Devil's Pact or Doom Loop. Do we need economic growth?

To misappropriate an early song-title by a semi-famous Scottish indie band, everything flows – from economics.

What may seem on the surface a dry and technical subject actually reveals the beating heart of the political philosophy behind it.

The economics behind Starmerism consists of massively increasing spending on weapons, to be paid for by renewed austerity, and propelling the most vulnerable in society further into destitution and misery.

While, at the same time, asset-stripping the rest of the economy by selling it off to American vulture capitalists.

What flows from this will not be pleasant. It involves entrenching the rule of profit-extracting corporations while impoverishing swathes of the population. Though it will go by a far more benevolent name, this – necessarily buttressed by authoritarian means – amounts to corporate fascism. This kind of fascism will likely creep up on us gradually rather being proclaimed by a march on the capital, an Act of Parliament, or even a general election result.

In such circumstances, the Left doesn’t merely need to get its shit together politically but also economically.

In fact, economics, traditionally the weak point of a Left more concerned with the equities of distribution than the production of wealth, can actually become its strength. This is because though the Starmer government is rhetorically obsessed with achieving economic growth, it is very bad at actually achieving it.

The Doom Loop

Growth expectations from the Office of National Statistics are terrible, and as socialist economist Michael Burke says, without higher growth, living standards will not rise.

Sustainable growth, he says “is an appropriate aim for all economic policy”. The problem for Starmer is that his avowed method – austerity and taxes rises on ordinary people in the context of ramped up state spending on weapons (military Keynesianism) – is, in reality, anti-growth.

The British economy, says Burke, is trapped in a “doom loop” of deteriorating public services, rising government debt ‘necessitating’ more spending cuts which depresses the economy even more. We need to break out of this ruinous cycle and actually achieve growth rather than merely talking it up.

The fundamental question is whether pursing growth by other means is possible, and if it is possible, whether it is desirable.

The economics of the socialist case rest on first of all not massively hiking spending in a drive to war. Money, buttressed by a wealth tax on billionaires, will instead be diverted to public investment in areas like public transport, council housing, infrastructure. At present, under the ‘Labour’ government’s Spending Review, non-defence public investment is set to fall in real terms over the coming years.

But ironically for a political ideology invariably condemned for being ‘anti-business’, socialists aim to reverse the pervasive, and long-term, weak growth of the economy. This will be attempted through methods like the above-mentioned public investment but also through ‘innovations’ like a national investment bank.  The aim here is to revive private investment which is at anaemic levels, and has been for a long time. RMT trade union leader Eddie Dempsey recently told the TUC conference: “Corbyn had the right idea — we need a public investment bank funded by seed capital that can drive strategic investment in parts of the economy, where we will build proper unionised jobs, good work that will take the country forward instead of leaving us at the mercy of the money markets”.

Socialist Pro-Capitalism

If it is accurate to estimate, as is frequently done, that capitalists need annual economic growth of 3 per cent to make a decent profit, then ‘socialism’, in attempting to resuscitate growth in the economy, is not anti-capitalist at all, rather the opposite. But I don’t expect enlightened self-interest to become the fashion any time soon.

However, merely correctly understanding the aspiration is no guarantee it will be successful. Many other countries and blocs have public investment banks, but their recent growth record is nothing to write home about. In fact, the Eurozone boasts a worse growth performance than Britain despite the existence of the European Investment Bank.

Even where a public investment bank does have a tangible impact, as seems the case with Brazil’s BNDES, the remaining commercial banks are left free to concentrate on speculation and mortgage lending, which is extremely profitable but merely exacerbates the inherent flaws of the extractive economy where small minorities make huge profits but many people struggle to make ends meet.

That is why some Marxists advocate taking control, as the British Labour party once aspired to do, of the “commanding heights” of the economy which includes nationalising the big, private banks (properly nationalising not merely assuming ‘hands-off’ ownership as the government did with RBS after the financial crisis). This will direct private, now public, investment into desirable areas.

Should we aim for growth?

