Fri 9 Dec, 2016

Patrick Harvie MSP

Glasgow
Finance, Economy, Fair Work, Equalities

Website

Amid all the big disagreements in Scottish politics, there are still some areas of common ground. From arch Brexiteers to committed Europeans, from Union flag wavers to those still wearing Yes badges, and from austerity cheerleaders on the Tory benches to left-leaners who passionately believe in a new economic vision for the country; pretty much everyone agrees about one thing. We have a woefully low level of productivity.

This is a problem which both Scottish and UK Governments have acknowledged, and which economists from the dominant centre-ground to the radical fringes agree on. It’s also going to be relevant whether we stay in the EU or leave, and whether the UK remains this uneasy union or becomes two independent countries (or even in the newly reimagined fantasy world of federalism).

For Greens as well, although we object to the obsession others have with the dominance of GDP growth or the idea that it can last forever on a planet of finite resources, productivity has an important role to play. If we had the kind of strong and resilient local economies that Greens believe in, with a diversity of independent businesses and different ownership models, putting sustainable resources to use meeting social needs, this would require significant levels of productivity.

But just as Greens make the case that GDP fails to measure many things that matter in life, we also need to be careful about what we mean by productivity. It’s measured differently at the level of an individual business, and at the level of a whole economy. But it tends to focus on one principal input – labour – regardless of the quality of the employment and without considering other inputs such as the overconsumption of finite resources, from hydrocarbons to fish stocks. And it tends to focus on one principal output – economic value – regardless of how fairly that value is shared in society and without considering other outputs like pollution or health impacts.

So just as a narrow GDP-based view of economic activity can distract us from other things that matter, a narrow understanding of productivity can do the same.

Many people agree we’re on the verge of a new wave of automation, and see the prospect that this will herald greater productivity. But it also brings the risk of unemployment and underemployment, as well as greater concentrations of power and money, as a lower share of economic value goes into wages.

This isn’t to deny there will be benefits, with driverless transport for example potentially helping reduce emissions, congestion, injuries and fatalities. Automation could also make other goods and services more affordable – at least for people lucky enough to still be in work. But we can’t afford to ignore the downsides.

There are other areas where higher productivity could even be the opposite of what we need. Take for example the care sector. Whether it’s childcare or care of the elderly, the “output” is not a product you can measure in the conventional ways – it’s the quality of care that matters, not the unit cost of delivery. Increasing productivity by paying poverty wages or reducing the time carers spend with people undermines the whole purpose.

Education is similar. We could measure productivity in exam passes or league tables, but that ignores the long-term damage to people and the economy which can come from “teaching to the test”. Stripping out the labour input is a bit like trying to make a bus run more efficiently by reducing the number of wheels.

If our economic ideas ignore consumption patterns or the value of employment, rather than production, or ignore the distribution of income and wealth, the best we can do is build an economy that’s very efficient at exploiting people and the planet.

This week’s Finance Committee in Holyrood discussed economic forecasts, and there are very few these days that don’t paint a bleak picture. The weak recovery from the crash, the UK’s structural problems, and the growing economic impact of the climate crisis were already a lot to deal with; and that’s before the chaos of Brexit. Yet we’re still relying on mainstream economic models which failed to predict the crash, and which have barely been tweaked since.

If we felt that the world was a stable place right now, with little risk of economic surprises, we might get away with that kind of complacency for a while. As 2016 draws to a close, does anyone really feel that way?

We can look at our low productivity and say “something must be done”. But if the actions we take are grounded in tired and failed economic assumptions, they’ll ignore what matters in life.

A truly productive economy must provide prosperity that benefits everyone and the kind of secure, rewarding work and public services we all want and need.

This article first appeared in the National

 

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