It’s Not Wages *versus* Growth
Posted: 18/12/2013 | Author: The Political Idealist | Filed under: Uncategorized | Tags: employment, equality, growth, social justice, socialism, trade unions, wages, work |Comments OffThe narrative of Britain’s General Election in 18 months’ time is going to be one defined by Labour’s “cost of living” message and the Coalition’s “trust us on the economy” line. The left claim to have the answers on easing the pain as inflation outstrips wage growth. The right claim to be the only group that can generate growth.
It remains to be seen which of the platforms the public will be won over. However, pollsters have been trying to predict this by asking the public if growth in GDP is a higher priority than growth in incomes. I take issue with the whole premise of the question, as I shall explain below, but we should still have the arguments to debunk it if that is how the debate is framed. The fact is, wages have fallen as a proportion of GDP quite dramatically since around 1980, in the UK and most of the western world. For a twenty or thirty year period before that, governments of the right, centre and left had worked to turn their economies into what they should be: diverse and mighty engines structured to share their proceeds amongst the entire population including support for a robust public sector.
Trade unions helped secure better and better deals for their members, as what was an essential component of social democracy- though of course this is truer of Europe than North America. Unfortunately, things went wrong and increasingly militant trade union leaders pushed wages above a level many economies could sustain. And we know what happened next. From one extreme to another, we’ve seen wage stagnation and mass indebtedness threaten future economic growth.
In the US, the typical worker is no better of in real terms than s/he was thirty years ago. The US economy has boomed, but all the benefit is felt at the top. The likes of you and me have been encouraged to think we’re better off by being handed access to bigger and cheaper avenues of credit, but all debt catches up with you eventually, as is happening to millions now.
Let’s not fall for the lie that it has to be like this.
Economic growth is not the be all and end all of economic policy. What’s the point of it if the public finances continue to deteriorate and are families are getting worse and worse off? No, we need fair and sustainable economic growth, which is something we can’t stimulate by adopting tax haven style macroeconomic measures. We need government with the confidence to invest in the future. We need workers to be prosperous enough to spend money on goods and services other than rent and energy, where money flows straight out of the economy.
The economy can and will grow if wages do too. Indeed, it is a precondition for sustainable growth. So let’s do away with the fallacy that growth and lower living costs are conflicting ends. They are interdependent.
