Aedan MacRae, researcher with Common Weal, looks at Barclays prosperity index published and heavily covered by the UK media on Tuesday 30 August. He finds flaws in the way the findings were presented, in the data sets used and in the choice of indicators selected
IF on Tuesday you read the front page of The Scotsman, looked at BBC or The Guardian website, you’d have been informed that Scotland’s household wealth has grown faster than London and indeed any other part of the UK. In fact, just about every major news outlet picked up the story that, according to the Barclays 2016 ‘Prosperity Index’, we’re doing pretty darn well north of the border. This is a striking finding, on the face of it, but with some light picking into Barclays report, the bones of this assertion fall apart.
In fact, all that the report shows is that Scotland has risen more places in Barclays table of regional prosperity than any other area, not that it has topped the table or even done substantially better than most regions. According to Barclay’s own figures and indicators (indicators which are intrinsically flawed, which we’ll return to shortly), 10 of the 12 regions of Britain have experienced higher improved prosperity than Scotland. Only the West Midlands, with 4% improved prosperity, have a lower figure, whilst the North West is tied with Scotland on 6%.
When Scotland’s compared directly to London, it’s not difficult to see the chasm in prosperity performance between the two:
Perhaps more worrying is the media’s replication of Barclays’ bold statement that household wealth had the highest rise in household wealth in the UK over the past year, the figure of “13%” being claimed. The Scotsman led their front page report with ‘Scottish Households see biggest rise in wealth in the UK’.
Barclays’ claim the research was from ONS data on household income, but the ONS’ most recent direct regional comparator covered 2014, and found the following:
The most recent Scottish data set on household income (covering 2014/15) was released on 29 July, and the highlighted box below shows a decline on the previous year, including a decline of over £1000 per year for the bottom 20 per cent of Scottish Households.
It is difficult, in fact nigh on impossible, to identify how Barclays found from these results an improvement in Scottish household wealth of “13 per cent”, other than that to say that their results are out of date (possibly covering 2013/14 rather than the most recent figures) or just wrong.
The wider problem with Barclays’ prosperity index is the selection of indicators represented. GDP is, as usual, given pride of place (Scotland is attributed the third highest GDP in the UK). GDP is often considered the most reliable tool in displaying a nation or regions prosperity, but its weaknesses are increasingly being exposed. Ireland is a case study in the problem of GDP.
Ireland’s official economic figures for 2015 saw its GDP rise by 26%: a remarkable increase, and one that immediately raised eyebrows. What quickly became clear was that these figures did not represent economic performance in the slightest. Irish Times writer Cliff Taylor has suggested the nation’s GDP had been massively bolstered by a number of massive multinationals relocating their productive assets and intellectual property assets from abroad to Ireland. Low corporation tax is likely to have been the primary driver of this. As Taylor puts it, “Everybody knows that the 26 per cent plus growth rate recorded for 2015 may be a statistical fact, but in terms of reflecting what is actually going on it is clearly a fiction.”
The problem for Barclays lies in that, on the face of it, GDP seems to be one of the most reliable indicators they use in their prosperity index. Some of the other indicators range between unsuitable and perverse.
“The problem for Barclays lies in that, on the face of it, GDP seems to be one of the most reliable indicators they use in their prosperity index. Some of the other indicators range between unsuitable and perverse.”
Two such indicators are ‘Charity Donations’ and ‘Millionaire Numbers’. The former seems to suggest, strangely, that an increase in charity donations is an indication of greater prosperity. Perverse, since charitable donations are more likely to come from poorer people and people are more likely to need the help of charity, such as Trussell Trust foodbanks, when they are poorer.
Why is the number of millionaires an indicator of general prosperity? Millionaires represent the top 1 per cent of people in a region like Scotland, and it is widely accepted by most major institutions and thinkers that rising inequality is a burden on prosperity for the majority. Barclays, and the other major banks, clearly still hold true to the failed ‘trickle-down economics’ mantra, where having more very wealthy people contributes to an increase in the fortune of everyone in a region. Empirical data since the financial crisis in 2008 proves the theory to false: while the wealth of the millionaire class has continued to rise, wealth for the majority has had its longest period of stagnation in the post-war era.
Another indicator which was used and has fundamental flaws is ‘House Prices’. The presumption from Barclays is that higher house prices in a region are positive and act as “a sign of their status as increasingly attractive areas to live and work”. This is one way to look at it. Another way to view high house prices is as a major barrier to low and medium earning people entering the housing market and achieving housing security. House price rises are one of the major drivers of inequality in modern society.
‘Hours worked’ is another indicator used – why does working greater hours necessarily suggest greater prosperity. It could indicate an increasing rate of exploitation in the workplace, and an increasing number of people overworked, as well as an increasing number of unemployed shut out from work due to high hours worked.
“It can be argued that within nearly all of the indicators used to determine Scotland’s wealth the ‘growth fetish’ can be identified – the assumption that an increasing amount of products and services produced is the only means by which to judge the success of a society. Beyond the clear and present sustainability problems for the planet, the focus on growth has failed on its own terms – it hasn’t produced generalised prosperity throughout society.”
It can be argued that within nearly all of the indicators used to determine Scotland’s wealth the ‘growth fetish’ can be identified – the assumption that an increasing amount of products and services produced is the only means by which to judge the success of a society. Beyond the clear and present sustainability problems for the planet, the focus on growth has failed on its own terms – it hasn’t produced generalised prosperity throughout society. In an article for the Huffington Post, James Gustave Speth, professor at Vermont Law school, argues: “Growth doesn’t work. It doesn’t deliver the claimed social and economic benefits. Since 1980 real GDP in the US has risen 130%, and you know what happened: wages stagnated, jobs fled our borders, life satisfaction flat lined, social capital eroded, poverty and inequality mounted, and the environment declined.”
Is there a better way of measuring the prosperity of a nation’s people? Oxfam’s Humankind index provides an alternative. The Oxfam index has eighteen indicators, all weighted differently. The two indicators which are given most credence by Oxfam are an ‘affordable, safe and secure home to live in’ and ‘being physically and mentally healthy’. Already the contrast to the Barclays index is obvious. Oxfam seem to measure prosperity based upon people’s happiness, healthiness and security as well as their wealth. These indicators, unlike those used by Barclays, do not simply fulfill a growth fetish.
Other indicators include ‘having a secure source of money’, ‘feeling good’, ‘getting enough skills and education to have a good life’ and ‘having enough money to pay the bills and buy what you need’.
Another approach is to stick to classic indicators of prosperity that can be used for comparisons spanning decades: employment, wages, prices, productivity, poverty, rent costs and homelessness being a few obvious ones.
Barclays fundamentally flawed prosperity index will have been digested by readers of major news outlets in such a way that they may well now have a very distorted picture of what is going on in Scotland and the UK. More careful media scrutiny is necessary of those with particular commercial interests in presenting a particular image of the UK through their own highly subjective selection of indicators and framing of their outcomes.