According to a new OECD working paper, Britain is one of the wealthiest countries in the world. Net wealth is estimated to stand at around $500,000 per household – more than double the equivalent figure in Germany, and triple that in the Netherlands. Only Luxembourg and the USA are wealthier among OECD countries.

On one level, this isn’t too surprising – Britain has long been a wealthy country. But in recent decades Britain’s economic performance has been poor. Decades of economic mismanagement have left the UK lagging far behind other advanced economies. British workers are now 29% less productive than workers in France, and 35% less than in Germany. How can this discrepancy between high levels of wealth and low levels of productivity be explained?

The process of how wealth is accumulated has been subject of much debate throughout history. If you pick up an economics textbook today, you’ll probably encounter a narrative similar to the following: wealth is created when entrepreneurs combine the factors of production – land, labour and capital – to create something more valuable than the raw inputs. Some of this surplus may be saved, increasing the stock of wealth, while the rest is reinvested in the production process to create more wealth.

How the fruits of wealth creation should be divided between capital, land and labour has been subject of considerable debate throughout history. In 1817, the economist David Ricardo described this as “the principal problem in political economy”.

Nowadays, however, this debate attracts much less attention. That’s because modern economic theory has developed an answer to this problem, called ‘marginal productivity theory’. This theory, developed at the end of the 19th century by the American economist John Bates Clark, states that each factor of production is rewarded in line with its contribution to production. Marginal productivity theory describes a world where, so long as there is sufficient competition and free markets, all will receive their just rewards in relation to their true contribution to society. There is, in Milton Friedman’s famous terms, “no such thing as a free lunch”.

The aim was to develop a theory of distribution that was based on scientific ‘natural laws’, free from political or ethical considerations. As Bates Clark wrote in his seminal book, ‘The Distribution of Wealth’:

“[i]t is the purpose of this work to show that the distribution of income to society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates”.

Seen in this light, wealth accumulation is a positive sum game – higher levels of wealth reflect superior productive capacity, and people generally get what they deserve. There is some truth to this, but it is only a very small part of the picture. When it comes to how wealth is created and distributed, many other forces are at work.

Wealth, property and plunder

The measure of wealth used by the OECD is ‘mean net wealth per household’. This is the value of all of the assets in a country, minus all debts. Assets can be physical, such as buildings and machinery, financial, such as shares and bonds, or intangible, such as intellectual property rights.

But something can only become an asset once it has become property – something that can be alienated, priced, bought and sold. What is considered as property has varied across different jurisdictions and time periods, and is intimately bound up with the evolution of power and class relations.

For example, in 1770 wealth in the southern United States amounted to 600% of national income – more than double the equivalent figure in the northern United States. This stark difference in wealth can summed up by one word: slavery.

For white slave owners in the South, black slaves were physical property – commodities to be owned and traded. And just like any other type of asset, slaves had a market price. As the below chart shows, the appalling scale of slavery meant that enslaved people were the largest source of private wealth in the southern United States in 1770.

When the United States finally abolished slavery in 1865, people who had formerly been slaves ceased to be counted as private property. As a result, slaveowners lost what had previously been their prized possessions, and overnight over half of the wealth in the southern US essentially vanished. All of a sudden, the southern states were no longer “wealthier” than their northern neighbours.

But did the southern states really become any less wealthy in any meaningful sense? Obviously not – the amount of labour, capital and natural resources remained the same. What changed was the rights of certain individuals to exercise an exclusive claim over these resources.

But the wealth that had been generated by slave labour did not disappear, and it wasn’t only the USA that benefitted from this. Many of Britain’s major cities and ports were built with money that originated in the slave trade. Several major banks, including Barclays and HSBC, can trace their origins to the financing of the slave trade, or the plundering of other countries’ resources. Many of Britain’s great properties, which today make up a significant proportion of household wealth, were built on the back of slave wealth. Even today, many millionaires (including many politicians) can trace some of their wealth to the slave trade.

The lesson here is that aggregate wealth is not simply a reflection of the process of accumulation, as theory tends to imply. It is also a reflection of the boundaries of what can and cannot be alienated, priced, bought and sold, and the power dynamics that underpin them. This is not just a historical matter.

Today some goods and services are provided by private firms on a commodified basis, whereas others are provided socially as a collective good. This can often vary significantly between countries. Where a service is provided by private firms (for example, healthcare in the USA), shareholder claims over profits are reflected in the firm’s value – and these claims can be bought and sold, for example on the stock market. These claims are also recorded as financial wealth in the national accounts.

However, where a service is provided socially as a collective good (such as the NHS in the UK), there are no claims over profits to be owned and traded among investors. Instead, the claims over these sectors are socialised. Profits are foregone in favour of free, universal access. Because these benefits are non-monetary and accrue to everyone, they are not reflected in any asset prices and are not recorded as “wealth” in the national accounts.

A similar effect is observed with pension provision: while private pensions (funded through capital markets) are included as a component of financial wealth in the OECD’s figures, public pensions (funded from general taxation) are excluded. As a result, a country that provides generous universal public pensions will look less wealthy than a country that rely solely on private pensions, all else being equal. The way that we measure national wealth is therefore skewed towards commodification and privatisation, and against socialisation and universal provision.

Capital gains, labour losses

The amount of wealth does not just depend on the number of assets that are accumulated – it also depends on the value of these assets. The value of assets can go up and down over time, otherwise known as capital gains and losses. The price of an asset such as a share in a company or a physical property reflects the discounted value of the expected future returns. If the expected future return on an asset is high, then it will trade at a higher price today. If the expected future return on an asset falls for whatever reason, then its price will also fall.

Marginal productivity theory states that each factor of production will be rewarded in line with its true contribution to production. But although presented as an objective theory of distribution, marginal productivity theory has a strong normative element. It says nothing about the rules and laws that govern the ownership and use of the factors of production, which are essentially political variables. For example, rules that favour capitalists and landlords over workers and tenants, such as repressive trade union legislation and weak tenants’ rights, increase returns on capital and land. All else being equal, this will translate into higher stock and property prices, which will increased measured wealth. In contrast, rules that favour workers and tenants, such as minimum wage laws and rent controls, reduce returns on capital and land. This in turn will translate into lower stock and property prices, and lower paper wealth.

Importantly, in both scenarios the productive capacity of the economy is unchanged. The fact that wealth would be higher in the former case, and lower in the latter case, is a result of an asymmetry between how the claims of capitalists and landlords are recorded, and how the claims of workers and tenants are recorded. While future returns to capital and land get capitalised into stock and property prices, future returns to labour – wages – do not get capitalised into asset prices. This is because unlike physical and financial assets, people do not have an “asset price”. They cannot become property. As a result, it is possible for measured wealth to increase simply because the balance of power shifts in favour of capitalists and landowners, allowing them to claim a larger slice of the pie at the expense of workers and tenants.

To the early classical economists, this kind of wealth – attained by simply extracting value created by others ­­– was deemed to be unearned, and referred to it as ‘economic rent’. However, ever since neoclassical economics replaced classical economics as the dominant school of thinking in the late 19^th century, economic rent has been increasingly marginalised from economic discourse. To the extent that it is acknowledged, it is usually viewed as being peripheral to the story of wealth accumulation, resulting from  ‘market frictions’, such as monopsony and asymmetric information, which give rise to certain instances of ‘market power’. For the most part, economists have tended to focus on the acts of saving and investment which drive the real production process. But on closer inspection, it is clear that economic rent is far from peripheral. Indeed, in many countries it has been the main story of changing wealth patterns.

To see why, let’s return to the OECD wealth statistics. Recall that net wealth per household in Britain is more than double what it is in Germany, even though Germany is far more productive than the UK. This can partly be explained by comparing the power dynamics associated with each factor of production.

Let’s start with land: Germany has among the strongest tenant protection laws in Europe, and many German cities also impose rent controls. This, along with a banking sector that favours real economy lending over property lending, means that Germany has not experienced the rampant house price inflation that the UK has. Remarkably, the house price-to-income ratio is lower in Germany today than it was in 1995, while in the UK it has nearly tripled over the same time period. The fact that houses are not lucrative financial assets, and renting is more secure and affordable, means that the majority of people choose to rent rather than own a home in Germany – and therefore do not own any property wealth.

In Britain, the story couldn’t be more different. Over the past five decades Britain has become a property owners’ paradise, as successive governments have sought to encourage people onto the property ladder. Taxes on land and property have been removed, and subsidies for homeownership introduced. The deregulation of the mortgage credit market in the 1980s meant that banks quickly became hooked on mortgage lending – unleashing a flood of new credit into the housing market. Rent controls were abolished, and the private rental market was deregulated. Today tenant protection is weaker than almost anywhere else in Europe. Meanwhile, the London property market has served as a laundromat for the world’s dirty money. As Donald Toon, head of the National Crime Agency, has described: “Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK”.

The result has been an unprecedented house price boom. Since 1995, skyrocketing house prices have increased value of Britain’s housing stock by over £5 trillion – accounting for three quarters of all household wealth accumulated over the same period. While this has been great news for property owners, it has been disastrous for tenants. As I’ve written elsewhere, the driving force behind rising house prices has been rapidly escalating land prices, and we have known since the days of Adam Smith and David Ricardo that land is not a source of wealth, but of economic rent. The trillions of pounds of wealth amassed through the British housing market has mostly been gained at the expense of current and future generations who don’t own property, who will see more of their incomes eaten up by higher rents and larger mortgage payments.

So while German property owners have not benefited from skyrocketing house prices in the way that they have in Britain, the flipside is that German renters only spend 25% of their incomes on rent on average, while British renters spend 40%. The former is captured in the OECD’s measure of wealth, while the discounted value of the latter is not.

Now let’s look at capital. In the UK and the US, the goal of the firm has traditionally been to maximise shareholder value. In Germany however, firms are generally expected to have regard for a wider range of stakeholders, including workers. This has led to a different culture of corporate governance, and different power dynamics between capital and labour.

Large companies in Germany must have worker representatives of boards (referred to as ‘codetermination’), and they are also required to allow ‘works councils’ to represent workers in day-to-day disputes over pay and conditions. The evidence indicates that this system has led to higher wages, less short-termism, greater productivity, even higher levels of income equality. The quid pro quo is that it also tends to result in lower capital returns for shareholders, as workers are able to claim more of the surplus. This in turn means that German firms tend to be valued less than their British counterparts on the stock market, which contributes to lower levels of financial wealth.

