The director of the Jimmy Reid Foundation, a Scottish think-tank, argues that increased wealth does not benefit everybody, and instead, governments must look at policies to increase equality in order to create a more progressive, just society. GDP growth is not the solution to society’s problems because it may benefit only a few, not increase the job rate, or can be unsustainable. Instead, “it’s all about how you grow.” Over the last 30 years, as Scotland became wealthier, there was actually in increase in inequality, higher levels of crime and lower levels of happiness. States should realize that GDP growth may not foster growth in all sectors, and reassess their priorities.
By Robin McAlpine
Scotsman
August 17, 2011
The Jimmy Reid Foundation was launched last week as a left-wing think tank to inject fresh thinking into Scottish politics and to set an agenda which is people-focused rather than profit-focused.
But these are the same thing, are they not? What's good for profit is good for people, right? Well, no. The Foundation has set six core principles to guide its work but perhaps the most fundamental is that society should be based on equality and social justice.
The understanding of the concept of social justice has been greatly diluted through years of lazy usage but it should still be seen as the primary goal of a democratic government. And it is an objective ill-served by "mainstream" approaches to the economy.
For decades, at the core of western politics has been the belief that simple GDP growth is either in itself the solution to society's problems or that from it, all solutions spring wholly-formed. But this just doesn't seem to be true.
In the past 30 years the proportion of GDP which goes in wages has fallen from 58 to 53 per cent. Which is to say that the more the economy has grown, the less ordinary people have shared in it. And of all the income growth in the past decade, four fifths of it has gone to those with above average salaries and two fifths to the richest 10 per cent.
So for this generation, the richer Britain has become the more unequal it has become. But this is not inevitable - during the most impressive period of growth in the history of capitalism (the three decades leading up to the mid 1970s) inequality fell and social mobility increased. It's all about how you grow.
But does this matter? By far the balance of evidence strongly suggests that it does. Pot-shots have been taken at the research which shows this because it so fundamentally undermines the philosophy of neoliberal capitalism, but it remains compelling. Societies with lower levels of inequality have lower levels of crime, better records on health and higher levels of reported happiness. The same is broadly true of everything from educational attainment to teenage pregnancy and obesity.
And one of the most telling factors is that this is as true of poor countries with low level of inequality (such as Cuba) as it is of rich countries (such as the Nordic nations) and is as true for the wealthiest members of these societies as the poorest. Much more important than how rich we are is how much we feel that we share in society's total wealth. The limited economic powers we currently have in Scotland mean that the pressure from international money markets to show growth for its own sake is absent. Also absent is the old belief that growth must automatically create jobs, undermined by the jobless growth of speculative financial markets. And many were nothing more than the cheapest jobs possible, which simply outsources the problem to the taxpayer who has to top-up inadequate pay through benefits and tax credits.
So a major focus of the Foundation will be to convince politicians that they need to recalibrate their attitude to economic growth and its place in the family of political priorities.
This is not an anti-business agenda. Indeed, the majority of Scottish businesses should welcome such a recalibration. This is because the kinds of growth that do benefit the country are those where the scope for the expatriation of profit is minimised and the multiplier effect of economic activity in Scotland and for Scotland is maximised.
Let's look at one example. If Scotland's economy "grows" because we allow foreign-owned multinationals to erect wind turbines on our prime sites, what does Scotland get? Some temporary jobs erecting them? Some technician jobs to keep them going? Whitehall gets the corporation tax, the Crown Estate Commission gets the rent (if they're offshore). And a Spanish conglomerate gets most of the profit.
But alternatively, if we manage to develop an industry based on Scotland's leading position in wave and tidal electricity generating technologies we could have indigenous companies plugged into indigenous supply chains employing people in high-skill research and development and mass manufacturing with both significant amounts of domestic technology deployment and a serious export industry.
We need to move away from an outcomes-blind "growth is growth" attitude towards a thinking, strategic and realistic vision-based approach. And this should be based on a quality test - will intervention create quality jobs, indigenous businesses, joined-up industry sectors, community benefit and long-term sustainability? It's time for growth to earn our support.
But there is more to be done. Government must look for ways to flex its muscles and encourage the kind of economy it wants to see rather than allow the big business sector to create the kind of government that it wants. We need to tackle social irresponsibility and wage inequality. And even with its existing powers the Scottish Government has two tools at its disposal with which to do this.
One is procurement policy. Currently this is based on the concept that if we have to cut off our own hands to save ten pence then that's what we have to do. The misguided approach of amalgamating contracts into a size that may save a few quid but often makes it impossible for domestic businesses to bid for them has to end. In trying to save fairly small amounts of money we are expatriating even more Scottish wealth to overseas companies and putting small Scottish enterprises out of business. Simply by making procurement accessible by Scottish-based companies we would see more benefit than the money saved. And then conditions should be added to procurement - such as wage ratios or community engagement criteria. This can gently change the nature of the relationship to fulfil the government's responsibility to its shareholders (you and me) which is what the big suppliers have tried to do in the opposite direction.
Planning is another tool. Local authorities already put public interest conditions on planning applications. Again, let's encourage businesses to treat all employees in a more equal manner because it is in the public interest. (Remember, people spend wages in local economies; multinationals expatriate profit and often we never see it again).
This is simply a starting-point for rethinking our attitude to growth with the focus put on the people of Scotland and not on corporate dogma. Growth has to earn its right to be supported. It has to be growth that brings greater equality or it will simply not strengthen the country.
There is an assumption that the business class knows best what is good for the Scottish economy, but its expertise is limited to creating economies that place profit before any real social responsibility. Thinking has been excessively dominated by those that stand to gain, with a very limited voice for those that stand to lose. This has benefited neither the productive economy nor wider society.
A productive economy and a strong society are two sides of the same coin. The private sector has a very valuable role to play in improving social cohesion. But just like the rest of us, sometimes it needs to be encouraged to do the right thing.
• Robin McAlpine is director of the Reid Foundation.
