Remember trickle-down theory? It's the rose-tinted notion that economic growth is the only way to bring poor people out of poverty and reduce the inequality that divides society and undermines political solidarity.
It was JFK who popularised the idea that a "rising tide lifts all boats". Back in the 1960s, it had the virtue of being almost true. Today it is profoundly wrong. The narrative of relentless economic growth is driving us towards an increased inequality.
Even as recently as 1980, the lion's share of economic growth really did go to the poorest in society. Incomes for the poorest decile in the US grew by over 3% per year back then, significantly faster than those of the richest. Today the situation is more than reversed. Incomes for the very richest in society are growing at 6% a year, while there is virtually no growth at all in the incomes of the poorest. Since the financial crisis, in particular, far from trickling down, wealth has trickled upwards to the lucky few.
A decade after the onset of that crisis, we're still hooked on the idea that growth will not just solve our economic woes, but that it is the only possible way to bring poor people out of poverty. In its name, successive governments have justified austerity, reduced their commitments to welfare spending, cut taxes for the richest and withdrawn vital safety nets for the poorest in society. These regressive policies are busy compounding the injustice of income inequality with something even worse: inequalities in healthcare, in longevity, in basic security, in human dignity. The broken promise of economic growth is beginning to undermine the social fabric of society.
How did it all go so badly wrong in the space of a few short decades? And what, if anything, can we do about it?
Perhaps the first thing to do is forget the idea that we're looking at a temporary or cyclical phenomenon caused by slow growth rates in the wake of an otherwise unrelated financial crisis. What some well-known economists have called the 'new normal' has its roots much further back in time. Growth rates in advanced economies have been slowing down for several decades. In the UK, for example, the peak in trend labour productivity growth was way back in 1966.
The reasons for the subsequent decline are contested. US economist Robert Gordon points to a variety of secular 'headwinds' - such as rising debt overhang - which slow down demand, as well as to basic technological factors that put the brake on supply. The huge productivity increases that characterised the early and middle twentieth Century were a one-off, it seems, something we can't just repeat at will, despite the wonders of digital technology. A fascinating - if worrying - contention is that the growth rates of the 1960s were only possible at all on the back of a huge and deeply destructive exploitation of dirty fossil fuels. Something we can ill afford - even if it were available - in the era of dangerous climate change and declining resource quality.
The critical question is how we respond to this not-so-new reality. Over the last few decades, capitalism has had a very specific response. From the late 1970s onwards, falling labour productivity growth has been punished with even lower wage growth. Conventional economics tells us that wage growth follows labour productivity growth. But outcomes have been even worse for ordinary workers. Faced with diminishing returns, producers and shareholders have systematically protected their capital and depressed wages. One might even be tempted to suggest that this underlying injustice was partly responsible for the subprime mortgage fiasco that precipitated the financial crisis in the first place.
Our choices are now clear. Either we endure the rising instability and fractured politics of a deeply unequal world, or we build a new vision of a shared prosperity. At the heart of that vision, we must reframe the distribution of rewards in society. And abandon the dysfunctional narrative that relentless growth is the only means to achieve this end.