Liz Truss dreams of growth – but even if she pulls it off, it won’t help Britain

theguardian.com:

Liz Truss was clear what she wanted. “I have three priorities for our economy,” the prime minister told the Conservative party conference last week: “Growth, growth and growth.” But her problem is that this is not actually clear at all.

The definition of economic growth is an expansion of national income, as measured by GDP (gross domestic product). Since the 1950s it has been the objective of more or less all governments to have GDP growing every year.

In the postwar period there was a good reason for this. Growth gave us all the other things we wanted: falling unemployment, rising incomes, lower inequality, higher tax revenues to pay for public services, even some environmental improvement as a few pollutants declined.

But this is no longer true. From 2010 to 2019, growth averaged around 2% a year, but disposable income has barely increased. This is because the compositionof growth has changed. The UK economy has been driven mainly by consumption, rather than investment in capital – like technology –or skills. This has left productivity stagnant, generating almost no growth in average earnings.

In turn, economic growth has not reduced inequality. For 30 years after the second world war, an increasing share of national income went to labour in the form of wages and salaries. But since the mid-1970s more has flowed into the profits and dividends of those who own capital. This “labour share” has declined across almost all developed countries. Income inequalityhas risen.

The problem is particularly acute in terms of wealth. The past 30 years has seen a huge growth in asset values, particularly land, property and company shares. Ownership of these is highly concentrated, so the gap between the wealthy and the majority has grown