The question we rarely ask, despite quarter after quarter of scrutiny when new figures emerge, is whether Scotland’s growth is sustainable.
Sustainable economic growth means it can be maintained without creating other significant economic problems, especially for future generations. Sustainable economic growth might not amount to much, but if it’s sustainable, it can improve and accelerate without unwanted repercussions.
In that context, consistent growth of 0.1 per cent might be all Scotland can expect at the moment, bearing in mind our economic relationship with the oil and gas sector, and inconsistencies in trading conditions from one industry to the next.
It is rare to find clear parallels between country and commerce, but business leaders will perhaps understand this point more clearly than politicians. In commerce, sustainable growth is the rate of growth that a firm can sustain without having to dramatically increase financial leverage or look for outside financing. It is the long-term view: the driving mechanics of business strategy that weighs reward with risk and is driven by your core business. It is not about chasing revenue growth for its own sake.
If only there was a way to release GDP of its considerable political equity. GDP is kicked around between government and opposition, neither agreeing on the implications for businesses. That lack of consensus trickles into the economy and encourages us all to weigh in – is it good or bad? Black or white? We are rarely asked if the growth we see is sustainable or if it is delivering other benefits such as real wage growth.
If we are growing within our means, whether as a country or a business, we should value the long-term benefits of that. But GDP alone cannot tell us this, though still we rely on it.
The Scottish Government clearly states its desire for sustainable growth, which it defines as steady, and enduring. While it has two GDP-related Purpose Targets, it has also set out a range of other measures such as labour market participation, reducing inequality and social cohesion.
I find myself asking why we rarely hear about the whole picture holistically, nor even the sum of the parts. If country and commerce both value long term thinking, why don’t we measure ourselves against it more openly?
Sustainable growth is not the same as low-risk growth. Investment in a long term goal might mean forgoing short term returns. The survival of a business might require such an approach. I’m sure car manufacturers and the oil and gas supply chain would both argue that sustainable growth is not the easy option at the moment. But if this connection was more clearly made, we might better address low productivity and encourage real wage growth thanks to a longer term vision.
The legal sector is not immune to this bigger picture. We see disruption ahead. The traditional model of legal business is changing and we are all future gazing to understand what decisions we should take now. These decisions have to be explained in the wider context.
The difference is, as business leaders we do not have to judge our performance with one number. We can be more holistic in measuring success, and we get the opportunity to explain the journey we are on. Revenue, profits, dividends and other rewards are all measures of success that shareholders and staff alike will benefit from.
Sustainability, whether commercial, environmental, social or all three, is also a mark of success. Showing that a business is bigger is one thing; demonstrating that it is better takes much more effort and imagination.
In this, country and commerce diverge. GDP demeans the complexities of business and of economic growth and does not help to explain whether we are on a sustainable trajectory. It is high time we all understood whether that is the case.