2018 is proving to be fickle. The mood is, as a weather forecaster might say, changeable.
The FT has run articles about a new era of ‘beautiful normalisation' in finance, as rates, profits, monetary policy and, of course, the ability to con the consumer, all get back to something like pre 2008 levels.
Feedback from New York's finance sector via colleagues is that the mood is upbeat there: subprime is back in town with all that goes with it.
In the UK the government has ‘done a Lehman' by letting Carillion fail. No one knows the consequence is yet, but it feels ugly, although it's unlikely to be a global tipping point; more a significant UK shock.
The mood on Brexit is changing: maybe a second referendum is on the cards, but the EU agencies and the jobs that go with them will have left anyway.
In politics, I can only believe that 40% say they will still vote Tory because they really cannot face Corbyn. That's what many who I think should be natural Labour supporters tell me. Otherwise, how could Tory support be at the level it is?
And underpinning all this? I want to draw attention to three things. First is Aditya Chakrabortty's new column on ‘zombie economics' and the ideas that underpin it in the Guardian. No doubt this will annoy some macro economists, as Larry Elliott's not wholly dissimilar assault did recently.
But then there is the crisis in macro that needs to be faced anyway. This is reflected in the new edition of the Oxford Review of Economic Policy, available free here, and subject to daily comment in the FT this week (big paywall). At its core this collection of papers says macro has gone wrong by thinking it is based on microeconomic foundations, not least because the assumption of rationality within very constrained criteria has not, in any case, served micro well.
And through all that there is the common narrative that we know that what we have does not work. To say so is the easy bit though when the evidence is overwhelming. To say what replaces the zombie is harder.
I can say three things.
The first is that answer will be in economics, even if not economics as most have quite known it to date.
Second, I think what we are looking for an adequate explanation of ‘what is' and not ‘what should be' because that is what economics should do.
Third, to quote Michael Buble, most just haven't ‘met it yet'.
And there is good reason for that. Take a discussion I had in the last week on an academic paper I am writing on tax gap theory. In the course of that work I have changed a definition in national income accounting because what I can see in reality is not explained by available theory. So I am suggesting alternative theory. But as one academic put it to me ‘Can you do that?'. And ‘Is that allowed?'
My answer was that I do not care: I will do what I think appropriate without consideration for the constraints imposed. And it will get published, I suspect.
And it's that process of change that matters. 2018 is fickle because of the inherent tensions: the old isn't dead and the new is yet to be recognised. Whilst this persists the world wobbles. And it will until it has a new 'ism' - that is, an explanation that makes sense to most on how things do work and what the consequences are.
I am exploring MMT here because I think it's explanation of money is part of that 'ism'.
And I have offered my own twists in the past.
This much I know though. First, there will be no ‘beautiful normalisation'. The past is dead.
Second, there has to be an asset price revaluation which will shock the financial system.
Third the relationship between the state and private sectors needs to be redrawn.
Fourth, the GDP obsession of economics has to go.
Fifth, well being matters.
And sixth, contrary to Jeremy Bentham's beliefs, so does its distribution.
Seventh, we have to live with our planet.
Eighth, it is ideas that will change the world.
Ninth, there are too few thinkers.
There isn't a tenth, right now. I've got work to do: I have to get to Brussels to talk tax gap theory. But I'll keep thinking about it.
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The ‘unmoveable’ 40% is quite a big issue here and could be the grounds of further stagnation giving the ‘status quo’ the legs to last another ten years. A significant number of that 40% are over 55’s who have enough assets to sit back in their ‘Jackist’ armchairs. I would suspect some are not happy with things but fall victim to the ‘devil you know’ state of mind.
Further, there is still a rigid belief that the economic myths still hold that’there is no money’ and that the food banks are ‘just too bad’ or the 30,000 excess deaths through lack of social care and health cuts are ‘just the way the world works’ and that the suicides of benefit claimants are ‘unfortunate.’
Further to this, the Tory policy from 2013 onward of dividing the struggling ‘in work’ with vast housing costs against those on benefits (particularly the vulnerable) was hugely successful and still maintains today; witness the recent reporting that 87% of claims reporting benefit fraud are baseless and the benefit fraud estimate is still around 0.7%-1.1%. The Tory ‘nudge unit’ did its work well.
Ann Pettifor on a New Year edition of Renegade Economist was very pessimistic , as were the other contributors (David Graeber, Keen and David Wade ( viewable here: http://www.rt.com/shows/renegade-inc/415258-2018-mega-trends-expect/). This is a very divided country and the European backdrop is of a move to the Right with the pro-EU Left failing at every juncture.
