Reeves must get whatever growth she can – Financial Times

Report on the Interdependence of Economic Growth, Democratic Stability, and Sustainable Development Goals

Introduction: Economic Performance as a Foundation for Sustainable Development

The stability and success of Western democracies are intrinsically linked to economic performance. Stagnant economic growth presents a significant challenge not only to political governance but also to the achievement of the Sustainable Development Goals (SDGs). A lack of growth creates a “zero-sum” economic environment where progress for some necessitates a loss for others, undermining the principles of inclusive and sustainable development. This report analyzes the trend of economic slowdown in high-income democracies and outlines its implications for key SDGs, proposing pathways to foster growth that is both sustainable and equitable.

Economic Stagnation as a Barrier to SDG 8 (Decent Work and Economic Growth)

The period since the 2007-2008 financial crisis has been characterized by a significant slowdown in economic growth across G7 nations, directly impeding progress towards SDG 8, which calls for sustained, inclusive, and sustainable economic growth. This trend is evidenced by declining productivity and GDP per head.

• Trend Growth in GDP Per Head (Post-2008):
  • United Kingdom: 0.7%
  • United States: 1.5%
  • Other G7 Members: Below 1%
  • Italy: Near zero
• Productivity Decline: The trend rate of growth in GDP per hour worked from 2007 to 2025 has been exceptionally low in several countries, including the UK (0.5%), France (0.4%), and Italy (0.2%).
• Innovation Stagnation: Total Factor Productivity (TFP), a measure of innovation, has shown negative average annual growth between 2007 and 2025 in all G7 members except the US.

This prolonged period of low growth fails to create the conditions necessary for full and productive employment and decent work for all, a core target of SDG 8.

Fiscal Constraints and Their Impact on SDG 1, 3, 4, and 10

Slow economic growth creates chronic fiscal problems, forcing governments to choose between reducing public spending, raising taxes, or increasing public debt. This fiscal pressure directly threatens the public investment required to advance several critical SDGs.

• SDG 1 (No Poverty) & SDG 10 (Reduced Inequalities): A zero-sum economy makes it politically difficult to fund social safety nets and implement policies aimed at reducing inequality.
• SDG 3 (Good Health and Well-being) & SDG 4 (Quality Education): Fiscal consolidation often leads to cuts in spending on essential public services like healthcare and education, jeopardizing long-term human development outcomes.

Pathways to Revitalizing Growth in Alignment with SDG 9 (Industry, Innovation, and Infrastructure)

To overcome economic stagnation, nations must pursue strategies that foster innovation, build resilient infrastructure, and promote inclusive and sustainable industrialization, in line with SDG 9. Key recommendations include:

