Economic growth: getting beyond fairytale policy

Against the myth of trickle down economics.

Sarah Longlands
13 June 2014
Knight in shining armour Clare Longlands

Economic growth is not our "knight in shining armour". Credit: Shutterstock.

Everywhere wants to grow their economy. We’ve got growth plans, growth strategies, planning for growth and even growth vouchers.

But while the language of growth and competitiveness fills the pages of our local plans, enterprise partnerships and corporate strategies, there is much less clarity about what we actually mean by growth and how we hope to use it to improve our localities.

Instead, economic growth is increasingly the unquestioned goal that will enable us all to live happily ever after.

We see growth almost "like a flow of water, each drop of which is equally valuable, homogenous and beneficial"as Peter Self said in Rolling Back the Market. Across the political divide we assume that growth will bring everything we want, jobs, growth, personal wealth, welfare and even happiness.

However, our enthusiasm for growth rests on a body of economic theory and assumptions about which, despite appearances, there is ongoing argument and debate. Behind the scenes, economists argue endlessly about the assumptions and ideas behind growth and economy. Do human beings simply act in their own self-interest to maximise their own consumption of life or are they influenced by their interaction with others? How does big brand marketing influence our behaviour, and help to construct the idea that we live in a world of infinite desires but limited means?

A common argument within local economic growth strategies is that it will create jobs which help to achieve higher levels of income which will in turn have spin-off benefits for local expenditure and investment. If people are better off, they might also be happier, and of course, the more people earn, the less they rely on the state and so on. But even this version of events is filled with some big assumptions. Is income such a great measure of how we feel about life or does this confuse wellbeing with being well-off? How do we know that the people who need the jobs most in an area will get them? Will the money they spend remain in the area or leak away into the coffers of multinationals?

Whilst its nice to dream of economic growth, is that the limit of our aspiration? What we actually want to achieve is the opportunity to create a good society, where people have a chance to live a life that they have reason to value? By itself, it’s doubtful that economic growth can deliver that fairy tale ending:

  • Beware of non-jobs growth: Many areas experience what is often called ‘non jobs growth’. When growth does come, for example from a new factory, retail outlet or construction project, often few of the jobs actually come to the people living in the area. That’s often put down to a skills mismatch between the people to live in the area and the skills required by the new growth. The net benefit to the area and to the people who live there is zero.
  • False choices: support economic growth or tackle poverty? There is often a chicken and egg debate in public policy which argues that if you prioritise growth, then this will, in time, give you the resources to help tackle poverty and support people. In the absence of growth, the state is forced to make ‘hard choices’ while we wait for growth to return. Human development becomes dependent upon growth. There is a growing body of evidence which suggests that this is the wrong way round and that what we should be supporting and strengthening the lives and opportunities of people in our communities, regardless of growth – particularly those where growth is most difficult to achieve. Not only is this socially just, but from this investment in people, the evidence suggests, economic growth will emerge.
  • Trickle down is a myth: It’s time to stop pretending. Trickle down doesn’t work effectively. We know that economic growth is uneven, in fact some economists suggest that the inequality is an intrinsic quality of the growth process. So when we achieve growth, it does not flow equally, not everyone living and working in an area will benefit in the same way. The reality is that what little income trickles down in society occurs mainly as a result of fiscal policy and systems of welfare. How do we recalibrate our economies so that the benefits of growth bubble up from within communities and rain down, rather than simply trickle?
  • Growth is just a tool, learn to use it. Growth is just a tool. It’s a means by which we can help build a good society by supporting families, providing good systems of education and health and enabling everyone to live a life that they have reason to value. Instead of spending our time chasing growth as our knight in shining armour, we need to learn to use the economic, social and environmental growth we have got to support prosperity for all.  

This article was originally published by New Start magazine.

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