None of this means that Germany is poorer than Britain. Instead, it just reflects the fact that German capitalists and landowners have less bargaining power than they do in the UK, while workers and tenants have more power. While lower shareholder returns and house prices are reflected in the OECD’s measure of wealth, better pay and conditions and lower rents are not.

Conclusion

All statistics tell a story, but stories can be told from different perspectives. Embedded in the definitions of all economic statistics are value judgements about what is desirable and what is undesirable, which in turn shape the way we think about the economy. At the moment, the way we measure the wealth of nations mainly reflects the fortunes of capitalists and landowners rather than workers and tenants. Britain looks wealthier than Germany on paper, but this does not reflect the lived reality for most people. While it’s important not to overstate the extent to which statistics can influence the real world, this is important for at least three reasons.

Firstly, it illustrates how seemingly objective metrics often have ideological assumptions baked into them. While there is already a well-established literature on alternatives to GDP, many economic metrics are used in economic analysis and policy appraisal without any critical appraisal of their underlying ideological assumptions. This needs to change.

Second, it highlights how paper wealth has in many places become decoupled from productive capacity, and how conflating the two can be highly misleading. This is particularly the case where zero sum rentier activity is widespread, as in the case of Britain. Such discrepancies raise the question of whether the way that we currently measure wealth is really the most sensible.

But most importantly, it illustrates that the distribution of wealth has little to do with contribution or productivity, and everything to do with politics and power. As J.W. Mason states: “It’s bargaining power, it’s politics, all the way down.”

For economists who see their discipline as a ‘value free’ science which is separate from politics, this is uncomfortable territory. But if the aim is to understand the economy as it really exists, then analysing power beyond the narrow concept of ‘market power’ is essential. Among other things, this means grappling with the power dynamics that underpin ownership and property relations, as well as those that that drive inequalities between different social groups and identities.

It’s been 200 years since David Ricardo described the “principal problem” of political economy. Perhaps it’s time to revisit it.

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It’s 1944. In a small hotel in Bretton Woods, world leaders meet and imagine an end to a world divided by war and terror. It was here that a new age, promising peace and prosperity, began – and with it the birth of Gross Domestic Product (GDP). The arrival of GDP firmly marked the economy as a nation’s priority, while also promoting global competition, providing a way for thriving industrial economies to champion their advancement over others.

But times have changed, and the global agenda has shifted priorities. Neoliberal globalisation has redefined the world economy, bringing with it previously unimaginable swathes of wealth and consumption, but a lifestyle defined by material possession has brought the question of economic wellbeing and development to the forefront of the conversation. Without an appropriate measure to capture wellbeing, GDP was swiftly introduced as a measure for development and wellbeing as well as economic growth, despite its design as a statement of a nation’s income, output and expenditure.

GDP cannot begin to capture economic development – it is static and quantitative, which provides a reliable measure for economic growth, but economic growth alone. In contrast, development is a constantly evolving concept: first coined by Truman in 1948 as justification for Marshall Aid, the term is loaded with history and has been manipulated over time to justify foreign policy. Defined as both a goal and a process, development is too contested as an idea to be bluntly confined to statistics – it is a highly intangible and qualitative concept.

Our understanding of economic development is constantly evolving. It is dynamic and context-specific, and thus needs a metric that evolves alongside it. The role of the nation state is changing too, meaning that a comparative measure will find it harder to pin down the specific workings of an economy and the people that define it, as borders become more flexible and disputed, compressing space and allowing people and ideas to travel faster and in higher volumes. These movements are not always tangible, such as creativity and human capital, and also may be temporary, making the actual potential of a country highly variable.

GDP is associated with aspects of an improving life, such as raised life expectancy, education and healthcare, but a more direct indicator is needed to qualify these and weight them correctly while also predicting which of these are prerequisites for improvement. This is why the 2017 Indigo Prize asked entrants to reimagine GDP, and why I, a 20-year old Geography undergraduate, entered the competition with my proposed alternative – the Global Integration and Individual Potential (GIIP) index.

The GIIP index is my solution to the GDP crisis – an indicator that prioritises individuals as key markers of development, extrapolating these individuals onto the world stage and championing integration. The index is designed not to force countries to compete, but to encourage nations to take advantage of the enriched cultural, social, political and economic ideas, practices and innovations that the integrated world economy offers.

The GIIP Index is divided into four equally weighted components: Perception, Opportunity, Ability and Global Integration.

Perception

Perception is a both qualitative and abstract idea, but the most important and refreshing. Perception is never normally considered in a state’s potential and this index pioneers its use as an alternative to GDP.

According to Deloitte, uncertain economic outlook is the leading obstacle to growth. Perception not only acts as an indicator of the present state of affairs within a country, but just as equally gives some idea to the shape of their future. Having citizens that are confident in an economy, supported by strong social and political stability, results in more expenditure, greater ability and support to take risks – conditions that foster creativity.

Opportunity

Opportunity is something largely provided to citizens by government through equal opportunity laws, investment and infrastructure, as well as whether governance is technocratic and incorporates technical expertise in policy. Social norms also dictate opportunities available, as equal opportunities will not arise simply as a result of a change in law. Cultural and religious standing on marriage and gender take precedence over national law, and countries where FGM, child marriage and disregard for a girl’s education are prominent will severely lack opportunities regardless of what the law states.

Ability

The ability to execute ideas, by providing the right networks and conditions, can overcome physical geography, instead of aiding the course it has chosen for a nation. If a country is able and fulfilled in a number of areas, its vulnerability to and frequency of natural hazards will not be reflected in its ability to bounce back. The ability to dream is inspired by role models, the desire to build oneself up from nothing or bounce back from a bad event, or being inspired by success are all possible due to economic interconnectedness and technological advancement that proves what success can be.

Each of these is measured in 8 factors: social (perception of minorities, women and wealth distribution), economic, international relations and their position in global economy, geographical (physical limitations and world issues), human Capital, health, political/government and freedoms.

Global Integration

Global integration extrapolates these individuals onto the world stage, as measuring people is our best representation of the state of not only national but global affairs, which are taking an increasingly important place in international discussion. A number of issues confronting the entire human race irrespective of nationality, such as poverty, population and climate change, mean that this measure will become increasingly important over time.

The GIIP Index looks at the following factors in assessing how integrated a country is into the global economy: aid/debt, response to global issues, trade, TNCs (whether they benefit from or are exploited by), technology, involvement in supranational organisations (like the UN, IMF, World Bank), influence and attractiveness to investors, migrants and financial flows. Global Integration champions collaboration and cooperation between each of us. Sharing models and ideas, which have been bred from our cultural and physical distinctions, has the power to strengthen all of our economies and solve world problems while creating huge potential for their development.

Engine economics

Presenting the GIIP index in engine form is a new way of representing the workings of an economy. Individual perception, which takes into account ability, opportunity and perception, together make up the length of the propeller (like a composite bar chart), represented by each colour within the segment. The three measurements are weighted equally and hence the potential length (not the area) of the propeller is split into 3.

The larger an engine size is, and the larger the propellers, the nearer a country is to achieving their full creative, political, social and economic potential. The symbolism is that an engine allows us to imagine the potential a plane has before take-off – how fast is their ascent, how high they are able to fly, and how long the plane is able to fly for. A large engine without suitably large propellers will not function properly, nor a small engine with large propellers: both must be of a similar size for an economy to function at a sustainable rate. GDP can be defined as the plane’s journey alone, but with the GIIP there is much more diversity in what enables its present and future successes, and what gets the plane off the ground.

Making change happen

There is an urgency about this change. Changing our metrics is the first step to changing how we understand and quantify development, and thus allows us to see where policy is providing positive and negative solutions. Scores of countries are being left behind by GDP and it remains a mechanism for exerting power or support over other countries, enhancing an unequal world economy. A new indicator would present development as the responsibility of more than just the economy, and encourage long term investment instead of policies for political gain. Rewarding countries for these factors will also create a more equal world economy, where cooperative measures promote mutual prosperity instead of competition.

Alice Lassman’s ‘GIIP Index’ was awarded the ‘Rising Star’ award in the 2017 Indigo Prize. The full proposal is available here.

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It would be funny if it wasn’t so distressing. After every recent election in the West, the reaction of so many pundits has been to ask: Why are the anti-establishment parties so strong again when GDP has been picking up recently?  But perhaps the pick-up in GDP is so removed from what really matters to people that voters are seeking significant change.

Voter’s intuitions – that our economies are not aligned with what really matters to them – are mirrored in the evidence. The research is clear: growth in GDP has not been widely shared, instead it is the wallets of the already wealthy that have expanded. Moreover, while policy makers strain to squeeze more GDP from a stagnating economy, we know that, beyond a certain threshold, increases in GDP per capita don’t bring greater progress.  Quality of life is about more than gains in average incomes. GDP doesn’t capture the value of non-monetized or non-marketed work, like housework, raising children, caring for the elderly, or volunteering. It is blind to the carrying capacity of our environment.

Recognition of the limits to GDP is nothing new. Fifty years ago today, on 18 March 1968, then-presidential candidate Senator Robert Kennedy made the exact same point:

“The gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”

To avoid another fifty years with an economy geared up for inappropriate goals, we need to cultivate a new economic vision. We need an ambition that relates to people’s daily experiences, not the growth of abstract numbers. This is the vision of a ‘wellbeing economy’: an economy that promotes wellbeing for people and planet. It’s an economy that meets the needs of all within planetary boundaries. It is fair, sufficient and ecologically sustainable.

This isn’t an unrealistic pipedream of a utopia where people flourish and the planet survives, it is an ambition being realised, right now, by innovative and creative people who are taking on the challenge of growing wellbeing, rather than just financial wealth.  We see this happening in communities, in businesses, and even in the corridors of government.

Take Costa Rica. Most of the time, they run completely on renewable energy. In 2017, their energy production was 100% renewable for more than 300 days. And while the rest of the world is desperately trying to halt deforestation, Costa Rica is actively re-foresting, doubling its forest coverage between 1983 and 2016.  Coupled with low poverty and inequality compared to other countries in the region, they are punching above their weight on  the Social Progress Index. No other country is better at marrying individual wellbeing, life expectancy and equality with a low ecological footprint. That’s true leadership.

Closer to home, consider Scotland. In 2016, the Scottish Government published a Circular Economy Strategy which sets out a vision for an environmentally sustainable, low-waste Scotland, with several new regulations soon following. It has cross-party support for the Living Wage and has recently created a commission to tackle inequality and poverty.

