We are coming up to elections. I'm not really referring to the EU elections - important as they are in so many ways, but to next year's general election.
It's curious that in the EU elections the economy hardly figures. The debate on UKIP dominates, regrettably, and that relates in large part to questions of the most profound ethics.
When it comes to next year's general election everyone will expect a different story. The Bill Clinton campaign adage that "it's the economy, stupid" will be expected to prevail. Maybe it will. I'd prefer it didn't. I think we should instead be asking questions of profound ethics all over again in May 2015.
I have, I think, good reason for saying that. It's not that the economy is not important. Far from it: I've always thought and suspect I always will that economics and politics are inextricably linked. But then, from fairly on in my time reading and studying economics I was taught (more at school it must be said than was ever the case at university, where silo based thinking was, I regret already commonplace) that to ask deeper questions on the relationship between economics and politics was necessary.
This is a lesson that has almost been forgotten over the thirty eight years since I left school. It does, however, remain of fundamental importance because unless you look at the assumptions that drive the economics that underpins any political belief system (and by and large that is the right way to recognise direction of travel in the association) then little makes sense about the statements of intent on politics that follow.
For thirty or more years now - so during the entire time that the vast majority of those now in political office, or aspiring to it, in the UK were taught this subject - economics has been subject to a hegemonic stranglehold by neoliberalism. Despite espousing the merits of competition this thinking has, in fact, sought to eliminate all opposition to its creed (I choose the word with care). So absurd has the consequence been that I have been told by an Oxford professor that I pursue politics because I question neoliberalism but his own work is wholly objective because it follows the natural laws on which he claims that the neoliberal interpretation of neoclassical economics is founded.
I have covered this ground many times before, and have explained, often, why this claim is wrong. But it has real relevance now, for two reasons. The first is, as Larry Elliott has pointed out, there will, it is confidently expected, be reports of economic 'good news' this week, which will be trumpeted as a sign that recovery is now fully upon us. Secondly, that is wrong.
As all those who have looked at GDP per capita data know, the UK is not enjoying growth in anything but population right now - much of it because of net immigration. That is the cause of our growth. Indeed, in many areas, as I have, for example, shown with the self employed, real earnings growth is negative and likely to remain so.
And second, there is no doubt that what's happening is an old fashioned pre-election boom of the very worst kind. We all know that the last thing we need in the UK is house price inflation, over extended personal credit before inevitable interest rate rises and growth based on credit bubbles and not investment and yet that is exactly what we have. This is 1988 and 2006 all over again. And the bust will follow - to be triggered by interest rate rises unless something unforeseen happens before then (and don't rule out a Euro crisis if the far right get a significant blocking mandate in EU elections as a potential trigger for that earlier event).
So why go back to fundamentals? The answer is simple. We need to look at what change is really needed in our economy. We need to ask what the assumptions that should drive the economics that can delver the freedom from fear I have written about should be. We should be asking what that economics and so what that politics would look like. And we should be asking which parties are willing to rise to that challenge when deciding how to vote - which is an issue on which I do not advise.
That is, incidentally, true of the EU elections as well as next year's general election. And what are the fundamentals? I think the critical assumptions that must underpin the economics as well as the politics - all of which issues are now clearly evidence based - are a belief that inequality is harmful; that providing opportunity for all - including access to capital in all its forms - is vital; that safeguarding of future generations is essential, and that investing with that in mind is key whilst providing work for all who want it is the most obvious way of using our economic resources sustainably as well as socially acceptably.
The economic news we will get this coming week is not based on any of those assumptions, and the political thinking of those who will deliver the news is far removed from that logic which values each and everyone, now and in the future, as of merit in their own right That's why we will get no economic good news this coming week. We'll just get some papering over some more cracks in he facade of a failing economy, a failing politics and a failing way of economic thinking.
The time for change has come.
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Surprised that the Oxford Proff. and others hold on the fallacy of Natural Law regarding neoliberal economics. It’s so elementary to prove it is non such.
It is elementary to disprove such nonsense; but risky to do so – unprofitable in the private secor, and with a real risk of dismissal; unpalatable in the academic sector, where prestige and academic funding follow fashion and political approval.
Why include harm from inequality as an assumption of the system? I would have thought that it would be something you could conclude from observation.
I agree entirely, Richard -and ‘good’ to note that you no longer expect anything from Labour -we need to acknowledge that it is a one-party state now.
neo-classical economics (as Steve keen points out) is rooted in a fundamentally impoverished notion of human nature and so-called natural laws (all, of course, defined by a public school educated elite going back to Bentham).
You are right to see politics and economics as virtually the same thing. That an economics professor can see neo-classical economics as describing ‘natural laws’ reveals a staggering level of hubris and myopia combined.
Take inflation figures: 1.7% when people can’t afford housing;can’t put food on their tables;can’t pay energy bills -this figure is a placebo at best-hardly scientific!
Another house price boom is beyond the most crass stupidity comprehensible and contributes to greater inequality (those that already have houses and those that don’t).
The increase in ‘self-employment’ has largely been a product of ‘hounding’ those on JSA into it while housing benefit is still needed due to the previous housing booms.
Any being watching this from another planet would be belly-laughing at the utter stupidity and imbecility of it all.
I have recently struggled through Steve Keen’s ‘Debunking Economics’. He was one who foresaw the Global Economics Crisis. His theme is that economics is one of the least empirical sciences. I have thought over the last four years that I’ve been following this blog, that much of economics is a branch of theology (of a self worshiping self). Keen says that most of the assumptions underlying conventional economics can be shown to be wrong or not generally applicable. It is analysed by linear maths and the complexity of the real economy would benefit from modern mathematical tools such as that used by complexity/chaos theory.
