Economic growth has become the only measure of a country’s success, but the pandemic and climate crisis tell us to strive for something more meaningful, says KPMG’s Richard Threlfall
Is bigger, better? Quality over quantity, goes the old adage. But it seems as society, as businesses, and as individuals we have an obsession with wanting more. More jobs, more revenue, more income, more stuff. But, increasingly, the assumption that growth is good is coming under scrutiny. It is a discussion that has profound implications for the construction industry.
Covid has intensified the debate, but is not the cause. The trigger is rather the growing awareness that we are living beyond the means of the planet to support us. Or to use the term adopted by Kate Raworth in Doughnut Economics, we are breaching our planetary boundaries. We are doing so in multiple ways, particularly through global warming, biodiversity loss and deforestation. If we blindly continue to pursue growth for its own sake, we risk driving humanity itself to destruction – potentially within the lifetimes of those being born today.
It reminds us of the dire warnings of Thomas Malthus, more than 200 years ago. He forecast that the population would grow at a rate that would absorb and then outstrip greater levels of food production, leading eventually to catastrophe.
Concern over the damage to our planet comes at a time when I believe we should also be facing up to the reality of our own economic future as a country
By the time I was at college in the early 1990s it seemed clear that Malthus was wrong. Humans had proved to be so innovative that we had not only managed to feed a more than five times increase in population, from around 1 billion individuals in 1800 to 5.3 billion in 1990, but we had also increased average income per head, albeit at the cost of much greater inequality. According to Paul Bairoch’s 1995 Economics and World History, developing market gross national product per person more than doubled over that period, and increased by an astonishing 17 times in developed markets.
But Malthus was not wrong. The constraint is just one step removed from food production, to the consequences of that food production, such as the clearance of ancient forests to create grazing land for cattle. And in parallel the consequences of our seemingly insatiable demand for energy, water, housing and every conceivable thing we might own, or do.
After World War II, increasing globalisation of finance elevated the pursuit of more into the national measure of success – the rate of growth of a country’s economy measured in gross domestic product (GDP). And it has become so engrained in economics and policy-making that it seems every investment decision rests on that test alone.
In the UK the first tentative departure from this view came with the announcement in September last year of the new Social Value in Procurement rules, requiring major procurements by central government departments to explicitly evaluate social value, with a minimum 10% weighting. The rules came into effect on 1 January 2021. A further step was the government’s decision following the Green Book Review, and announced within the National Infrastructure Strategy in November, to “end the dominance of the Benefit Cost Ratio in decision making”.
Neither step is however as bold as it first seems. It would be radical if we prioritised our investments according to the quality of life they offer to our community. All the new rules do is create mechanisms to eliminate the most egregiously damaging projects from the shortlist, and then continuing to allow financial economics to dominate in the ranking of the projects that are left.
But the direction of travel is nonetheless clear. On 16 January The Times published a letter from National Infrastructure Commissioner Sadie Morgan, Lord Foster and other architects exhorting the government to prioritise refurbishment of buildings over demolition and rebuild.
And perhaps it is particularly important for the UK to have this debate, because concern over the damage to our planet comes at a time when I believe we should also be facing up to the reality of our own economic future as a country.
We have punched above our weight on the world stage all of my lifetime. We have done so courtesy of the legacy of the industrial revolution that was celebrated so vividly in the opening ceremony of the 2012 Olympic Games. Today much of what we do continues to be world class, especially our research. But we are not rich as a country like we once were and it is inevitable as even greater wealth accumulates in the vastly greater populations of China, India and the African continent, that we will gradually, and hopefully graciously, slip down the world’s economic power rankings.
So perhaps now is the time to formally exit the global rat-race and strive for something more meaningful: long-run sustainable quality of life for the whole population. In the UN World Happiness Report 2020 the UK did well, placed 13 out of 156 countries. But what would it take to beat Finland to the No 1 spot? Among other things a revolution in why we build, what we build and how we build. Let’s not wait for this to be done to us. Let’s start now as an industry to articulate differently how we add value. Not bigger. Not more. Just better.
Richard Threlfall is a partner and global head of infrastructure and KPMG IMPACT