Move fast and break things? What’s missing from the UK’s ‘growth plan’

The UK has a new Prime Minister and cabinet, from a party that has been in power for twelve years. The Conservatives have presided over austerity and Brexit, as well as a pandemic and now war in Europe. Many economists argue that the first two have sapped economic growth since the Great Recession of 2008-09, even before the disruption of the latter two factors. Productivity growth has been feeble during those years, breaking sharply with the previous long run trend. Other countries have experienced productivity slowdowns, but the UK’s has been particularly poor. The ‘new’ government and its leader Liz Truss have promised to ‘grow the economy’ faster via a mix of tax cuts and deregulation. Rather than acknowledging the Conservatives’ role in holding the country back, she has blamed some made-up enemies: the ‘anti-growth coalition’, which in practice seems to mean anyone who opposes her policies, and a focus of previous governments on redistribution rather than growth itself. As a self-styled controversialist, she has claimed that disruptive change is needed in order to restore the country’s economic fortunes.

All this seems to imply a future of regressive growth at all costs, whether socially, environmentally or even, paradoxically, economically. The government may not see it this way, and the full extent of its plan has yet to be laid out. But as an antidote to what is likely to prove to be a fantasy, more or less libertarian, set of economic policies, I thought I would lay out some areas of progressive concern over the ‘growth plan’, by taking a constructive approach rather than a purely critical one. The following sections are not meant to be in order of importance. In fact I think that all these areas are important to securing a more widely-shared prosperity, not least for the UK, as well as elsewhere. Continue reading

Quote of the week: Keynes, capitalism and public purpose

“In their own way – and in the social, political, economic and institutional context of the early decades of the twentieth century – globalisation, free markets and light-touch regulation contributed to the devastating events that produced two world wars, with the Great Depression in between. Keynes recognised this, and he sought to reform capitalism so as to make it work both more efficiently and more fairly, such that people could live the good life, eventually free from the economic problem of material need.

Indeed, after World War II, the managed capitalism of the so-called ‘Keynesian’ revolution – in which domestic and international financial markets were tightly regulated – delivered three decades of unprecedented improvements in economic equality and living standards. However, since the 1970s and 1980s, across the industrial world, the return to laissez-faire and the unleashing of international corporations, markets and finance set into motion similar forces to those of Keynes’s time, and he would not have been surprised by the events that followed. From the arrival of the Great Depression, Keynes became a critic of both free trade and unrestricted international capital flows, and he ‘would not have been an enthusiastic globalizer’ (sic). But, as he did throughout his lifetime, were he alive today, Keynes would have developed pragmatic policy proposals appropriate to the social, political, economic and institutional circumstances of our times.”

S. J. Konzelmann, V. Chick and M. Fovargue-Davies (2021), Keynes, capitalism and public purpose, Cambridge Journal of Economics, vol. 45, no. 3, p.610.

Quote of the week: remaking the case for the mixed economy

AmericanAmnesiaThe machinations of American politics today recently led me back to the 2016 book American Amnesia, in which two professors of political science remake the case for the mixed economy in the US. They document the history of the “war on government” by the political right over many decades and argue that only strong, accountable and effective government operating within a mixed economy can help create a flourishing economy and society.

“[W]e should also recognize just how valuable the mixed economy is, how fundamental the role of government is within it, and how badly we are served by the misleading juxtapositions that dominate public debate: markets versus the state, freedom versus tyranny, free enterprise versus big government. From a more realistic and historically grounded starting point, we can have vigorous, reasoned, fact-based debates that reflect the diversity of our values and priorities as well as the inevitable uncertainties about the best ways to tackle complex problems. We can seek positive-sum bargains and broad consensus about how to improve the mixed economy and address new challenges, learning over time how to adjust the nimble fingers of the market and the strong thumb of government to best grasp our future.

To get to that more realistic starting point will require a serious and prolonged investment in ideas. The crisis of public authority is a consequence of orchestrated, persistent efforts to tear down government and a long spiral of silence in response. To shake free of that amnesia and rebalance our national conversation will take leadership and activism over many years to rebuild the intellectual and organizational foundations of effective public authority. The idea that one visionary figure can restore a more balanced politics is alluring but illusory. We need such men and women, but as President Obama’s experience suggests, even the nation’s most powerful politician requires a strong coalition to transform rhetoric into reality. Reform must be a multifront, interdependent effort of the sort that we have been discussing, in which robust but realistic reforms steadily build trust and momentum toward a revitalized mixed economy.

In any battle of ideas, organizations are at least as important as individuals; scripts as important as speakers. When conservative business leaders such as Charles and David Koch invested in Cato, Heritage, the American Enterprise Institute, and all the other intellectual weapons of the right, they were playing the long game. When Republican political leaders like Newt Gingrich and Mitch McConnell developed new strategies for tearing down American government to build up GOP power, they were playing the long game. Those who like us believe we can and must build a mixed economy for the twenty-first century – they need to play the long game, too. And they need to speak not just on behalf of individual policy goals. They need to speak on behalf of effective public authority.

A government that effectively promotes human flourishing is a government worth fighting for. More than ever, the problems we face demand a sustained and principled defense of a vital proposition: The government that governs best needs to govern quite a bit. Americans must remember what has made America prosper.”

Jacob S. Hacker and Paul Pierson (2016), American Amnesia: How the War On Government Led Us To Forget What Made America Prosper, New York: Simon and Schuster, p.368-9.

