Getting the measure of a better capitalism

Growth and relative poverty are no longer enough to tell us whether our economy is on the right trac

Today the Institute for Fiscal Studies has launched an Exocet at the Coalition's claims to be a one-nation government taking a lead on poverty reduction. Nearly all measures of poverty are set to rise over the next five to ten years and the Coalition's policies are part of the cause.

But underneath the headlines the IFS analysis serves a less likely purpose. It provides timely grounds for questioning some of the key measures we use to judge progress in our society. In particular, it raises difficult questions about our reliance on a formula that says 'GDP growth plus poverty reduction' is enough.

To understand why, we should start by looking at the IFS account of what is happening to child poverty. Over the short-term relative poverty has fallen (though it will go on to rise sharply, as will absolute poverty). This fall might seem counter-intuitive given the current squeeze on living standards. The explanation nothing to do with a positive impact from the government's welfare policies. It is because typical ('median') household incomes have faced an 'unprecedented collapse' (in the words of the IFS), lowering the bar against which relative poverty is measured. It's not that those at the bottom are doing any better, just that those in the middle are doing worse.

It is for these same definitional reasons that the IFS show it would be a bad thing for relative child poverty if we find ourselves in the lucky - and highly unlikely - position of securing faster earnings growth for those on low-to-middle incomes in future years. The result would be higher median incomes and therefore increased poverty rates. Just as perversely, it would be a good thing for child poverty if future earnings growth went overwhelmingly to the top of society - a depressing if more likely scenario - and so failed to lift median incomes.

There is nothing new about scoring debating points against a relative measure of poverty. It's not just those who disagree with it on the ideological grounds that we shouldn't care about income inequality (wrongly in my view). There are also progressive voices who think there are smarter ways of measuring these things. These concerns have a new purchase in an era when poverty appears to fall simply because the living standards of those in the middle are falling through the floor.

Nor is this the only measure of economic progress that needs probing. Take GDP growth. It used to be the case that if the growth figures were good then we could assume the living standards of the working population could take care of themselves. Now we're not so sure. In the UK growth stopped flowing into personal gain for low-to-middle income households early on in the last decade when wages started to flat-line. For ordinary families growth, it seems, doesn't signify what it used to.

The importance of this goes beyond a technocratic debate about definitions. Governments - left and right - set their course and judge their progress by a few key measures. If these are designed for the nicer world of the 1990s and early 2000s, not the nastier times we now live in, they may be less reliable guides to good policymaking then our leaders like to think. In the past 'growth plus poverty reduction' was thought to be a decent proxy for a better capitalism. Today, the route to a progressive economy requires additional bearings.

There is, of course, scope for endless debate about how to judge what a better capitalism should look like. The ONS is currently investigating a new measure of well-being - an idea with some merit - though one suspects that it was also conceived with better economic times in mind. Surely, however, a wide swath of opinion would concur that a key goal should be ensuring economic growth steadily lifts the incomes of those in the middle, not just the top, at the same time as ensuring the bottom catches up. Higher absolute living standards for the majority of families whilst closing the gap: very hard to achieve in practice, but not, you might think, all that controversial as a 21st century lodestar for government policy.

Indeed, given this goal is in tune with the regularly repeated rhetoric of party leaders, you'd have thought it might be a statement of the obvious - banal even. Yet Whitehall has a complete blind spot in relation to measures of living standards. Within the Treasury and No 10 there will be real anxiety, sometimes near crisis, preceding the announcement of weak growth numbers. DWP will be laser focussed on poverty numbers. In contrast there is entrenched ignorance, bordering on indifference, about the living standards of low-to-middle income households. Before the recession, when families knew their living standards were flat-lining, Whitehall assumed all was well - after all GDP was steadily climbing. Alarm bells weren't ringing. Those seeking to get Departments to focus on these questions were made to feel like they were speaking a foreign language.

Of course, right now you might think such talk is a luxury. We're not in a position to choose the type of growth we want - we'll take any on offer. But over the longer term we need to hold our governments to account for securing growth that leads to a rising tide of prosperity for those at the bottom as well as those in the middle. It would be a helpful start if Whitehall could get the measure of what a better capitalism might look like.

Gavin Kelly is a former Downing Street adviser to Gordon Brown and Tony Blair. He tweets @GavinJKelly1.

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Is there such a thing as responsible betting?

Punters are encouraged to bet responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly.

I try not to watch the commercials between matches, or the studio discussions, or anything really, before or after, except for the match itself. And yet there is one person I never manage to escape properly – Ray Winstone. His cracked face, his mesmerising voice, his endlessly repeated spiel follow me across the room as I escape for the lav, the kitchen, the drinks cupboard.

I’m not sure which betting company he is shouting about, there are just so many of them, offering incredible odds and supposedly free bets. In the past six years, since the laws changed, TV betting adverts have increased by 600 per cent, all offering amazingly simple ways to lose money with just one tap on a smartphone.

The one I hate is the ad for BetVictor. The man who has been fronting it, appearing at windows or on roofs, who I assume is Victor, is just so slimy and horrible.

Betting firms are the ultimate football parasites, second in wealth only to kit manufacturers. They have perfected the capitalist’s art of using OPM (Other People’s Money). They’re not directly involved in football – say, in training or managing – yet they make millions off the back of its popularity. Many of the firms are based offshore in Gibraltar.

Football betting is not new. In the Fifties, my job every week at five o’clock was to sit beside my father’s bed, where he lay paralysed with MS, and write down the football results as they were read out on Sports Report. I had not to breathe, make silly remarks or guess the score. By the inflection in the announcer’s voice you could tell if it was an away win.

Earlier in the week I had filled in his Treble Chance on the Littlewoods pools. The “treble” part was because you had three chances: three points if the game you picked was a score draw, two for a goalless draw and one point for a home or away win. You chose eight games and had to reach 24 points, or as near as possible, then you were in the money.

“Not a damn sausage,” my father would say every week, once I’d marked and handed him back his predictions. He never did win a sausage.

Football pools began in the 1920s, the main ones being Littlewoods and Vernons, both based in Liverpool. They gave employment to thousands of bright young women who checked the results and sang in company choirs in their spare time. Each firm spent millions on advertising. In 1935, Littlewoods flew an aeroplane over London with a banner saying: Littlewoods Above All!

Postwar, they blossomed again, taking in £50m a year. The nation stopped at five on a Saturday to hear the scores, whether they were interested in football or not, hoping to get rich. BBC Sports Report began in 1948 with John Webster reading the results. James Alexander Gordon took over in 1974 – a voice soon familiar throughout the land.

These past few decades, football pools have been left behind, old-fashioned, low-tech, replaced by online betting using smartphones. The betting industry has totally rebooted itself. You can bet while the match is still on, trying to predict who will get the next goal, the next corner, the next throw-in. I made the last one up, but in theory you can bet instantly, on anything, at any time.

The soft sell is interesting. With the old football pools, we knew it was a remote flutter, hoping to make some money. Today the ads imply that betting on football somehow enhances the experience, adds to the enjoyment, involves you in the game itself, hence they show lads all together, drinking and laughing and putting on bets.

At the same time, punters are encouraged to do it responsibly. What a laugh that is. It’s like encouraging drunks to get drunk responsibly, to crash our cars responsibly, murder each other responsibly. Responsibly and respect are now two of the most meaningless words in the football language. People have been gambling, in some form, since the beginning, watching two raindrops drip down inside the cave, lying around in Roman bathhouses playing games. All they’ve done is to change the technology. You have to respect that.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war