Policy Papers

Never having it so good in the twenty-first century?

Jim Tomlinson |

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Executive Summary

  • Economic growth has once again become central to British political debate but promises of faster expansion of GDP are highly problematic.
  • The promise of higher growth originated in the 1950s, and its appeal was tied to the very particular circumstances of that decade.
  • Subsequent promises of faster growth (notably in the 1960s) have not proved successful.
  • GDP is a poor measure of long-run economic welfare, especially now in the face of global heating and the crisis in the natural world.
  • The concept of GDP growth is not one that has clear meaning and resonance for large parts of the population.
  • In any event, growth of GDP is likely to be slow in the future because of deindustrialization.
  • Electoral promises of economic improvement are inescapable, but we need better framing of such promises, such as ‘more good jobs’, which are designed to be understood and embraced by the electorate.

Never Having it so Good in the 1950s and 1960s

Economic growth has once again become central to British political debate. The premiership of Liz Truss in September/October 2022 was remarkable not only for its brevity, but also for  its exclusive focus on growth. Much of the response to her ‘plan’ was extremely hostile,  but despite such criticism, the Truss debacle did have the effect of focussing attention once more on economic growth, with unfavourable comparisons of Britain’s GDP performance again at the centre of much public discourse. Rishi Sunak made ‘growing the economy’ one of the pledges in his ‘five-point plan’. Most specifically, one of Keir Starmer’s five missions is to have the “highest rate of sustainable growth in the G7 by the end of the first parliament” (Guardian 23 February 2023.)

To historians of twentieth century Britain this look like “an old story (slightly) newly told”. Commitments to improved growth performance (though not necessarily using precisely that terminology) were a recurrent feature of political discourse after Conservative Chancellor RAB Butler made his promise to double the standard of living in twenty-five years at the Conservative party conference of 1954. This was famously followed by Prime Minister Macmillan in 1957 talking of the British ‘Never Having Had it So Good’. Although Macmillan’s speech was as much a warning about the dangers of inflation as a prospect of future prosperity, in practice it came to evoke the political promise of faster growth and resonated powerfully through succeeding decades. In the 1950s a minority of Conservatives opposed this appeal to ‘crass materialism’, but for the party leadership it provided a rhetoric that worked with an electorate anxious to escape the austerity sacrifices of the 1940s, which delivered exports and investment a plenty, and an austere welfare state, but tight rationing and controls on personal consumption. Setting the people free to buy more food, clothing but especially cars and consumer durables proved a winning formula.

Labour’s initial response to this prospect was largely hostile. For many on the Left higher personal consumption evoked an image of a profoundly dangerous undermining of collective solidarity, and Labour’s common goals. Mountains of sociological effort went into investigating whether, tempted by Conservative consumerism, the working class was becoming bourgeois.  In less sociological language, many of the anxieties were articulated in JK Galbraith’s Affluent Society of 1958, the best selling popular economics book in post-war Britain. His evoking of ‘public squalor and private affluence’, and the claimed ignoring of continuing poverty in the growing economy chimed with the worries of anti-Conservative Britain. Of course, Labour views were not uniform. In his 1956 The Future of Socialism Crosland famously welcomed the rise in working-class consumption, and castigated those on the Left for their attitudes of ‘puritanism and paternalism’ about working-class consumerism. But for many on the Left there was at best an uneasy response to the new ‘affluence’.

Only after the third general election defeat of 1959 did a sea change in Labour’s positioning begin. Using the explosion of new, internationally comparative data on economic activity which began to attract public attention in the 1950s, Labour sought to turn the argument about the British economy’s performance, in terms of these growth figures, to its advantage by pointing to Britain’s lagging growth rate compared with Western European neighbours. The slogan ‘Thirteen wasted years’ (referring to the period 1951 to 1964) sought to put the blame on the Conservatives for this perceived failure in British performance. Economic historians have long disagreed about what lay behind these comparative growth rates. Even those most inclined to see faults in Britain’s policies have pointed out that much of the pattern is best explained by the catching-up by these European countries of the British (and American) lead in industrial efficiency evident in 1950. Above all, France ,West Germany, Italy and the rest were able to enjoy the one-off benefits of transferring large numbers of workers from low productivity agriculture into high productivity urban and industrial occupations—the benefits of which process  Britain had enjoyed in the nineteenth-century. It should be emphasized that it is only relative to other Western European countries that Britain’s economic growth lagged in this period. Viewed in terms of past or future performance, this was a ‘Golden Age’ of growth.

