Explainer

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Nationalism

3 August 2023

5 min read

Beyond wealth and wellbeing: how nations flourish

As GDP data is increasingly scrutinised, Ryan Gilfeather asks how to measure the true health and wealth of a nation.

Ryan Gilfeather

Ryan Gilfeather explores social issues through the lens of philosophy, theology, and history. He is a Research Associate at the Joseph Centre for Dignified Work.

Two women sit behind a press conference desk against a backdrop, one listens as the other speaks and gestures.

A recent International Monetary Fund press conference on the world economic outlook.

IMF.

Discussions of GDP loom large in our current age. As we live under the shadow of the threat of a recession in the UK, ministers and commentators anxiously follow our country’s Gross Domestic Product, to see whether we are on the right track. Measuring the total value of goods and services produced in a country, this figure is a litmus test for the health of an economy. Crucially, many policymakers and leaders in government believe this figure reveals the health of a nation.

As we will see, not all agree. Opponents rightly highlight that an increase in GDP does not necessarily mean that ordinary citizens live better lives. There are good reasons to share this opposition from a Christian perspective. However, ultimately, the Christian tradition highlights a very different way to measure the health of a society.

In 2020 The Carnegie UK Trust, a think tank campaigning for greater welfare for all, published a new measure for social progress: GDWe (Gross Domestic Wellbeing). In brief, they gathered and processed ONS (Office for National Statistics) data on a variety of domains in life, giving them a single figure on a 10-point scale to rate well-being. These domains included personal well-being, relationships, health, vocational activities, living environments, personal finances, the economy, education and skills, governance, and the environment. When they plotted GDP against GDWe from 2013-9, they revealed that the two do not always line up. As GDP steadily increased from 2016, overall welfare in society dipped. From 2013-9 GDP increased by 10.34 per cent and GDWe only 5.19 per cent. Hence, measuring GDP does not necessarily reveal whether life is getting better for ordinary.

Economic resources are not useless... However, they are not sufficient unto themselves for us to live full and good lives.

This attempt to shift the conversation about social progress from predominantly centring GDP is commendable. The Bible does not legislate on whether to use GDP or GDWe. However, scriptures within it repeatedly decouple economic wealth from flourishing. For example, in the gospel of Matthew, Jesus says the following:

Do not store up for yourselves treasures on earth, where moth and rust consume and where thieves break in and steal, but store up for yourselves treasures in heaven, where neither moth nor rust consumes and where thieves do not break in and steal. For where your treasure is, there your heart will be also.

In life, we can either focus our efforts on attaining wealth or fostering our relationship with God. Only the latter will lead us to flourish. Economic resources are not useless; they are necessary for us to thrive in certain conditions. However, they are not sufficient unto themselves for us to live full and good lives. Furthermore, when wealth becomes the focus of our hearts and minds, our lives will be hollow and fractured. GDWe is a good measure, insofar as it acknowledges that economic flourishing is not the same as a good quality of life, and it attempts to shed light on the latter. However, the Christian tradition highlights a different framework altogether to grasp the health of a society.

Gregory of Nyssa, a fourth-century theologian and bishop, frames wellbeing as a human being reflecting the image of God to the greatest of their ability. The book of Genesis says that God made us all in His image. Gregory argues that this means that we can become like God in certain ways. God is the fullness of all good things, such as love, justice, peace, joy, and courage. Consequently, Gregory argues that when we act in good ways, we begin to share those characteristics, which in turn leads us to act well in the future. For example, if I defend someone who is under attack, I will become more courageous, and more likely to repeat the same action in the future. The more we reflect the image of God, by acting well and taking on His characteristics, the more we will flourish as individuals. In this vision of human flourishing, Gregory brings together an Aristotelian account of virtue, with a Christian understanding of people as the image of God.

This framework for the well-being of an individual also provides a good barometer for the health of a society. All of these actions and characteristics are building blocks for a healthy society. So long as we have a good sense of how to act appropriately with love, justice, peace, joy and courage, then our actions will build up our common life together. They benefit all, rather than one. They are not zero-sum actions. Accordingly, a society made up of individuals who are acting well and reflecting the image of God would be very healthy indeed.