1. Embrace Technological Innovation: Leveraging technologies such as artificial intelligence can drive a new wave of productivity. However, this must be managed through policies like “Flexicurity” (flexible hiring/firing combined with strong worker support) to address the “creative destruction” of jobs and ensure a just transition, supporting SDG 8.
2. Foster a Dynamic Start-Up Economy: Reforms to planning and business support systems are needed to encourage the creation and growth of new, innovative enterprises. Universities should play a central role in this ecosystem.
3. Increase Investment in Sustainable Infrastructure: The UK’s low investment rate (17% of GDP) is a significant barrier. Radical reforms, including in pensions, are required to boost national savings and channel investment into sustainable infrastructure, including lowering high electricity costs, which aligns with SDG 7 (Affordable and Clean Energy).
4. Strengthen Domestic Resource Mobilization: Fiscal consolidation will necessitate tax increases. This presents an opportunity to reform tax structures to be more efficient and equitable, strengthening domestic resource mobilization as called for in SDG 17 (Partnerships for the Goals) and ensuring sustainable financing for development.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth: This is the central theme of the article. The entire piece revolves around the slowdown in economic growth, declining productivity, and the impact on standards of living and employment in Western democracies, particularly the UK. The article explicitly discusses the need to “get whatever growth” is possible.
• SDG 9: Industry, Innovation and Infrastructure: The article connects the economic slowdown to a decline in innovation and productivity. It mentions that Total Factor Productivity (TFP) is held to measure “innovation” and that its growth has been negative. It also calls for specific infrastructure improvements, such as “planning reform” and lowering “exorbitant electricity costs,” and advocates for creating a “dynamic ‘start-up economy'” supported by universities.
• SDG 16: Peace, Justice and Strong Institutions: The article’s core argument is that slow economic growth undermines the stability and successful functioning of democratic institutions. It opens by stating, “Democracy is simply far stronger if it is possible for everybody to become better off.” It further explains that a “zero-sum” economy is “almost impossible to manage” politically and creates a “chronic fiscal problem” for the government, thereby affecting the effectiveness of state institutions.
• SDG 17: Partnerships for the Goals: The article touches upon the financial aspects of development and stability. It discusses the need for fiscal consolidation through improved tax systems (“strengthen domestic resource mobilization”) and highlights the UK’s low national savings rate and its heavy dependence on “foreign savings,” which relates to mobilizing financial resources and macroeconomic stability.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 8.1: Sustain per capita economic growth. The article is fundamentally about the failure to sustain per capita economic growth in G7 countries. It provides specific data, stating that in the UK, “trend growth in GDP per head since the financial crisis of 2007-2008… has been a mere 0.7 per cent.”
• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article extensively discusses the decline in productivity, citing “a more realistic productivity forecast” and the “miserable 0.5 per cent” trend rate of growth in GDP per hour worked in the UK. It directly links this to a lack of innovation, noting that the growth of Total Factor Productivity (TFP), a measure of innovation, has been negative.
• Target 9.b: Support domestic technology development, research and innovation. The article suggests that a future upsurge in productivity “will probably come from artificial intelligence” and emphasizes that “Universities must play a central role” in creating a more dynamic start-up economy, directly pointing to the need to support domestic innovation and research.
• Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article argues that slow growth makes it “almost impossible to manage” the country, forcing governments into “hard choices” between cutting spending, raising taxes, or allowing “explosive rises in public debt.” This directly impacts the effectiveness and stability of governing institutions.
• Target 17.1: Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection. The article directly addresses this by stating that “Fiscal consolidation will require higher taxes” and that “the structure of taxation also needs improvement.” This is a clear call for strengthening domestic resource mobilization to manage the country’s finances.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Annual growth rate of real GDP per capita (Indicator 8.1.1): The article explicitly uses this indicator throughout. It provides historical and recent figures for G7 countries, such as “trend annual growth in GDP per head was… 4 per cent in France from 1950 to 1974” and has fallen to “a mere 0.7 per cent” in the UK since 2007.
• Annual growth rate of real GDP per hour worked (related to Indicator 8.2.1): The article uses “GDP per hour worked” as a key measure of productivity. It states that for the UK, “the trend rate of growth in GDP per hour worked from 2007 to 2025 has been a miserable 0.5 per cent.”
• Total Factor Productivity (TFP) Growth: While not a formal SDG indicator, the article uses TFP as a direct measure of innovation (Target 8.2 & 9.b). It notes that “The average annual growth of TFP between 2007 and 2025 has been negative in all members of the G7, bar the US.”
• Total government revenue as a proportion of GDP (related to Indicator 17.1.1): The discussion about the necessity to “raise taxes” and improve the “structure of taxation” to solve the “chronic fiscal problem” implies the importance of revenue collection as a measure of a government’s ability to function.
• Gross fixed capital formation as a proportion of GDP (related to Indicator 9.2.2 and 17.3): The article explicitly identifies low investment as a major problem. It states, “The UK has the lowest investment rate of any leading high-income economy: between 2007 and 2025, this averaged a mere 17 per cent of GDP.” This serves as a direct indicator for investment levels.
• National Savings Rate as a proportion of GDP: The article provides this as a key financial indicator, noting the UK’s rate is “still lower [than investment], at just 14 per cent,” which explains its dependence on foreign savings.

SDGs, Targets, and Indicators Summary

Source: ft.com