And turning to Slovenia, we find a country where inequality and the gender pay gap are among the lowest in the OECD. Last year, after extensive public dialogue, they published their Vision 2050. Its core themes are learning for life, innovative society, trust, quality of life and an identity that is inclusive and outward-looking.

Examples such as these offer hope for all of us. There are many more examples around the world where governments, businesses and communities are putting the wellbeing of people and planet first, and living up to their promises.

But these pockets of progress on wellbeing are not enough. In isolation, they cannot challenge the status quo.  Deep, sustainable change needs a comprehensive, cooperative, and collaborative approach.

Fortunately, in October last year, several national and subnational governments from around the world, including Costa Rica, Scotland and Slovenia, decided to establish a group of governments, somewhat akin to the G7 or the G20, that commit to creating wellbeing economies. They agreed that only by collaboration and sharing of lessons will efforts to create economies that serve people and planet have a fighting chance of being realised.

With plans for a public launch later in the autumn this is a pivotal moment for such an initial group of governments to take up Robert Kennedy’s challenge and lead the way in setting a new course for 21^st century progress and development.

This new form of governance and policy-making is needed in a complex, interconnected world. If we are to tackle the shared global challenges we face, from rising inequality to the effects of environmental degradation and climate change, then we need exactly this kind of international co-operation between countries who recognise that a wellbeing economy should be a key aim in their public policy frameworks.

Working together to promote policies that improve all our lives and protect our planet offers this ambitious group of governments the means to demonstrate to the rest of the world that the shift to a new economic and social paradigm with the wellbeing of people and planet at its core can be done. In doing so, they will encourage other governments to follow their lead.

Realising wellbeing economies will require political will and bold leadership. It’s time for political leaders all around the world to step up and commit to a new vision of wellbeing. People and planet won’t wait another 50 years.

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Diane Coyle is Professor of Economics at Manchester University, and this year will become the inaugural Bennett Professor of Public Policy at the University of Cambridge. In 2017, Diane was awarded the prestigious Indigo Prize in economics .

In the first in a new series of interviews with leading economists, Diane speaks to openDemocracy about industrial strategy, universal basic infrastructure, moving beyond GDP, and how to build an economy that works for the 21st century. 

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Public versus private is back. After the liquidation of Carillion, the government’s use of private companies and outsourcing to deliver public services is under close scrutiny. Now the National Audit Office has added to this with a new report which reviews the costs and benefits of the Private Finance Initiative (PFI). The conclusion will come as no surprise to anyone who has ever scrutinised any PFI deals. It finds that PFI projects can be 40% more expensive than doing it directly with public money.

This begs the obvious question: why did we ever enter PFI contracts in the first place? The answer is provided on page 11 of the NAO report: PFI is off-balance sheet for national accounts purposes, which means it “results in lower recorded levels of government debt and public spending in the short term”.

Time and time again, governments and other public bodies have been lured into using PFI, even when it costs taxpayers much more over the longer term. But while part of the reason for the proliferation of PFI undoubtedly stems from political short-termism and an irrational fear of the national debt, there is another culprit which is rarely discussed: Britain’s rather peculiar approach to measuring public finances.

Now be warned: this is not the sexiest topic. But it has had an enormous impact on the way that our economy has been run in recent decades, so try and bear with me.

Whenever the government establishes a new body or privatises or nationalises an existing one, the resultant body must be classified for National Accounts. The Office for National Statistics (ONS) decides the treatment in the National Accounts by applying international accounting standards. If a body is deemed to be controlled by government or a public corporation, then it will be classified as in the public sector. If not, then it will be classified as in the private sector. So far so good.

Once a body has been classified as either public or private sector, the next step is to assess whether it will have an impact on Public Sector Finance statistics and the UK Government’s fiscal targets. Here’s where things get interesting.

In the UK, the main measure of public debt is ‘public sector net debt’, which is defined as public sector financial liabilities (for loans, deposits, currency and debt securities) less liquid assets. According to the ONS definition, the public sector comprises central government, local government and public corporations.

While the UK government targets total debt across the whole public sector, this is not standard practice internationally. Most other countries, including across the EU, monitor and target ‘general government gross debt’, which includes both central and local government but excludes public corporations. There is a logic to this: typically, bodies classified as ‘public corporations’ are operated on a commercial basis at arm’s length from the government. Excluding the liabilities of these companies from measures of government debt and deficits ensures day-to-day running of government is kept separate from commercial, albeit publicly owned, operations.

The difference between these two approaches is particularly significant for countries where public ownership is widespread. Take Germany for example: in 2015 Germany’s general government gross debt stood at 71% of GDP – slightly below the average for EU countries. When the liabilities of public corporations are added (as they are in the UK measure) the total amounts to 181% of GDP – the third highest in the EU. This is largely attributable to the scale of the German public banking sector which includes the KfW at the federal level, the state banks (Landesbanken) and the municipal savings banks (Sparkassen). So much for the fiscally prudent Germans!

While German public banks and utilities can borrow and invest prudently without clouding the debate about day-to-day government spending, British public corporations cannot. In the age of austerity, this self-imposed constraint creates an obvious political bias against public ownership. It’s little wonder we hardly have any public corporations left.

The Green Investment Bank (GIB) is just one example: George Osborne said that it would only be granted borrowing powers when the ratio of public sector net debt to of GDP was falling. Of course, this never happened, so it was swiftly privatised on the basis that it could only access the capital it needed under private ownership. Contrast this with the German KfW, a publicly owned bank which raised €73 billion to invest in the German economy in 2016.

The UK’s approach is entirely voluntary: the inclusion of public corporations in measures of debt and deficit is not imposed on us by Brussels or anyone else. But it’s not an accident. In practice, these rules have served to reinforce an ideology that seeks to shrink the state and hand over our public services and public assets to the market. There will no doubt be many politicians who will be quite happy with the way things are. But for any progressive government,  a logical and straightforward step would be to align the UK’s measurement of debt with the approach used elsewhere and unshackle public corporations from their financial straightjacket.

But that’s not all. A balance sheet has two sides: assets on the one side, and liabilities on the other. But for some reason, when we assess public finances we only seem to focus on the liability side of the balance sheet: the ‘national debt’. But what about our ‘national assets’? Why do we never hear anyone talk about them?

We all know that government borrowing increases the deficit and the national debt. But borrowing is often used to invest in a new asset, for example new housing. Often these assets will generate a future income steam. However, under the current approach these new assets aren’t accounted for anywhere. To the casual observer (and to our less astute politicians) borrowing to invest simply appears to worsen the public finances.

But as any City analyst will tell you, if the return on the asset being invested in is greater than the cost of borrowing then the investment should be made because it is a net positive. So instead of having a debate about whether we can afford to make these investments, we should really be debating whether we can really afford not to.

But when it comes to management of the public finances, these basic accounting principles are overlooked. As Vince Cable, who knows a thing or two about dealing with the Treasury, has explained:

“borrowing to finance investment by a government body may create an asset (machinery, a building) but – bizarre as it may seem – this is not properly accounted for and so the activity is treated as adding to gross and net debt as well as government borrowing. The current enthusiasm for ‘selling the family silver’ has its roots in bizarre Treasury accounting conventions.”

A more rational way to measure public finances would be one which recognises we have national assets as well as national debts, and which differentiates between borrowing for consumption and borrowing to invest in new income generating assets.

From PFI to privatisation, countless daft decisions have been encouraged by our peculiar national accounting rules. These rules defy all economic logic. It’s time to change them.

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Rosalind Gill is Professor of Cultural and Social Analysis at City, University of London, and is Co-Editor of the new book ‘Aesthetic Labour: Rethinking Beauty Politics in Neoliberalism’, published this year by Palgrave MacMillan. In this interview Ian Sinclair speaks to Professor Gill about the relationship between beauty politics, aesthetic labour and neoliberalism, the role of social media and the impact all this has on women.

Ian Sinclair: What has happened to beauty politics since the turn to neoliberalism in the Western world from the late 1970s onwards?

Rosalind Gill: Over the past two decades we have seen an extraordinary intensification of beauty pressures that are connected to a variety of changes – some of them social, cultural, economic and technological. In terms of technological change, for example, the ubiquity of camera phones with very high capacities for magnification has led to a new and unprecedented surveillance of women’s bodies. It is a truism to say that this is the age of the image, of the photograph – 24 billion selfies were taken in 2016 alone. No previous generation has ever been the subject or object of so much visual attention. This was bound to have an impact on beauty pressures. When you add to it the mainstreaming and normalisation of cosmetic procedures – both surgical interventions and nonsurgical beauty treatments such as Botox, liposuction, skin peels and fillers, promoted as  ‘everyday’ even ‘lunch hour’ interventions, you can see that even at the level of technological change there has been a growing impetus to focus on appearance. Yet on top of that there are key social and cultural changes, and the vast economic growth of the cosmetics industry too, blurring and hybridising into surgical and pharmaceutical industries. Now, more than ever before, it really makes sense to speak of a ‘beauty industrial complex’.

One of the ways that this is connected to neoliberalism is through the emphasis upon the body as a project – something to be worked on, and something which is thought about as our own individual capital. This idea has been around in social theory for some considerable time now, linked to theorisations of late modernity in which we are all held to be responsible for the design of our own bodies. Interestingly a lot of this writing has been quite general, even universalising, in tone – but I think what we are seeing much more now are attempts to ground this in specificities – for example in terms of gender or race or disability. While it is clear that there is a broad imperative around the symbolic value of the body, it matters whether you are cis or trans, whether you have a normative body or are fat, and still – I think – whether you are male or female.

“Now, more than ever before, it really makes sense to speak of a ‘beauty industrial complex’”

Allied to neoliberalism there have been a series of shifts that have come to be understood in terms of a ‘postfeminist’ sensibility circulating in contemporary culture. One of the key features of this sensibility is the emphasis on the body as the locus of womanhood and the core site of women’s value. This has displaced earlier – equally problematic – constructions of femininity, which placed emphasis on motherhood or on particular psychological capacities such as caring. Today, the requirement to work on and perfect the body has reached such an intensity for women that it has become – in Alison Winch’s words – ‘her asset, her product, her brand and her gateway to freedom and empowerment in a neoliberal market economy’, even though it must also always be presented as freely chosen, not the result of any coercion or even influence. A beauty imperative has gained more and more traction, with the idea that sexual attractiveness is the measure of success for a woman – whatever else she is she must also strive for beauty and perfection. Depressingly, you don’t have to look far to see instances of this in popular culture. Even our female politicians are subject to this as we saw graphically in the notorious ‘LEGS-IT’ headline a few months ago, comparing and rating Theresa May’s and Nicola Sturgeon’s legs.

