By comparison with the previous decades, the growth experience of the UK since the Global Financial Crises (GFC) has been one of sluggish growth (annual rate 1.1 percent of GDP, 0.5 percent of GDP per capita between 2007 and 2022), albeit that there had been some slowdown of growth in the years prior to the GFC. This type of experience has been shared with many other industrialized economies.

Promoting faster growth has been rising up the political agenda, reflecting the experiences of the past few years, often with declining living standards for many. This has been summarized in statistics, such as real earnings that were around the same level in 2023 as in 2013. In early 2023, Prime Minster Sunak stated his economic missions of halving inflation (which has been achieved) and achieving a modest aim of restoring growth (specifically, growth positive rather than negative). The Labour Party has been in opposition but is widely expected to win the general election due before the end of the year and has set as one of its five missions to achieve the highest sustained growth rate in the G7 by the end of the next Parliament. It will prove difficult to assess whether the objective is reached (attained over what period of time? What counts as sustained?). Given the slow growth in many other G7 countries, it may not involve much of an increase in the UK’s growth rate.

When growth is discussed, it refers to rising gross domestic product (GDP). It is rarely asked whether such rising GDP would be socially beneficial and environmentally friendly. No regard is paid to the wellknown shortcomings of GDP as a measure of economic well-being or even as a measure of the size of the economy (as it only refers to the marketed output). This is important in at least three respects. First, there is a need to pay attention to the composition of GDP including failing public services and resources used for investment, particularly ‘green’ investment rather than the promotion of growth in general without regard to its composition. Second, there must be recognition of the damage done to the environment and health through externalities and pollution. Third, some welcome activities would reduce GDP while improving economic benefits – notably improving heating efficiency lowers energy use (hence GDP) while maintaining or even improving living conditions.

There has been a complete lack of consideration among politicians and the media as to why growth, whether in the UK or other industrialized economies, has tended to decline over the past decades. There may be mention of austerity or, for the UK, the effects of Brexit. While these have contributed to slower growth, they do not address the length of time over which growth has slowed. Particularly for the UK, there is often mention of relatively low investment though the slowdown in growth has gone alongside maintenance of the level of investment. There is little consideration of whether higher investment, and thereby faster growth of the capital stock, would enable an upward shift in the trend rate of growth of output, which is to be viewed as related to growth of the labor force and productivity. And are there forces which have held back investment?

There are more generally industrial structural changes that have been unfavorable to environmentally sustainable growth—these broad structural changes have tended to hold back investment but also shift incomes towards profits and rent, and to direct resources in socially detrimental ways. Here there is a focus on three though others could be mentioned (e.g., increasing monopolization).

First consider financialization which in the words of Gerald Epstein "means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies." The financialization of our economies has been conducive to instability and growth of debt. The growth of the financial sector in recent decades has been associated with slower growth as the focus of that sector shifts away from funding productive investment to boosting household debt and increasing trade in financial assets, neither of which contributes to growth. It is then inappropriate to boost the financial sector (as the UK Labour Party has been recently doing) without fundamental reform of that sector to ensure that funds are directed towards sustainable investment with the development of mutual and public banks, and financial transactions taxes to restrain speculation.

Second, there has been over the past half century a major shift towards the ‘pursuit of shareholder value’ being the appropriate objective for corporations. The ‘pursuit of shareholder value’ is the promotion of the view that profits and dividends (and thereby the stock market valuation of the corporation) should be or are the primary purpose of the corporation. The ‘pursuit of shareholder value’ places the shareholders (and thereby financial interests) above those of other stakeholders such as employees, customers, and the wider society. The ‘pursuit of shareholder value’ favors dividends over re-investment. Re-designing corporations to have responsibilities for all its stakeholders could offer a more sustainable program of investment.

The third is the emergence of a rentier society. In the words of Brett Christophers, “Rent is payment to an economic actor (the rentier) who receives that rent – and this is the key factor – purely by virtue of controlling something valuable. The ‘something’, whatever it happens to be, is referred to generically as an ‘asset’: an ‘item of value owned’ … that is valuable precisely in view of the fact that control over it endows the owner with the capacity to generate future income.” The growth of rentier income shifts the focus from value creation to value extraction. The Labour Party’s proposals relate to ‘growing the economy’ through increased investment. There is no mention of how investment is to be increased (other than perhaps a suggestion of lower taxes on profits) and the limitations placed by the conditions mentioned above are to be overcome. There is no concern over environmental sustainability or broader economic welfare. These proposals come without any clear direction travel by which the economy will grow. It fails to address the major structural issues mentioned above, and addressing those is vital not so much for raising growth but for ensuring that the growth which does occur is the growth of economic and social being consistent with planetary boundaries.

The Labour Party is prone to portraying GDP growth as coming before and necessary to public expenditure (particularly on health) and on a ‘green new deal’. This is completely the wrong way round. The increased expenditure on the health service (which is near to collapse through underfunding) would bring socially beneficial growth. Expenditure on a ‘green new deal’ would help to stimulate economic activity and make a good contribution to meeting environmental commitments.

Malcolm Sawyer is Emeritus Professor of Economics at the University of Leeds. He was lead co-ordinator of the EU-funded, 5-year project, "Financialization, Economy, Society and Sustainable Development" (FESUD). Professor Sawyers's research hs included fiscal policy, financialization and the role of the financial sector, European single currency, and intellectual and institutional obstacles to full employment. He was founding Editor of the International Review of Applied Economics and he is the author of numerous journal articles and books including Economics of Michal Kalecki (Macmillan) and Can the Euro Survive? (Polity Press).

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