The Diseconomics of Growth

H.V. Hodson


Chapter VI.

Options for Advanced Countries

There has developed in the Western world—perhaps especially in the United States and Britain, though the contagion irresistibly spreads—a cult of economic growth. It has not only its intellectually committed priesthood but also a powerful lay force of vested interest: politicians who can offer growth and its benefits as bait to the electors, businessmen concerned with “growth industries”, investors in securities whose market value hinges on the expectation of growth, trade-union leaders who without the assumption of growth would have to fall back on more modest claims for their members, advertising men, media interests and all the other hangers-on of economic expansion and change. An economy without growth has become a by-word, a reproach to the political leaders, a stick for the militants, a cause of depressive psychology both in newspaper and broadcast comment and in business reaction. An industrial economy continually without growth—as conventionally measured by the increment of Gross National Product—has become almost inconceivable, or if conceived a portrait of gloom and decay. Growth, for its multitudinous worshippers, has become like the priest of Aricia, described by Sir James Frazer in The Golden Bough:—

The priest of Aricia was one of those sacred kings or divinities on whose life the welfare of the community and even the course of nature in general are believed to be intimately dependent. It does not appear that the subjects or worshippers of such spiritual potentates form to themselves any very clear notion of the exact relationship in which they stand to him; probably their ideas on the point are vague and fluctuating, and we should err if we attempted to define the relationship with logical precision. All that the people know, or rather imagine, is that somehow they themselves, their cattle and their crops are mysteriously bound up with their divine king, so that according as he is well or ill the community is healthy or sickly, the flocks and herds thrive or languish with disease, and the fields yield an abundant or a scanty harvest.

Substitute industry and commerce for flocks and herds and fields; and you are not far off from an account of the prevalent popular attitude towards economic growth.

Those who believe that economic growth, so understood, is a false god which has deceived us into many errors and perils have the task of outlining a picture-constructing a model, as the economists would say—of a society with nil growth over a substantial period. If we could see what it might be like, we could both judge whether it would seem desirable or even tolerable, and start from there in considering what sort of economic growth, if any, would be an ideal objective.

The basic hypothesis is that total national product (at constant prices) remains stable over a stretch of years. To simplify the argument at the initial stage we can assume an unchanging total population; more exactly, we can take stability of Gross National Product as identical with stability of GNP per family (as an economic unit) or per worker. Refinements on this score must be introduced later.

Some emphasis must be laid on the word Gross: we may well find Net National Product, after providing for making good the deterioration and running-down of resources, following a different course. Net National Product can go up while Gross National Product goes down. Suppose, for example, that in the course of technological or business changes a large plant or section of a particular industry becomes uneconomic. Maximising GNP, or promoting economic growth, requires that the resources of capital and labour released be taken up in more prosperous, expanding sectors: no allowance is made in GNP for the disuse, or under-use, of the plant itself and other physical capital associated with it; whereas to arrive at Net National Product a figure for this is deducted. Now suppose that instead of letting that physical plant and equipment become idle, and the workers become redundant and have to find other jobs, the government steps in with a subsidy or a protective tariff or non-market finance or some other means of keeping the activity going. No such deduction has to be made then from NNP, which may be actually going up, whereas GNP suffers because no resources are released for transfer to more profitable and expanding purposes. Rolls-Royce, or shipbuilding on the Upper Clyde, are British cases to which this argument can be applied.

Does the assumption of constant GNP, or nil national economic growth, mean that every man has his income, every company its turnover, every government authority its tax base, fixed and incapable of enlargement? Of course not. We are not supposing a condition of no change, a sort of still photograph shown continuously on the screen, but one of unceasing movement (as is natural to an advanced economy)—within an unexpanding frame. On the personal side, men and women grow older, enter into employment, advance from lower to higher positions, change their jobs, retire. It is never exactly the same people who share the national income from year to year, or share it in the same way, growth or no growth. On the business side, following changes in demand or inventions or productive innovations, or more or better management of resources, some concerns, some industries, will grow, others will shrink. We do not pre-suppose a stagnation of overall industrial and commercial efficiency, but only that this is not translated into higher gross income for the nation.

