Last Wednesday’s FT could have been part of a seminar on economic growth. Professor Nicholas Stern (Opinion, January 31) pointed to the necessity of a coherent and sustainable programme of public and private investment to stimulate growth and raise productivity, with a focus on countering the market failures of environmental degradation.
Bruce Lloyd, in his letter “Debate about growth needs fresh starting point” (January 31), argued that the pursuit of growth is too focused on its quantity and not enough on its composition and quality.
Gross domestic product currently includes negative externalities that Stern’s strategy aims to correct. GDP, in other words, is a vector; it has direction as well as speed. But how is that direction determined? The traditional answer is usually “market forces and technical change, which are not to be questioned”. Shaping the direction of growth, however, is precisely what Professor Stern’s argument is about, and governments have been doing it for centuries, not least through defence spending.
Direction is the issue where policy meets the opposition of vested interests, either of those intent on maintaining the existing path (the fossil fuel producers, for example) or of those insisting that an extrapolation of their existing technology is the best and inevitable path to follow (the promotion of artificial intelligence by Big Tech, for example).
This is where Janan Ganesh’s point about the “bleeding of power from the state” by corporate interests underlines the need for strong resistance from democratically elected governments capable of designing coherent strategies in the interests of their populations as a whole.
A coherent policy must also address another potential source of resistance to a change of direction, namely from employees and regions disproportionately affected by the costs of transition. Governments have tended to ignore or underestimate the social costs, as Michael Stoltz’s letter (“Globalisation and betrayal of America’s working class”, January 31) suggests in the case of trade liberalisation.
The Luddites’ revolt of 1811 was not against technical change but at being forced to bear the costs of innovation promoted for the general good. Today, protests are rising throughout Europe for similar reasons, reminding policymakers not to ignore the detail of adjustment costs.
Paul Rayment
Former Director of Economic Analysis,
UN Economic Commission for Europe,
London SW1, UK
