Post-growth politics

In an important new paper (pdf) Robert Gordon suggests that US economic growth could be very slow over coming decades, even ignoring the consequences of the financial crisis. I'll leave the critique of this to others. I want to ask: if his pessimism also applies to the UK, what would be the political implications?

It's bad news for the Tory right. If there are few new innovations - or if the funding for them is unavailable - then deregulation and tax cuts just won't unleash the wave of entrepreneurship and growth they hope it will.

But it also requires Labour to think again. Rob Marchant says:

A simple fact seems to lie unaddressed by politicians: people still want to get on in life, just as they always have done. And they want politicians who understand that. It’s called aspiration, and in Labour we used to understand it.

But in a stagnating economy, aspirations are dangerous.When there's no aggregate growth, one person can "get on" only at the expense of another. Aspiration thus becomes a (near) zero-sum game, which is a recipe for conflict and social tension.

Which brings me to other worries. Traditionally, growth has helped resolve two conflicts. One is resistance to taxation versus the demand for public services; economic growth funds increases in the latter without excessively onerous taxation. The other is between rich and poor; people might tolerate the rich getting better off if they too are getting better off, if only at a slower rate. But what if the rich get richer as the poor get absolutely poorer? On both counts, stagnation would increase political conflict, perhaps undermining the perceived legimitacy of democratic government. Remember, the (mild) stagnation of the 70s triggered serious talk (pdf) of a crisis of democracy.

This could be exacerbated by a tendency identified by Ben Friedman. Slower growth, he said, makes people meaner and less tolerant; its no accident that the slowdowns in the 1930s and 1970s led to increased class conflict, racism and worse.

Post-growth politics thus presents some nasty challenges for all politicians.

In this context, perhaps (only perhaps) there's something to be said for David Cameron. You can interpret his big society and broken Britain thinking as an intuitive recognition of all this - as a belief that social capital must be shored up against the threat of its degradation by economic stagnation.

Whether he can succeed in this is, of course, another question. But my point is that Rob's likening him to Harold Macmillan might be more correct than he realizes. Macmillan thought his role was to manage Britain's relative decline. And this might be exactly the job of Cameron and his successors.

Comments

[Richard Gadsden]

Real conservatives - not the Conservative Party - have traditionally sought to teach people to be happy with their lot. A post-growth economy might well favour social structures similar to the pre-growth economy, with lots of concentration on inheritance, and on accepting your social and economic position rather than trying to improve it.

[Anonymous]

Let's have a world war ! That usually does the trick

[weareastrangemonkey]

Half of Gordon's paper or more is a rewriting of Tyler Cowen's "The Great Stagnation" without citing it.

Its incredible that economists think the idea that growth doesn't go on for ever is a new one.

[Chris Purnell]

The point about MacMillan was that society was becoming more equal. Housing, social services, and education all became better. So the relative decline was managed with social justice. His phrase was One Nation Conservatism. All of which is a long way from the red meat of "estate- agent- Toryism" from the London suburbs.

[gastro george]

Considering economic policy is being driven by a concern to preserve existing wealth and wealth extraction by the managerial class, should the lack of growth be surprising?

[Diarmid Weir]

gastro george has it right, I think.

There are surely loads of ways we could improve our lives, societies and world without such rapidly increasing overall material consumption.

If the 'big society' did mean anything, it would be about getting together to do this by co-operative rather than competitive means.

[guthrie]

I disagree with your last, short, paragraph, because it seems clear that even if their actual job is to make the UK's relative decline, Cameron and his pals appear to think that they can halt and reverse the decline by introducing policies which they are constitutionally unable to recognise are bonkers and wrong.
Moreover the real degrader of social capital is 'free' market capitalism and bug business practises, not stagnation per se.

[P Spence]

Baran and Sweezy identified capitalist stagnation in Monoploy Capital nearly 50 years ago: socialism likely to offer the most hope to most people, and the alternatives are too dreadful to contemplate

[BenP]

There certainly is growth for executives and wider 1%. Capitalism is predicated on the promise of tomorrow for crap today, it's unlikely that the experience of today with no fututre will be tolerated for long. Bring it on.

[Account Deleted]

Without getting into a detailed critique of Gordon's case, it's worth noting that the now fashionable pessimism tends to combine three elements: the relative decline of the US (i.e. if they aren't number 1, then the world is awry); the constraints on capitalism, such as welfare costs, thick students and regulations (i.e. a mish-mash of prejudices); and the slowdown in innovation (which many think is a myth).

