Wednesday, 9 June 2010

What are we really missing?

There are a number of basic and very important facts in today's front page story in the Western Mail. There are also a few assertions which are not facts and which need to be challenged. And the headline is a complete non-sequitur.

The headline, like much of the story, seems to be based on the assumption that high earners and wealth creators are almost interchangeable terms. They are not.

Certainly, there are high-earning entrepreneurs who do create wealth, but not all high earners fall into that category. And low-earners can create wealth as well.

There are other high earners who accumulate wealth, mostly by redistributing it from other people into their own bank accounts. Then there were the high earners in the banks and hedge funds who managed to destroy a lot of our wealth by their actions. And finally there are high earners working in the public services. More of any of these might not actually be the answer to anything.

The other myth which needs to be challenged is the idea that becoming wealthy is the same as creating wealth. It is not necessarily thus.

Wales certainly does need to create wealth, in the sense of increasing our overall collective wealth and our levels of GDP per head. That doesn't necessarily involve ever greater levels of inequality, though, and to suggest that it does has more to do with ideology than economics, as does the underlying assumption that 'becoming personally wealthy' is the only driver of economic activity.

The fact that Wales has a comparatively low level of income inequality is actually something which I welcome; the gross levels of inequality which permeate the world in general are a major part of the world's problems, not part of the solution.

If we are to solve Wales' undoubted economic problems, we need to make sure that we understand what they are. A lack of billionaires isn't one of them.

2 comments:

Welsh Ramblings said...

Excellent points there John. Would you agree that constantly comparing our economic indicators to those of England is also a red herring?

There are some indicators where we actually have done better than parts of England of course (not that we'll hear about them in the WM anytime soon!). But it's still ridiculous and smacks of a post-colonial mentality, to constantly be using England as a benchmark for how well we're doing!

Just my opinon but i'd like to know if you agree?

While i'm rambling away i'll also mention the ridiculous WM headline piece from earlier in the week, 'Wales missing out on high property prices'. Seeing as we've just had a financial crash caused partly by property prices, I think we should be celebrating the fact that property prices are lower here, as well as recognising it will allow more people to get on the ladder!

John Dixon said...

Ramblings,

I'm not convinced that it is always a red herring, I'm afraid. When used to compare different methods of allocating funds in education, it generally is, because it's comparing apples with pears. When used to compare the outcomes of different services it sometimes is, because the nature of devolution is that it enables the adoption of different priorities, so differences are to be expected.

But when it comes to basic economic performance, we need to remember that the main argument used by Plaid's opponents is that 'Wales can't afford it', and the relative underperformance of the Welsh economy related to the UK average is a key part of that debate. (Although I accept that comparing Wales with the UK average isn't the same as comparing Wales with England.)

We need to tackle that argument, both by showing what we would do to address the gap, and also by drawing attention to the fact that current arrangements are more likely to be the cause of the gap than the solution to it.

I entirely agree with you on the house price issue, though. That, like the story which provoked my original post, is an example of how the indicators often used to judge economic 'succcess' aren't necessarily talking about the sort of 'success' that we want to see.