“A beauty imperative has gained more and more traction, with the idea that sexual attractiveness is the measure of success for a woman”

When I make this kind of argument the first responses is usually for someone to say ‘men are under pressure too’. And this is undeniably true. I’ve done a lot of work over my career on changing representations of male bodies – from the ‘sixpack’, to the trend for removing body hair, to the promotion of skincare products targeted at men. For me it is absolutely clear that the beauty industry is moving in on men, big time; they represent an enormous potential market – and it is especially clear this year as we see cosmetics companies begin aggressively to market make up to men. Cover Girl’s first male/gender fluid ‘ambassador’, James Charles, is simply the most visible example. It seems to me that there is a relentless market-driven pressure being brought to bear on men – especially young men. Having said that, the pressure and scrutiny that women are under is still far greater, has a different history, and greater significance and centrality in women’s lives.

IS: In the book you refer to ‘aesthetic labour’ and ‘aesthetic entrepreneurship’. Citing some examples, can you explain what you mean by these terms?

RG: The term ‘aesthetic labour’ had been around for some time, especially used by sociologists of work. It has been part of a toolkit of terms designed to unpick the different forms of labouring involved in various occupations – emotional labour, affective labour, venture labour, and so on. A body of work by scholars including Irene Grugulis and Chris Warhurst has been interested in how soft skills are increasingly called upon, including the need for workers to ‘look good and sound right’ in workplaces such as coffee shops. More recently Elizabeth Wissinger has also developed the notion of ‘glamour labour’ to talk about the work of models and fashion industry insiders. A particularly valuable feature of this is the way it shows that this labour isn’t just about the physical body but also involves attention to qualities like ‘cool quotient’ – which involves relationships, social media use and style or reputation.

With our intervention we wanted to build on these really interesting bodies of work to argue that these practices of what we see as aesthetic entrepreneurship are not bounded by the workplace, but rather are much more widespread in contemporary societies that are dominated by new forms of visibility, appearance and looking. The requirement to curate an appealing self is not only a work requirement; it is a growing social and cultural imperative. Secondly we also wanted to highlight the psychosocial dimensions of this, with an emphasis on the fact that in today’s makeover culture it is not just the body that is reinvented but the whole self, the making of a beautiful subjectivity.  And finally by using the term ‘aesthetic entrepreneurship’ we wanted to draw links to neoliberalism more broadly – that is to this idea of selves as enterprising, calculating, reflexive, and so on.

One of the things this does for us is to break the impasse in feminist beauty studies – an impasse in which some talk of women as autonomous and creative agents, and others talk of passive and docile subjects. Our intervention – and shown through the chapters in the book – is to argue that women are both subjected and creative. A chapter in the book by Simidele Dosekun illustrates this beautifully. The affluent, fashionable Nigerian women she interviews are shown to be operating in a beauty regime in which particular features are highly valued and others disparaged – in this sense their aesthetic labour is culturally compelled. Yet far from being ‘passive dopes’ Simi shows that these fashionistas are knowing and sophisticated consumers, investing in notions of vigilance and rest – e.g. giving their skin time to breathe, their nails ‘time out’ from gel add-ons, and so on – practising aesthetic entrepreneurship to mitigate risks.

IS: How have the changes you have set out been influenced by the increasing popularity of social media?

RG: Social media are so ubiquitous now that they are hard to disentangle from other influences. One of the things that interests me greatly, though, is the impact of social media on our ways of seeing. A lot of writers have tried to engage with this in some way – Terri Senft has talked about ‘the grab’ of social media, whilst Malcolm Gladwell famously talks of ‘the blink’ as our current modality of engagement. Personally I am really interested in current attempts to think about surveillance beyond the metaphor of the Panopticon. Of course there is loads to be said about big data and surveillance which is hugely important. But my focus has been on something slightly different: the idea that our ways of seeing are literally transforming. I notice with my students that they pore over and really scrutinise images on their phones – whether this is of celebrities, their friends or themselves. It involves the kind of forensic form of looking in which magnification is to the fore. This is producing all kinds of new visual literacies, particularly of the face, and they are literacies in which I am not competent. As someone who believes thoroughly in the idea that we are socially and culturally shaped, I can recognise that my own visual habits and competencies have been formed in another era: when I look at an image on social media I simply do not ‘see’ what my students (often 30 years younger) see. I am constantly astonished by the detailed and forensic quality of their ways of seeing, as well as the way they are often framed through a ‘pedagogy of defect’ (to use Susan Bordo’s famous phrase) in which minute flaws and imperfections are itemised. Compared with this I feel my own ways of seeing are almost akin to a blur or at best a casual glance – and mostly more benign.

These new visual literacies have been engendered and taught not simply through Facebook and Instagram and Snapchat but also through the vast proliferation of beauty apps that I have been writing about with Ana Elias.  Some of these are filters: ‘swipe to erase blemishes, whiten teeth, brighten dark circles and even reshape your facial structure’ (Face Tune) or ‘to look 5, 10 or 15 lbs. skinnier’ (SkinneePix). As we have argued, many of these filters encode deeply troubling ideas about race as well as gender – with skin ‘lightening’ a common feature, and recourse to problematic ideas from evolutionary psychology. Aesthetic ‘benchmarking’ apps are another huge category allowing users to get a score on ‘how hot am I?’ or ‘how old do I look?’ or get rated by the ‘ugly meter’. These apps call on users to upload a selfie – after which they will be given a ‘score’. Claiming to tell you things your friends wouldn’t, the apps trade on a certain algorithmic authority and may also highlight which features need to be changed, with ‘helpful’ hints about treatments or surgeries that would elicit a higher score. As such they shade into another type of app we discuss – namely the cosmetic surgery try-out apps that allow you to ‘visualize a new you’ with whiter teeth, or larger breasts or a remodelled nose. As Ana and I argue in an article that has just come out in European Journal of Cultural Studies, these kinds of apps (and others we discuss) not only generate new visual literacies but also bring the cosmetic surgeon’s gaze out of the clinic and into our most intimate moments, via the smartphone. We argue that they are part of the shifting of meaning-making about surgery and other interventions – made more seductive through the gamified features of these apps.

“These new visual literacies have been engendered and taught not simply through Facebook and Instagram and Snapchat but also through the vast proliferation of beauty apps”

IS: How have women been impacted by the ‘intensity of beauty norms’ pushed by what you call the ‘beauty-industrial complex’ and wider culture?

RG: It’s quite hard to answer this question. It seems strange doesn’t it – yet there really is a paucity of research around these issues – at least outside of psychology. Psychology and the ‘effects tradition’ has the upper hand in this field with lots of studies correlating social media use or posting of selfies etc. with poor body image, mental health issues, greater propensity to undergo cosmetic surgery and so on. This is all valid of course, but tends to be focussed in a narrow effects tradition with all the problems that are well documented. The lack of sociological studies makes it feel as if we lack a sense of the way feelings and practices and everyday reasoning around appearance are actually part of the texture of everyday life. On the other hand when we do have more ethnographic studies they often seem invested in a particular perspective – for example the claim that young people are robust, resilient, critical users of media and there isn’t really a problem. I don’t find either perspective particularly illuminating.

I have to admit that the main insights I get come from my own students’ discussions of these issues in my courses on media. Some are scathing and critical and may claim their engagement with beauty culture is always mediated by ‘having a laugh’. Others tell of painful struggle with weight or skin conditions, or experiences of untagging themselves from multiple photos in which they don’t think they look good, or of trying to score higher on some attractiveness-rating app. I think it’s fair to say that none of us exist outside of the rapidly intensifying and extensifying beauty industrial complex. I say extensifying as well as intensifying because what is striking is how beauty pressures are also spreading out – across new domains (facial symmetry measurements, thigh gap) and new parts of life – childhood, old age, pregnancy etc.

IS: I was interested to see you discuss Dove’s ‘Love Your Body’-style Campaign for Real Beauty, which was launched in 2004. Though it has been widely celebrated, you have some criticisms of it?

RG: Love Your Body (LYB) advertising has really taken off over the last decade or so with brands like Dove, Always, Weightwatchers and Special K queueing up to spread the self-love and body confidence message to women. I feel deeply ambivalent about this. On the one hand these exhortations to self belief, body love and confidence are genuinely a welcome interruption to a stream of commercial communications that have focussed on body hate and pointing out what was wrong with us and how we could do better. Yet against this it is hard not to feel cynical when it is the exact same companies that sold us HYB (Hate Your Body) that are now preaching a quasi-feminist empowerment. Special K telling us to “shut down fat talk”?! Come on! Even the Daily Mail called it ironic. And clicking through on that very ‘positive’ campaign takes you straight to the company’s BMI calculator…

Some other relatively obvious criticisms of LYB are about its fakeness – it uses the exact techniques  it claims to repudiate: hiring ‘non-model models’, using photoshop, etc; it’s pseudo diversity – try comparing a Dove advert with an image from Fat Activism and see how ‘diverse’ it really looks; and its ‘re-citing’ of hate talk – when Special K told us to shut down fat talk it obviously had to spend most of the advert reminding us just what those hostile messages were (obvs!). But more than all this I’m very critical of LYB – and what Shani Orgad and I have called ‘confidence cult’ discourses more generally – for some more profound reasons. First because they blame women for their own lack of confidence, and exculpate patriarchal capitalism by implying that low self-esteem or body insecurity are things that women do to themselves (try watching Dove’s ‘Patches’ if you don’t believe me). And secondly because I believe that this new culture of confidence actually represents a new form of regulation: one that seeks to regulate not simply the physical body but also the self and one’s feelings and relation to oneself and others. Body love and self-confidence have become compulsory dispositions. It is not enough to work on and discipline one’s body, but one also has to have the correct, upgraded, body-positive subjectivity. Insecurity and vulnerability have become toxic states – something that links to the wider culture of what I call the ‘femspiration’ industry. Be afraid. Be very afraid. This is about the affective life of neoliberalism: how it not only shapes our economic and political formations, and our subjectivities, but also colonises our feelings.

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There seems to be a new trend in town – it’s not Pokemon Go or turmeric lattes or pouty photos on social media.