As a measure of a society, we should ask whether it leads citizens away from virtuous actions and characteristics. For example, between 2019 and 2021, gun murders in the USA rose by 45%. Earlier this year, journalist John Burn-Murdoch argued this rise is partly due to decaying public trust in that country. This tells us that a culture marked by fear of others can lead some of its citizens to commit terrible actions and live lives full of violence. GDP may rise during this time, as may other markers of welfare. However, to see the whole picture we need also consider how societal forces are leading citizens away from flourishing in their reflection of the image of God. Then, we should go about addressing these malignant forces.

In times of adversity... individuals in societies marked by high levels of trust are more satisfied with their lives and act more benevolently.

At the same time, we should also consider how a society enables its citizens to reflect the image of God. Societies with high levels of social trust create space for a variety of positive actions and characteristics. The World Happiness Report studies people’s sense of life satisfaction worldwide. It routinely finds that in times of adversity, like the Great Recession in 2008 or the COVID pandemic, individuals in societies marked by high levels of trust are more satisfied with their lives and act more benevolently than others. Again, these social forces are not the same as GDP, yet they have a significant ability to shape the extent to which citizens can reflect the image of God, and thereby flourish.

In my work for the Joseph Centre for Dignified Work, I am particularly concerned with low-wage workers’ pay and conditions. As I have argued elsewhere, low pay leads to some workers needing to take on two or more jobs. They, consequently, have no time to see their children, nourish their faith, or participate in community institutions. It is clear, therefore, that the widespread pattern of paying below the Real Living Wage (£11.94 p/h in London, £10.90 elsewhere), hinders people in their expression of love for God, family and neighbour. Pay and conditions are but one further example, amongst many, of how societal forces can hinder or help our flourishing in the reflection of the image of God.

Needless to say, GDP and GDWe are still useful and necessary tools. However, they do not tell the full story. GDP only describes the progress of the economy as a whole, and GDWe can only describe the quality of an average person’s life. In contrast, when we set a goal that each citizen should reflect the image of God, we can begin to explore how societal forces enable or squeeze out this aim. With this greater knowledge in mind, we can strive for progress in our nation by fostering good structures and stamping out bad ones, so that all may reflect the image of God to the greatest of their ability.

Explainer

Comment

Economics

29 October 2024

6 min read

How to tax ethically to avoid a two-tier society

From income tax to property and inheritance taxes, which is fairer?

Laurence Fletcher

Laurence Fletcher is a journalist at the Financial Times.

Sarah Agnew on Unsplash.

Few doubt that Chancellor Rachel Reeves will be putting up taxes when she presents her first Budget on October 30th.

The political narrative of recent months has very much been of an alleged fiscal “black hole” of £22bn - or is it £40bn? - that somehow needs to be filled.

While the size of the shortfall and the identity of those responsible are both hotly disputed, and despite a lack of detail from the Treasury about what it actually consists of, the questions now being asked are not whether taxes will rise but which ones and by how much.

Months of speculation have focused on employer National Insurance, capital gains tax and freezing income tax thresholds as areas that Reeves could look to for the additional revenue.

But beyond the immediate issue of raising enough revenue to make good any shortfall, lies a deeper, trickier question about the way in which taxes should be levied for the good of society. If a government is to force people and companies to hand over their money, then what is the most ethical way to do this? Who should pay and who shouldn’t? How can tax be used to reduce inequality and build a better society?

Answering such questions is, of course, far from straightforward, because there are plenty of other factors in play.

For instance, some taxes are surely levied because they are simpler to collect. Take income tax - an unpopular measure introduced in 1799, then abolished before being reintroduced as a supposed temporary measure. It could certainly be argued that taxing people’s income - their attempt to get on in life and improve their lot in life - is less “fair” than taxing wealth that has been accumulated by someone’s ancestors years ago. Working hard and earning income is often surely a way of breaking down class divisions. But income tax - contributing 28 per cent of UK government tax take in 2023-24, according to The Institute for Fiscal Studies - has the advantage that it is relatively difficult for the average worker at a UK company to avoid it. Ease of levying it is surely a driver.

Equally, some taxes that might seem “fairer” have deliberately not been levied because of the difficulty in collecting them, and/or because to try to do so could be counterproductive.