But we are still left with the basic assumption that economic growth is a good and necessary thing – “an appropriate aim for all economic policy” – even if, in an historical irony, only the Left or radical Left seem serious about attaining it.

However, is growth the goal we should be striving towards? Growth, as the word implies means getting bigger, over time much bigger. Economic growth of 3 per cent a year, a sweet spot for corporate profits, government finances, and personal livelihoods, means the economy doubles in size every 24 years. A little over a decade ago geographer, and Marxist, David Harvey wrote that compound growth means the result will be even more extreme.

Imagined physically, the enormous expansions in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have to be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained. Take a look at a map of the city nearest you in 1970 and contrast it with today and then imagine what it will look like when quadrupled in size and density over the next twenty years.

 It is worth noting that, in Britain, the rate of capital accumulation has not been maintained – an economic malaise that has produced various maladies – but that cities and towns have nonetheless grown “in size and density”. In the context of the government’s huge housebuilding targets, totally reliant on the private sector, they are predicted to do so even more in the coming years. Many British urban areas are anticipated to have virtually whole new towns tacked onto them over the next decade, even if a sputtering housing market means that improbable government targets will not be met. Presumably had the ‘rate of capital accumulation’ been sustained, these urban conglomerations would have expanded even more.

Supporters of the idea that economic growth can be sustainable would counter that it can be directed by the state into beneficial and necessary things, such as public transport and public housing. Futurologist Jeremy Rifkin who predicts the end of capitalism in a ‘zero marginal cost’ society where copies of products can be produced for virtually nothing, believes transitioning economies from fossil fuels and nuclear power to renewable energy “will require millions of workers and spawn thousands of new businesses” (note however that that he thinks this will involve “one last surge” of wage labour and thus growth).

The Chinese Way

But it is stretching credulity to believe that all economic growth can be funnelled towards socially beneficial ends. China, the bête noire of America and the faltering West, presents an example. On the back of high public investment in infrastructure, China has achieved GDP growth rates the West can only dream about and lifted millions out of poverty. But, it was believed, this was bought at a price – exponential carbon emissions and falling life expectancy because of unbreathable air. At the Beijing Olympics in 2008, the Chinese authorities famously manipulated clouds to disperse smog, while life expectancy in northern China was five years below that of the south of the country because of air pollution.

Now, reportedly, such problems have been significantly assuaged because of the Chinese government’s war on pollution – pollution has declined by 42% in nine years, while air quality correspondingly enjoyed a massive improvement. In the face of climate change, China has also made huge investments in solar energy was a result of which the cost of generating electricity from solar has plummeted.

But pollution has not been vanquished. It is still six times higher than the World Health Organisation’s guidelines and in Beijing at about the level of Europe’s most polluted city Sarajevo. And air pollution-related deaths in China are projected to continue to rise despite the improvements.

China also features heavily in the UN’s Red List of endangered species, a fact clearly not unrelated to its high rate of economic growth.

Devil’s Pact

And in the West, where over two-thirds of economic growth can be attributed to consumption, the Left will face an additional problem. If it is to distinguish itself from the corporate automatons in government and opposition, it will not only want to encourage growth in some areas, but restrict it in others. A Left government, if it is worth its salt, will want, for example, to place restrictions on gambling or marketing to children.

It is unquestionable that the health of the UK economy has been significantly impaired by the fact that wages have been held down for years and incomes depleted. ‘Britain needs a pay rise’ as the slogan goes. But should it get one, part of that will inevitably go into becoming the willing prey of profit-driven market forces to an even greater extent. The exploitation of “culturally generated pseudo needs”, though clearly anti-social, has been a crucial element of the economic growth that has been achieved in the West (and elsewhere) in recent years, a chink of light, if you will, in an otherwise gloomy picture. Toxic consumption is a mainstay of the modern economy.

We face a quandary we seem only dimly aware of. In the corporate capitalist economy that we live in, if you don’t achieve economic growth – or only very anaemic growth – the result is misery, poverty, inequality, racism (probably in time fascism), rising public and private debt, and global conflict.

