We need to measure well-being to reverse Britain’s social decline

It was only two-and-a-half years ago that an economic statistic threatened to kill off George Osborne’s economic strategy. There was speculation that the British economy might have shrunk in the first quarter of 2013. When the Office for National Statistics did announce – at 9.30am on Thursday 25 April (remember how some of us used to wait on the edge of our seats for the GDP data?) – that UK plc had actually grown by 0.3 per cent, there was a massive sigh of relief inside Number 11 Downing Street.

 

A triple dip recession and an insurrection from Vince Cable had both been avoided. Tories feared that a negative growth number would have produced public splits in the coalition government and calls for austerity to be junked. Coalition harmony survived and Britain has gone on to become one of the fastest growing economies in the advanced world.

 

Some policymakers increasingly worry that we focus too much on the GDP number, and not just because it is subject to often hefty revisions by the pointy heads at the ONS. For most of the post-war period, the relationship between growth in national income and median wages was a steady and reasonably predictable one. In recent decades the relationship has eroded, however, with median incomes falling behind GDP growth in some advanced nations. 

 

Even when the British economy was growing before the 2008 crash, the incomes of many less skilled workers were stagnant or falling. There is also evidence to suggest that a lion’s share of GDP growth in America is going to the already very rich. Measures of income growth should probably be elevated within the national conversation in order to provide a context for the GDP data. There is also a case for multiple inflation rates to be published so that we capture the fact that, again in the United States, average price increases have been higher for poor Americans in 139 of the last 168 months.

 

Before the banking crash and before they came to power, the Conservatives appeared to want us to go even further in overhauling the statistics we collected. Alongside talk of publishing measures of individual and national happiness, there was even grander talk of “a post-Marxist era”. Oliver Letwin – then and now one of David Cameron’s most influential advisers – noted how “before Marx, politics was multi-dimensional: constitutional, social, environmental as well as economic.” That is certainly how Adam Smith wrote. He was not the number-crunching econometrician of today’s economics profession.

 

“After Marx,” continued Letwin, “socialists defended socialism and free marketeers defended capitalism. For both sides, the centrepiece of the debate was the system of economic management.” Now, however, that the free market had triumphed “from Beijing to Brussels… the mission of the modern Conservative Party… is to bring about Britain’s social revival: to improve the quality of life for everyone in our country, increasing our well-being, not just our wealth.” 

 

In this new era, he continued, “irresponsible parents” rather than “irresponsible unions” were the cause of weakness. Britain was no longer the sick “man” of Europe but social breakdown made it the continent’s sick “family” – characterised by high levels of social atrophy. Social rather than economic decline was the new challenge. The speech was incredibly badly-timed. Weeks after Letwin delivered it, in May 2007, the housing crisis that would threaten to bring down the financial system was already rearing its ugly head. “Economic decline” was very much at the top of the agenda again.

 

Fundamentally, however, Letwin was right. The weakness of social structures needed to move to centre stage in politics. Family breakdown, in particular, is a cause of unemployment, educational failure, personal unhappiness and of growing demands on the public purse. The strength of family and community in southern European states explains why the economic hardship inflicted by the Eurozone and counter-productive employment legislation has not produced the social misery that would have occurred in more atomised societies.

 

The truth is strong free market economies need to be underpinned by strong social networks. Pope Francis correctly described the family as “the nearest hospital, the first school for the young and the best home for the elderly”. In debating what kind of statistics we collect, we need to measure our social as well as our economic well-being. So long as social indicators are absent from the national dashboard, we shouldn’t be surprised if politicians drive policy in wrong directions.