In his speech on 4 January 2023 the Prime Minister promised to, “… grow the economy, creating better-paid jobs and opportunity right across the country”. But what does growing the economy mean? Politicians and much of the media love to measure the economy by so called Gross Domestic Product (GDP), the monetary value of the goods and services produced in a given period. They do not seem to think it important to ask whether those goods and services have improved the lives of citizens or whether producing them was actually the best use of the resources consumed.
For example, the government has said it intends to ease regulations on the financial sector and bankers’ bonuses, so that sector can contribute more to GDP. But how much does this improve citizens’ lives? When we desperately need more people to train as doctors and teachers should we be taking measures to encourage skilled people into an industry of which Christine Lagarde (Managing Director of the IMF in a speech in 2019) said, “… too often, it has worked hard to serve itself rather than serve people and the economy at large”?
Another example. When we are becoming more aware that extreme weather and disruption to food supplies and people’s lives is being caused by the effects of fossil fuels on our atmosphere, the government has approved a new coal mine because of the jobs and income generated, although it appears the ultimate ownership will be with a private equity firm in the Cayman Islands.
Then there is the issue of all the activity which is not counted in GDP as it does not involve a market transaction but is nonetheless of value to society. Why is the time spent looking after your own toddler or aged parent not counted towards GDP, whereas if someone else were to do it for you it would be? Such parental or social care within the family is treated as if you are not “working” or “contributing”.
These examples lead me to the same conclusion as in my earlier articles – on National Savings versus National Debt and National Resources versus Taxpayers’ Money. The predominance in positions of power of individuals who have worked in the financial world has led to policy being determined by questions about money rather than questioning how best to use our nation’s limited resources for the good of the population.
Perhaps the best summing up of the situation came in a speech given in 1968 by Robert Kennedy in which he concludes that a monetary measure such as GDP, “… measures everything, in short, except that which makes life worthwhile”. We do not seem to have moved on much in over 50 years.