Considering Keynes’s ‘Liberal Socialism’

Was Keynes a champion of a reformed capitalism or a liberal socialist? He consistently argued for a middle way between laissez-faire and state socialism as a means of achieving the good society. But although he referred to a form of socialism in some of his work, his possible variant of such a system creates some confusion in the use of language and argument. A modern social democratic liberalism retains the core features of capitalism and can continue to draw on the ideas of Keynes, even if it does ultimately evolve into something different.

keynesThe conventional wisdom on Keynes has it that the great economist and statesman argued for a reformed capitalism, in order to save the system from its flaws, and guard against political extremism of the left and right. But some of today’s thinkers make a rather different case. They hold that he wanted to see reform lead the way to what he called ‘liberal socialism’.

James Crotty has turned this idea into a whole book, which I wrote about in this post. But Rod O’Donnell makes a similar argument, following the evolution of Keynes’ output during the 1920s, 30s and 40s, in a short chapter from an edited volume from 1999 honouring the work of the late post-Keynesian Geoff Harcourt. The chapter is titled “Keynes’s Socialism: conception, strategy and espousal”. In it, O’Donnell argues that Keynes consistently made the case for a middle way between (and in the process rejecting) laissez-faire capitalism and state socialism. This was his liberal socialism. Politics and economics were to be the means to achieve an ethical goodness in society. This system should combine the best elements of liberalism and socialism, and discard the worst. Continue reading

The essential needs of a flourishing capitalism

WhatCapitalismNeedsA flourishing capitalism needs both high levels of social cohesion and strong state capacity, according to a new book by two sociologists. Today’s societies are in trouble. We could do worse than draw on the ideas of some of the great economists of the past who realised that factors beyond the economic can help to provide a richer understanding of how capitalism works and may enable us to restore and sustain a more widely shared prosperity.

Sociology can often be critical of capitalism. Unlike much of mainstream economics, it sometimes draws attention to exploitation, inequality, alienation, and the neglect of society and social relations in general. Heterodox or non-mainstream economics, particularly when it takes more of a political economy and interdisciplinary perspective, can have more in common with the concerns of sociology than its often narrow and intolerant mainstream cousin. A sociological approach to studying capitalism and the economy can therefore offer useful insights. It was Marx whose own approach to political economy perhaps reached the heights of interdisciplinarity in the history of the discipline, and whose deeply critical and radical approach drove economics to become, at its core, something of an apology for an optimally working system. Continue reading

Economics and the left – some recurring themes

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Inspired by a book on the economics of decline, I reflect on some themes which concerned the left in the 1980s. Many of these continue to exercise our attention today, and distinguish progressive thinkers from conservatives in economic and political debate.

Since the advent of Keynesianism, leftist and progressive economics has been concerned with government policies of demand management to help the economy attain full employment. More broadly, social justice and reducing inequalities of all kinds have even deeper roots. Apart from its socialist wing, the left has tended to champion economic and social reform in the shape of capitalist social democracy, as opposed to revolution leading to socialism. Back in the 1970s and 80s, during the rise and heyday of Margaret Thatcher, British left wing economists had become deeply concerned about the relative, and at times absolute, economic decline of the UK, compared with its international rivals, such as the US, Japan and continental Europe. Radical economic and social reform involving increased intervention in the economy were seen as a solution to the country’s problems. This was in opposition to the Thatcherite programme of monetarism, deregulation and privatisation. But the left were kept out of power for 18 years, by which time, under the leadership of Tony Blair, they accepted much of the Conservative legacy, and attempted to improve on it rather than undo it. Continue reading

Biden’s progressive crusade – how might workers benefit?

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Joe Biden has been styled as the most pro-union US President for decades. But how might workers and the economy benefit from progressive labour market policies, if they are to reduce inequality and poverty for a sustained period?

Columnist Rana Foroohar has an interesting piece in Monday’s Financial Times in which she discusses President Biden’s ‘competition crusade’: his efforts to reduce market concentration and corporate monopoly power alongside another aspect of his political agenda, ‘elevating the position of workers’. Should Biden succeed, this will represent a fundamental shift in the balance of power in the American economy. His latest tirade has been against the supposed impact of monopoly power as a contributor to today’s higher inflation. Continue reading

Ten reasons why we live in interesting (economic) times

599px-The_Blue_MarbleFor those wedded to economics or political economy as ways to help explain the world, we live in interesting times. By this I certainly do not mean that things are going well. There is plenty that is not. But humanity’s problems of necessity call forth potential solutions, even if they prove at times to be the wrong ones. Sometimes we can get it right, and that is cause for hope.

This post takes the form of a list of the current issues that call for economics to address them. The ten reasons are ones that I feel are particularly pressing. I hope you agree. Continue reading

A left Keynesian speaks his mind – reconsidering Kaldor on Thatcher

NPG x104756; Nicholas Kaldor, Baron Kaldor by Antony Barrington BrownI recently reread The Economic Consequences of Mrs Thatcher, a fascinating collection of speeches given to the British House of Lords in the early 1980s during Mrs Thatcher’s first term in office by Nicholas Kaldor. Lord Kaldor, by then a Labour peer, was a Professor of economics at Cambridge, a former advisor to Labour governments and a searing critic of Thatcherite policies. As far as I can gather, Kaldor was always a pragmatic rather than an ideological economist, deeply concerned with matters of policy and how to improve the world around him. In this short volume, he addressed a wide range of issues concerning the British economy, but also of relevance to other advanced nations. In sum, they remain a revealing snapshot of a particular moment in history, which witnessed the turn from the postwar social democratic Keynesian consensus to a more adversarial, individualist state of affairs. I break this post down into sections, in order to comment from a 2021 perspective on Kaldor’s often blistering denouncements of Thatcher’s economic policies. Given that he died in 1986, with almost eleven more years of Conservative government to come, before Tony Blair’s Labour party swept into power in 1997, it is interesting to reflect on Kaldor’s predictions and how many of his ideas stand today, following 13 years of Labour and, to date, a further eleven years of Conservative-led governments. Continue reading