Easter and Eostre, Germanic goddess

This post was written in 2013 – pre-Brexit and Trump, before we realised how plastic was killing our oceans, when the northern white rhino was not extinct. It’s about value over volume, about the quality of life over the quantity of life – the sort of thing we should consider at the start of Spring or even at Easter-time.

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In the Christian tradition, it is Easter – named after Eostre, the Germanic Goddess of Fertility and Spring. It is that time of year, when we look for growth all around us. Yet, more prosaically, mention growth to most and we talk about recession and how ironically the current German goddess (Chancellor Merkel) is not so keen on helping those in need around the periphery of Europe.  She wants them to help themselves.

Growing Pains

Michael Heseltine, Cabinet Minister under Margaret Thatcher, who recently provided a report to the UK Government on the regeneration of English cities that David Cameron and George Osborne have welcomed , told The Independent newspaper on Saturday, March 30, 2013 that: “the richer you get the less imperative there is” for people “to drive themselves”.”

BBC Radio 4 followed this up with a debate on Saturday’s Today programme between Mariana Mazzucato (an economist) and Terry Greenham (from New Economics Forum – NEF). Terry ended by calling for more quality rather than quantity in how we measure “growth” – that GDP as a measure was flawed.

Our Affluent Society

Back in May, 2012, I posted “The Affluent Society and Social Balance” which looked back at the writings of John Kenneth Galbraith (author of The Affluent Society) and wrote about how mindsets had not changed since he wrote the first edition in 1958. Quantity was still valued over quality – economics was still all about more things, not more quality of life despite our (developed world) ability to acquire so much stuff.

I spelt out four areas for concern as developed nations seek to address further “growth” requirements. They were characterized as follows:

Forty years ago, five, major elements were missing from or only sidelines in Galbraith’s analysis – issues which have become more central over time and which complicate the prescription that Galbraith proposed: They are repeated below:

1. Globalisation

2. The errors in GDP accounting – quantity vs quality

3. The Environment – valuing quality

4. Civil Society – ending the private vs public sector spat

5. Social Balance

1. Global Trading

The world is a different one from 1958 or even 1973. We trade globally and the developed nations increasingly use labour from the undeveloped nations to do low-cost, manual work (often in conditions we would not tolerate in our own countries). It is a 19th Century state of work but internationalised– where now, international companies tend to operate as the mill owners of old.

From a micro-economic sense that is understandable – each company is different and many act responsibly. However, from a macro-economic viewpoint and from an international political viewpoint, there are limited mechanics for equalizing health and safety laws let alone education and pay scales.

Galbraith’s concern was that we produced too much and that we should be able to make less in a country like the USA. When the work goes international, the responses to the problem have to as well.

2. Production by numbers: quantity versus quality

In an affluent society, production is made the cornerstone of all we do (the economy is central to all our decisions) because work is needed to secure income. Even in an affluent society, income at a certain level is deemed to be critical. Products of progressively less use (or utility) are sold (often solely on the back of advertising) and we buy them and this is meant to keep us in work and more buying goes on.

Of course, in an international labour market, that won’t always work (as Gandhi found out in the early 20th Century when England produced most of the cotton garments sold in India) and it has become harder to focus just on one country.

However, the global economy does not mean that products become more useful – much of what we make is simply wasting energy and resources. However, it is keeping people in work in many developing nations.

But, growth is measured by GDP and GDP is a poor measure of quality of life or even production. Quality of education, for example, is measured in GDP by its cost (an input) not an output. A £500 handbag is deemed worth the same as £500 worth of essential foods – no difference in utility is assessed.

The felling of a rare tree is “valued” at the cost of felling or its price in the market as a table. The value of a river is missed completely – unless over-polluted when its clear-up costs may enter as a cost in a nation’s GDP.

It is production by numbers, quantity versus quality.

3. Environmental Balance

While mentioning the issue of environment, the main topic of “The Affluent Society” is the social balance between public goods and market production. All these are made by people – so, the environment in which we live is ignored. The trade-off is not, of course, that simple (even though the Galbraith trade-off has never been seen to function). The environmental trade-off (our need to maintain our natural capital) is now being understood but remains relatively hidden in economic debates. Natural capital needs to be brought into any debate on affluence in society – our quality of life as opposed to the quantity of life.

4. Civil Society

To Galbraith, the game is between the market and the public sector and to most, this battle still exists as the only one. There was not much mention of civil society – where most of us spend most of our time – except through discussion of leisure time. Here, the trade-off was between productive working and spare time. I expect that this assumes that all non-productive time is spent on hobbies or watching TV.

The creativity and value of civil society – a huge array of organisations from sports to international development, from charities to women’s institutes – is normally missed completely by economists and thinkers on society. The problem is that it does not fit easily into econometricians’ computer simulations: more of the “if you can’t count it, it doesn’t exist” syndrome.

Of course, for centuries, people have been undertaking “good deeds” – the history of the 19th Century is full of examples of charitable activities. However, society is changing fast and as politics loses its appeal for so many (with parties genuinely fearing for their future), the role of civil society is growing and, in affluent societies, taking back more from the state that it lost to the state in the 20th Century.

