So much of what passes for discussion these days on how to improve economies is centred around GDP growth, debt ratios, tax regimes, the regulatory environment, infrastructure development and corporate profitability. Moreover, when a company announces that it is cutting costs, by laying off workers and closing down divisions, analysts cheer, the stock price rises and commentators laud the good decision.
Personally, I have always had the overwhelming belief that without understanding the impact or the consequences of economic and/or financial decision-making on people then that decision-making can be neither good nor wholesome. For me, the real difference between the developed and the developing world has always been that the former has had a very much larger middle class.
That’s right, in the final analysis, the real difference between the UK and Ethiopia is not just in the GDP per head but in the different capabilities of their peoples. In the UK people are on average better educated, they are able to do highly skilled work which in turn allows companies to create high value profits by way of either local sales or exports to other countries.
Unfortunately, most economic analysis looks at it the other way—we need to attract good companies so that we can create a better economy. This is what many of our politicians, governments, bankers and business people do not realise. It is their prioritisation of the numbers over the people that will cause us the greatest damage in the long run and it is the singularly worst mistake of the post-financial crisis era.
In Spain, youth unemployment is 50%. How and when can that economy ever recover?
The EU and has insisted on crushing the life out of Greece as a viable economy and there is no prospect of that country recovering for at least one generation but more likely two.
In America, the Republican insistence on cutting debt in the short term while cutting corporate taxes at the same time serves only one real purpose—to create rich companies and poorly served people. It is undeniable that this will also hollow out the middle class.
Are corporate profits in America so divorced from the welfare of the people?
Can American companies really sustain themselves in the long term by constantly cutting costs and putting more and more workers on part time and low wage employment with little or no benefits?
In truth, we were always led to believe that it was the opposite—that it was the American consumer that drove the economy. Does that no longer hold true? Does anyone care?
That said, let me share with you the story that really drove my wider thought process today. It is a story on Reuters entitled: No Menstrual Hygiene For Indian Women Holds Economy Back. It shows how a lack of availability of suitable female hygiene products has severely impacted Indian women and girls in terms of their access to both education and work. The story goes on to say that resolving that problem alone would improve the Indian GDP by 4% each year. To put that into even greater perspective, resolving this problem would double the Indian economy within a generation.
This is a sad story and one made even sadder by the fact that it is probably true for women and girls in many other parts of the world. While women in western countries do not have these problems, it should serve as a lesson as to why people issues need to be placed at the heart of any debate about the economy and GDP.
Unfortunately, those who hold the economic levers of power are failing to recognise this.
Jonathan Ledwidge is the author of The Human Asset Manifesto and Clearing the Bull, The Financial Crisis And Why Banks Need A Human Transformation