Magical economic growth

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One of the many areas of agreement between Labour and the Tories when it comes to economics is their unshakeable belief in the Great God Growth as the solution to all economic problems, to say nothing of other problems such as health and education. There is, it seems, no need to consider further taxing, or redistributing, accumulated wealth or disproportionately high income because the Great God will magically make the cake bigger, and a bigger cake goes further. To the extent that there is a difference between the parties, it relates only to the question of which particular rites and ceremonies need to be performed by the devotees of the Great God before (s)he performs his or her magic. The problem with this whole belief system is that it depends on some unstated and very dubious assumptions.

The first of those is that the government itself has no direct role in making growth happen. Government’s job is simply about providing a bit of infrastructure and slackening a few rules, and suddenly growth will just happen. It’s an approach which, incidentally, treats government expenditure as though it is a drag on the economy and therefore to be avoided rather than something which can itself directly stimulate growth, and undermines its own aims in the process.

The second is that a bigger cake means that everyone benefits. But without any consideration or control of the way in which the extra cake is shared out, what stops those who already have the biggest slices from simply grabbing all the extra cake for themselves? After all, recent history of growing disparity suggests that that is the most likely outcome.

And the third is that, as the cake grows, the government’s tax income grows in proportion. It’s a belief which rather overlooks the fact that those taking the biggest slices of the cake are also those who are best at avoiding paying tax, and most likely to be able to conduct their financial affairs in such a way as to take their income in the form of (lower-taxed) capital growth rather than taxable income, and/or shift their wealth and income into off-shore havens.

Perhaps the biggest assumption of all is that growth is, in and of itself, always a ‘good thing’. It is at best arguable and at worst a potentially disastrous approach to the utilisation of the Earth’s resources.

Maybe they believe that their Great God will add a magic ingredient to the cake mix which ensures that baking a bigger cake doesn’t need any extra resources; maybe the same ingredient turns greedy hoarders of wealth into altruists keen to share the cake more evenly. Maybe the moon really is made of green cheese, and revolves around a flat disc called Planet Earth. Or maybe, in the real world, we actually need government to take deliberate action to ensure greater fairness in the allocation and use of resources. That’s an option which currently looks unlikely to be on any ballot papers come the election. Seen solely in terms of the choice of a future UK government the question is very much simpler: which colour disillusion do we prefer?