It’s the tendency to unquestioningly throw around the term ‘productivity’ as an unmitigated good – as an important goal of policy – without defining it, let alone discussing whether more ‘productivity’ is an appropriate goal for today’s economy.

Admittedly, the mantra of ‘we need to boost our economy’s productivity’ has long been with us – but it recently seems to be experiencing a spell of particularly high popularity in ministerial speeches, TV and media interviews, and in high level meetings.

In one of these meetings – a room full of highly educated people, people very senior in businesses or economic agencies or government – I asked: ‘but how are you defining productivity?’

The answer: ‘we haven’t really discussed that’.

This is concerning.

I asked if they were defaulting to the definition I was taught in my first year studying economics at university – output per worker. Yes, that was, apparently, what they had in mind: ‘Productivity gains are vital to the economy, as they mean that more is being accomplished with less’.

So the next question is if increasing the output each worker produces is necessarily a good thing. Why would we want more? And why would we want to do it with ‘less’, if less means fewer people?

First, more stuff? Really? In a world pushing up against and beyond environmental limits and planetary boundaries? When there is already more than enough to deliver sufficient food for everyone, if only we could share resources better and stop wasting so much? When the link between more stuff and enhanced wellbeing becomes tenuous after fairly modest levels of income?

Second, more output per worker? In an economy in which many people are simply trying to stitch together a semblance of a livelihood on short term contracts and too few hours, is pursuit of fewer people on the payroll a good thing for anyone other than those signing the pay cheques? And is it even relevant in an economy where care, personal services and creative sectors are growing in significance? After all, these are sectors where having more people involved might just lead to better outcomes and higher quality delivery.

And as economist William Baumol noted, with reference to a string quartet, the push for more intensity of work might end up compromising the quality of delivery and hence the experience, for both worker and customer. Ecological economist and former UK Sustainable Development Commissioner Tim Jackson explains that ‘when it comes to human services, continually stripping out the time spent in service actually becomes (in any meaningful terms) counter-productive, even though it is counted in economics as being productive’.

A recent Oxfam International report suggested we need to consider who gets the gains of any productivity increases. Doing so would reveal this is one type of decoupling that has occurred: a breakdown of the link between productivity gains and workers’ wages. To a great extent (especially in the US) owners of capital have siphoned off the benefits. Whereas workers – often due to their declining power in workplace negotiations – have been delivering more for their bosses, but without commensurate remuneration.

So why, with all these possible downsides, is productivity rolled out so often and so categorically as a good thing? It seems to me that it reflects an example of how out of date economic axioms remain entrenched in so many discussions about the economy in political and media circles.

It is the same with productivity’s twin-concept of ‘growth’ – another abstract term wheeled out without asking what sort of growth is wanted, for whom, and what trade-offs societies need to make in order to attain it. Instead an ‘adjective lipstick’ is painted on the growth pig – to paraphrase Sarah Palin. We have: ‘Inclusive Growth’; ‘Sustainable Growth’; ‘Green Growth’; ‘Shared Growth’; and ‘Low Carbon Growth’. Whitewashing an abstract term of dubious merit is not good enough.

But returning to productivity, there are some good reasons to put it forward as a goal. One would be if workers were able to negotiate to take the benefits – for example, as more leisure time, without less pay. This would be a good thing in our over-worked stressed out society. Another would be if pursuit of productivity gains were focused on those jobs that are unpleasant – using technology and automation to make these jobs easier would be entirely appropriate.

And finally, what if the sort of productivity being promoted was ‘output per unit of resources’? That would mean the same amount of material goods or services were being delivered, but using fewer resources. Given the extent of stress on the environment, an economy that chews up less would be a great turn of events.

Discussing how the challenges the economy faces and how it can be improved is a very necessary conversation. They would be even better if the terms used and assumptions made are on the table for debate and redefinition. A more cautious and nuanced approach to mantras such as growth and productivity might just lead to a wealthier country. Wealthier, of course, in the old English definition of ‘the conditions of wellbeing’…

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During recent conversation about Brexit, Trump, and widespread public dissatisfaction with the status quo in the US , Europe and elsewhere, I was reminded of a piece I wrote some years ago as part of a short book of essays and observations.  It was an attempt to spear some of the nonsense perpetrated both in academia and government about how large-scale economic activity is interpreted and “sold” to the public; and why that interpretation is wholly inadequate.  Although framed around two fictional characters and deliberately tongue-in-cheek, the essential details of the piece are as historically and factually accurate as I could make them.

Net Economic Outcome as a concept was introduced by Sandra Mendoza and Veliama Sivaganamin a joint paper presented to the Third Women’s Econo-Solidarity Conference in Porbandar. Despite initial ridicule by academics and dismissal by policy-makers, radicals soon latched onto NETCO as a weapon in their war against capitalism; although it is far from certain that this was the authors’ original intention.

The aim of the Porbandar paper was to elucidate what Mendoza and Sivaganam considered to be a universal confusion between “national or regional economic efficiency”, and the “efficiency of the firm”. Conventional wisdom held (as in many quarters it still does) that the two ideas went hand in hand: in other words, that an efficient private sector offered the best route to the welfare of the people and therefore to the success of the nation or the region in which it operated.

Mendoza and Sivaganam suggested, instead, that private and public efficiency were not only different but, in many cases, mutually exclusive. In a capitalist economy, they claimed, an efficient firm endeavoured to maximise sales, while minimising labour costs and leaving the state with as many associated burdens as possible: pollution, waste, environmental degradation, road maintenance, worker training, social security, unemployment insurance, and so on. But was it economically efficient at national level, they asked, for people to buy superfluities (and create the resultant waste), or for a state to cope with employment instability caused by  downsizing or outsourcing, the displacement of small farmers and entrepreneurs by multinationals, the ravages of industrial pollution, and the societal disruptions that accompany extremes of inequality? The prospect of exceptional wealth might well be a spur to enterprise, but wasn’t it too often also a charge on the social fabric? Currency and commodity markets could net handsome rewards for a handful of businesses and individuals, but often by devastating countless numbers of impoverished people in stricken areas of the world.

And what about natural and environmental disasters? Earthquakes, tsunamis, chemical spills, shipwrecked oil tankers could ravish the human environment and cause untold human misery – even though they usually resulted in greater economic activity and an increase in GDP as producers geared up to repair the damage. In economic terms, few things could be better than a catastrophe or a conflict fought in some distant territory where the loss of many lives would be counterbalanced by the enticing prospect of corporate super profits and unprecedented economic growth, first in arms sales, and then in rebuilding towns and industries.

Mendoza’s and Sivaganam’s paper offered some provocative examples of how private sector efficiency could, and often did, mean “screwing the taxpayer”: overcharging on government contracts, bribing officials, blackmailing governments into awarding investment subsidies, circumventing environmental regulations, failing to compensate victims of industrial blight and so on.

They went on to propose a different, more sophisticated analytical vocabulary for assessing economic efficiency and assigning financial responsibility, which would allow the social, environmental and infrastructural impact of corporate activities to be costed and charged.

In a subsequent monograph “Owning up – Investors and the Invested”, the authors argued that so-called private investment is in reality a joint venture in which public goods – roads, railways, airports, an educated workforce etc are joined to private capital. Ownership should, therefore reflect the participation of all investors. Terms such as “Socio-environmental Cost Analysis”,  “Input Distribution”,  “Capital (Stock) Equivalence”, “Subvention Equity” and “Context Sensitive Accounting”, made their first appearance in this little book.

The personal histories of both Mendoza and Sivaganam bear some relevance to the conclusions they reached about the nature of economic life.

Sandra Mendoza was born in Tegucigalpa, Honduras into a wealthy land-owning family. At seventeen, she began an affair with one of the gardeners at the family hacienda, by whom she became pregnant. When the affair came to light, the gardener was arrested on a rape charge and was never seen again – a not untypical fate in those days for a man who dared to bed above his station.

Mendoza fled to Tuxla Gutierrez in Mexico where she lived for some time in deep poverty. The child – a daughter – died in infancy from a lung infection – Mendoza’s pleas to her family in Honduras for money to buy antibiotics having gone unheeded.

By the age of nineteen, she was in Mexico City working behind the counter in a pharmacy and studying for a degree in Economics at UNAM. After graduating with distinction, she landed a job with Verduras y Aceites de Mexico S.A. – a subsidiary of a large US agroindustrial company. There she played a key role in developing an investment in the far western state of Baja California Sur where the company leased a stretch of semi-desert on the outskirts of the town of Santamaría and collared the local water supply to grow tomatoes for export. The project proved highly profitable, and Mendoza received a substantial salary increase on the strength of her contribution.

On the other side of town, however, where farmers had cultivated the rich soil since the town’s foundation in the late eighteenth century, traditional irrigation channels ran dry and crops failed for lack of water. Proud horticulturists, accustomed to a dignified independence, began sinking into poverty. A few of them found low-paid jobs with the company; many sold their fields as building plots to wealthy newcomers for whom they ended up working as servants, chauffeurs, or even gardeners digging patches of the same soil that had once been theirs. The gap between rich and poor widened, social cohesion weakened; burglary and petty theft – formerly unknown – became commonplace. Beggars appeared on street corners.

This was Mendoza’s first experience of the double-edged sword of western-style industrial investment. Government statisticians registered an increase in local employment and GDP; but who, Mendoza asked herself, were the beneficiaries? And who bore the costs? She wondered if a way could not be found of recognising recipient communities as co-investors and decision-making participants in new projects.

Back in Mexico City, Mendoza met Carlos Restrepo Robles, the exiled Colombian human rights lawyer who was later gunned down at the airport on his return to his homeland. From him, she learned of the notorious El Cerrejón strip coal mine in the north of Colombia owned by a consortium of multinational mining companies. The mine had brought profits to the owners, but despair to local communities whose homes had been razed, fields destroyed, burial grounds desecrated and environment polluted beyond recovery. After Restrepo’s death, she visited the mine and saw for herself the devastation it had wrought on the locality and the indigence into which the former residents of the demolished village of Tabaco had fallen as a result.

Determined to study the issues raised by what she had witnessed in Santamaría and Tabaco, Mendoza resigned from her job and, after turning down offers of scholarships from several western universities, she chose to read for a doctorate at the University of Porbandar.  “I didn’t need western professors telling me how people in countries like mine think and feel,” she explained to a colleague who questioned her choice. It was at the university in Porbandar that she met Veliama Sivaganam.