This ought not to be difficult to imagine. Countries at similar stages of technological and social advancement have had, since the statistics became part of common knowledge, considerably different rates of growth of GNP. Does the daily working of their respective economies vary so conspicuously? Clearly it does not. The differences are, after all, fairly marginal. One would expect more contrast between a country with a persistent 5 per cent growth-rate and one with a persistent 2 per cent growth-rate than between the latter country and one with a nil growth-rate. Examples can be found among the advanced industrial countries of long-term growth rates ranging from 10 to under 2 per cent. Nil is much nearer to 2 than 2 is to 10.

Britain probably had in 1970-71 a nil short-term growth-rate. This was accepted as temporary, and was associated with the struggle to contain wage-inflation and build an adequate balance of payments, in the course of which half a million had been added to the total of unemployed; but the gloomiest of economic prophets did not argue that if the growth-rate were to remain nil or thereabouts for a couple of years more the economy would break down or even that unemployment would necessarily rise further: that would depend on other circumstances. Nor was it suggested that in a year of nil growth in Britain there were no industrial changes, no advances of particular corporations or industries, no improvements in productivity whether through innovation, capital investment or skilled management, no redistribution of national income between different sectors, classes or individuals. Indeed there was a renewed rise in average productivity of labour. It was taken for granted that these things go on all the time, growth or no growth.

The difference lies essentially in expectations, and in material reward for a given input of labour, ability or investment. In a nil-growth economy, nobody can expect his or her real income to rise automatically through a general rise of economic output to which he may or may not have contributed. Nobody can sit back and let growth work for him. The enlargement of his real income, whether from his labour and brains or from his enterprise and investment skill, depends on himself. In this sense a nil-growth model is the ideal of the free-enterprise, individualistic society. But the argument has no particular favour for individualism, or for capitalism against socialism. The same analysis goes for the public sector as for the private.

If a man, then, wants to improve his real income he must look to the rewards of better work, greater skill, larger opportunity, higher responsibility, coupled with those of seniority and good service. Once he has reached a platform of seniority and skill, he must be content—or jump off it and make a bigger change. In the public sector, governments can embark on larger spending exercises only if they effect a redistribution of national income from its existing pattern; they cannot do it by pre-empting a chunk of overall growth. That would be a very salutary discipline for them.

Such redistribution of national income may be by way of economy in existing expenditures, a process which takes money out of the hands of those on whom or through whom it has been spent, and switches it to the agents or beneficiaries of the new activity; or it may be by way of raising more taxation overall, which takes real net income from the taxpayer; or by way of a direct exercise in changing the pattern in which national income and resources are deployed. A good example of the last process is the National Health Service in Britain. When it was introduced, it did not automatically increase the number of doctors or hospital beds, the skill of surgeons and physicians or the beneficial properties of medicines; so it could not be said to increase the total of health service available. It redistributed what there was. Many doctors worked harder, no doubt: some, over-stressed in the previous system, worked less hard; but apart from an increased consumption of medicines and a certain bureaucratic apparatus no additional national resources were immediately used up. Subsequent developments, including improved hospitals, more doctors, better drugs, or such evils as over-prescription, malingering on minor health pretexts (or, to be kind, a lowering of the threshold of tolerance of minor ill-health), abuse of doctor’s time, are beside the point. The example is one of redistribution of existing national resources, based on social equity and public policy, which experience has shown to have increased real national welfare, and which could be effected in a condition of nil economic growth.

The prospect of nil growth does indeed gravely heighten the problem of re-distribution of this world’s goods, as the Bishop of Kingston, Dr Hugh Montefiore, has recently emphasised. In his 1971 Rutherford Lecture, [Published by the Manchester University Press], he declared that “there is not much more economic growth possible; or, if there is, it will lead to later collapse.” In the context of developing countries, the Bishop continued:

The finiteness of our global resources and the impossibility of bringing living standards up to those enjoyed, say, in the western world raises in acute form the problem of their equitable distribution. In a situation of perpetual growth, this problem is partly obscured by the rising standard of living in poor countries. Where overall growth slows down or ceases, the moral problem of the different living standards in rich and poor countries becomes even more acute... And the same point holds good nationally as well as internationally... Present inequalities of wealth have only been tolerable because of the hope that poorer as well as richer citizens will benefit from a constantly rising standard of living. They become intolerable once it is recognised that there is an absolute ceiling to our standard of living.

