Growth and Ignorance

As the man said, most of the problems of the world could be fixed with five minutes concerted thought: but thinking is hard work, and five minutes is a long time.

One of the characteristics of the British at the moment is that we are happier debating in an information vacuum than when in full possession of the facts. Nowhere is this embrace of passionate ignorance more destructive than in political and economic debate. Consider again our approach to growth. To summarise, for most of the world most of the time, I think economic growth equates to an increase in human security, without which most of the things we value and love about humanity comes under threat. But plainly, not all growth delivers increases in security: growth generated by excessive 'returns to agglomeration' in cities measurably results in people finding it more difficult, expensive and therefore risky to retain their toehold in the successful city. Alternatively, growth sustained only by ever-larger acceptance of debt by households and families can hardly be said to have increased the debtor's security. Put the two tendencies, and rapid economic growth can degenerate into a desperate struggle to stay on board the careering train. If you live and work in the fully developed world, you can count yourself lucky if you don't recognize this.

We could, if we wish, make some attempt to measure the extent to which economic growth seems to be delivering or destroying the good life.

India does - a legacy of Amartya Sen's work, perhaps. In its annual Economic Survey, published this week, we have this:

India’s growth performance over the last couple of decades or so has been a subject of a great deal of scholarly enquiry, as well as a cause for celebration. A measured optimism, in this regard, would be understandable–-but a spillover into unbridled euphoria would not. The case against complacence resides in the large magnitudes of both poverty and inequality which coexist with growth. A natural question that arises is: is there a simple summary statistic that might throw some light, all at once, on the phenomena of growth, inequality, poverty, and inclusion? In

a broad and suggestive way, yes: the statistic in question is the “quintile income”, or average income, of the poorest 20 per cent of population.

Actually, what they produce is a comparison of the bottom quintile expenditure as a proportion of the average. It shows that spending by the bottom 20% rose from an average of 42.3% of the average in 1977/78 to 49.7% in 2004/05. If the figure is right, it suggests that India's growth has probably not been a matter of the rich getting richer whilst the poor get poorer.

I have tried to produce something similar for the UK, but - surprise, surprise - the data, if collected, is neither current nor easily available from the National Statistics Office. I can construct them only for the three fiscal years ending 2002/03. They show that the bottom 20%'s expenditure was only 37.5% that of the average in 2002/03. On the face of it, Britain, with all its pretensions to being a rich social democracy, has an income distribution markedly more uneven than India. What's more, within the three years of the data that is available, there is no sign that things were getting better - indeed, the situation in 2002/03 was slightly more uneven than in 2001/02.

Any set of politicians who had an interest in addressing these issues would ensure that this data would be released simultaneously with the quarterly GDP figures. We could then see not just whether the economy is growing, but also begin to fathom out what the growth, of lack of it, actually meant. We would soon learn to understand not just how we ourselves were developing as a society, but also where we stood in comparison with others. More, if things started going wrong 'despite all our efforts' (you hear our politicians cry), then there'd be an advantage in debating and understanding the causes. In particular, it would be difficult to escape the ownership of the results of policies.

But you can see why this would make our politicians nervous. Our current crop might have to defend themselves against charges that large-scale immigration had undercut the lower end of the labour market. We'd find out if the combination of minimum wages and tax credits actually worked in the way they were (presumably) intended. Our future crop would have to explain why the rise of unemployment and/or cuts in welfare spending were a price worth paying.

Having the information is the start of the debate. Our current determined and perverse ignorance merely suggests that our political establishment has no real interest in our society.