Ms Sivaganam came from a very different background. Born into a poor family in Pudukkottai, a rural district of the Indian state of Tamil Nadu, she and her mother learned to read and write together – thanks to a literacy drive funded by an enlightened local charity. Sivaganam’s father made scant effort to follow suit. Like many men of the district, he had given himself over to the consumption of arrack – a locally-brewed liquor – on which he spent whatever funds he could lay hands on. Officially, private distilleries were forbidden in Tamil Nadu – the local government having awarded licences to a couple of large national distillers that produced IMFL (Indian Made Foreign Liquor). Sales of IMFL through recognised brandy shops provided the government with tax revenues, thus ensuring – as is so often the case – an alliance of interests between government and big business. But that didn’t stop the illegal distilling of cheap arrack for which the demand proved insatiable and the rewards substantial. “In Pudukottai, Tamil Nadu’s least urbanised district,” wrote Palagummi Sainath in 1995 when Sivaganam was still a teenager, “official data show that an arrack distiller is arrested every 45 minutes; and one is convicted every two hours.”

Illegal distillers  happily paid their fines – the amounts were derisory compared with their profits from the trade. Then they moved their equipment to another location and carried on as before. Arrack consumption, meanwhile, had become a source of grief and conflict within families. Husbands commonly financed their drinking habit from an already meagre household budget and then under its influence abused wives who had the temerity to complain. Children grew to dread their fathers’ drunken outbursts and the parental disputes they occasioned.

On her twentieth birthday, Sivaganam joined a women’s group formed with the aim of declaring Pudukottai a dry region. They succeeded in having most of the illegal distilleries closed down – but only to find the brandy shops taking their place – backed by the state government and the big liquor companies. IMFL came to dominate the market and since it was more expensive than arrack, drinkers paid for the increase not by reducing their consumption, but by appropriating more of the household income. Children went hungry, but like whales feeding on plankton, big business and government got a little fatter.

The protest movement intensified. Campaigners petitioned the authorities, organised protest marches, bombarded the local media with demands to be heard and read. Scandals came to light: a senior government official was found to be in the pay of a liquor multinational; another was discovered running an arrack distillery of his own. Some of the women suffered beatings and ostracism in their village. All the leaders received threats. The campaign continues to this day – partially successful but never completely so – as is invariably the case with human effort.

Sivaganam received repeated beatings at her father’s hands and narrowly escaped death when he returned home drunk one night, doused her with kerosene and tried to set her on fire. The poor quality of the fuel saved her: it had been adulterated with water. After this, she fled to Madras where she found employment – coincidentally also in a pharmacy – and took night classes in economics and political science at the university.

Two years later, she published a paper – “Profit and Losses” the first of many on the social costs of large-scale corporate enterprise. In it she argued that Adam Smith’s ideal of business serving the people (even if unwittingly) had been reversed. The effect of western capitalism had not been to make the market serve the people, but to bend the people to the needs of the market. The paper was not especially original, but it contained useful references to Sivaganam’s experience in Pudukottai where the campaign against illegal arrack distilling had handed much of the market to external suppliers, allowing them to suck funds out of the area.

For her degree dissertation, she conducted a study of two large-scale industrial investments: the infamous Union Carbide plant in Bhopal where, on 2nd and 3rd of December 1984, a cloud of toxic vinyl chloride gas leaked into the air, killing 3,000 people in the first 24 hours and tens of thousands of others in the weeks, months and years that followed; and the Sardar Sarovar dam on the Narmada River in Madya Pradesh where countless villages have been submerged, and upwards of half a million people uprooted and left with little provision for their livelihoods. In the course of this study, she began to form her theory of “default economics”, the term she coined for the failure of corporations and governments to account for the full social costs of their operations. “Only those expenses from which they can’t hide are counted,” she concluded in an oft-quoted peroration. “And these are considered solely in relation to the business or the project itself. Responsibility for the human costs of Bhopal or Sardar Sarovar accrue to some other entity: to the state perhaps or charity, to history or to God.”

(please note that whilst many of the events and contexts are real, this story is fictional)

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All states, markets, welfare systems, major religions, their justifying ideas and the people that fought to create them came about in a uniquely stable epoch geologists call the Holocene. This era was typified by a climate suited to human flourishing, and is now over. In its place comes the Anthropocene, the name for a time in which humans are the decisive influence on the natural world.

This influence is so overwhelmingly negative that younger and future generations may inherit unassailably high levels of damage. Currently, we consume resources at around 1.5 times the Earth’s ability to regenerate them – a rate which, crucially, differs enormously between countries. Extinction rates are now some 1,000 times the background rate and around 58% of all vertebral life may have died between 1970 and 2012. This precipitous collapse in global biodiversity means we are likely to be living through the sixth major mass extinction of multicellular life on Earth.

Species loss is being made worse by changes to the very systems that facilitate life. The most famous of these is the carbon cycle and 2016 is likely to be the point at which atmospheric CO2 concentrations permanently exceeded 400 parts per million. It is estimated that a 66% chance of avoiding a 1.5C rise in the global mean temperature – a red line identified by the UN – will require all global carbon emissions to cease around Easter 2021. Another cycle is the global nitrogen cycle, which has, in the last 40 years, been impacted more than at any point in its 2.7 billion year history. These changes are the result of a global food system that has destroyed a third of all arable land over the same period. Global top soil degradation means we may only have sixty harvests left.

Together, the effects of resource depletion, collapsing biodiversity, rising temperatures and the instability of the earth’s regulating systems feed into each other creating dangerous feedback loops. In turn, these increase the chance of tipping points such as the rapid melting of Siberian tundra below which methane, a potent greenhouse gas, is trapped. Runaway climate change could then occur, bringing other systems with it. A vicious circle.

The destabilisation of natural systems is already feeding back into human systems. Take phosphorous, which we can’t synthesise, is essential to the global food system, and is being consumed at an unsustainable rate. These pressures came to a head in the wake of the financial crisis when phosphorous prices spiked by 800%. In turn, food prices shot up, affecting those countries with disproportionate reliance on food imports, including the Middle East and North Africa. The effects then fed into the causes of civil unrest that led to the Arab Spring and the Syrian civil war. This instability displaced around 12 million people from the Fertile Crescent, some of whom fled to Europe. The resultant ‘migrant crisis’ widened political and cultural fault lines that opened up in the wake of the financial crisis.

In fact, these fault lines have been opening up over the last thirty years as a result of wage stagnation, rising inequality, recurrent economic crisis, industrial decline and the retreat of the state at a time of increasing globalisation. A cursory glance at past episodes of globalisation teaches us that government needs to support those who are negatively affected, and that ‘too much market, too little state’ leads to a backlash. The prevailing approach to economics and politics – so called ‘neoliberalism’ – demands the precise opposite. Combine this with the perception of a corrupt and uncaring elite and the agenda of vested interests within and out of the media, and surprise at the election of Donald Trump and the result of the EU referendum seems inappropriate.

And so, after considering the scale of the failure of the current approach to capitalism, what happens when the collapse of natural systems begins to kick in? Even if Marine Le Pen doesn’t become French president, what happens to Europe if profound social collapse in the Middle East, a by-product of resource depletion and spiralling food costs, led 120 million people to be displaced? In this world, global co-operation could give way to domestic protection, leading to a breakdown of co-ordination as countries turn inward, or on each other. This is what global collapse looks like.

We are not there yet. But understanding of the scale of these threats is poorly understood, partly because they are so complex. It’s also because there is little to no awareness of these issues within and out of the political process. Many people would have noticed Black Friday was last week. Did they notice that temperatures in the Arctic are around 20C above what is expected for this time of the year and that the Winter sea ice is now at the lowest extent ever recorded? Our political systems at least ostensibly rely on aware voters applying pressure to politicians, who are in turn supported by an ecosystem of researchers and civil servants. If one, or both, of these groups is unaware of the scale of the challenge it may be impossible to rise to it.

There is a particularly acute generational element to this. Like a young doctor walking into the ER for a night shift and inheriting a total disaster from a clueless older colleague, the millennial generation must first comprehend the scale of the problem. Quickly realising that the odds are not in its favour, this generation must receive all the help it can get in creating institutions fit for the Anthropocene, and the ideas to underpin them. Surely these must include global programmes of technological development as well as the reigning in of vested interests that prevent action on, or understanding of, systemic instability. They will also likely have to include preparation for the worst, including triaging action to support nature and human societies, the implications of which pose profound questions of equity beyond the staggering inequalities already imposed by human systems and environmental degradation. By definition these institutions cannot be neoliberal and so we must understand how democratic institutions can exist in a radically unstable world and how they will ultimately differ from authoritarian technocracies, however liberal in their intention.

As such, having inherited damage of almost incomprehensible scale and complexity, the millennial generation may be the most important on earth. It could be that this challenge brings together a vast number of diverging constituencies across generations in a transformative political agenda – a re-politicisation of all that neoliberalism has ostensibly de-politicised. Indeed, anything other than this may be unacceptable. But it may be that we are in dire straits. When considering the scale of change already underway in many economies – including automation and digitalisation, demographic change and economic stagnation – the acceleration of environmental instability could place societies under intolerable stress. It is unclear how our institutions will be able to cope with this challenge. In endeavouring to overcome it, all generations must first understand that there is a chance we are entering a period of potentially terminal crisis. Only then can we rise to the challenges of the Anthropocene.

This article is an unbridged version of an essay in Juncture, IPPR’s journal of politics and ideas.

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The inquests into the financial crash of 2007-08 have exposed the misconception clung to by mainstream economists and financiers who, for decades, relied on modelling a world based on the idea of the ‘rational actor’ or ‘homo economicus’ (HE). Momentous conclusions were routinely drawn from the actions, reactions and well-being of HE within a modelled world. So, correspondingly, a lot was riding on the assumption that this person was very like the majority of us living our real lives in the real world. The crash, and a mass of social scientific evidence tell us this crucial assumption is simply not the case. Even a casual observation of everyday life could reveal why the problems arose. So, why did no-one spot this? Or, if they did, why did they not rate the risk as important?

HE is very straightforward and rational, making rational decisions according to rational preferences, and having a straight-laced and narrow set of character traits.  The first thing that sounds laughable if you are modelling a human agent is the starting position that people are ‘rational’ in this strict sense involved in modelling the behaviour of HE. HE conducts his life in this simplified, modelled world according to cost-benefit analyses (CBA) that allow them to see clearly what would be in his best interests from an objective standpoint. He then makes ‘rational’ decisions as defined by CBA, and holds consistent preferences about everything. Despite the richness and complexity of philosophical debate and uncertainty about the elements of human rationality – we should say rationalities – most models unthinkingly set the richness aside in favour of a standard range of grossly simplifying assumptions.