However much this ‘declinist’ narrative may be seen as based on highly-politicised readings of contingent events, its power is evident not only in the politics of the 1960s but also in the 1970s and ever since. Initially endorsed in its essentials both by the Olympian Marxist, Perry Anderson, alongside the technocratic soft Leftism of writers like Michael Shanks and Andrew Shonfield, it eventually mutated into a right-wing critique of Britain as the sick man of Europe, which underpinned the case for the Thatcherite free market revolution after 1979. But in the 1960s it had put the Tories on the defensive, and after it carried Labour (narrowly) to office in 1964, the party famously promised to harness the technological revolution to raise the growth rate, in the first explicit promise of national improvement couched in the language of GDP, a language powerfully propagated by international organizations like the OEEC/OECD and the UN, and increasingly embraced in official and political circles from the late 1950s.

Promises made in the poetry of ‘the white heat of technology’ were pursued in the prose of institutional invention and administrative reform. The growth promise itself was embedded in the National Plan of 1965, produced by the new Department of Economic Affairs (DEA), though much of the serious action was pursued by The Ministry of Technology, where Tony Benn laboured to change the behaviour of British industry from above; later he came to believe this could only be altered ‘from below’, by a radical extension of worker and union influence. But, beset by balance of payments problems, largely the result of the entanglement of currency ambitions and an over-extended international posture, the economy failed to deliver the promise of four per cent per annum expansion.

What are we to make of this failure?  Despite all the declinist talk, the 1950s and 1960s was in fact a golden age of British economic performance by conventional measures. Inflation and unemployment were low, and productivity growth was at a record level. In this, the supposed ‘Keynesian era,’ public finances were persistently strong. On the key issue of growth performance judgement is, as always, a question of comparators and time frames.  When the Conservatives first put forward their growth prospectus in the 1950s their framing was a comparison with pre-war conditions. But as the OEEC/OECD ground out their comparative GDP data the framing increasingly became contemporaneous: how is Britain performing compared with its near neighbours? Given the structural aspects already noted, these latter comparisons were bound to be unfavourable. A longer-term comparative framework against Britian’s own record would be much more favourable.

The conventional story that emerged, however, was one of Britain having a lower rate of growth until the 1970s, then from the 1980s equalling that of other Western European countries. In fact this was not because Britain’s growth rate from the 1980s was better than it had been in the 1950s and 1960s, it was because its European comparators had now slowed down after the postwar Golden Age, c.1945-73, because their ‘catch-up’ had exhausted itself- they no longer had a large agricultural workforce after 1980..

Labour’s electoral prospects and damage to its economic credibility was done much more by short-term economic crises than by the underlying economic performance. However, having promised such an unrealistically high growth rate (4%) the failure to achieve it was of course a centrepiece of the Conservative critique of Labour’s performance in the 1970 general election. In the party manifesto for 1970 they argued that: ‘Our economy expanded more slowly than that of any other comparable country in the world. Almost everywhere in Western Europe and North America the standard of living grows faster than in Britain’. Stressing the contrast, they suggested that the standard of living grew three times faster under the previous Conservative government than it had under Labour.


The Career of Growth

Growth has never been wholly off the political agenda since the 1950s, but for most of the 1970s it lost its prominence in political debate in the face of the crises of inflation, public sector deficits and the exchange rate which followed the Conservative ‘dash for growth’ after 1972 and the OPEC oil price increase at the end of 1973. For Margaret Thatcher, the framing of policy was by no means dismissive of growth but focussed on the underlying issues allegedly inhibiting faster expansion, rather than the more technocratic emphasis on growth targets. In the Thatcherite view, the immediate problem of rapid inflation indicated the deep-seated, anti-enterprise culture which was at the heart of Britain’s malaise.

Under New Labour growth was once more placed in the centre of the policy agenda, one striking continuity with the ‘Old Labour’ governments of the 1940s and 1960s being the emphasis on improving productivity as the key to faster expansion. While Gordon Brown is perhaps best known for his attempts to ‘re-invent’ Keynesianism, his much-mocked allusion to ‘post neo-classical endogenous growth theory’ was indicative of the other major strand to his economic thinking. That theory, developed in the 1980s, suggested that faster growth could be secured by government activism on increasing research and development and workers’ skills, an agenda enthusiastically embraced after 1997.

But the financial crash of 2007/8 brought an end to the benign post-Cold War circumstances which had encouraged the ‘Great Complacency’( known more kindly as ‘the Great Moderation’) of the previous decade, which had allowed UK growth to reach levels in line with the Golden Age. The austerity policies after 2010 inaugurated a ‘wasted decade’ of poor economic performance, compounded by Brexit and then COVID. By the early 2020s the growth performance of the preceding period was clearly inferior to anything experienced for generations, and growth was firmly back on the agenda.


