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 adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Cambridge Analytica and the digital war in Africa

Across the continent, UK expertise is being deployed online to sway elections and target dissidents.

Cambridge Analytica, the British political consultancy caught up in a huge scandal over its use of Facebook data, has boasted that they ran the successful campaigns of President Uhuru Kenyatta in the 2013 and 2017 Kenyan elections. In a secretly filmed video, Mark Turnbull, a managing director for Cambridge Analytica and sister company SCL Elections, told a Channel 4 News’ undercover investigative reporting team that his firm secretly stage-managed Kenyatta’s hotly contested campaigns.

“We have rebranded the entire party twice, written the manifesto, done research, analysis, messaging. I think we wrote all the speeches and we staged the whole thing – so just about every element of this candidate,” Turnbull said of his firm’s work for Kenyatta’s party.

Cambridge Analytica boasts of manipulating voters’ deepest fears and worries. Last year’s Kenyan election was dogged by vicious online propaganda targeting opposition leader Raila Odinga, with images and films playing on people’s concerns about everything from terrorism to spiralling disease. No-one knows who produced the material. Cambridge Analytica denies involvement with these toxic videos – a claim that is hard to square with the company’s boast that they “staged the whole thing.” 

In any event, Kenyatta came to power in 2013 and won a second and final term last August, defeating Odinga by 1.4 million votes.

The work of this British company is only the tip of the iceberg. Another company, the public relations firm, Bell Pottinger, has apologised for stirring up racial hostility in South Africa on behalf of former President Jacob Zuma’s alleged financiers – the Gupta family. Bell Pottinger has since gone out of business.

Some electoral manipulation has been home grown. During the 2016 South African municipal elections the African National Congress established its own media manipulations operation.

Called the “war room” it was the ANC’s own “black ops” centre. The operation ranged from producing fake posters, apparently on behalf of opposition parties, to establishing 200 fake social media “influencers”. The team launched a news site, The New South African, which claimed to be a “platform for new voices offering a different perspective of South Africa”. The propaganda branded opposition parties as vehicles for the rich and not caring for the poor.

While the ANC denied any involvement, the matter became public when the public relations consultant hired by the party went to court for the non-payment of her bill. Among the court papers was an agreement between the claimant and the ANC general manager, Ignatius Jacobs. According to the email, the war room “will require input from the GM [ANC general manager Jacobs] and Cde Nkadimeng [an ANC linked businessman] on a daily basis. The ANC must appoint a political champion who has access to approval, as this is one of the key objectives of the war room.”

Such home-grown digital dirty wars appear to be the exception, rather than the rule, in the rest of Africa. Most activities are run by foreign firms.

Ethiopia, which is now in a political ferment, has turned to an Israeli software company to attack opponents of the government. A Canadian research group, Citizens Lab, reported that Ethiopian dissidents in the US, UK, and other countries were targeted with emails containing sophisticated commercial spyware posing as Adobe Flash updates and PDF plugins.

Citizens Lab says it identified the spyware as a product known as “PC Surveillance System (PSS)”. This is a described as a “commercial spyware product offered by Cyberbit —  an Israel-based cyber security company— and marketed to intelligence and law enforcement agencies.”

This is not the first time Ethiopia has been accused of turning to foreign companies for its cyber-operations. According to Human Rights Watch, this is at least the third spyware vendor that Ethiopia has used to target dissidents, journalists and activists since 2013.

Much of the early surveillance work was reportedly carried out by the Chinese telecom giant, ZTE. More recently it has turned for more advanced surveillance technology from British, German and Italian companies. “Ethiopia appears to have acquired and used United Kingdom and Germany-based Gamma International’s FinFisher and Italy-based Hacking Team’s Remote Control System,” wrote Human Rights Watch in 2014.

Britain’s international development ministry – DFID – boasts that it not only supports good governance but provides funding to back it up. In 2017 the good governance programme had £20 million at its disposal, with an aim is to “help countries as they carry out political and economic reforms.” Perhaps the government should direct some of this funding to investigate just what British companies are up to in Africa, and the wider developing world.

Martin Plaut is a fellow at the Institute of Commonwealth Studies, University of London. He is the author of Understanding Eritrea and, with Paul Holden, the author of Who Rules South Africa?