This escape from the centre is to be applauded, but needs to be better understood.

5. Social Balance

Complete reliance on the market or on the centre (libertarianism or communism) may still appeal to some. The reality is that complexity is the norm. Society is a mixture of competing ideas and competing structures – out of which we muddle through and where individuals take centre stage and form organisations to make their voice louder.

Nevertheless, we should learn from history and our mistakes. Centrism is a doctrine of the defeated; totalitarianism a doctrine of the damned. There is no one answer but a constant mix of opportunities that society provides and where changes are constant in the way we answer our problems.

The mix of competing answers does no longer rest between public and private sector in an affluent society – that is a 20th Century doctrine or response. The response now has to take into account the social balance we want from our lives between products, social value, natural capital and civil society relationships in a global context not a rigidly national one.

This means being adult about the causes of change and grown-up about the challenges – it means being international in approach and understanding the complexity of the problem – not something that can be understood wholly by quantities or computer simulations.

As we grow materially (i.e. through the quantity of products we are able to manufacture) and bump up against the troubles of environmental degradation and massive disparities of wealth and conditions (on a global scale), the question to be addressed is how does a complex society best form itself to take the decisions it needs to maximize the value we all give and receive from this “affluent society”.

So, should we Give up on Growth?

Terry Greenham of NEF would propose (as does NEF) that this is what we have to do. As the developing world strives towards economic well-being as described by growth of GDP (gross domestic product), the developed world should (in NEF terms) re-balance the lives of their people so that quality is maximized and quantity is stabilized.

Of course, all our measures and motivation focus on quantity. Homo sapiens have developed over 100,000 years to seek food and shelter and the more the better. However, following Maslow (Hierarchy of Need), humans aspire to more than just “stuff” and as we gain wealth, the majority want more that is not measured.

A salutary valediction from The Independent’s Michael McCarthy (Environment Editor) today after 15 years with the newspaper, showed a pessimism that the human race could wake up to the qualitative disaster that it was causing in its rush to quantitative growth. Governments have responded with nothing in this debate – transfixed as they are by the glamour of GDP statistics. Heseltine is the first senior Conservative in the UK to state the obvious – that being the fastest growing economy is not necessarily what we all want. GDP is, in reality, meaningless as it fails to measure value as outlined above. A tree is not worth the amount it costs to fell and transport; a river is not worth just the cost of keeping clean – they have value beyond this that is not within the bounds of GDP.

Businesses, operating in the micro-economy cannot be expected to make the change – they are set up to benefit their shareholders and adjust to cultural and legal pressures (usually with some degree of resistance).

It ends up with Government having to lead. In very few nations is there an understanding of the problems that faces us – the race to grow GDP. Most completely misunderstand what GDP measures (and that includes most economists – centred as they are on econometrics the simulation of economies that reflect the 19th Century reality not the 21st Century’s).

We need to establish measurement (if that is how we work best) of the Gross Domestic Value  –  GDV  –  where Value takes over from product (things).

In this way, CO2 in the atmosphere can be valued; that tree being felled can be valued; humans can better value their time given back to society.

We should not give up on growth, but growth of value not product or income (based on the wrongful simulation of salaries, costs and sale prices).

National Value or Gross Domestic Value should become the target – not how many products we have. The question is whether there is a drive and energy to establish an understanding of what really is important or whether (as economist Georgescu-Roegen said in the 1970’s)

“Perhaps the destiny of man is to have a short but fiery, exciting, and extravagant life rather than a long, uneventful, and vegetative existence. Let other species — the amoebas, for example — which have no spiritual ambitions inherit an earth still bathed in plenty of sunshine.”

Michael Heseltine is only partially right. There is a limit to the drive and push people have to continuously get more stuff – but, there is probably no limit to our drive for more value. Michael McCarthy is, maybe, too pessimistic – we can drive human growth through value not products – GDV not GDP.

 

Under-valuing Civil Society – Wherever the Market and Government don’t work

What, in the 21st Century, is it the role of charity?  Where does civil society (the real society) fit in a world dominated by the market and the state?

Recently I became Chief Executive of Willow Foundation (www.willowfoundation.org.uk) – a Charity in the UK that works to help 16-40 year-olds who are suffering from life threatening illnesses. We do this by providing psychological and emotional benefits through the provision of “Special Days” – something exceptional that we organize and make work  for them and their close ones. Our research shows that this is important for all – whether in curative or palliative phases of their illness.

So, my question above is heartfelt as well as intellectual.

Well, the simple and well-known answer is that where the marketplace has no response to society’s need and today’s government (focused on financing an NHS as the biggest employer and where they are just getting round to looking after elderly patients with care) is not entrusted (or does not feel entrusted) with this task, then charities and civil society intervene. That response encompasses both interventions such as Willow employs all the way to campaigners for new rights (here and overseas).

Charities?