If we accept that innovation is significant (whether slowing down or not), then the key question, for the UK as much as the US, is: what can we do to foster innovation?

The Tory strategy appears to be based on: looser employment law, easier planning permission, fewer graduates, lack of credit (though cheap money), minimal government pump-priming, and the City still preferred to manufacturing. This does not really cut it.

A more courageous strategy would include the likes of a basic income (so people were emboldened to start businesses), land-value tax (to encourage optimum use), an education system geared to developing potential, not passing exams, and higher tax rates for financial businesses and speculators.

Judging by their choices, the Tories are not seriously committed to supporting innovation to drive non-bubble growth. Now that the nonsense about "Maoism" has evaporated, they're revealed as true conservatives. Too much innovation would challenge the social order.

[Martin Audley]

You what? WTF?

"When there's no aggregate growth, one person can "get on" only at the expense of another. Aspiration thus becomes a (near) zero-sum game"

What a moronic thing to write. Cart before horse I think.

If there's no aspiration, there's likely no growth. The aspiration would be the trigger for whatever growth there was, and should be welcomed.

Do you really think that if you worked hard, got better at skill "X", and were able to produce more output of in-demand item "Y" a day as a result, that this would _harm_ anyone else? Of course it wouldn't! The world would be the better off for the presence of more item "Y"s.

[Anonymous]

@Martin Audley

In third world and other poorer countries there is plenty of aspiration and no growth. I have lived in such countries and seen it first hand.

Growth does not occur because some magical superhuman uber-menschen have deigned to descend from the skies to walk amidst we mere mortals. That is Randist claptrap.

Growth is more complex and depends on collaboration between individuals, groups and governments. The joint stock company, where financiers pool their resources, is a case in point. The development of human "capital" through education is another.

Although individual aspiration may be a necessary condition for growth, it is not a sufficient condition. Collaboration is also necessary. There is so much more to achieving growth than simplistic Randian notions of individualistic aspiration and talent.

[Keith]

I misplaced my crystal ball some where today so unlike the scribblers in economist land I cannot predict the future!! Hence tell you how much growth there will be. But I can relay from the dead the message of A. J. P. Taylor that predictions of the future have a cyclical quality. There are times of optimism, and pessimism, and neither is ever a totally correct estimate of things to come. Apparently reasonable assumptions turn out to be totally wrong and a huge balls up ensues.

You give Cameron and co far too much credit by taking their PR tosh at face value. All the predictions they made before they came to power by their back room stitch up, were well wide of the mark. Deregulated Ireland and Iceland are not mentioned by the tory Crystal ball gazers any more are they?

As for Supermac he did have to manage the decline of the UK from great power status. But that had no detrimental effect on the people. The economy prospered with considerable equality in material improvement. The loss of empire was inevitable but no great harm to any one except right wing nostalgics. Macmillan also had brains and understood Keynes before most Tories or Labour. No comparison with light weight used car salesman Cam, Clegg, and Osborne .

And if I may say so it is unwise to assume you know what Conservatism or any ism should require. Parties change their actual policies over time and may do so in a huge way as when Peel split the Tories over the corn Laws and embraced free trade. As Wellington astonished the Tory die hards by embracing Catholic emancipation. Who would have predicted the Iron Duke would be so Liberal?

[james higham]

then deregulation and tax cuts just won't unleash the wave of entrepreneurship and growth they hope it will

Not when the whole fabric has been white-anted by the global socialists. They've done a pretty effective termiting job.

[Neil]

Nil desperandum, just get some useful idiots to shout 'LUMP OF LABOUR! LOL!' loud and long enough and the problem of there being *no demand* will just go away.

[north face outlet]

loud and long enough and the problem of there being *no demand* will just go away.

[Jeff Torborg]

@weareastrangemonkey:

You comment that "Half of Gordon's paper or more is a rewriting of Tyler Cowen's "The Great Stagnation" without citing it. Its incredible that economists think the idea that growth doesn't go on for ever is a new one."

I've read this comment in several of the discussions that are linked to RJG's paper, and all I have to say is this: if you think that Tyler Cowen is the first economist to have conceived of the idea that growth doesn't go on forever, then you have sadly misspent your education.