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12 October 2022

The growth delusion

Liz Truss and the economics of deception.

By Matthias Schmelzer

“I have three priorities for our economy: growth, growth and growth.” Liz Truss’s pronouncement on the final day of the Conservative Party conference last week reverberated around the world. So, too, did her attacks on what she called an “anti-growth coalition”, a term designed to discredit all those – “Labour, the Lib Dems and the SNP, the militant unions, the vested interests dressed up as think tanks, the talking heads, the Brexit deniers and Extinction Rebellion” – that might prioritise social and ecological goals over neoliberal market reforms.

The Prime Minister’s focus on economic growth is politically misleading, economically wrong-headed and profoundly outdated. By putting growth at the centre of her political programme, she is invoking an economic ideology – the “growth paradigm” – that emerged during the 1950s, which made growth the master goal of all politics. Associated with thinkers and economists such as Paul Samuelson, Leon Keyserling and Walt W Rostow, it assumed that the statistical measure of gross domestic product (GDP), with all its inscribed reductions, assumptions and exclusions, adequately measures economic activity; that growth is a panacea for a multitude of shifting socioeconomic problems; that growth is unlimited, provided the correct policies are pursued; and that GDP-growth is a necessary means to achieve essential societal goals such as progress, well-being or national power.

The origins of this belief stretch back to the onset of capitalist industrialisation in the early 18th century and the emergence of a secularised conception of economic progress and a first generation of classical growth theories. These ideas were supplanted by econometrics and neoclassical economics in the later 19th century. It was only during the Great Depression that a renewed interest in macroeconomic questions gave rise to the modern conception of “the economy” and to interventionist policies designed to create both economic stability and jobs. It was then in the late 1940s and early 1950s – in the midst of world war, European reconstruction and Cold War great power competition – that economic expansion became a prime policy goal throughout the world.

[See also: Can Kwasi Kwarteng survive?]

The growth paradigm became hegemonic by sustaining the idea that GDP growth is necessary as well as natural, inevitable and timeless. Growth was presented as the common good, justifying the interests of those who benefited most from the expansion of the market as beneficial for all. The hegemony of growth depoliticised key debates about what societies value, how they interpret their position historically and within the global economy, and how they define the good life. Growth turned political conflicts over distribution into technical questions of how to collectively increase the economic output of the nation. Writing in 1972 Henry Wallich, a governor of the Federal Reserve Bank and former adviser to Dwight Eisenhower, noted: “Growth is a substitute for equality of income. As long as there is growth there is hope, and that makes large income differentials tolerable.” By transforming class and other social antagonisms into apparent win-win situations, the hegemony of growth provided what Terry Eagleton called an “imaginary resolution of real contradictions”.

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The concept of growth has colonised our political imaginaries: it not only reinforces the dominance of economic thinking by rendering all political or social questions into economic problems (what could be called “economism”), but it also strengthens the positions of technocrats within modern societies, ensuring the primacy of the economy over politics.

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Even if the mid-20th century saw the proliferation of experts, ranging from international relations theorists to demographers and anthropologists, sociologists to agronomists, economists were the ones who claimed they had mastered the modern political fetish of growth. Since the 1970s growthmanship has become a cardinal feature of neoliberalism, used to justify market reforms (and the attendant inequalities that result from the super-privatisation of life). As the historian Charles Maier argued in 2009: “The concept of growth as a surrogate for redistribution appears, in retrospect, as the great conservative idea of the last generation.”

If growth makes for a good political soundbite – often articulated through tired metaphors like “rising tides” or “expanding pies” – a closer look reveals how disastrous its hegemony has been for modern societies. GDP is a flawed measure of human welfare that disregards diminishing stocks, equality and ecological destruction. There is now a broad consensus among experts that rising GDP does not by itself improve prosperity for all. Since the 1980s GDP growth in developed economies has been accompanied by stagnating levels of welfare, while the ecological costs of growth have been exacerbated. Truss’s argument that stagnating wages and dwindling funds for social services are due to low growth is a deception. UK household wealth tripled from 1995 to 2017. Yet most of that wealth has not trickled down, as Truss and her supporters claim it should, but has been captured by a small proportion of the population.

Truss’s call for growth is concealing a radical agenda of austerity: cutting taxes to improve international competitiveness, getting what she has called an “iron grip on the nation’s finances” by slashing public spending to create a “lean state”, and “economic reform” that tears up planning regulations and lowers social and ecological standards. Even if these policies would achieve “growth”, it would be a kind of economic expansion that curtails the prosperity of middle-income voters and further aggravates the ecological crisis. It might be GDP growth, but it will be experienced as public austerity and ecological destruction. As the campaign “Enough is Enough” rightly argued, following Truss’s statement, “what ‘grows’ for them” is “corporate profits, number of billionaires, wealth of the top 5 per cent”, and “what ‘grows’ for us” is “in-work poverty, monthly bills, housing costs, NHS waiting list, foodbank queues”. One could add fossil-fuel driven climate disaster.

Under Truss, British politics in the 21st century is stuck in the 1950s. The left should embrace the term “anti-growth coalition” by creating a new consensus around a politics that critiques the abstractions of the growth paradigm, liberates economic thinking from the putative “iron grip” of markets, and formulates policies that focus on what actually matters to people – living a dignified life on a finely balanced planet.

[See also: Liz Truss to resign as Prime Minister after just 44 days]

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