The end of Growth?
Now, you are right, we have touched upon this in the past; but it is time to look at it again. Why? Because this is an idea (or is it a fear?) which not only refuses to lie down but appears to be getting stronger.
This is a big topic. There are many articles and books being written on this and variations of it. I am not going to do it justice in a small blog. But I want to draw the readers’ attention to it. Perhaps, if I may be so presumptious, point some in the right direction to go and investigate a little further? And try and draw out what it might mean for normal everyday businesses. The kind of businesses which make up the bulk of not only our clients but also the wider UK business landscape.
The American economic historian Robert Gordon is the commentator currently most closely identified with the idea that low levels of economic growth are the new normal. Strictly speaking he is only talking about America (The Rise and Fall of American growth: The US Standard of Living since the Civil War. But given how similar many economies are worldwide to the American model (ours included) the assumption is that the broad premise of his thesis will have relevance elsewhere – such as in the UK.
There is, of course, a chorus of disapproval for the idea that low, and increasingly unequal, economic growth may be a ‘new normal’. Some of it well thought through; others a little less so. The charge is that such a view is unduly pessimistic and the many great technological, economic, social and political advances of the past (usually the last 100-200 years timeframe) are highlighted as evidence that humanity has an, apparently, bottomless well of innovation to draw upon and will continue to do so into the future. That may be true – about the past. But as advertisements for investments always tell us: the past performance is no guide to the future. That said, the extreme flipside of this, that humanity has somehow reached a peak or an ‘end of (political economy) history’ in its current incarnation just feels, well, odd and ‘not quite right’ to most people. Myself included.
Perhaps what we are really seeing, what we have been really going through over the last 9 years or so is a slow (and at times highly painful and disturbing) end of a particular type of growth. A transition from one ‘wave’ of economic development to another.
One which had been generated by the neo-liberal economic model, fuelled by ever mushrooming levels of debt. By the way, there is a worry that we are entering this territory again with the ratio of household debt to income now at around the 135% mark. It is interesting to compare that to the UK Government debt to GDP level of some 80% or so. Many commentators tell us that UK Government debt “..must be reduced!” – but often don’t get similarly perturbed by the levels of personal debt in UK society. As others have pointed out, Keynes suggested that in a sense it is irrelevant where the debt lies, whether in public or private hands, if it is too much then it is too much.
Are we are seeing the emergence of the factors which will lead to a new form of capitalism emerging; or indeed something more radical, post-capitalism? Paul Mason’s book Postcapitalism, does (as the name suggests) address this very question and an interesting read it is too.
If we are, then the old familiar economic landscape is evolving and businesses will have to evolve and change with it. But if it is such a radical development, the challenge is knowing how to evolve and change. What will a successful business in 2030 ‘look like’? As I have said many times before, my crystal ball is as murky as yours; but I am persuaded by the arguments identified by Mason, Kaletsky, Hutton and others that suggest that such a business is going to be far more comfortable with collaborative working as opposed to ‘red in tooth and claw’ competition. Indeed such collaborative (or ‘open source’) working may become a defining characteristic of what it means to be a successful business in the future. And collaborative working is likely to be most effectively achieved and facilitated by the continually developing communications technology.
Talking about how the internet will ‘change the world’ can make you sound a little like you have joined some kind of techno-cult. Many people have said that the advent of the internet has been over hyped and that when it comes to radical economic impacts, the invention of an affordable washing machine for the home was far more important.
Perhaps. But such ‘techno-pessimism’ seems to be implicitly founded on the idea that we should be able to assess and understand the full impact of the internet right now. That may be a false assumption. As Will Hutton notes (How Good We Can Be) “It may take time for digitisation [ie internet driven technological change] to work its magic: after all it was a full sixty years before the transformative impact of steam began to be widely felt… petrochemicals and electronics took only forty years. All the signs are that digitisation will work through the system even faster – within thirty years.”.
We may be on the cusp of something truly transformative in our economy and society; but if we are, will its impacts be positive or negative? Let’s come back to that next time.