But if you do have growth, while, if it proceeds are equitably distributed, you relieve some of the pressure on individuals and government finances, you just accelerate global warming and environmental degradation, the relentless swallowing up of what’s left of the countryside, and acquiesce in the exploitation of our psychological vulnerabilities to the benefit of obscene corporate profits.

Eventually, actually probably quite soon, you hit a society that may be economically successful but that nobody wants to live in.

In the short-term this devil’s pact is, to varying degrees, in virtually everyone’s rational self-interest. But from a wider perspective it plainly isn’t in anyone’s, barring maybe that of a small, and insulted, ultra-rich elite.

Explaining Donald Trump

But then there is the problem of whether reviving economic growth is even possible – that the Left, if it by some miracle achieves power, will discredit itself in a futile drive to “save capitalism from itself”.

Looked at historically, the only time the capitalist system, in advanced countries, attained sustained healthy economic growth was in the period from 1950 until the mid-1970s – the so-called “thirty glorious years”.

In fact, according to a research group at the University of Manitoba in Canada, the reality may be even worse. Growth in Northern industrialised economies, they argue, has been falling, “with only brief and limited interruptions”, since the early 1960s.  If so, economic problems cannot be placed solely at the door of bad policy, such as neoliberalism, or economic trends, like financialisation. The findings, according to the report’s author, Alan Freeman, “shed light” on seismic political developments such as the rise of Donald Trump and the far-right, the implosion of the centre and centre-left, the growth of social unrest, and rising geo-political tensions across the world. But they also indicate that:

… limited measures, whether of a left character such as fiscal and monetary stimuli unaccompanied by state-led investment in new production, or of a right character, notably austerity, but also the free-market economic nationalism of Donald Trump and other such figures, are unlikely to resolve these problems.

Why should this be so? Although, there is no consensus on what led to the post WW2 economic boom, part of the explanation must surely lie in the fact that it was preceded by the most destructive conflict in human history. The Second World War was not only physically devastating, it also vaporized capital value – the mass of money that can be deployed to build up infrastructure or enterprises. Society could, so to speak, begin again.

However, that option is no longer available. In subsequent decades, economic downturns were dissipated by the soothing balm of state intervention and subsidy because, quite rationally, nobody wanted a return to the miseries of the Great Depression of the 1930s. Meanwhile, in the West, the forces leading to war (and thus destruction of capital) were consciously repressed.  

As a result, the ‘wall of money’ (capital) seeking profitable outlets, steadily grew, reaching astronomical levels. The other option, war among advanced countries, will likely lead to the end of human civilisation and the death of millions, though, astoundingly, western elites seem willing to toy with this possibility.

Such are the choices that the capitalist system, at this stage in history, presents us with.

Facing the Truth

In this 1998 book The Trouble with Capitalism, economist Harry Shutt argued against forever taking refuge in “limited measures”, against the comforting notion that capitalism could always be ‘rewired’ to work in more equitable, ‘greener’, and less amoral ways:

The truth must at last be faced that there is no realistic hope of expanding demand (and hence aggregate global output) fast enough to 1) Absorb the ever-accumulating capital surpluses generated by the private sector 2) Contain, let alone reduce, the rising burden of public-sector deficits and debt under the existing pattern of income distribution and taxation 3) reduce the huge gap between the super-rich and most other people.

And, given by now obvious environmental limits which place necessary restrictions on the expansion of the economy, the “traditional policy of seeking indiscriminately to maximise GDP will have to be jettisoned”.

In other words, growth is neither possible nor desirable.

The consequences of not striving to maximise GDP are two-fold: 1) that government finances will no longer depend, as they do now, on how much tax revenue can be squeezed out of the economy. And 2) that people’s living standards will no longer hinge, as they do now, on what they can extract from the economy from wage-labour or, if they are fortunate, from the ownership of property.

