Question Time: Have we been asking the wrong one?
The media is awash with headlines about new policies and trials to solve the UK’s ‘productivity problem’. Twyla Williamson unpacks this and asks whether increased productivity is the answer to our financial woes.
At Audley, we are committed to unconventional thinking. Not just because we are a communications agency and it’s a good tagline, but because often thinking conventionally produces the same old results. We know if we want a different or indeed better answer, then we need to look in different places. More often than not, you need to change the question, in order to change the outcome.
As four-day weeks are being trialled throughout the country and Hunt’s third ‘E’ for ‘Employment’ - in last week’s budget - is set to encourage the over-50s back into work and increase product output, there seems to be no end to the productivity policies and trials headlining the British media. Remarkably even 65% of us Britons rank productivity more important than being happy. But is increased productivity really the answer to our financial woes?
To a degree, yes. Productivity is a key factor in determining long-term macroeconomic growth and can be helpful for assessing working practices. The OECD defines productivity as the “ratio between the output volume and the volume of input”. In other words, how much bang do you get for your buck? The Office for National Statistics similarly states that “economic productivity measures output per hour, output per job, and output per worker” and that this is standardised across all G7 nations. So effectively what we’re saying is how do we produce more: output, output, output.
But let me ask you this. Does more always equal better? And does it make our societies financially better off? If this article was split into three, would you say I had been more productive because the quantity of my output had increased? Would someone pay more for three articles than they would for one? By this measure, people would drop that pair of Nike trainers in favour of three pairs of high-street brands. Or shop online instead of going to a tailor, and Saville Row would cease to exist. Quantity does not equal quality. When reducing the problem down to the day-to-day activity of buying and selling goods, we find the problem is far more nuanced than just: more bang = more buck.
As we start to challenge the zeitgeist, our focus then begins to question the constituent parts for how we measure the health and prosperity of the UK. For example, typically we measure the economic wealth and prosperity of a country through GDP, which by this measure means we are the second largest economy in Europe and the sixth largest in the world. And yet, why then are low income households in the UK 22% poorer than the French, earning on average £3,800 less a year – despite France being behind us in the rankings for economic prosperity.
GDP took a substantial hit in 2020 and growth fell by 0.5% in December 2022, meaning our economy is 0.8% smaller than its size pre-pandemic. The current 3-line whip of government comms departments tends to blame this decline on Covid and the Ukraine invasion, but the UK did not face these crises in isolation. All of Europe has been affected. Yet, British families are seemingly far worse off. Compared to our friends across the pond, we are the poor relation, with the typical American now 60% richer than the typical Brit.
Although UK GDP took a dramatic downturn to a record low of -11 in 2020, we have been seeing a decline in real-term wages since 2010. According to the Financial Times, between 2007 and 2015, the UK was the only big economy where wages contracted whilst the economy expanded. If the prosperity of individuals was linked to our output as a country, then surely our available cash would ebb and flow in accordance with GDP. But this is not the case.
The numbers seem to tell us that more input does not actually equal more output and that productivity (the measure of output) should not monopolize our focus if we are looking at producing a more healthy and strong society who are ultimately richer. Some might posit that we are erroneously trying to measure the health of our country based on one fundamental assumption that was created in the 1930s in the form of GDP – that indeed, as a country, we’ve been asking the wrong question – for decades.
Kate Raworth and her colleagues at the Doughnut Economics Action Lab seem to think so. They have developed a new way of measuring a country’s general health. They focus on whether an economy is thriving and not growing. Analysing whether we can measure people’s prosperity, to ensure that no one falls short on life’s essentials while ensuring collectively we do not overshoot the environmental planetary boundaries using a set of indicators. They say for the last century we’ve been asking only one question (and the wrong one at that) when we should have been asking multiple.
Cities such as Amsterdam, Copenhagen, El Monte, and Brussels are beginning to implement Doughnut Economics. Marieke Van Doorninck, Amsterdam’s deputy mayor stated ’The doughnut does not bring us the answers but a way of looking at it so that we don’t keep on going on in the same structures we used to.’ The city has recently started regulating building materials, promoting recycled and bio-based products to help tackle the 31% carbon emissions increase it has seen since 1990 – 62% of which is believed to come from building materials, consumer products, and food as was indicated by their doughnut economic modelling.
The city portraits as the Doughnut Economics Action Lab call them, are used to apply the theory of doughnut economics at a regional city level. In Brussels, they developed a set of indicators to measure the health of the country and mapped the already pre-existing regional objectives against these findings. An interesting discovery came from the initial workshops whereby they found an absence of regional objectives in areas where the indicators had suggested there needed to be greater progress made. This finding proved useful for developing new policies. Essentially, providing the local decision-makers with a new set of questions to inform practical policies for meeting the social and ecological parameters of the city.
Only time will tell whether they have indeed found a solution to measuring prosperous economic change.
Perhaps Einstein was right when he said, ‘if I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it’. Maybe we’ve spent so long trying to solve the problem of increasing GDP through greater productivity, we’ve forgotten what we are actually trying to resolve with this “solution”.
By Twyla Williamson, Senior Associate at Audley