We cannot expect the poor to accept a stationary poverty while the rich enjoy a stationary wealth. Eventually, in a nil-growth economy, there would need to be a much more equal division both of goods and services and of leisure. But this could take many other forms than mere governmental transfers of money, or enforced depression of the real incomes of some classes for the benefit of other classes. “Short of a believable threat of human extinction,” claims Professor Walter Heller, [see note 1] “it is hard to imagine that the public would accept the tight controls, lowered material standards, and large income transfers required to create and manage a stationary state.” But none of these horrors is a necessary accompaniment of nil growth of GNP. If rising technical productivity, which will not cease, is barred from expressing itself in higher GNP, it can express itself in other ways—in better public services, in lighter toil and improved modes of life. There can be a re-distribution of leisure; and what people do with the hours and days spared from work can serve to raise not only their own standards of welfare but also those of others.

Some resources would also be released for potential redistribution. Governments, in such a condition, would not be burdened with the task and cost of stimulating growth. This can be very expensive. The aeronautical and space industries have been among the most spectacular growth points in the economies of the United States, Britain, France and other advanced countries. They have also been among the most costly in public funds. There may be other reasons, military reasons for instance, for promoting aviation and space transport, besides the reason of promoting growth, but with this reason absent there might well be a redeployment of tax money to different and better uses within a stable aggregate for equal division both of goods and services and of leisure. [sic] government expenditure. Some margin for redistribution would also be present in the lesser requirement of business investment for material growth.

For business, likewise, the only difference in a nil-growth economy from one of regular growth of GNP is that it has to look for its opportunities of profit and expansion within an existing total of real public purchasing power. It has to re-work its calculations on production, marketing and investment on slightly scaled-down figures of potential. The difference in decisions actually taken in consequence is not likely to make much difference in the overall working of the business economy. Investment in new plant, new machinery or processes, new products or new sales efforts depends only marginally on whether the potential market—only potential, mark you, for no one can be sure that the benefits of national economic growth will come his business way—will probably increase by 0 per cent, 3 per cent or even 5 per cent per annum. What count much more are the absolute scale of the market, the competition of rivals, the cost of production at the anticipated scale, the price at which the product or service can be sold, and the cost of the required investment and work-force. If these figures work out right—or wrong—the decision yea or nay is not likely to be radically affected by the possibility of a little extra jam from national growth, save in exceptional cases directly geared to overall economic growth, cases which are not in the aggregate as important as they might seem.

To return to the individual, it is only the recent phase of measurement and cultivation of growth that makes the facts of a nil-growth economy seem strange and disagreeable. Some people are old enough to remember those days before World War I when such a state of affairs was commonly assumed to exist in countries like Britain, though it did not. (One must leave out wartime and the two inter-war decades because their deep swings in employment and production, their inflations and deflations, confuse the picture.) Then, in a stable economy, the basic pay of a docker or a doctor, a miner or a sanitary inspector, an actuary or an agricultural worker, was not expected to change very much from year to year, with constant purchasing power of money. It was understood that if a man worked hard or well, got promotion, or increased his skill, whatever his trade, job or profession, he would earn more: he could start at the bottom and end at the top of the earning scale. But if he just went on doing the same thing to the same effect he would expect to go on getting the same pay. (This basic-platform, self-advancement attitude is still common among professional people.) The drive of the trade unions and other militant working-class movements was essentially to make the basic pay a “living wage,” or a “fair wage,” or to increase the workers’ share in the total national income, with echoes of Marxism and the theory of “surplus value”; it was not to take for the workers any regular bonus of income implied in national economic growth.

