Capitalism has failed to ensure our actions increase the welfare of everyone in society. This needs to change.
We are faced with far slower growth than what we saw under New Labour. The rates of productivity are lower than the end of the 1970s. Back when it was called the ‘British Disease’. We have had the largest squeeze on wages since the days of Charles Dickens. Yet despite getting much wrong under neoliberalism capitalism is here to stay. And it is not f****** leaving.
At least not anytime soon.
It is no secret capitalism has failed to ensure our actions increase the welfare of everyone in society and focus on the common good. It is of paramount importance that we seek to build cohesive societies that trust each other. Yet people are angry. Many are angry because right across most parts of the class system people do not feel they are sharing in the benefits of growth.
This needs to change.
The OECD has documented how most advanced economies have seen the standard of living stagnate for half their population over the past two decades. The compounding of disadvantage now sees it take no less than five generations for those from the bottom of the income distribution to rise to the middle. With much of the middle class also seeing their income remain completely flat, while at the same time the cost of health and living rising three times fast than their own income.
One of the scariest statistics is that the top ten percent retain fourty percent of the wealth and the top five percent retain twenty percent of the wealth. In contrast, the bottom fourty percent retain a mere three percent of the wealth. This inequality cuts across racial lines too. Between 1983 and 2013 the wealth of median Black households in America dropped seventy five percent, the median Latino household wealth dropped fifty percent, while the White median household wealth increased fourteen percent. If this trend continues the median Black household wealth will hit zero by 2053. Liam Byrne MP stated at an All-Party Parliamentary Group address on inclusive growth that by 2030 the richest one percent will own two-thirds of the wealth.
Such a dystopia is not that far away.
Nevertheless, we need to take ownership of the fact this widening chasm of wealth and opportunity has been down to unfettered, unregulated, unethical capitalism. We must also turn to history to recognise command and control top down socialism also does not have the answers, nor the innovation, to ensure prosperity through investment and entrepreneurship. An issue recognised by the former President of the United States Barack Obama.
Gabriel Ramos of the OECD highlights the way we can achieve this is through bringing the public and private actor together. She states it is possible by changing the way in which governments use metrics to ensure that the policies enacted by governments are fair. And that the benefits of growth are distributed fairly. To date the metrics such as GDP, GDP per capita, trade openness, and trade changes in investments flows have been used as a means to an end. Ramos states we need to go beyond the material wellbeing indicated by such metrics. And that we must go multi-dimensional. That we must stop treasuring what we measure, and measure what we treasure.
There is a glimmer of hope. As the OECD have indeed sought to change the metrics in which we should measure growth. To ensure it is more inclusive through the measurement of wellbeing. They have developed a framework for inclusive growth that encompasses twenty-four indicators that are much broader, which are designed to consider all the elements of progress and distribution. For example, New Zealand has taken a step that demonstrates we need to go beyond just a simple economic model focused on efficiency and productivity. Focusing on just the average output through GDP is not enough. We need a method of measurement that better informs policy. One that is much more granular. And one focused on wellbeing.
This has been found through a framework for inclusive growth. A framework that focuses on how equitable the policy outcomes are. This can be demonstrated by looking at the impact of policy on each income group, looking at how the benefits will be distributed, how much of that will help the most vulnerable in society. For example, the aim of the budget in New Zealand has been one focused on wellbeing . If Prime Minister Arden can build a budget that tells her where to spend the money then so can we. Should a future British government seek to distribute 6% of its resources to education it should be able send a powerful message that they care. It will show it cares about what proportion of that resource will address inequalities such as low-income group access to health and education, and how much of this economic output will benefit the environment. It is the only way forward if we are to buck the trend of failing neoliberal capitalism, only possible through an inclusive growth agenda.