Crucially important to the structure of the model is that all the actors in the HE framework have rational preferences. And at first glance this condition may seem quite reasonable. Perhaps we may not be HE rational choosers, calculating our next move according to a tedious, exhaustive and infeasible CBA, but surely we have rational preferences? After all, what could an irrational preference be? To like something that I do not like? But there is a very specific sense of ‘rational preference’ implied by this model; four conditions must be met for preferences to be rational.

First, preferences have to be transitive. If apples are preferred to beans and beans to cabbage then apples must be preferred to cabbage. Outside the model there are of course situations when this does not happen: the obvious one is with a change of mind. Fortunately (and unfortunately) for the model, a change of mind is not permissible within the HE framework. HE agents have fixed preferences which are consistently transitive. This makes HE consistently abnormal human beings.

The next requirement of rational preferences is that they must be complete. HE must have a complete and fixed set of preferences for everything. Not only does HE need to know about the preference of apricots over boomerangs, but also be clear about preferring boomerangs to carpets. There is a point worth examining here about a notion still often overlooked in most economics: the vital importance of having access to good information pertinent to economic decisions (this is despite at least one, if not three, Nobel prizes on the topic). HE is assumed to have reliable and complete information about preferences, and about the goods to which they are applied. Again, this is a heroic assumption that generates a picture of agency and rationality far removed from everyday life.

In our reality of complex systems of economic supply and demand our decision-making is routinely (we might say consistently) sub-optimal: we cannot get hold of all the information needed for a decision process to meet HE requirements, certainly not at reasonable ‘cost’. Our choices are at best ‘good enough’, possibly ‘rationally ignorant’ (Downs 1957) or at worst ‘irrational’ by HE’s standards. HE’s perfectly informed rational standards are inhuman – and end up modelling ‘unhuman’ systems.

Finally, independent preferences complete the set of rational conditions in the HE framework. This assumption provides the most vivid example of how dangerously far removed from today’s complex and interconnected social reality we have to move so that we conform to the requirements of mainstream economic models. Independence forces the constraint that each agent has a set of preferences which can in no way be influenced by others preferences. One prefers Nikes, another prefers Hush Puppies. Or perhaps one prefers Nikes and the other prefers Nikes as well. Anything is fine – but in HE modelling the two individuals’ choices are in no way related.

This leaves out of the model the role that influence and imitation play in fixing our desires and preferences, a fundamental aspect of human sociality – and one that in a networked and information-heavy world is ever more important. Interestingly, with this condition, we come close to the ‘who knew?’ and ‘why not say anything?’ question in the first paragraph. People who create and operate in markets, such as the sub-prime and associated insurance markets, make large amounts of money out of the fact that imitative behaviour occurs: so called ‘herding’ behaviour is a feature of speculative trading. So, if you are in that business, you are caught in a dilemma. You can choose to bluff the world into believing in the robustness of HE so that the current system stands to play another day, or you can call out the errors in the assumptions to highlight the risks. Doing the latter would protect the global economy, but, quite possibly, end up killing the goose that lays the golden eggs by regulating the flawed markets out of existence.

Apart from plain rationality, Homo-economicus is required to conform to other characteristics that would be somewhat disturbing in a real human. The great US social theorists and economists Samuel Bowles and Herbert Gintis offer the following list of (intentionally, on their part) bizarre contradictory character traits of our HE model selves:

• No ethical thoughts;
• But respects contracts and property rights;
• Egoistic;
• But does not shirk or behave opportunistically ;
• Tiresome, cautious pursuit of financial gain;
• But devotes his entire life to this only.

Bowles and Gintis, like us, by no means reject all economic modelling or every aspect of HE. But they insist, rightly, that Homo Economicus is a very partial and unreal picture of human motivation and agency. What they term Homo Socialis is a far richer, more complex and socially realistic framework – but their work on that concept is a theme for another article.

Our conclusion is that, given the evident widespread lack of good sense and reflection of many who model, Homo Economicus is an abstraction too far. It is quite simply an abstract concept with a track record of misuse generating calamitous consequences in the economy and our societies.

A better future for economic modelling lies in the embrace of complex systems thinking, and a picture of human beings as social creatures with multiple ‘rationalities’ and forms of desire, preference and motivation. If this conception becomes the new bedrock then we believe that, even when tempted (rightly sometimes) by simplicity, modellers will look at the evidence before them to see which assumptions should be adopted. Equally they will examine their emerging results back against their chosen assumptions in the cold light of reality.

We accept that if we are in the business of understanding departures from a ‘first best’ economic optimality we must still nevertheless know, understand and refer to HE as a crucial part of that ‘first best theoretical framework – but in a complex world we have to think better and bigger and escape the trap of the HE mindset. Creative and thoughtful analysis is far harder to do than just modelling HE. But the fatal temptation must be resisted and Homo Economicus must die to finally be seen as the dry bones of an equation that it is.  

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Network analysis is the method of the future. That is not only – certainly not primarily – because we are ever more connected in some superficial social-media driven internet sort of way. All of that may be fascinating (and certainly can be analysed using network analysis), but it is not fundamental to our existence as humans – we existed before Facebook, we will exist after it is gone.

Entirely fundamental though are the complex linkages between humans, problems and resources. And those linkages are just as important as the humans, problems and resources themselves. Analysing the links, not just the elements in isolation, requires network analysis.

In environmental, human and, therefore, long-run economic terms the models we use to describe the world currently find false optimal flight-paths towards unsustainable monolithic solutions. And don’t forget what an important and multi-faceted word unsustainable is – not just environmental concerns, but also the physical and mental health of populations, poverty and income divergence, political and societal fractures.

Human society is ever more linked. But the business, wider economic and political imperative hangs doggedly onto an assumption of individualism. And alongside this grand assumption sit the linear, non-network methods of analysis. It is hard to say which way cause or effect works – almost certainly some in both directions. And anyway, these traditional ways of seeing the world produce apparent ‘knowledge’ (or, even more dangerously,’solutions’) whilst in fact pushing the societal direction of travel entirely the wrong way.

Embedded within the definition of network analysis is its proximity to our human experience. Network data occurs whenever there is

• some kind of ‘entity’, be that a human agent, an event, a geographical location, and
• some kind of linkage or relationship between these e.g. humans meeting, events of a similar nature or occurring simultaneously, geographical places linked by transport.

A simple example of how this contrasts to non-network analysis is on risks of communicable disease. A non-network model would assign the risk of disease to someone according to characteristics: where they live, their income level, general health status, etc. But if we bring in the power of networks, understanding who had a relationship with who, we can analyse how someone is positioned in the network. If they are where many people had the disease and links were many and strong, or if very close to several people who were at high risk then that would indicate a high risk of contracting the disease. Clearly, with networks included we build a much more powerful model.

Co-operation was shown many years ago to be the optimal solution in a vast range of situations, far outperforming the blind pursuit of individual interest. But this fact is ignored by most of the human systems that are shaped and built by government and business. In exactly the same way the reality of a connected world is ignored in decision-making models from big data, through HR ‘performance systems’, health, education and other metrics, GDP and other economic statistics. Ultimately, we have to understand linkages and feedback in network models and reform our thinking all the way to the classic (linear) economic model where, most dangerously, the assumption of ‘independence’ is so heavily embedded it cannot be escaped.

Dynamic, interconnected analysis approaches built around networks (and associated complexity methods) are able to create more human-centred  and sustainable directions – also they can reveal the weaknesses in our society built on an ignorance of complexity. If we model who we really are, what we really do and our relationship with a complex world more faithfully and subtly we can make progress. Such models illustrate the potential of shifting and changing solutions rather than a distracting and damaging simple point-estimate.

Perhaps solidarity and co-operation have gone out of fashion. Perhaps an empathy with the natural world is ebbing away. Or maybe these values stand no chance in a world shaped around the flawed machine algorithms and models that now measure and decide our lives.

Some models don’t ignore this, such as many trading algorithms for financial instruments, and they succeed greatly – in a sense – by making large profits for those who run them and dumping the costs on us. Partly because our models don’t recognise what theirs do.

So the knowledge is out there, but not being used for our benefit, yet! We should demand better in the models that shape our everyday lives – and follow the best. We must adopt network analysis widely to embrace concepts which model our modern human reality and reject the outdated, disconnected and linear view of the world.

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The 2009 Stiglitz, Sen and Fitoussi report drew widespread attention to the inadequacies of GDP as an indicator of social progress. Traditional approaches measure how a society is progressing based on the view that a growing economy will result in an improved society. While economic growth is important, it is not the only thing that matters. To truly measure progress, governments need to focus on measuring the wellbeing of citizens.

Wellbeing is a holistic concept comprising social, environmental, economic and democratic outcomes. Measuring citizen wellbeing should be a key focus of governments at all levels. The Carnegie UK Trust has actively supported governments across the UK to develop wellbeing frameworks to guide what they do. Most recently, the Trust has supported the Northern Ireland Executive to place wellbeing at the heart of its work through the new Programme for Government. Internationally, the development of wellbeing frameworks by governments to define their purpose, set priorities and measure progress has gained traction at a jurisdictional level.

But wellbeing approaches shouldn’t be restricted to this level. The OECD describes wellbeing as ‘a description of social progress in terms of improvements in quality of life, material conditions and sustainability’ (OECD, How’s Life?). While policies at jurisdictional levels are important for these factors, individual wellbeing is also shaped at a very localised level.

In this regard, city and regional-level governments have an important role to play in promoting wellbeing. Given the dominant focus on jurisdictional level approaches to developing wellbeing frameworks, governments at city and regional levels face particular challenges in establishing and using wellbeing frameworks.

The OECD and Carnegie UK Trust have recognised this challenge, and come together to develop straightforward guidance for decision makers in regional and sub-regional governments on the benefits, challenges and possibilities of using wellbeing frameworks. The guidance includes evidence from 16 case studies across the OECD, including regions and cities in North America, Europe and Australia that are developing and using wellbeing strategies, objectives and measures.

The guidance outlines the common steps that governments in cities and regions across the world have taken in developing wellbeing frameworks to bring data collection, policy and community priorities closer together.