Few people want to go back to pre-1914 standards and conditions. Let us be thankful for the benefits as well as mindful of the ills that economic growth has brought meanwhile. But let us look at those workers’ objectives in the present-day light. Despite the vastly increased power and membership of trade unions, despite the appearance of radical, pro-labour governments, despite nationalisation and state enterprise, despite great extensions of public spending and falls in the proportion of the economy motivated by profit, despite all this there has been remarkably little change, especially in the most recent period during which these influences have been at their height, in the fraction of total national income going to wage and salary earners. In any advanced economy the figure seems almost a constant in a given technological phase.

The idea of a fair wage for the job has become laughable, when lavatory attendants are paid more than school teachers, and when quite new sorts of job are created by technology all the time. There remains the concept of the “living wage”. Implicitly, this concerns only the lowest-paid workers: if they get a living wage, the rest must be getting more than a living wage. Unskilled labour is now a comparatively small and still dwindling sector of employment, so the theme has only limited application to the general problem. Naturally, ideas of what constitutes a living wage change as standards of living rise. A couple on a state old-age pension in Britain today get more in real value than a man in work got in low-paid occupations like agricultural labour in times one can remember, even later than World War I. Both in Britain and America, rates of welfare benefit, which indicate society’s view of a minimum decent income, may exceed normal wages for an unskilled man with many dependants. Nevertheless, it is impossible to claim that the present levels of even relatively low pay are not a living wage as it used to be understood.

A statutory minimum wage may or may not be a wise provision. It would certainly have its merits in the nil-growth model we are contemplating; but like other elements in that model it, too, would have to be fixed and stable, unless a change in it were a deliberate move to redistribute national income or for some reason to create unemployment among the unskilled. For it is obvious that, if unskilled labour is priced above the market rate, less of it will be employed. A relatively high minimum wage may indeed be a way of forcing a potential growth, if it impels businesses to use more labour-saving, capital-intensive techniques and innovations. Many people believe that the high cost of unskilled or little-skilled (including clerical) labour in the United States, by compelling greater use of advanced machinery, automation and computers, there compared with, say, Britain, has been an important reason for America’s more rapid economic growth over the past two decades. This may well be so, but it has had its price in high unemployment among those classes of labour (which include a large proportion of blacks), with all its social consequences.

Stability of real wages certainly does not mean that the trade unions would go out of business. On the contrary. In recent years a great deal of their strength, and of the cost of strikes, has been dissipated upon demands for higher money wages, inflated by expectations of growth, which in the end, through consequent inflation of costs and prices, have been futile for the workers as a whole. If that expectation were denied, they could concentrate on getting better pay for more effective work (in a word, through productivity) and on improving the real welfare of their members through better conditions of work and larger benefits outside working hours and places. Objectives for better conditions might include shorter hours, or a less exacting spread of hours and days worked. In a nil-growth economy, improvement of working conditions and an increase of leisure would become desirable ways of using any increase in productive efficiency that would otherwise emerge as growth. These two objectives are inter-related. If a man is working in conditions which give him satisfaction, he may not want more leisure at the expense of real wages: a balance has to be struck nationally as well as individually or industry by industry.

It has just been remarked that workers’ organisations could still strive for better pay on the basis of better output or productivity. The productivity must be real, not spurious, and its value must not all be seized by those directly responsible for it, leaving nothing for the general benefit. But there is nothing in the nil-growth model to inhibit or frown upon such wage-bargains, any more than upon improvements of individual income through increased skill. They might indeed be expected to multiply, once the distraction of trying to cash in on national economic growth was removed from labour-management relations.

Would not the outcome then be economic growth, so that the nil-growth model would chew up its own basic premise? There is a confusion of thought here. Higher productivity, though connected with growth, is not identical with growth unless it is made so. This can be seen from the example of a single firm, assumed to have a monopoly or virtual monopoly of the market for its particular product. Suppose its productivity ratio rises, that is to say its costs per unit of output fall: we are here concerned primarily with labour costs, so we may assume that its capital input is unchanged. Several options are then open to it: lower selling price and larger output and sales, or higher profits on the same output and price policy, or higher rewards for its work force, or shorter hours, or other variants or combinations. Clearly the effect on total national money income and therefore on national economic growth differs radically from option to option. For example, if the increased productivity is used up on shorter hours or more agreeable working conditions that effect is nugatory: one form of labour cost has been translated into another.

