has done much to counter many of the societal imbalances caused by dizzying wealth inequality. But, short of the state paying all citizens the living wage they deserve, there is little more the state can fiscally or institutionally do to offset the inequitable wage realities of millions of citizens.

While Ed Miliband’s concept of predistribution hardly struck a chord with people outside academic circles, it is highly apposite to the problems described previously which modern society faces. The idea of predistribution, put simply, is that fundamental changes can be made to the way in which the economy functions, which in turn builds a fairer society, even before redistribution provides more tangible effects such as public services and the welfare state.

We must maintain and continue to advance the idea of strong public services such as the National Health Service. Additional public services, such as trains and utilities, should also be integrated into the public sector. However, we must equally recognise that within a capitalist system, the capitalists must also play a role in improving the quality of people’s lives, as oxymoronic as such a proposition may sound. The state should not in effect subsidise and tacitly approve of people being underpaid for the labour they provide to businesses. Instead, government should be much firmer on the rights of employees and more statutorily active in ensuring not just the volume of jobs, but the quality.

Labour’s Chuka Umunna recently recognised the systemic issues of employment, by stating that “any old job won’t do“, in response to the government’s pursuit of raising employment regardless of the quality of employment.

The value of a job should not be seen from a purely macroeconomic standpoint, but rather from the perspective of the person occupying that job. In a developed society such as ours, the mere fact that someone is employed does not automatically translate into higher living standards for them, far from it.

Finally, we must also pay much greater attention to the happiness of the nation. In recent times, it has become increasingly clear that a distinct chasm exists between the economic productivity and happiness of the nation. This touches upon the need to transform not merely wages, but also the conditions in which people work, in order to reduce stress by building more relaxed and productive workspaces.

To summarise, while in the past economic growth has automatically led to an increase in living standards and the establishment of a burgeoning middle class which enjoy high living standards, in a developed nation such as ours it is no longer enough for growth to be the primary source of the reduction of wealth inequality and the advancement of people’s living standards. Instead, we must shift our attention as a society towards people’s wages, working conditions and happiness, and then act to combat the issues which arise from these metrics, rather than relying upon traditional conceptualisations of growth trumping all else and being the panacea for all of society’s ills.

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Contributory welfare betrays the very essence of welfare

The debate over the future of welfare has intensified over the past year or so, with Labour being placed under increasing pressure to declare its vision, and the right of the party and especially the “Blue Labour” faction advocating a downsizing of the welfare state which would be tantamount to a new consensus, abandoning the settlement established by the Attlee government following the Second World War which established uniformity and more importantly equality of treatment when it comes to welfare.

In it’s simplest form, welfare exists to improve the lives of the most vulnerable in society. It combats the inherent weaknesses of capitalism by preventing members of our society from slipping into regressive cycles of poverty where generations would otherwise be presented with a very limited scope of opportunities and the inability to escape poverty. More than this though, it builds a sense of societal solidarity where we, as a group, recognise that life does not always go to plan and that we all need support at times in our lives due to no fault of our own. In these situations, people deserve to be treated with respect and helped to return to some sense of normality in order to get back on their feet. Significantly, this support does not exist for society to give itself a pat on the back, but due to the fact that at a fundamental level all humans are equal with a common set of rights which should not be subject to upbringing, life choices or wealth.

The basic goal of Labour is not to have a big state or to centralise government. Instead, it is simply to build a society in which every person has equal opportunities and a pleasant quality of life. For this reason, some in Labour have mooted the concept of contributory welfare. The idea is a rather adventurous reimagination of welfare which would see people ‘pay’ into the system. The more someone ‘pays’ in, the more they get out in times of need. Professor Heinz Wolff recently aired a similar idea for elderly care on Daily Politics. In both cases, ‘paying’ into the system does not refer to money, but rather to volunteer work helping your local community or elderly relatives. At the core of this concept is the desire to nurture a much more philanthropic, caring, and communally active and aware society.

However, while it is perfectly noble and valid to pursue such a vision for a caring society, doing so through welfare reforms would be both unfair and heavy-handed. Contributory welfare betrays the very essence of welfare which is to offset inequalities and to treat everyone at the same equitable level. In many ways, it’s an oxymoron as welfare based on contributions would essentially introduce inequalities into a system which is supposed to dampen inequalities through a sense of solidarity and equality of treatment. However much we would like to expand the philanthropic sector and build a more volunteer and community centric society, we cannot do so through treating some people better than others in their time of need.

Additionally, it is unclear how you would gauge the level of contribution to society, whether disabilities would be factored into the equation, as well as the time consumed by people who have jobs and thus have no time to volunteer, or the skills required to care for people with complex illnesses. These issues would make it  likely that the realities of contributory welfare would spawn a greater bureaucracy than is currently the case. On top of this, large sections of the population would need to be exempted from the contributory system due to the fact that their lives simply permit them precious few opportunities to contribute as much as others.

Expanding the philanthropic sector is a key responsibility for any future government, but doing so by introducing overt inequalities into the welfare system would be a poor course of action and would ultimately prove to be a regressive, rather than progressive, measure, harming those in need while at the same time failing to achieve a real philanthropic society. Government-led schemes to organise, provide a framework for, and to encourage a more philanthropic society are needed, but they must be optional with those taking part doing so in an altruistic manner to help others rather than themselves. Any reform to welfare must not sacrifice equality or be heavy-handed.

Credit: Xavier Häpe - http://www.flickr.com/photos/vier/192493917/

Europe must move together

French President Francois Hollande recently called for a eurozone economic government with the power to raise taxes, borrow and have a budget. This is not really surprising, with the almost-unanimous agreement amongst economists that for the euro to survive, it needs a strong fiscal union in order to better handle future crises in the currency.

What is worrying however is the speed at which Hollande has advocated the idea. Clearly, there are 16 additional opinions to be heard on the matter, though there is a very real risk that a fiscal union could be implemented without a broader vision for the entirety of the EU. Many have termed this possibility as being a two-tier Europe, one in which the inner circle of eurozone countries move towards ever-greater integration both fiscally and, significantly, politically, while non-eurozone members become an afterthought on the sidelines. This would be a terrible course of action.

We are currently undergoing a substantial challenge to the EU, with minority and mainstream parties alike speaking of reform – a general spell of isolationism in an economic depression, hardly to be expected – a foreign enemy is always a convenient scapegoat. In some ways, it’s interesting to note that with all the integration up to this point, there seems to be a distinct lack of solidarity on the European level – Europe just isn’t together in fighting in the same corner against common adversity.

Of course, I would love to see dramatic reform of the EU, but only in a constructive and progressive manner with a unified vision of solidarity and compassion, and of sharp critique of isolationism. Following the same disjointed path as the United States would be disastrous – a situation where two catch-all centrist parties are at each other’s necks constantly, a constitution so entrenched that common sense need not raise its hand, and a federal government system where nothing gets done and the people with popular support are hamstrung by those without.

My key point is that we cannot rush reform, and more importantly we must not retreat from integration as a way to resolve the democratic deficit. Instead, we should work to strengthen the democratic heartbeat of the Union, the Parliament, by truly making it the absolute authority, discarding the Commission and other messy and undemocratic intergovernmental relics of which the Union is in abundance. Crucially, we, all 27 member states, must move together. We must look at the bigger picture, move away from technical issues and seriously ask ourselves the question: what do we want Europe to be?

(Featured Image Credit: Xavier Häpe)