This might seem a frightening, in fact, unthinkable prospect, such are these two notions seared into our consciousness as just the way things are and always will be. However, it is important also to appreciate how much of a liberation a post-capitalist society will be. Society will be freed from the necessity to find profitable outlets for the huge wall of money seeking. At present this pathology manifests in profoundly anti-social ways such as speculation in food prices, which causes hunger around the world based on artificial, not genuine, scarcity, the privatisation mania, the hunt for profitable companies and public services that can be taken over using borrowed money and milked for returns, the vast weapons and security industry, the compulsion to seek more and more debt as a means to dabble on the stock and bond market, and the corporate juggernaut that looks on our psychological make-up as something to be exploited for profit.

Individuals, too, will be relieved from the necessity to secure their livelihood in the market and to suffer if they fail to. This has to mean that, for the first time in history, a person’s income will be unconditionally guaranteed.

All this may seems like a pipedream that will never happen except that it flows from two inescapable facts about the modern world – in Harry Shutt’s phraseology the “decline in demand” for both capital and labour.

Nature of the Problem

In Britain, the latter problem may seem belied by the eclipsing of the 4 million strong dole queues of the 1980s by high rates of employment. But the solving of the unemployment problem is in many ways illusory in that it is based on zero hour contracts, the dramatic rise of the ‘solo self-employed’ and the stifling of the healthy wage growth of previous decades. Certainly, wresting some kind of income from the economy – mimicking the huge “informal sectors” of the Global South – is not the same as the secure, decently-paid, and full-time jobs of the past.

And that is not getting into the contention of the late David Graeber that many white-collar jobs, while decently paid, are not only socially useless but economically pointless too. They are a form of “pretend work”.

But certainly, with demand for capital “fixed investment” (big things like factories and offices) in decline, there is no hope of reviving the benign equilibrium – where capital outlay and effective demand existed in a kind of symbiosis – of the post-WW2 years. And this mismatch cannot be nullified by abolishing zero-hour contracts, reinstituting collective bargaining, and welcoming back trade unions into the fold.

But there is no hope of understanding the need for a solution unless, first, the problem is recognised.

The Trouble with Wealth

Living in a World with too much capital

Inequality is usually pictured as the obscene contrast between grinding poverty and unmerited opulence, between mile-long queues at food banks and corporate CEOs buying gold wrapped steaks with their £5 million annual salaries. Hunger in the midst of unbelievable plenty.

Or, in economic terms, through the irrationality of a system that blocks the flow of money to the mass of people, thus creating a demand problem as the poor – or not wealthy – are far more likely to spend their income than the rich.

There is nothing wrong with viewing inequality in these ways but in my opinion they leave something important out. What they overlook is that great wealth is a problem in itself, not just in relation to poverty. This is because wealth is invariably transmuted into capital – money invested in order to make money which is then reinvested again in a never-ending process. And capital which is not directed to a palpable collective need, inevitably distorts society and makes solving urgent problems such as climate change all but impossible.

A Tale of Two Factors

Economists often refer to capital and labour as “factors” in production, i.e. inputs that enable goods or services to be produced and turn a profit. As shown by heterodox economist Harry Shutt, western economies hit a benign equilibrium during the post-war boom (1950-73) in that there was strong demand for both factors – capital and labour. The result was extremely low unemployment (around 3% in Britain) and buoyant growth in fixed investment (capital investment in physical assets such as factories, buildings, equipment, vehicles etc.) that actually exceeded GDP growth.

However, after stagnation set in the mid-70s, the rate of fixed investment fell below GDP and unemployment began to rise. The decline in fixed investment has continued over the ensuing decades, dropping from 20% of GDP in France, Germany, Britain, Japan and the US in 1980 to 14% in 2015. Unemployment spiked in the 1980s and ‘90s. Its subsequent official decline has much to do with compelling individuals to take any available work – Germany introduced ‘mini-jobs’, for example, and on-demand labour and self-employment have mushroomed everywhere. In Britain, if you work for one hour a week, you’re counted as employed. And in order to “make work pay” it is subsidised by the state in the form of tax credits.