Likewise, over the whole national economy, if heightened productivity (or, if you like, greater efficiency) leads to a condition in which economic growth could emerge, the productive bonus can be turned to other uses, such as improvement of the environment, or more leisure all round. In an ideal nil-growth economy, in which technical progress and higher efficiency were steadily operating, any fall in production costs, given existing industrial practices, could, for instance, be absorbed in changing those practices to make them less harmful to the environment. Saving on one element of cost would be translated into expansion of another element of cost, to the greater good of the whole community. Higher productivity is a means to an end, not an end in itself, and we have a choice of ends. It is argued that the mass of people would prefer more spending power to better environment. How do we know? They have never been given the chance to choose.

At this stage the refinement of population change may be conveniently introduced. Our initial hypothesis was that constant Gross National Product was identical with constant GNP per economic family or per worker. In actual fact, even if total population is stable, neither enlarging nor shrinking, its composition is likely to be changing. It appears, for instance, that a near-balance could soon, if only momentarily, be the condition of both the United States and Britain, in respect of natural increase, before allowing for immigration and emigration. Births may approximately equal deaths. But, because the expectation of life has risen, this means that the proportion of older people to children is also rising. Later on, the numbers entering employment in youth will be less than the numbers leaving employment in middle age. Obviously the Gross National Product, which is mostly produced by those in between those ages, during their working years, has to take care of such shifts, if real income per economic family or per worker is to be stable.

Immigration and emigration complicate the problem further. Immigrants have different inputs and take-outs in regard to GNP from the average native of all ages; different inputs and take-outs from the average have likewise to be deducted for emigrants, who tend to be in their most productive years. There is no need to pursue all these possibilities and qualifications. All we need observe is that there may have to be some economic growth (in the sense of growth of GNP) if there is to be nil economic growth in the sense of stability of average real income per family or per worker. Since population changes, whether by natural birth-to-death ratios or by migration, cannot be foreseen (the current fall in British and American birth-rates came as a surprise even to the expert demographers), a country which aims both to provide a better all-round life for everyone, and to keep open its options as to how this is to be done, needs at least to have some potential economic growth to take care of all the changes and chances it may have to face.

The concept of potential economic growth, distinguished from actual or realised growth, is one that plays a considerable part in the argument of this book. In order to understand it, we must look again at the meaning of economic growth. For the man-in-the-street, it is invariably taken to mean expanded material production and higher consumable income; but this is not quite the same as the economist’s analysis or the statistician’s computation of growth of Gross (or Net) National Product. An example will illustrate this. If a manufacturing company or industry directs some of its finance, and its use of labour and skill, to improving its plant and processes from an anti-pollutant point of view, it cannot use the same resources for expansion of output or distribution of income; and in this sense it has chosen to use its potential for an object other than actual growth. But all cost of production is grist to the GNP mill; expenditure on the anti-pollutant measures is part of the national income, and contributes to its growth. Likewise, if a country chooses to use an increment of its wealth potential not for direct economic expansion but for some non-economic (or only remotely economic) purpose such as better education, the additional salaries of the teachers or others involved enter into the count of national product, just as if the increment had gone into industrial investment or higher real wages generally; whereas from the point of view of the man-in-the-street there has been no economic growth because the take-out that he sees and enjoys is neither an immediate rise in volume of material production or levels of material consumption, nor an addition to productive capacity promising such a rise in the near future, but only an intangible improvement in the overall national way of life.

In distinguishing potential from actual economic growth, we stand somewhere between the man-in-the-street and the economist or statistician. Actual or realised economic growth, in the language used here, is additional economic capacity translated into greater production of goods and services, corresponding to higher real incomes for consumption and productive investment.