Key messages from the guidance include that the process of developing a wellbeing framework is an ongoing one, involving multiple iterations and refinements, and enduring leadership by local leaders. While leadership from the top is important, so too is continuous communication with and engagement from citizens. Meaningful citizen engagement is important to ensure community by-in to the wellbeing framework.

The use of wellbeing frameworks to set priorities and measure progress, at all levels of government and across the world, is still in its infancy. However, we know that implementing a wellbeing framework can have a transformative effect on governance, allowing for greater transparency and accountability, and more joined-up working and public sector reform. Ultimately, using a wellbeing approach to determine and measure what really matters leads to better outcomes for citizens.

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Work dominates pretty much everything. Whether or not you have it, it’s probably taking up most of your time. Employment is the most-common indicator of economic health and nearly all of the public debate about economics has to do with creating jobs. If you don’t work, it can have a detrimental impact on your health and your cognitive capacities. And with the automation of cognitive as well as physical labour many people think their jobs are useless, and it looks likely that many kinds of jobs are going to be become increasingly scarce. So maybe we need to rethink what it means to work and the role of work in our society.   

Having a job either plays an outsize role in framing our identity or not having one is a major source of anxiety and insecurity as well as a cognitive drag on our capacities. Poverty, which usually results from none, not enough, or poorly paid work, places a cognitive strain on the brain that saps concentration and processing power. If you are poor or precarious, finite cognitive energy is being devoted to making micro-financial calculations and the anxiety coming from constant worry about housing, feeding, clothing oneself and one’s family. The supposed poor macro-financial decision making often attributed to those in poverty doesn’t come from thinking too little, but rather from thinking too much about every transaction.

Moreover, the work that fills our lives with meaning is not always work in the sense of wage-labour. That’s probably a very good thing considering that, according to the anthropologist David Graeber, a great many people think that their jobs are “bullshit”. 

Modern capitalism seems to rely on the moralisation of work and the de-moralisation of debt. Work, regardless of what it is, is often understood to have a moral value. Our culture idolises the ‘grafter’, even while our governments often undermine the possibilities for ‘hard graft’ to lead to a decent life. Hard work is its own moral reward, you should not expect that it will guarantee enough income to live a good life, at least not in this life. The legendary protestant work-ethic, which, according to the famous sociologist Max Weber, spurred Capitalism’s development in Northern Europe has today been shorn from the social-democratic guarantee of good wages and some equality of opportunity for social mobility, to which it was attached for much of the latter part of the twentieth-century. At the same time the de- moralisation of debt still holds, at least on an official level. Apple’s newfound thirteen billion Euro debt to the Irish government is not the personal moral failing of Apple’s shareholders and they won’t be held personally responsible either morally or financially – and that’s a good thing.

Not to worry, it looks like this phenomenon won’t be around much longer. As I’ve written previously, the large scale-automation of many cognitive as well as manual jobs threatens to shake up all of this conventional thinking about work. If robotics and AI driven automation leads to a significant rise in long-term structural unemployment, where there are simply not jobs in the economy that people can do, as many are predicting it will (see my previous piece for more on that), we’ll have to dramatically rethink the role of work as valuable in and of itself. Just as importantly we’ll have to dramatically rethink how to re-establish or rebuild the identity and meaning endowing social infrastructures that jobs, work, vocations, once provided in industrial economies. A good place to start is probably an important distinction between work and labour made by the German philosopher Hannah Arendt. Very coarsely, labour is what we do to fill our bellies, work is what we do to gives our lives a meaning beyond filling our bellies. In modern capitalism, these two have usually, at least to a large extent been coupled; in the next phase of automated capitalism that coupling will become much more difficult. As such, it seems like ‘employment’ is an anachronistic means by which to measure the health of an economy. It measures neither the technological development of the country, nor the wellbeing of its citizens.

In a world with much less work, new institutions will be needed to provide the identity and meaning that work, however arduous, once provided for many. We will have to think work in a much broader context than wage-labour. This entails nothing less than a full scale revitalisation of civil-society. How exactly we can do this is the task for the coming years. Whether or not the predictions about automation and employment are wholly correct, we need to look beyond employment to provide meaning in our lives and measurement in our economy.

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The Brexit campaign saw much pontificating about the need to free UK businesses from the yoke of workplace regulations and union protections, in order to ‘make Britain competitive’. This reliably translates to ‘allow business to suppress wages’; making Britain’s workforce low paid and malleable enough to attract transnationals to set up shop here. This is supposed to create investment, which creates jobs, which creates demand, which stimulates investment, and so on. The logic goes that wages are a cost to businesses, so an upwards pressure upon them begins to look a lot like a threat to those tantalising profit margins intended to attract investment. This enlightened progress towards poverty salaries can be thoroughly derailed by union action. Unions are after all one of the – if not the singular – most important forces in gaining and defending wage rises. Workforces and industries with greater union density have consistently higher wages; like herd immunity, it’s a benefit reaped even by those individuals who don’t happen to be unionised themselves.

If unions are a threat to the economy, then gutting their legal protections amounts to a defence of the public interest. In this respect, public interest has been very thoroughly and rigorously defended over the past few decades. The impact of collective bargaining has been weakened by a steady rollback on legal protections surrounding, making it more and risky to organise – combined with heavy police crackdowns on union action. Union density has halved in the last thirty years. If this was meant to allow wages to fall, it has worked like a charm. As a percentage of national income, wages have fallen by 8.9% compared with their peak in 1975. Since the start of the most recent financial crisis in 2007, the UK has enjoyed a real-terms fall in wages of over 10% – second only to Greece. In fact, wages have been so successfully shrunk that it’s a little mystifying why the economy, according to this rationale, is far from flourishing, and worker productivity is actually falling.

We must re-evaluate how we think about wages. They aren’t just a burdensome cost to businesses, to be avoided as much as possible. They are also the basis of demand. They largely provide the money people use to pay rent, buy food, heat their houses. They provide money we use to buy mini-scooters and electric toothbrushes and magazine subscriptions and all the other products whose manufacture, distribution and sale forms a fundamental part of the economy. If wages are squeezed, then people have less cash to spend on consumer goods and services. Whilst squeezing wages might be a good idea for any one business, for businesses in general it’s a recipe for disaster: they are essentially competing to gut their demand base. Indeed, this pattern obtains across Europe. With a common currency and tight controls on fiscal policy, wage suppression is one of the most readily available ways in which countries can pursue a competitive advantage over their neighbours, trying to make workers more productive per euro spent on their wage packet. It’s rapidly becoming a race to the bottom; with countries competing to pay people less, for harder and longer work days. Countries with a trade surplus, exporting more than they import, are less dependent on the wage packets of domestic workers to secure a basic level of demand. But if these countries trigger a race to the bottom – well, it means that foreign wage packets are diminishing too. There are few winners. 

If we strengthen collective bargaining, we bolster the power of trade unions to act as a bulwark against this mutually assured stagnation. If we roll out strong legal protections around union action, we can increase the power of unions to effectively demand wage rises. Moreover, by rebalancing the amount recouped in wages by low-income workers, we can ensure that wages do the most work in stimulating demand. If you give someone on minimum wage fifty quid, they are almost guaranteed to spend it – not through some inherent profligacy, but simply because they need that cash. If that same fifty quid is paid as a dividend to a CEO – someone who most directly benefits from rising profits – it’s much more likely either to be saved, or to be driven into unproductive investments (like, say, inflating the cost of houses). 

It also acts as a check on the enormous amount that the government shells out to plug the gap between inadequate wages and the rising cost of living. When people depend on welfare to scrape by, make it to work the next day, and keep the company running, welfare payouts amount to a massive public subsidy to businesses and landlords. This isn’t a magic bullet – the point of trade union action is not to save capitalism from its own caprices. But it’s a step towards rebalancing the distribution of economic power in our country, and stemming the collapse in living standards that threatens the real ‘wealth-creators’ with precarity and penury.

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What would genuine economic progress look like today? The orthodox answer is that a bigger economy is always better. But this idea is increasingly strained by the knowledge that, on a finite planet, economies can’t grow forever.

If developed nations were to grow GDP by 2% over coming decades, and by 2050 the global population had achieved a similar standard of living, the global economy would be approximately 15 times larger than it is today in terms of GDP. If the global economy grew at 3% from then on it would be 30 times larger than the current economy by 2073, and 60 times larger by the end of this century.

It is utterly implausible to think that planetary ecosystems could withstand the impacts of a global economy that was 15, 30, or 60 times larger than it is today. Even a global economy twice or four times as big should be of profound ecological concern.

It has been estimated that we would need one and a half Earths to sustain the existing economy into the future. Every year this ecological overshoot continues, the foundations of our existence, and that of other species, are undermined. Like a snake eating its own tail, our growth-orientated civilisation suffers from the delusion that there are no environmental limits to growth. But rethinking growth in an age of limits cannot be avoided. The only question is whether it will be by design or disaster.

This realisation has given rise to calls for economic “degrowth”. This means a phase of planned and equitable economic contraction in the richest nations, eventually reaching a steady state that operates within Earth’s biophysical limits.

At this point, mainstream economists will accuse degrowth advocates of misunderstanding the potential of technology, markets, and efficiency gains to “decouple” economic growth from environmental impact. But there is no misunderstanding here. The fatal problem with the growth model is that it relies on an extent of decoupling that quickly becomes unachievable. We simply cannot make a growing supply of food, clothes, houses, cars, appliances, gadgets, etc. with 15, 30, or 60 times less energy and resources than we do today. We need to embrace renewable energy, but renewable energy cannot sustain an energy-intensive global society of high-end consumers. Some countries have shown trends of decoupling, but under closer examination this is generally because of them outsourcing energy and resource-intensive manufacturing elsewhere. Technology and ‘free markets’ are not the salvation they promised to be.

In order to move toward a just and sustainable global economy, developed nations must reduce their resource demands to a ‘fair share’ ecological footprint. This might imply an 80% reduction or more, if the global population is to achieve a similar material living standard. But such significant quantitative reductions cannot be achieved if we persist with the dominant economics of GDP growth. It follows that the developed nations need to initiate policies for a post-growth economy at once, followed in due course by developing nations. This is humanity’s defining challenge in coming years and decades.

A degrowth society embraces the necessity of planned economic contraction, seeking to turn our environmental and social crises into opportunities for civilisational renewal. Among other things, we would tend to reduce our working hours in the formal economy in exchange for more home-production and leisure. We would have less income, but more freedom. Thus, in our material simplicity, we would be rich – if we manage the transition wisely.

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