Did you realise that in 2015, you are unlikely to be any richer than you were in 2001? That’s according to the Resolution Foundation, which I mentioned last week. According to their research, average incomes in Britain have not kept pace with the last decade of growing GDP, and have fallen after the recession. Even if the economy recovers, it will take until 2015 for incomes to creep up to where they were fifteen years ago.
There are a variety of reasons for this, but what interested me was that as far as average income goes, the economy has been steady-stating for a decade already. And that made me think about incomes in a post growth economy, and if you’ll excuse the somewhat rambling nature of the following, here are a few observations.
Of all the obstacles to the idea of a steady state economy, one of the biggest is pyschological – the idea that growth implies progress, aspiration, and rising quality of life, and therefore life without growth would be static, boring and backward, and we’d never be able to improve our lot.
That’s wrong on two fronts. It’s wrong because a steady state economy doesn’t have to be static. There are no limits to qualitative progress, and a post growth economy wouldn’t be one where nothing ever changed. It’s also wrong because as the graph shows, rising incomes are hardly guaranteed in a growth economy anyway.
In a post-growth economy, the average wage might remain more or less the same or only rise very slowly. That’s because one of the main reasons that average incomes rise is not because we’re getting richer in real terms, but because the value of money is constantly eroding due to inflation. If we got a grip on the creation of money and limited the rent-seeking practices of charging interest, currency would retain its value and we’d be off that treadmill. A steady state economy would also be free of the boom-and-bust cycles that destroy wealth as well as create it.
Of course, just because the average income remains the same doesn’t mean that we’d never get a pay rise as individuals. We’d still get promoted, and experience would still be rewarded. The average would stay the same because for everyone getting a pay rise there’s someone else entering the job market lower down the pay scale, although that’s subject to retirement ages and immigration policy as much as anything else.
In other words, your personal income might look very different in a post growth economy. You might even be better off, because the economy would be more stable and less likely to go into meltdown once a decade.
But those are all rather half-formed thoughts. Anyone got a different idea of how incomes shake down in a post growth environment?