In 2010, Sir Stephen Bubb, CEO of ACEVO in his paper titled: “Rediscovering Charity: Defining our role within the State” focused on the role of charities from their origins to the present day through their varying links to Government.  Whether funded by government (the state) or philanthropists, the link with the state was crucial from early times when the state was there just to extract taxes and fight wars to now (when it seems to be much of the same!) where the state sets the minimum standards of involvement.

The state also sets the laws under which charities operate (partly to defend its citizens from rogue elements) and pays a considerable amount of its taxation to charities. My recent blog on this: Do we value the Charity Sector? (https://jeffkaye.wordpress.com/2012/04/01/do-we-value-the-charitable-sector/)

was a statement of concern that the state completely fails to lay out the economic benefits and costs of the sector.

But, it is not only in regard to the state (or government) that charities must be seen. Charities exist in the 21st Century in the USA, UK and other, wealthier countries because neither government nor the “market” meets all our needs – even if they are better met than five hundred years ago. The “Third Sector” exists where the main economic system actors fail and where the need is financeable and / or manageable by volunteers and / or better managed by this sector.

Charities (or civil society organisations) range very widely. With newer forms of company (like social enterprises, community interest companies), the blurring is intensified, but the relationship of many forms of non-government, non-traditional market organisations are continuously reforming and developing.

Also changing is the gap that is to be filled as a result of government and / or the marketplace “failure”.

Maslow described in 1934 our “hierarchy of needs” which changes as we become wealthier. From charities operating to provide food and shelter (critical in much of Africa now and the UK in the 19th Century and before), as economies grow, the gaps become different. As income grows, the market may wake up to provide the need; government raises taxation and develops new ways to disburse that income where voters shout for that need to be filled.

Charities and the economy

In 2010, Charities had an income of £36.7 billion – about the same size as Aviva’s revenue – the UK’s biggest insurance company. The UK economy’s GDP in 2011 was around £1.5 trillion – so, the Charity sector is about 2.5% of the UK’s GDP as measured in simple economic terms (comparing income to GDP).

Financially, the raw economic facts do not speak for themselves. Economic statistics are based on what is measured and it is assumed that £1 is £1 is £1. Measurement in our economy is flawed – real value is mistaken, of course, when our decisions are made almost entirely on the basis of cost data.

The impact of the charity sector, then, is much greater than the raw data. This is reflected in the media and elsewhere but because the third sector is not so easily measureable – charities don’t have financial bottom lines – it is too easy to ignore it or treat it like a small child to be patted on the head when it does well and scolded if it doesn’t.

How important is the Third sector / civil society?

If it is not practical to value civil society or that piece of society that is not government or the market (although it interfaces with both), then how can the real value of this sector be valued? If we are now working to value our natural resources, the value of the charity sector (or whatever we call it) has to be made so that decisions are not taken purely on the basis of costs.

The stupid action of the Treasury in proposing to set an upper limit of £50,000 or 25% of income for tax deductions on charitable donations is so crass as to be almost unbelievable! It is the sign (if we needed it) that valuation is not the issue. Apart from the fact that the Treasury cannot even provide decent examples of the complex schemes that they are trying to hit (sledge hammers cracking nuts), it completely under-values the Charity giving sector and the value that is created from these donations.

This is happening throughout our austerity-driven society. In the same way that pollution effects of manufacturing in the 19th and 20th Centuries (from pesticides to greenhouse gasses) were not properly valued (and are still not properly), so charity is completely undervalued by those responsible for taking decisions that have enormous and adverse impacts.

The value created by a volunteer does not show up in statistics. The value created by pro-bono help from companies and lawyers and school governors and countless others is not shown. The reduced cost of staff in the sector compared to other sectors (notwithstanding the argument about managerialism which is another important subject) is shown as much lower and demands far lower “income” to fund it. Discounts from companies, gifts in kind – all appear to reduce the economic benefit of the sector because they show up as lower costs. But, they provide huge value, which is seriously under-reported. The Big Society is much bigger than the raw data shows.

Yet, decisions are still made based on 19th Century statistics and 19th Century economics.

If we value society as a mix between the market, government and the third sector – with individuals as the customers of all three – then we have to be much smarter and less lazy in understanding what real value comes to mean and much less lazy in using out of date models to make decisions.

The Charity (or third) sector / civil society has a huge and under-estimated impact on society – far greater than the 2.5% of GDP or its equivalent to other sectors of society – which (apart from various externalities) are better approximated by GDP statistics. It is not just the market and the state which makes up society – although we are brainwashed to believe it it.

In the past, before we became beholden to numbers as the only arbiter in society, charity was understood for the huge part it played. As we have become wealthier, rightly government and the market have taken positions, which in the past were covered by charities. Charities and civil society in its widest sense have moved into new areas as the demand became clear. Now, we need to understand the impact of the sector in macroeconomic terms (across the huge range of “charitable activities”) – not just its GDP – in order to properly make decisions.

Osborne’s recent numbskullery with the £50,000 limit has not done much to Cameron’s happiness index nor his leader’s desire to establish the Big Society, has it?