Adam Smith may be considered a forerunner of free market economics, but he had no truck with growth. The idea of economic growth, as measured by GDP, came much later. For Smith, it was a matter of improvement. You could improve or enhance your economy by providing infrastructure or building robust institutions. In places like Britain, talking about improvement makes more sense than talking about growth.
This is a topic I explore in some detail in my forthcoming book, but here’s another attempt to detail some of the ways we can look to improve the economy, with or without growth. It’s from a report called , from by the . It’s a few years old now, but I came across it again recently and it’s worth highlighting their key points.
“For Australia, the critical economic challenge is no longer how to increase the production of goods and services” says the report. “Many of the things that Australians desire – leisure time, vibrant communities, a thriving natural environment, a sense of purpose and wellness in our lives – will not flow automatically from a growing economy. We need a new approach: not one framed in opposition to economic growth, but one that is actively better than growth.”
Here are the eight areas of focus for delivering a better-than-growth economy:
- Better progress – if we’re going to take wellbeing seriously, we have to be able to measure it. So step one is to adopt a broader set of metrics beyond GDP.
- Better work – there are many ways to improve work. The ACF report mentions leisure time in particular. I’d also add worker’s rights, workplace democracy, and employee ownership.
- Better production – switching from a throwaway approach to a circular economy.
- Better consumption – consumerism keeps GDP figures growing, but at the expense of the environment, consumer debt, and a lot of the time it doesn’t make us happy anyway. An economy freed from the need to endlessly grow would be able to slow down and take a healthier attitude to what we buy and own.
- Better markets – the report mentions sweeping away perverse subsidies and using regulation to lower pollution levels and price in externalities. We could also look at encouraging local markets, removing barriers to entry in critical industries or challenging monopoly power.
- Better business – encouraging more long-term thinking, not-for-profit models, reigning in executive pay and connecting rewards with longer term performance.
- Better taxation – ACF take the Pigouvian line of shifting tax from income to pollution and resource use, making work pay better and incentivising cleaner production. I’d add a land value tax and financial transaction taxes in there too.
- Better regulation – The report focuses on cost-benefit analysis and the need to price in environmental and social damage. I think we could throw it wider than that and aim to streamline bureaucracy, cut out rent-seeking and reduce regulatory burdens where we can.