In essence, intensified by technological advancement, the demand for both factors of production – capital and labour – waned significantly. However, the way they were treated could not have been more different. Labour, if organised, was denigrated as a pariah and a self-interested impediment to the production of goods and wealth. Unions were ensnared by legal restrictions and the unemployed compelled to retrain and make themselves attractive to employers.

Capital, by contrast, – despite facing, in Shutt’s words, “a demand-supply imbalance comparable to that of labour” – was fêted as the essential ingredient of wealth creation. Entrepreneurs were lauded, profitability seen as a desideratum that benefited all, and the rate of return demanded on capital was intensified. In addition, the “wall of money” at the top of society was augmented by an influx of pension funds into financial markets which naturally demanded a healthy return in order to pay their beneficiaries.

The result has been an immense surplus of capital which cannot be sated by purely physical innovation but is nonetheless perpetually in search of profitable opportunities. This state of affairs distorts society in multiple ways. One way has been a turn to debt-based speculation entirely unrelated to material assets. This path caused the 2008 financial crisis. But there are many other examples.

Gimme Shelter

The environment is one. Oil companies have responded to looming climate catastrophe by transforming their rhetoric but little else. They proclaim a commitment to a ‘green transition’ but still try to “optimise” their oil and gas portfolios and prioritise new exploration. Investment in renewable energy is so low it doesn’t warrant a distinct category in their accounts. Many institutional investors, such as pension funds, charities, and universities, under pressure from climate activists, are committed to divesting from such companies and investing in renewables. However, hedge funds – pooled investment funds patronised by extremely rich individuals that aim to beat average market returns – have stepped into the breach. They are buying large stakes in oil companies, pushing up their share price. “People don’t understand how much money you can make in things that people hate,” commented one manager.

Thus the surplus of capital is ensuring that any progress made on climate change is, under this economic system, instantly reversed.

The financialisation of housing is another way capital is perverting a basic social need. In countless cities around the world, rents have shot up after investors – invariably an unholy combination of hedge funds, private equity funds, and Real Estate Investment Funds (REITS) – have bought up whole blocks of rental properties, viewing them as lucrative income streams. Alternatively, housing is demolished to make way for luxury apartments. Berlin presents an extreme case. €42 billion was spent on large-scale real estate investment between 2007 and 2020.  According to one analyst, after the 2008 financial crisis, investors were looking for a place to put their money and set their sights on Berlin. In a city where 85% of the residents are renters, rents have increased by 70% in nine years. Despite the existence of a strong cooperative sector and state-owned housing companies, over four in 10 rental properties in the German capital are owned by either financial market investors or big, private landlords.

Unsurprisingly, given the city’s culture, there is resistance. In September, a referendum in favour of expropriating Berlin’s largest corporate landlords, who collectively own 11% of apartments in the city, was passed. Whether the result will be carried through, however, remains doubtful.

One way of looking at the frenzy for privatisation which has taken hold throughout the world since the 1980s is not just in terms of corporate capture or ideological monomania, but as an outlet for an ever-growing mass of surplus capital. Privatisation is a longing that can never be quenched. In the first stage of privatisation state-owned industries were hived off to the market in one-off sales. But that was just the appetizer. Now private capital is guaranteed an income stream by running, on a contract basis, public services funded by taxation. In Britain, railways and buses, even spy planes, are operated in this fashion, while the state-funded National Health Service is gradually being hollowed out by private provision. In 2010, the NHS spent £4.1 billion on private sector contracts. Nine years later, this figure had more than doubled.

‘Exiled’ former Labour party leader Jeremy Corbyn posed a genuine threat to these vested interests – through for example a pledge to “renationalise” the NHS. He jeopardised an extremely fruitful, and necessary, income stream and thus had to be destroyed.

Globally, a kindred process has occurred. Where public services have not been gutted, the state serves as a convenient shield behind which public funds are directed into private hands. Under the guise of attaining universal health coverage, the Kenyan government has subsidised access to private care, given private providers higher reimbursement rates and formed public-private partnerships with international companies at great expense. All this has been done at the behest of international agencies such as the World Bank and billionaire charities like the Bill and Melinda Gates Foundation.

