| 6 mins read
In the run-up to the next general election both main parties are giving high priority to increasing the growth rate. But does past experience suggest this is a sensible strategy? The historical evidence does not support the idea that this is a winning stance, and it places reliance on a concept which is both problematic as measure of economic well-being and little understood by the public.
Since the 1940s the trend towards a programmatic approach to electoral competition has been allied to a significant focus on economic issues. The expectation of economic improvement, and the belief that governments are responsible for its delivery, have become deeply ingrained in our political culture.
In the Cold War atmosphere of the early 1950s, GDP growth, promulgated by the OEEC/OECD and the UN, became entrenched in official discourse about the economy. What gave such data political prominence was the rise of ‘declinism’: an explosion of analysis and debate about the condition of Britain, which suggested that the country was suffering from profound pathologies in all its major institutions, and this was leading to economic failure on an epic scale.
Clearly Britain was suffering from relative decline as a world power, emphasised by the rapidity of decolonisation. But on the economic plane, it was bizarre that in one of the richest countries in the world, and which had seen unparalleled improvements in real incomes for a decade, all the talk was of decline. In fact, the relatively slow growth of GDP in Britain compared with western Europe was largely a matter of those countries catching up with the British levels.
Whatever its merits as an analysis of post-war Britain, declinism served to focus attention on GDP growth in a much more public way, moving the concept from the domain of the economic statistician and government adviser to the electoral stage. By the 1964 electoral campaign, the Labour Party used it to accuse the government of failure; the Conservatives used it not only to defend their record, but to make promises of future better performance. How far this mattered to the election outcome is impossible to say definitively. But opinion polling suggests that Labour won despite the electorate's strong scepticism concerning their promises about growth.
The political career of growth
Having made its promises on growth, Labour's failure to achieve its target of 4 per cent was unsurprisingly a centrepiece of the Conservatives’ critique in the 1970 general election. For Margaret Thatcher, policy framing focussed on the underlying issues allegedly inhibiting faster expansion, rather than the more technocratic emphasis on growth targets.
Then, under New Labour, growth was once more placed in the centre of the policy agenda. Gordon Brown suggested that faster growth could be secured by government activism on increasing research and development and workers’ skills, an agenda enthusiastically embraced after 1997. But the financial crash of 2007/8 brought an end to the benign post-Cold War circumstances which had allowed UK growth to reach levels in line with the Golden Age. The austerity policies after 2010 inaugurated a decade of poor economic performance, compounded by Brexit and then Covid. By the early 2020s the growth performance of the preceding period was clearly inferior to anything experienced for generations, and growth was firmly back on the agenda.
The electoral wisdom of growthmanship
In addressing these issues, we must acknowledge the appeal of ‘growth’. Logically, if the national ‘cake’ is bigger, then struggles over allocation can be muted. For the left, growth makes possible redistribution without anyone having to face an absolute reduction in income. So why not promise it? One set of arguments relates to the likelihood of achieving the goal, or facing the possibility of being damned for failure, as Labour was in 1970. Growth targets may be even more hostage to fortune now the world is much more unstable and the capacity of governments to deliver targets much less.
Another argument relates to the comprehensibility of the language of economic growth to the public. In a 2020 survey, the vast majority of focus group participants demonstrated little or no understanding of GDP. This problem of the alien, abstract character of GDP growth is compounded by the fact that the definition of GDP is not a fixed thing, but something which is subject to periodic and sometimes radical change.
Alternatives to growth
Alongside the inherent problems of the term, a focus on GDP growth is based on the ill-founded notion that we should seek a single metric by which to judge economic performance. Much better to accept that the complexity of what is meant by ‘the economy’ is irreducible to one number.
An alternative view, with potentially greater purchase on today's circumstances, is that investment in health and education should be seen as the starting point for economic improvement, by raising labour market participation as well as increasing output per head. This avoids the assumption that only with growth should we sensibly afford such ‘social’ expenditures.
One encouraging sign is that Labour sometimes links growth talk with a desire to provide more ‘good jobs’, though this is still framed by the growth pledge. This is not to say ‘good jobs’ is the best single metric any more than GDP could ever be. While good jobs generate many positive externalities, they do not address directly the problems faced by those not in the labour market. But the aim should be to use measures that reflect the circumstances of today—not the 1950s and 1960s.