The Problems of Growth

The reasons for this stance are not hard to see. Growth performance has been very poor under the Conservatives without let-up since 2010. The growth commitment also puts Labour on the safe, centrist ground that the current leadership wants to occupy. It has a seemingly obvious appeal to an electorate, the majority of whom have seen at best stagnant living standards for 15 years.

But is such a commitment wise?

The experience of the 1960s suggests some of the pragmatic dangers, even in a period when cycles were much more muted than they later became. It is true that short-run increases in GDP correlate well with short-run changes in welfare—especially, rises in employment and often wages. Such cyclical changes, if timed with the electoral cycle, can deliver political dividends. But cycles are largely international and hard for national governments to control. So tying your electoral prospects to the contingencies of boom and slump is hardly wise.  And the frequency of international cycles has increased markedly since the 1960s—there was no major cycle in output in the golden age - and even that in the mid-1970s was relatively small- but since then we have had three (the early 1980s, the early 1990s and that which followed the financial crash of 2007/8), even before COVID and the Ukraine invasion.

But though registered in GDP change, cyclical peaks are by convention not thought of as ‘growth’, which is about changes in trend. This is clearly implied in Starmer’s promise, with the use of the word ‘sustainable’. If short-run increases in GDP are correlated with short-term improvements in immediate economic welfare, the relation between long-term, trend growth and such welfare (in the economists’ sense, which broadly corresponds to average household income and somewhat confusingly has nothing directly to do with the welfare state) is one of the most fraught issues in modern economic history and political economy. Furthermore, it is now a well-rehearsed critique of standard GDP measures that they ignore the environmental impacts of growth; they don’t count unpaid household work that is crucial not only to the quality of people’s lives but also to the productivity of the economy (starting with child-rearing!) ; they don’t even include leisure, the expansion of which has been one of the most important features of modern economic and social change.

One of the ironies of the history of these discussions of welfare and GDP growth is that even before it came to be widely deployed, one of its founders, Simon Kuznets (who was later awarded a Nobel prize for his work on growth) had offered fundamental criticisms of his own concept of GDP as a measure of economists’ notion of welfare, some of which criticisms go well beyond those commonly noted today. For example, he pointed out the problem of inconsistent treatment of intermediate outputs, i.e. those that contribute to final production. While raw materials embodied in industrial output are netted out of GDP, the transport of workers to enable them to contribute to production (ie commuting) counts as final output. As Kuznets also pointed out, military spending counts as an addition to GDP, despite basic questions about its contribution to welfare. 

Taking account of all such factors would significantly alter our view of economic performance. It is important to note that not all the problems with GDP, as a measure of economic welfare suggest that the former is exaggerating the latter. Quality improvement in goods, for example is not well captured by GDP data. Anyone who drove a Morris Minor in the 1960s and drives a mid-range car today doesn’t need to be told that the quality change is from chalk to cheese.

But for most informed citizens in the 2020s the biggest question is likely to be how does GDP growth fit with the unfolding disaster of climate change and the degradation of nature. The answer for the Labour leadership, along with many others, is ‘green growth’. In this project, the de-carbonization of economic activity allows us to continue to have GDP expansion, whilst preventing further acceleration of CO2 emissions. Given the current state of many of the technologies needed to effect wide-scale decarbonisation, ‘green growth’ looks like an attractive slogan but one which smacks of ‘cakeism’; trying to tie together an old and a new politics which are inherently in profound tension. This of course is highly contested terrain. There are many who do believe ‘green growth’ is a viable option. But even if technological shifts can deliver decarbonization to enable GDP expansion without CO2 running out of control, does that mean ‘growth’, measured by GDP, is the best way of framing economic improvement?

One reason for thinking not is the nature of public understanding of the meaning of GDP and growth. Economists have long noted the widespread ‘ignorance’ about the term amongst the population at large, and this is backed by recent survey work. But something more than ‘ignorance’ is at work here, which may be characterised as a problem of distrust of this kind of language to describe the economy. This was pithily summed-up by an audience member at a public meeting in the run-up to Brexit, when an academic argued that leaving the EEC was likely to slow Britain’s GDP growth: ‘it’s your bloody GDP’ was the response. In-depth interviews have reinforced the sense of a serious disjuncture between popular understanding and much official framing of economic issues.  So, we might ask, is there a better way of making clear a desire to improve popular economic welfare other than the focus on growth?