“More and more people have been priced out of health care because of their socioeconomic situation and inability to access private care either because of the expenses involved or because the type of help they are looking for is not available, because it's not profitable”, says an author of a report on the subject.

There are numerous other instances of the pernicious effects of surplus capital scouring the globe to meet its unquenchable appetites. A partial list must include the warping of democracy and the media, the money laundering role of football, and the targeting of children by consumer giants. The problem of inequality – and thus contemporary capitalism – is apparent not just in too little money at the bottom of society, but too much at the top.

Check Your Privilege

But curiously one could argue this is contrary to the original purpose of capitalism. Defenders of the system are fond of pointing out its modernizing character in contrast to atavistic socialism. However, the myriad anti-social effects of surplus capital serve to illustrate how we in the 21^st century are living according to the dictates of a 19^th century system. Modern capitalism and its attendant institutions were born at the height of the Victorian age. Stock markets and joint-stock companies (later known as corporations) were created to facilitate outside investment – capital – in economic enterprises and limited liability laws introduced to protect investors by ensuring that if their chosen enterprise failed, they would lose nothing more than the original sum they ventured. Shutt calls “the privilege of limited liability”– which still exists – “the bedrock of capitalism”.

In the description of Canadian law professor Joel Bakan, “the modern corporation was invented in the mid-nineteenth century to help create pools in investment capital needed to finance new and growing industrial ventures, like railways, steamship lines, and factories.” Corporate law, he says, was “designed to incentivize and thereby produce the fuel, capital, that the system needs to operate.” Without it, “the whole system, not just the corporation but capitalism itself, would grind to a halt.”

Arguably, at the time, incentivizing the “fuel” did produce immense dynamism and social benefit in the form of railways, steamship lines etc. Even Karl Marx was impressed, paying tribute to the “colossal productive forces” unleashed by the bourgeoisie. But now this “fuel” is primarily engaged in a compulsive and blind search for profit, no matter whether this adds to social welfare, or more likely, degrades it. To stretch Bakan’s metaphor, the van is now full but the pump is still spewing out more petrol which is spilling all over the station forecourt and running down the street.

The capital imperative is now not merely anachronistic and anti-social but positively deadly. We now know that order to stand some chance of staying within the limit of no more than 1.5 degrees of global warming by 2050 – and thus potentially dodging catastrophic climate tipping points – the vast majority of fossil fuel reserves must remain in the ground. However, such a philosophy of abstention is utterly alien to the nature of capital which is myopically impelled to exploit short-term profit. And in a world of boundless surplus capital – with each fragment on an eternal search for profitable opportunities – such an endeavour is doomed from the start.

In 2014, geographer David Harvey estimated that capital had to find profitable opportunities worth $2 trillion in order to satisfy the requisite ‘return on investment’. By 2030, he gauges, that need will have increased to around $3 trillion. “Thereafter the numbers become astronomical,” he writes. “Imagined physically, the enormous expansions in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have to be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained.”

And we also have to imagine what non-physical – i.e. speculative – investment will do to the world in the coming years.

Bending the Knee

But, perversely, rather than face up to this literally unsustainable situation, the world’s governments have chosen to artificially turbo-charge capital creation. Through the central bank policy of Quantitative Easing, the quantity of money in the financial system has been massively expanded – by an estimated $13.9 million a minute since 2020. As a result, developed economies have largely weathered the Covid outbreak but at the cost of hugely increased inequality. The combined wealth of US billionaires has risen by 70% since the start of the pandemic, a period of a little more than 18 months. In Britain, the number of billionaires has jumped by a quarter while globally billionaire fortunes have increased by 27% in the context of an expected rise in extreme poverty for the first time this century. For reference a billion is a thousand million.

