Fairness is a prerequisite for economic growth
Apparently someone said something last Wednesday about growth. We thought we’d take a look today at the many ways that fairness comes…
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Apparently someone said something last Wednesday about growth. We thought we’d take a look today at the many ways in which fairness not only supports economic growth, but is a vital precondition for it.
REMINDER: Sign up here for the Fairness Index online launch event on 19 October.
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Fairness is a prerequisite for economic growth
Growth and redistribution are interdependent
As Tony Danker (Director-General of the CBI) said on Radio 4 in September, the idea that we have to choose between growth and redistribution (or justice, or equality, or fairness) is wrong-headed. The two things aren’t in opposition; in fact, they are interdependent. By the same token, low levels of growth and high levels of inequality feed off each other. As the Resolution Foundation and LSE suggested in Stagnation Nation, the interim report of the Economy 2030 Inquiry, “the toxic combination of slow growth and high inequality was posing challenges for low-to-middle income Britain’s living standards even before the post-pandemic cost of living crisis struck.”
Fairer societies are more prosperous
Fairer societies are more prosperous, because they are more efficient and more productive. Strong, resilient economies depend on a secure, healthy and well educated workforce and robust public infrastructure, both of which depend on well-funded public services. The Stagnation Nation report outlined what a real plan for growth should include, such as upgrading the skills of the UK population (focusing in particular on improving schools), improving infrastructure, and treating Net Zero as an opportunity to increase growth and create high-quality jobs.
Low-tax, low-regulation economies are bad for growth
Cutting back the state and removing regulations would harm growth. Unfair (i.e. unequal) societies harm economic growth because they undermine efficient markets; the poor don’t spend money while the rich hoard it offshore. The link between hard work and reward is corrupted when a lot of wealth is unearned, failure is rewarded and fair and open competition is undermined. Unequal societies deny people opportunities to develop and contribute to the economy, a huge waste of potential. High levels of inequality dampen both demand and output, as years of austerity have shown (the IMF agrees). A ‘dash for growth’ at all costs is likely to exacerbate inflation and undermine long-term growth, as most people learned from the Barber budget in 1971. And cutting taxes has no impact on economic growth, while giving money to the richest does not magically ‘trickle down’ to everyone else. Policies like restricting immigration, opposing housebuilding and other necessary infrastructure development and restricting collaboration with international partners will all constrain growth further.
Voters don’t like cutting taxes and regulations
Even if a low-tax, low-regulation policy agenda were somehow to magically help growth, voters are not keen on it, as Sam Freedman points out:
Voters want economic growth in the abstract, but they don’t want a lot of things that might, in theory, help that growth… from removing the planned rises in corporation tax to reducing employment protections and allowing bigger bonuses for bankers. Again the point is not whether these things will help growth — that is disputed — but that even if they did the public would still oppose them. Again the point is not whether these things will help growth — that is disputed — but that even if they did the public would still oppose them.
We can grow within planetary limits by reducing inequality
The richest in society are having an outsized impact on the climate crisis. In the UK, the average person in the top 1% emits 25 times more carbon dioxide equivalent (67 tons per year) than the average person in the bottom 10% (2.6 tons), and 13 times more than the average person in the bottom 50% (4.9 tons). The flip side is that, if we can reduce inequality and ensure that future growth is inclusive (benefiting everyone, not just the already-wealthy), we can improve living standards for everyone while reducing our carbon emissions in line with the Paris agreement. By 2030, the average per capita consumption emissions of the poorest 50% in the UK are set to fall to a level that is compatible with a 1.5°C rise in global temperatures (2.3 tons of CO2 per year), but the richest 10% will remain five times above it, and the richest 1% will remain 14 times above it.
But we need to measure the right things
Gross national product does not allow for the health of our children, the quality of their education or the joy of their play… It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.
Quiz of the week
There are several proposed alternatives to GDP. But what do the following acronyms stand for: HDI, GPI, TPI, BLI, HPI?
Reads of the week
“Low income households will be worse off next year — the only question is how much. Cuts have consequences and politics is about choices”. Deven Ghelani of Policy in Practice talks about new analysis suggesting that low-income households would be almost £400 a year worse off if the government chooses to increase benefits in line with earnings rather than inflation.
“If parents are unable to financially contribute to the economy then we miss out on skills and income, whilst dishing out benefits to keep families from destitution. It makes no sense.” Joeli Brearley, CEO and founder of Pregnant Then Screwed, talks about new research showing that nursery for under-twos costs parents in England almost two-thirds of their weekly take-home pay.
“There is clear evidence of adverse changes to mortality rates in the UK from the early 2010s onwards”. This is the understated first sentence of a new study from the University of Glasgow, showing that more than 330,000 excess deaths in Britain in the eight years before the pandemic can be attributed to cuts in public services and benefits. Danny Dorling at the University of Oxford writes about what this might mean for the impact of future cuts.
“Unrest is brewing. All I would say to the plutocrats is: you were warned.” Deborah Hargreaves, founding director of the High Pay Centre, asks how did the gap between CEO pay and that of ordinary workers get so wide?
“Not only is a more ambitious target achievable by 2030, it’s vital, so in future no child has to suffer like my daughter did.” Rosamund Adoo-Kissi-Debrah, whose daughter Ella died of an asthma attack caused by air pollution in 2013, comments on new research from Friends of the Earth showing that people of colour in England are more than three times more likely to live in neighbourhoods with very high air pollution, putting them at disproportionate risk of heart attacks, cancer and strokes.
“What’s clear from this research is that some groups are less equal and more impacted than others, including our black and minority ethnic communities”. Halima Begum comments on new research from the Runnymede Trust, showing that Black and minority ethnic people are 2.5 times more likely to be in relative poverty, and 2.2 times more likely to be in deep poverty, than their white counterparts.
“You cannot have a market that behaves in such a way — logically and effectively and everything else — that it’s going to damage a significant part of society.” Ben van Beurden, CEO of Shell, says that taxing energy firms to help the poor is ‘inevitable’.
“Taxes on air travel are far more socially just than taxes on necessities such as home energy use.” Milena Buchs at the University of Leeds and Guilio Mattioli at the Technical University of Dortmund argue that the fairest way to tax carbon is to make air travel more expensive.
Fairness Foundation updates
Fairness Index launching on 19 October
A reminder that the Fairness Index launches next Wednesday. If you haven’t already signed up for the launch webinar (11am on 19 October), please do. I’ll be joined by Will Hutton, Ann Phoenix, Torsten Bell and Richard Wilkinson, and as well as a quick tour of the index and the thoughts of our assembled expert panel, there’ll be plenty of time for you to ask questions.
The short life of the microcast
Last week we shared a pilot episode of a five-minute ‘microcast’ (mini-podcast) based on Fair Comment, which we were considering publishing every Thursday. Thanks to those people who shared their feedback.
We’ve thought about it and have decided not to continue with it. We’d be competing for the ears and hours of our audience with an ever-growing number of brilliant and professionally produced podcasts, and we don’t have the resources or the time to do that properly.
Originally published at https://fairnessfoundation.com.