The theme of this month’s Cynnal Cymru newsletter is ‘growth’ in its broadest sense. It’s a word that is often associated with positivity. I’m writing this on the first working day of British Summer Time, although it is still very much spring. Growth is in the air – with the daffodils having sprouted and blossom season in full swing. Growth in this context is very much welcome, even to hay fever sufferers like myself. But there are some debates where the concept of growth is more contentious.
Our role as Cynnal Cymru’s Fair Economy team is to make a contribution towards a fairer economy for Wales. Our two core work strands are partnering with the Living Wage Foundation in Wales – hosting Living Wage Wales in-house – and working with the Welsh Government to support their ambitions for Wales’ foundational economy. For those of you who don’t know, that’s the ‘mundane’ areas of the economy that are nonetheless incredibly important in underpinning everyday life – think care and health services, food, utilities, and similar. They haven’t always got the attention from economic policy makers that advanced manufacturing or cutting-edge technology have, but they make up a huge section of the economy – with 51% of Welsh employees working in the foundational economy. Their working lives and the contributions they make deserve attention too.
It’s predominantly through these living wage and foundational economy workstreams that we engage with the concept of growth – the narrower idea of economic growth. Far from springtime flowers to some this concept evokes thoughts of industrialisation and environmental harm. The public policy debate in Wales – particularly where it intersects with the third sector – has seen a debate around whether economic growth is a desirable goal, with efforts to move towards a ‘wellbeing’ approach instead.
Whereas in years past many would look to settle the inherent tensions between development and sustainability via an ambition for ‘sustainable growth’, some in the Welsh policy space are now looking to other concepts, such as ‘degrowth’, or asking for a ‘wellbeing economy’ to replace efforts to increase GDP.
To me, a wellbeing economy is clearly a highly desirable aim. Focusing on a broader set of metrics than simply growth makes a huge amount of sense. We know that a rising tide doesn’t always lift all boats. The gap between the rich and the rest is growing. There is increasing evidence that, to some extent, pay has partly decoupled from productivity. The labour share of national income in the UK has fallen in recent decades, as a greater share goes to those who own, rather than those who work.
Source: Our World in Data
But does that mean we should eschew the quest for economic growth in favour of a wellbeing economy? The chart above – which maps life satisfaction and GDP per capita – suggests this may be a false dichotomy. There is a clear correlation between reported life satisfaction (which I would suggest is fairly synonymous with wellbeing) and GDP per capita. It follows that a growth in GDP per capita – economic growth – is very likely to correspond to a growth in wellbeing.
It’s right that we look to a broad set of measures when trying to create a fairer economy for Wales. It is fairly unsurprising that the Nordic countries of Denmark, Finland, Norway, Sweden, and Iceland find themselves at the top right of the graph – with some of the highest GDP per capita and life satisfaction in the world.
The Nordic model of strong trade union rights and mass union membership to protect worker incomes is a successful one. It rebalances economies away from the ultra-rich having a unilateral say over how much they pay their workers and how much they keep in their own pockets. Wales would be sensible to emulate it as much as it can. But we shouldn’t forget that this model does include having amongst the highest GDP per capita in the world.
And whilst there is some evidence of productivity growth (which tracks pretty consistently with GDP growth) and pay decoupling, there is no evidence of a total decoupling. Strong growth in GDP still means rising wages – for people of all income brackets. When we talk about how we can tackle poverty in Wales, economic growth is a tried-and-tested method.
Economic growth is good for the rights of workers, too. Harvard University’s Dani Rodrik found in his paper ‘An Industrial Policy for Good Jobs’ that the ‘sine qua non’ (for fellow non-Latin speakers, that’s ‘without which, not’ – an indispensable ingredient) of good jobs is a high enough level of labour productivity. That is, increasing productivity (doing more with less), a key component of economic growth, results in jobs that ‘provide a middle-class living standard, adequate benefits, reasonable levels of personal autonomy, economic security, and career ladders’.
The trade-offs between measures to support economic development and considerations such as equity and environmental protection are complex and multi-faceted. But Wales is one of the poorest areas of Western Europe on many measures. This results in human misery – including child poverty and people trapped in work where they are paid and respected too little. We should be hesitant about well-meaning calls to eschew economic growth.
The ambition of many to become a wellbeing economy is a welcome one. But the increasingly common refrain of ‘wellbeing or growth’ is looking at the issue the wrong way around. We should instead consider how we can continue to decouple growth from carbon emissions and utilise economic growth in Wales to reduce poverty and increase wellbeing.