But those are merely the personal effects. QE has also instituted fake stock market booms, facilitated the lucrative practice of companies taking over their rivals (to no-one’s benefit bar senior executives and bankers), produced skyrocketing property prices in the UK, and swelled the resolutely short-termist venture capital industry. In short, rather than – heaven forbid – standing up to the immensely powerful vested interests around capital enrichment, governments have chosen to bend the knee and grant their every wish. Contrast this with the way defenceless benefit claimants are treated and you have an insight into the mentality of most politicians.

There is a current in left-wing thought that is indifferent to wealth inequality, viewing it as far less pernicious than income inequality despite the fact that it is more extreme. Before the pandemic, wealth inequality was rising in 49 countries. Its enormous increase in the brief time since Covid struck has prompted calls for a tax on wealth. But if wealth inequality has spiralled in such a short period, what will happen in the years to come when many of its causes will likely remain untouched? A wealth tax will be a mere drop in the ocean.

Great wealth is profoundly undemocratic, concentrating economic decision-making in fewer and fewer hands. But it also ensures that capital enrichment, a process which profoundly hurts and perverts society, is set in stone and will intensify year by year. The time is coming when we will find what it does intolerable.

How not to be gross. The trouble with the GDP obsession

Gross Domestic Product, or GDP, even sounds slightly repellent. All the outputs a country spews out into the world, minus none of the defilements to human welfare and the natural world. Gross is a good description. Unearth all the fossil fuels in the ground, burn them and watch the GDP meter spike, while civilisation drowns. Fight a war and see GDP spiral as you repair the damage you’ve inflicted. Sit back in grim satisfaction as your products cause an obesity epidemic and the economy spreads depression like a virus. But as long the volume of goods and services shows a steady rise, you are outpacing the abyss.

But more than just being blind to suffering, the obsession with GDP actively seems to thrive on human misery. According to psychologist Oliver James, who gives it the moniker, ‘selfish capitalism’, “it is absolutely critical for everybody to go around feeling miserable, filling the emptiness with commodities, dealing with misery by trying to give themselves short-term boosts with hamburgers or drink.”

Divorce and separation, seemingly unbridled negatives for human happiness, are a positive boon for GDP statistics, James points out. They result in more homes rented out, more fridges and furniture bought, extra DVD players needed etc. A world comprising solely of single person households would be terrible on many fronts – it would be an environmental disaster and would spread the blight of our time, loneliness. But as far as GDP is concerned, this outcome would be an unadulterated blessing.

Small wonder there is mounting pressure for other measurements of the state of the economy and society to knock GDP off the statistical throne it has occupied since the Second World War. According the author Dirk Philipsen, there are more than a hundred alternatives, ranging from the ‘Happy Planet Index’, to the Genuine Progress Indicator to the ‘Beyond GDP’ initiative.

These indexes both measure things that GDP ignores, such as childcare and housework, and take account of huge negative impacts that are grist to the mill of GDP. They are thus a far more realistic or complete picture of the health of the societies we inhabit. The book, The Spirit Level, painstakingly demonstrated that rising GDP, a blunt measure of rising societal wealth, can harbour great damage to well-being, incubating trends such as rising mental illness and obesity or declining social mobility.

But before we rush to ditch GDP as an economic measure, it is necessary to recognise that it does record something meaningful in our current society.

As economist Michael Roberts points out, ‘GDP is not designed to measure benefits to people but productive gains for the capitalist mode of production.’ And in a ‘capitalist mode of production’, there is an undeniable, if regrettable, link between the productive gains of the economy’s major institutions and the welfare of most people. If the system doesn’t make its productive gains, the disappointment is swiftly transferred downwards.

The 2007-9 recession and its aftermath made this plain to see. Global output slumped by eight percentage points and GDP in the OECD area (34 wealthy countries around the world) contracted by six percentage points. Those are the bare figures. But these statistical falls were accompanied by real-world spikes in unemployment and homelessness and serious depletions of income and wealth. With GDP per person still lumbering below its 2007 level, exploitative work contracts and self-employment have mushroomed. GDP may be blind but there is a connection between it and human welfare.

