Thoughts on ‘Picking Up The Pieces’ by Jim Power

27th January, 2010

Picking Up The Pieces' by Jim Power

The debate about the future of our economy is dominated by numbers. Economists measure how much our income has shrunk, the number of jobs lost and what our borrowing requirements will be for the next year. Recovery is defined as an economic phenomenon, allowing us to measure and track it’s arrival and duration. Commentators will then predict how many jobs will be recovered and by how much our national income will grow.

‘Picking up the Pieces’ is focused on economic recovery, and on the policy failures that led to this national depression. However what makes this book stand out from it’s many competitors is the argument that what really matters is the quality of economic growth, rather than just the quantity.

The author argues that an obsession with economic growth as an end to itself has led to grave policy errors. This led to a lack of focus on the sustainability of the growth and the delivery of public goods (such as world class schools and hospitals) that will outlast the ebb and flow of economic fortunes.

The justification of this argument is hard-headed. ‘It is much better to move gradually towards one’s target, rather than making a mad dash and running out of steam before the destination is reached.’

Greater focus on sustainable growth, based across all sectors of the economy and supported by stronger public services, might have led to lower growth rates but these rates would have been more sustainable and lasting.

In other words, if things had not been so good in the past, then they might not be so bad now. We are presented with a scathing criticism of why things were so good.

The book eviscerates the creation of a ‘one winged bird’ where output from the construction sector was equivalent to over 20% of GDP in 2007. It reviews how our cost competitiveness, the cornerstone of a small open economy, was whittled away by cost and wage increases. The rate of wage inflation between 2004 and the middle of 2008 was 50% above the EU average.

All of this was compounded by a litany of policy failures. The tax base was narrowed while public expenditure was increased. The author is a well known critic of social partnership, and he details how this process contributed to wage levels that are now not affordable and a lack of focus on public service outputs.

These points have been made elsewhere, by the author and others. However the book’s continual distinction between economic welfare and economic growth is a crucial point. It accepts that an economy exists to look after a society, rather than just to serve it’s own needs.

The return to economic growth will make a vital difference to the families and communities blighted by unemployment and debt. However we need to focus on the nature of this growth or this generation will face the same vicious cycle again.

It concludes ‘Economic welfare is more important than economic growth and a society is more important than an economy, but the reality is that, without economic growth in the first place, it would be nearly impossible to generate economic welfare or to support society. However, the nature and quality of economic growth and how its fruits are used are the most important considerations”.

This is a humane thought provoking book. Power knows that the difference between 1% of economic growth and 2% is just massive. However he is passionate in stating that a focus on the quality of the growth will lead to higher average rates of growth and a society better supported by public goods and services. This passion is what we need now!