Nil growth, as defined in this chapter, certainly does not mean stagnation. To identify growth with economic advance is like judging an automobile only by its speed and acceleration. In the historical development of the automobile, speed has been one object of importance among others. There is a story of a speedometer said to have been invented for an early motor car: at 20 miles an hour it showed a green light, at 30 it showed a red light, and at 40 it played “Nearer, my God, to Thee.” Nowadays the speedometers even of modest little family cars are calibrated up to 90 miles an hour or more. But improvements in other ways have been much more important to the car-user and to sales: improvements in reliability, in comfort, in ease of maintenance, in economy of running, in simplicity of driving. Speed records and even track racing mean little or nothing to the manufacturers of automobiles for the millions, or to their customers, except as pure sport. Now the emphasis is all on two other lines of improvement, safety and non-pollution. A car with the same horse-power and maximum speed is a very different object now from what it was even ten years ago, and it will become still more different in the future.

It is the same with national economics. We have not quite reached a ceiling of worth-whileness in realised growth as we have reached it in automobile speed, but we in the richer countries have certainly reached a point where other improvements in our economic lives compete strongly with it in value, and where some of them should have priority over it.

Let us therefore make a list of contenders for the benefit of potential growth of economic output.

1. Larger consumption of goods and services produced in the private market;

2. Larger consumption of public services (EG health services, or education);

3. Larger input of capital investment in the private market, leading to more output of goods and services at the next stage;

4. Larger input of public capital investment (EG parks, hospitals, schools, public transport);

5. Less work and more leisure;

6. Greater safety, and less harmful effects, in the goods produced;

7. Less pollution and waste of resources in primary production, manufacture, communications and transport;

8. Repair of damage already done or still being done to the environment (EG cleaning up rivers and lakes, removing dumps of waste or spoil);

9. Improvement in the total environment of cities and their dwellers.

One might make a special heading for housing, which plays some part in item 1 and item 2, if houses are regarded as consumption goods, in item 3 and item 4 if they are regarded as capital, in item 6 (for bad housing can be harmful and even unsafe for human welfare), and obviously in item 9. It deserves, if not a special heading, a special mention; for, of all the satisfactions of human needs which the economic system yields, housing is the most open-ended, and one in which performance has fallen below requirement on any comparison with other satisfactions. We see in our congested urban neighbour-hoods families with not only food and clothing at a standard far higher than an earlier generation deemed ample but also luxuries then unknown, like motor cars and television, yet living in homes which are no better than they were half a century or even a century ago, and which condemn them to a half-life of squalor. If we have the potential for economic growth we might well forego a good deal of it to redress this wrong.

Have we really these options, or is it all mere theory? We really have. But, in order to be free to choose among them, we must get out of our system the obsession with growth in terms of expanding value-total of goods and services, which makes us think only, or primarily, of options 1 to 3. We shall not succeed in furthering options 4 to 9 if we persistently overdraw on the credit of economic growth, not even yet achieved, in order to consume more goods and services or enlarge—the whole economic machine. It is plain that the first thing we need in our affluent societies is re-education in economic goals, priorities and concepts. We must teach ourselves to demote GNP and its growth to the status of mere measurements of one aspect of our material life, ingredients in a complex which makes up the total well-being of a nation. We need to promote a positive ideal of stability, as the necessary framework of real choices as to what we do with our economic capacity. We need to re-direct men’s hopes and expectations from bonuses which the economic system will provide for them to improvements which they can earn for themselves, leaving society to invest any increase of its economic potential in purposes that forward society’s well-being.

As an example of the wrong and out-dated approach, at the Blackpool conference of the British Trades Union Congress in September 1971 a motion was unanimously passed demanding a shorter working week, longer holidays, earlier retirement, “effective protection” of workers laid off, increased government investment and public expenditure in industry, substantial pension in creases, and more government aid for “development areas” (IE areas of relatively high unemployment and low growth). “We want,” said the mover of the motion, “a planned growth of real wages.” The Congress also unanimously called for a minimum basic wage of £20 per week, representing a rise of about 25 per cent from actual rates presently paid to the lowest ranks of workers. And the Vice-Chairman of the Congress declared: “An unsatisfactory growth performance will in the longer term jeopardise the attainment of all the essential objectives of trade unions.”