A wealth tax, for instance, would be “economically damaging”, according to one of the UK’s highest profile tax experts Dan Neidle.

Or take the politically contentious issue of non-doms, a colonial era tax break allowing rich foreigners to avoid UK tax on overseas income. It would be fairer, the argument goes, to tax them on the whole of their income. If they are going to be resident in the UK, then surely they should be taxed like a UK resident whose home is here?

Former Chancellor Jeremy Hunt abolished this regime earlier this year but left a number of concessions that the incoming Labour government pledged to abolish. But non-doms are tax-sensitive and highly mobile, and a number of jurisdictions compete to attract them. Many are entrepreneurs and wealth creators that many countries need. Reports have suggested a clampdown could raise no money or even cost money and could drive people away.

“Housing is being treated as a commodity. The problem is, it’s not; it’s not just an asset. It has utility value and a communal and quasi-spiritual value, enabling people to feel rooted.”

Paul Williams

So, what can be done to use tax in an ethical way? Paul Williams, research professor of marketplace theology and leadership at Regent College, Vancouver and chief executive of the Bible Society, takes a Biblical perspective that he believes offers some solutions.

He takes as his starting point a story from the gospel of Matthew, where Jesus is asked whether people should pay taxes to Caesar. The question is a trap - either Jesus gives his backing to taxation that is highly unpopular with the Jewish people, or he rejects the tax in an act of rebellion against the Romans.

Jesus replies that they should “pay to the Emperor what belongs to the Emperor, and pay to God what belongs to God.” We are to pay our taxes to those in authority, but we are also to honour God.

While Williams believes that too much emphasis is placed on the Budget and political parties’ promises to be able to fix everything, and that a more radical rethink of our economy is required, he also sees room for positive tweaks to the current system.

One key area is the property market, the manifestation of so much inequality in society, with some people owning multiple houses while others cannot afford to buy one.

Williams argues that the ready availability of debt finance has allowed those who already hold assets to easily acquire properties, turning real estate into an investable asset class to the detriment of many of the poorer in society.

“The reason there’s so many homeless people and empty houses is due to debt finance. It makes it easy for a relatively small proportion of the population to acquire a large percentage of the assets.

“The system has allowed a structure in which a small advantage in the beginning can lead to big, big differences over time.”

Williams highlights parts of Devon and Cornwall that have been, he says, “completely ruined” by wealthy people from elsewhere buying second homes, leaving property “out of reach of anyone who lives and works there”.

Nevertheless, he believes taxation can be used in this area to help level the playing field.

He proposes a “pretty punitive” marginal rate of tax on ownership of more than one home. (Stamp duty only partly does the job and is a blunt instrument also affecting people moving homes, thereby makes mobility expensive).

“You want to disincentivise the way the housing market is used for speculation,” he said.

“Housing is being treated as a commodity. The problem is, it’s not; it’s not just an asset. It has utility value and a communal and quasi-spiritual value, enabling people to feel rooted.”

Buy-to-lets, meanwhile, are better than having empty second or third homes, but “wouldn’t it be better if occupiers could buy that house?” he adds.

Meanwhile, research by the Financial Times recently found a huge wealth gap between the average millennial and the top 10 per cent of millennials, who are benefiting from family wealth to accumulate substantial housing assets.

So, would increasing the rate of inheritance tax - one of the most hated of taxes - and/or lowering the threshold also help reduce some of this inequality? After all, how is it fair that one child in the UK is born to inherit large property wealth while another is born to inherit little or nothing? Or, even worse, that second child will only ever be able to afford to be the tenant of the first, paying them rent for the rest of their lives?

Williams is not a fan of inheritance tax per se, arguing that it is “not part of the package” in a Biblical image of a flourishing economy.

But he adds an important caveat: “the playing field is not level.

“There might be circumstances to impose a one-off tax on the very wealthy… if you want a transition to a more equitable society.”

Such steps are not easy to take. It is, he admits, probably “career suicide” for a politician to adopt such views. But if we are to take steps towards a fairer way of life, and avoid a two-tier society in decades to come, then maybe the conversation needs to shift this way. Perhaps the Budget could be the time to start.