THE PROBLEM WITH HUMZA'S "WELLBEING ECONOMY"
Scotland is replete with happy talk from the Scottish Government boasting of its “wellbeing economy”. But what does this radical redesign of the economic system actually mean in practice?
Scotland is replete with happy talk about our economy with the Scottish Government boasting of its “wellbeing economy” (WE) representing a radical redesign of the economic system. But stripping back the rhetorical flourishes and buzzwords, what we see is an economy with serious problems going unaddressed by the incumbent Green-SNP administration
Defining growth
At the outset I wish to make things clear, not everything concerning the “wellbeing economy” is wrong. Far from it, the concept does highlight deficiencies in how we measure economic growth, and refocuses our perceptions on a need for growth to serve people rather than be an end in of itself.
One example of legitimate criticism advanced by advocates for the “wellbeing economy” agenda is that the traditional GDP growth measure is flawed. It is plainly true that GDP does not capture the value of all economic output. One example being unpaid care and some digital activity is not included in GDP. But can anyone honestly claim there is no value generated by these activities?
So, if we are to be intellectually honest we must admit to there being limitations on how we traditionally understand and measure economic growth in terms of GDP. In this regard the advocates of the “wellbeing economy” make a sensible point. GDP is limiting alone, in isolation as a measuring tool. There is a need to link economic growth and development with sustainable business models. But if we read the academic papers by key intellectual figures pushing WE, alarm bells should nevertheless start ringing.
For example, in ‘Wellbeing economy: An effective paradigm to mainstream post-growth policies?’ published in Ecological Economics the implications of WE become clearer.
“The WE approach differentiates between what we want to grow and what we want to decrease, and how we value these effects. A production process that has a negative impact on people’s health or the environment is, therefore, considered of negative value for the economy, while any improvement in the quality of work and better work-life balance is considered a positive, in so far as it produces desirable wellbeing outcomes. In this regard, local customised production can be more efficient than economies of scale and mass production”
On the face of it many on the centre-left will no doubt be nodding along vigorously. But if we break this paragraph down, examining its implications we should be more sceptical.
The claim that production processes which prioritise ‘work life balance’ over economies of scale may sound progressive but its the product of academic musings slapping up hard against actual business realities. For one thing, ‘work life balance’ is an entirely subjective matter.
Determining where the division of one's time and focus should be between working and family or leisure activities is subjective. Some folk live for their jobs, loving the work they do. Others prefer a slower work regimen leaving more time for the kids they chose to have. We know work life balance is important (happier workers are preferable to sad ones for any business), this is why the European Working Time Directive was created. It set a legal limit for how many hours any employer could force you to work. You are free to work more than that limit if you so choose, but you cannot be forced to. So we already appreciate the importance for work-life balance and have tangible legal measures to help individual workers set the balance they prefer for themselves.
What - precisely - then do WE advocates mean when we say ‘work life balance’ should matter more than economies of scale? The implication is that production chains which might leave people feeling subjectively happier about their work-life balance is more important than efficiency in business.
Increasing production and lowering cost (i.e. economies of scale) isn’t something to be so casually dismissed as less of a priority if our goal is sustainable economic growth that allows us to tackle inequalities in society. Economies of scale are cost advantages reaped by companies when production becomes efficient. The reason we prioritise economies of scale and mass production over worker happiness metrics (whilst still legislating to ensure better work-life balance!) is really incredibly simple.
A business which is more efficient, increasing production whilst reducing costs has more money to invest! Business investment is absolutely essential if we are to have any growth in the economy to actually redistribute. I can redistribute the wealth created by a business expanding operations by investing in itself, I can’t redistribute happiness.
And if we take a look at the real world, we see the damaging implications of WE happy talk coming at the expense of actual business investment. There many different types of business investment:
1. Capital investment is the spending on capital goods such as new machinery, buildings and technology so that the economy can produce more consumer goods in the future.
2. A broader definition of investment includes spending on improving the human capital of the workforce through training and education to improve the skills and competences of workers.
3. Infrastructure is spending on new sewers, wind farms, telecommunications networks, motorways and ports – this can be done by the private and the public sector.
A consensus then exists as most economists agree that investment is vital to promoting long-run growth through improvements in productivity and capacity (as is shown by an outward shift in the production possibility frontier).
But Scotland under the SNP-Green “Wellbeing Economy” agenda has witnessed incredibly worrying capital investment by businesses. To quote Fraser of Allander
“Since 2014, new capital investment made by Scottish firms has been weak, and despite recovery being made from the record lows seen in 2020, business investment has fallen consecutively each quarter since Q4 2021 and has remained negative since Q3 2022. Expectations around future investment have also been negative since Q2 2022.”
Put this simply, Scottish businesses aren’t investing to expand their future operations. They aren’t planning on producing more consumer goods, more production output. Why? I’d argue its perhaps due to the happy talk from Humza Yousaf about prioritising subjective happiness metrics at the expense of economies of scale. It’s incredible that in Scotland in 2023 we have political leaders who either do not understand business and economics or are so wedded to an Green party ideological mission to end the economics of growth in favour or eco-happiness.
Fact is, GDP growth modelling does have its drawbacks, but if you want to tackle inequalities such as food insecurity or rising child poverty you need economic growth to redistribute. Tony Blair and Gordon Brown understood this, and Scottish Labour should keep the lesson in mind, social democrats aspire to redistribute the proceeds of growth and for that to work there must be growth to redistribute. That means allowing businesses to prioritise economies of scale rather than punishing them in favour of happy talk about happiness measures. Obviously the economy is there to serve the people and we must incentivise more sustainable business models but this can be done by government investment, tax incentivisation and regulation - not at the expense of hard economic realities.
Scotland cannot afford to have the anti-growth Greens dictating economic policy for much longer.
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