One may well exclaim: “All this and heaven too!” Some of the demands might reduce potential economic growth: more government involvement in industry (a call at the same conference for further nationalisation included both advanced sections like computers and depressed sections like shipbuilding) would, for example, be likely to put a brake on overall growth; and more support for laid-off workers could certainly inhibit that continuous movement of labour from contracting or stagnant sectors to expanding and prosperous ones which is a requisite feature of a growth economy.

Without, however, entering into argument on such issues, which involve a confrontation between socialist and free-enterprise theories of economic progress, we can list from those TUC demands five distinct charges upon potential economic growth-charges before or after the growth appears statistically.

1. Shorter hours, longer holidays and earlier retirement for all workers;

2. More “protection”—necessarily meaning more money in cash or services—for workers laid off;

3. Substantial pension increases;

4. A higher minimum basic wage, involving, through differentials and wage-negotiation leap-frogging, higher wages for better-paid grades too;

5. A planned growth of real wages.

It is not easy to evaluate all these claims. But if we consider only items 1, 3 and 5, which concern all workers or pensioners, and assume that item 4 is essentially caught up in item 5, we can make a start. A 10 per cent cut in weekly hours worked, an extra week’s paid holiday a year, retirement on government pension (financed by contributions from employers and employed) at 60 instead of 65 for men, would together make up an increase of 22 and a half per cent in wages and salary costs, unless the shorter working year and working life led to higher output per hour—as of course it might. Wages and salaries amount to nearly two-thirds of Britain’s Gross National Product: say 50 per cent after taking off the top one-fifth of the wage-salary bill with which the TUC may be assumed not to be greatly concerned. The 22 and a half per cent thus becomes around 11 per cent of GNP. Pensions and other similar state benefits amount to some 10 per cent of GNP; a “substantial” increase in them, which could hardly mean less than a 15 per cent rise, would therefore involve at least a 1 and a half per cent charge on national income. Spread those non-wage benefits demanded over as much as three years, and they are seen to pre-empt an increase of over 4 per cent per annum in Gross National Product. The TUC wisely did not specify how big the “planned growth of real wages” was to be, but suppose it were around 4 per cent per annum, a modest figure in the unions’ eyes. That would take up another 2 per cent per annum, assuming no growth in sectors other than wages. We get a total of 6 per cent per annum demanded of the potential or actual growth of GNP, all claimed for a limited section of the community. It is not to be thought that other income-earners (higher salaried employees, farmers, shopkeepers and business proprietors generally) would be content with no real growth in their rewards while wage-earners were getting so much more; nor that such a growth rate could be achieved without a substantial increase in the percentage of GNP going into productive investment. So we see that the Trades Union Congress is presuming, on a very mild assessment of the figures behind its demands, a potential rate of growth of GNP of as much as 8 per cent per annum, which for a country like Britain is very ambitious indeed. And this before any charge or discount for better environment, whether by way of less-pollutant industrial production, or the cure of existing environmental sores, or improvement of controls on disposal of smoke, gases, dirt, garbage or noise; before any charge for better education or health services or improved city environment, beyond what is now being done; before any charge for radical improvement of the housing of the people; before even a contingency charge for increase of population or of the non-productive proportion of it.

Is this really what the nation wants? One may be permitted to doubt it, to believe that the trade-union claims represent neither a national nor a democratic order of priorities in what Britain might do with potential economic growth.

To rail at the unions is futile. They are a sectional interest which in its policies inevitably puts its own claims first. Other sectional interests behave likewise; politicians demand more money for their favoured forms of public expenditure and for the benefit of their electors, educationists demand a later school-leaving age or more universities and colleges, city planners demand works of urban amelioration, business demands lower taxes and other aids to more rapid capital modernisation and development, housing experts and social workers demand better houses, environmentalists demand protection of the surrounding habitat. The fault lies with the sectional approach, coupled with the assumption that economic growth is there to be had and spent, and the more the merrier. That is why we should first ask how the economy and society would work if there were no realised economic growth, then what is the cost of economic growth, and finally what we ought sensibly to do with potential or actual economic growth beyond the base-line nil. Some of our conclusions may surprise us.


Note 1. In a paper for the Forum on Energy, Economic Growth and the Environment; Resources for the Future, Washington, DC, April 1971.


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