Then there is what I call the ‘Brexit-hot-air machine’ which will continue to be a diversion from the real issues of changeing the economic paradigm. In a recent tweet, David Graeber suggested that brexit as a sort of Tory displacement activity to hid the appalling catastrophe of austerity:
‘Wondering. Is Brexit (in part) a Tory controlled demolition: way to blame inevitable crash on populism instead of austerity?’ (/twitter.com/davidgraeber/status/746692357962207232?lang=en)
And Austin Mitchell put it more starkly:
‘Brexit is just a distraction to the real problem: the UK’s clapped-out economy’ (www.theguardian.com/commentisfree/2017/dec/11/brexit-distraction-real-problem-uk-clapped-out-economy-winden-manufacturing-production-base).
Labour, is torn on Brexit and this will weaken the Left and they are failing to establish a new paradigm with enough clarity by keeping the ‘balance the books’ myth alive and thinking that ‘money grows on rich people.’
I expect years of stagnation and rigid division which will leave millions struggling and many suffering including unnecessary deaths which will continue to harm and fragment what is left of the moral fabric (not much!). This is the real inter-generational debt: a fearful, fragmented community, resentful and angry, morally recalcitrant and kept in the dark about how things can get better.
I agree
That’s why we need to think another future
“The ‘unmoveable’ 40% is quite a big issue here and could be the grounds of further stagnation giving the ‘status quo’ the legs to last another ten years. A significant number of that 40% are over 55’s.”
With regard to he nature of demographics it is distinctly possible that a significant proportion of your “‘unmovable’ 40%” will have moved into the cemetery over the next ten years.
Many who I think should be natural Labour supporters tell me they can’t face Corbyn, too. When I ask them why, the answers I get include:
‘Because he’s a looney’
‘Because of his lifestyle’
‘Because he’s anti-semitic’ WHAT? ‘OK, then, because he hasn’t eradicated anti-semitism’
‘You can say what you like about Blair, but he won elections’
‘Because he won’t bomb Russia’ (Because he refuses to countenance vaporising millions of children)
Now, if only we had someone who could pander to these people. What would such a leader look like?
OK, I don’t move in academic circles. If only some of these people had had the benefit of a college education. No, wait, I know for a fact that some of them did.
We should never underestimate the power of the brainwashing that’s taken place throughout the last 28 years. Once upon a time, long ago, it came from the pulpit. Then from newspapers & TV. And now it’s the internet.
But I agree with you, the answer’s somewhere in MMT. But it won’t be a discussion on MMT that does the unbrainwashing. It will be an idea that’s simple, powerful & true.
I agree
But it has to explain what actually happens
During this depressing and seemingly interminable interregnum between the death of the old order and birth of the new ….. https://www.youtube.com/watch?v=_UObEU3UCS8
Great song
Good song!
1. “The FT has run articles about a new era of ‘beautiful normalisation’ in finance”
Going by historic precedent there is no better indicator of an inevitable if not imminent crash than that one.
2. “In politics, I can only believe that 40% say they will still vote Tory because they really cannot face Corbyn. That’s what many who I think should be natural Labour supporters tell me. Otherwise, how could Tory support be at the level it is?”
To paraphrase the baseball legend, Yogi Berra, this is like “deja vu all over again” In the period that began with the ‘chicken coup’ and ended with the GE, I recall being subject to endless wall-to-wall predictions of electoral carnage at the hands of the “unrepresentative”, “naive”, “unelectable” Corbyn.
Much of it was based on opinion polls that turned out to be unreliable garbage. I don’t honestly know for sure but I have no reason to believe that they are any better now and certainly wouldn’t regard them as concrete fact.
[…] have suggested that we need a new ‘ism’ when it comes to economics. I am far from alone in doing so. The demand for a new paradigm […]
I have just started reading George Monbiot’s book ‘Out of the Wreckage’ which discusses the need for the Left to have a new narrative. I was wondering if you have read it Richard?
Yes
I agree with the idea
I am seeking to take it forward
There are too few thinkers…
I’m confused as to whether you mean there are too few people coming up with ideas or too many people not thinking for themselves (or thinking behind the sound bite*). Or perhaps both.
* Example. T May @PMQs 17/01/2018.
“We were a customer of Carillion, not the manager and that’s a very important difference.”
Which is factually accurate, hence many instantly agree with.
However the more you think about it the more dissembling it sounds until only sophistry remains.
I really meant your first category
But your second is probably right