In a quite different register, we may ask whether significantly faster growth is possible. In terms of broad trends two features seem clear.  First, much of what happens to comparative growth rates can be explained by catch-up and convergence, with fast growth amongst lower income countries slowing down as they exhaust the possibilities of easy mimicking of the organization and structures of rich countries. Second, there is the long-run tendency for the rising dominance of the service sector, or deindustrialization, to slow growth down. This was pointed out long ago by William Baumol, and the extent to which labour has moved out of manufacturing, with its capacity for fast productivity increase, into sectors where that increase is inherently less possible, has accelerated since he wrote. While plainly some services are subject to rapid, labour-saving technological change, such as finance, others are inherently labour intensive. Perhaps most striking are ‘care services’, broadly defined, where employment increase has been most dramatic in recent years.


Conclusions: Alternatives to Growth

Recognising the limits of GDP as a measure of economic welfare has led to many alternative suggestions. Indeed, economists have put tremendous effort over the last half-century into trying to find an alternative measure. This began with Tobin and Nordhaus’s Measure of Economic Welfare in the 1970s, which adjusted GDP for some of its omissions, such as unpaid work and leisure, noted above. But ingenious as such efforts are, they are often highly technical measurements which are hard to translate into appealing summaries for the population at large. This is strikingly so in the very important case of the Dagsputa Review, with its emphasis on the need to take account of our depletion of natural capital. In a different register, measures of ‘happiness’ have been introduced in a number of countries, including Britain. Such alternatives have failed to displace the seeming simplicity of GDP measures in governmental discourse, even if that simplicity is in many ways an illusion. The appeal of GDP to politicians relies on its familiarity, tied to its deep and long-term embedding in official institutions collecting data for economic analysis and measurement.

So we should look for alternative measures of welfare which may have more resonance with popular concerns. An important example of such alternatives comes from the American economist Dani Rodrik, who has suggested the expansion of ‘good jobs’ as one key part of an appropriate policy agenda for current conditions—good jobs meaning ‘those that provide a middle-class living standard, adequate benefits, reasonable levels of personal autonomy, economic security, and career ladders.’ This is different from the traditional focus on employment levels, recognizing how deindustrialization has been accompanied by labour market polarization and the proliferation of insecure, low-paid jobs largely in the service sector. This is a powerful line of thought, but the argument isn’t that any single measure should displace GDP.  Indeed, one of the problems of GDP (and some of the suggested replacements) is that they purport to be a single measure that can summarize economic improvement, when what is needed is a recognition that no such measure exists. While good jobs generate many positive externalities, they plainly do not address directly the problems faced by those not in the labour market. The aim should be to use measures that reflect the circumstances of today—not the 1950s and 1960s.

In addressing these issues, we must acknowledge the appeal of ‘growth’. Particularly for centrist politicians, it can seem to be the answer to how to reconcile the competing claims for resources of investment and consumption, and of the private sector versus the public sector, and also how to raise more tax revenue without raising tax rates. Most generally, growing the size of the ‘cake’, it is hoped by those on the Left, makes possible redistribution without anyone having to face an absolute reduction in income.  And the opposite is also true – very poor recent growth rates have coincided with the total tax take rising as a percentage of GDP – that might have been avoided had GDP only grown a bit faster.  Similar arguments made at the time help to explain why ‘growthism’ became so entrenched in the 1950s. But even in its own terms, it gives too many hostages to fortune, especially in a world economy grown so unstable.

In broader terms, the need to reconcile addressing profound environmental issues with improvements in well-being suggests ‘growth talk’ is at best unhelpful. Green growth looks like a purely verbal solution to a problem, and it is not clear many are convinced by it. We live in an age of statistics and the use of summary statistics to suggest the possibility of material improvement in people’s lives is unavoidable in a world of party political competition. But the language of growth of GDP is no longer a helpful way to frame this issue.

Further Reading

William J. Baumol, ‘Macroeconomics of unbalanced growth: the anatomy of urban crisis’ American Economic Review 57 (1967), pp.415-426.

The Dasgupta Review, The Economics of Biodiversity (https://www.gov.uk/government/publications/final-report-the-economics-of-biodiversity-the-dasgupta-review)

Tim Jackson, Prosperity without Growth. Economics for a Finite Planet (London, 2011).

Anna Killick, Rigged. Understanding the Economy in Brexit Britain (Manchester, 2020).

Simon Kuznets, ‘National Income, 1929-32’ in Senate Document no 124, 73rd Congress, 2nd session (Washington, DC: US Government Printing Office, 1934).

Dani Rodrik, An Industrial Policy for Good Jobs, Hamilton Project, Brookings Institute (New York, 2022).

Matthias Schmelzer, The Hegemony of Growth. The OECD and the Making of the Economic Growth Paradigm (Cambridge, 2017).

Ina Zweiniger-Bargielowska, Austerity in Britain, Rationing, Controls, and Consumption 1939-1955 (Oxford, 2000).


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