But, because this connection undoubtedly exists, it is used by governments and international agencies to justify all kinds of policies to resuscitate GDP which harm people. Neutral-sounding ‘structural reforms’, such as raising the pension age, restricting collective bargaining agreements or clamping down on ‘generous’ welfare benefits, are hawked as ways to return the world economy to a path of growth.

Sure, there is anger about these policies. Left Keynesians and others protest there are other ways to revitalise GDP growth. But there is unanimity that sustainable GDP growth is a worthy aim. And at the back of our minds there exists a seedy toleration of the anti-social consequences of rising GDP because, without it, the abyss seems to beckon. This is why, despite a wish to be humane on the part of many people, there is a deep ethical rot at the heart of our economies.

But, far from accepting this miserable bargain, we need to face it down. The god of GDP growth, as one economist puts it, needs to be dethroned. We don’t need alternative measures that co-exist with GDP, we need economic alternatives to GDP. Public policy should no longer aim at maximising GDP. It should aim at maximising human welfare and if that depresses GDP, so be it.

This change can take many forms. People growing their own fruit and vegetables rather than relying on the sugar-addled products of the food industry would improve well-being but be bad for GDP. A health policy that aimed at curing, where possible, physical and mental illness rather than merely treating their symptoms with drugs would benefit human welfare but dampen GDP. And policies to keep fossil fuels in the ground forsake future economic growth in the hope of ameliorating the impact of climate change.

It is estimated that the global economy needs to grow by at least 3% a year in order to make sufficient profits for large corporations. This means compound growth; growth on top of the growth already attained. It is doubtful whether this rate is possible but unquestionably it is not desirable. “Imagined physically,” says the geographer, David Harvey, “the enormous expansion in physical infrastructures, in urbanisation, in workforces, in consumption and in production capacities that have occurred since the 1970s until now will have be dwarfed into insignificance over the coming generation if the compound rate of capital accumulation is to be maintained”.

But should we collectively decide not to pursue the aim of maintaining the rate of capital accumulation, we need to be fully aware of what this implies. Not only do large corporations directly and indirectly (through supply chains) employ large swathes of the population, they also act as the destination for pension fund investments. The current and future wealth of millions of people depends on their success. Recognising this is not to justify the economic system but state a bare fact of social reality.

Corporations thus play a dual role in the economic system. Economic viability apparently depends on them but they are taking us in fundamentally anti-social, anti-ecological directions. This state can be characterised as one of economic bondage.

It might be argued that public investment should substitute for falling GDP. After all, the definition of GDP includes – in addition to consumer spending, business spending and investment and net exports – spending by the government. But, in order for growth to be maintained in this way the level of government involvement in the economy would have to rise more than anyone is advocating (Jeremy Corbyn included). This kind of economy would be akin to the Second World War economies of Britain and America. And of course without the huge stimulus of manufacturing weapons.

Twenty years ago there was unbridled optimism that the information economy was the future of capitalism. The number of new products was only limited by the boundaries of the human imagination. Steve Jobs could “anticipate technological desires you didn’t even know you had”. But digital capitalism has not turned out to be the saviour of corporate profitability and economic growth. “Info-tech,” says the author Paul Mason, “drives labour out of the production process, reduces the market price of commodities, destroys some profit models and produces a generation of consumers psychologically attuned to free stuff.”

We are currently living in a stagnant capitalist economy. Growth has levelled out at rate well below the average prior to the 2008 crash. Another slump is very likely, which will turn growth negative again, causing a depression. That’s the scenario, and all its human consequences, we have to imagine if we explicitly decide not to make the profits of multi-national corporations a priority.

Therefore, logically, not following the GDP compulsion anymore means constructing a post-capitalist economy. And in the short-term that entails safeguarding the incomes of millions of people. This implies the free (or at negligible cost) provision of many utilities and the use of a basic income as the primary source of people’s income, not as is commonly imagined, a fall back that gives people the confidence to make money elsewhere.

The most pressing task therefore is not just to illustrate how an alternative economic system is desirable, but to show how it would work. How it would provide and distribute income and wealth, substituting for the institutions that currently perform this function.