The tragedy is that the great depression of the 1930s was worsened by adherence to outdated economic theory and the same thing seems to be happening again. I am sure some of the defenders of neo-liberalism really do think there are no alternatives but many don’t care as long as they gain.
Thoroughly agree that we need to change and base our economy on moral principles.
It’s a great book – was an eye opener to me
“The tragedy is that the great depression of the 1930s was worsened by adherence to outdated economic theory ”
Indeed, but even then there were more open minded (although neo-classical) economists (Irving Fisher)and at least they had the Glass-Steagall act which was sunk by lobbyists. Now we have very little official opposition to the status quo with the complete disappearance of the public good and social purpose – in this respect it is worse than the Great Depression ( though we still have welfare-just about!).
A pre-election boom?
Ask yourself: “A boom for whom?”
If any GDP growth is real – and you are right to dispute that – such gains as there are will go to a tiny minority of the population.
And, as the concentration of wealth accelerates, the majority of the electorate are still experiencing a real recession.
So two cheers for Mr.Osborne: he’s succeeding in his job of making rich people richer; but he’s rubbish at buying elections.
So the question isn’t quite so much about the boom, it’s about banging the drum and generating ‘feel-good factor’ in the media, in the belief that an illusory boom will be reflected in the ballot box.
This is a risky strategy – lying always is – but empty promises and hollow speeches have this advantage: an empty vessel makes the most noise. And Labour are silent; partly through lack of vision, partly through lack of media access; and partly, I hope, that they are ashamed that their loudest noise to date is promising that they are even harsher on the undeserving poor than their neoliberal co-religionists in government.
I’m sure most readers know the reasons behind perpetration of the the neo-classical economic paradigm. It has served its time and should no longer be at the cutting edge of economics and much like Newton’s simple equations for force, velocity and acceleration have been replaced by Einstein’s theory of General Relativity should be superseded by models that describe the complex dynamic system that the “market” represents.
The first thing that needs to be done is to take into account the impact of banks and in this connection Martin Wolf’s article of 24 April 2014 is of great interest.
http://www.ft.com/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html?siteedition=uk#axzz307LB6vKb
The comparison to Newtonian mechanics is apt. Like Newton’s work, neo-classical economics provides a relatively simple and understandable model of the world that generally produces a fairly decent starting point to work from (provided you are aware of the scenarios in which it breaks down). It is when it is invoked as the complete and absolute truth that you run into trouble.
Nonsense
It doesn’t even come close to explaining the economy
Oh, explaining whole actual economies is definitely one of those scenarios where it breaks down rather badly, and people who are convinced otherwise shouldn’t be allowed to run a bath, let alone a government. A complete explanation of the economy in this metaphor is like a Grand Unified Theory in physics (ie something various people are working on with varying degrees of success, but which at present we don’t actually have).
Fortunately, almost none of us have to actually run the economy, the value most people would get from a basic understanding of economics is in making much smaller, less important and considerably simpler decisions.
Except that it does not explain, it asserts e.e. Profit maximisation, which is just wrong
You are confusing assertion and assumption. Of course agents aren’t universally rational profit maximisers *in the real world* (that’s pretty easily observed). On the other hand, the assumption makes the model much simpler and the resulting calculations considerably easier. All I’m saying is that the output of the model is in many circumstances *close enough* to be a useful aid to decision making.
But the assumption leads to the wrong prescription and is therefore wholly inappropriate
Easy modelling of a system that does not exist is as useful as the proverbial chocolate fireguard
Richard this comment is probably too long and was really intended as a response to a reply you made in the last few days to a question someone asked you. Your response was, as I recall, “Errm”. Please feel free, therefore, to delete it if you wish without offence.
When, in the 1970’s, Noam Chomsky described his theory of the ‘propaganda model’ of government he described perfectly the situation in which we live in now. Others have written about the ‘social construction of reality’. The perception that Britain is in recovery, endlessly parroted by a media now almost entirely subjugated to the Neo-Liberal agenda, will for many become ‘the truth’. Not, of course the truth as perhaps we might see it, but, in the echoing void of dissent from the opposition benches, ‘truth as social construct’.
That agenda, advanced by a ruling hegemony that owes no loyalty to anything or anyone, other than its own narrow vested interests has permeated through, and annexed, all of the three major political parties. For those of us who hail from the left wing it is embodied in the ‘Osbornomics’ of the Conservative party. But we only have to look dispassionately at the Labour Party to see that the presence of the neo-liberal tendency has captured and emasculated what was once the party of the common man. Terrified of division the ‘true Left’ within the Party is constrained to the sidelines. Beyond the boundaries of the mainstream there is no hope. Hopelessly schismatic, riven with infighting, the radical left offer no threat, weakened as they are by subdivision after subdivision, until they resemble nothing more than a Monty Python sketch (‘but I thought WE were the popular front of Judea…’) Unable to extricate themselves from hide-bound dogmatic adherence to the thinking of a 19th century, German Jewish political philosopher, the idiosyncratic pronouncements of the far left appeal only to themselves, and then often fractiously.
But we on the left make a mistake if we conflate Cameron, Osborne et al with Conservatives. The Tory vote can be roughly subdivided into three groups, namely, the Neo-Liberals who control the Party, Conservatives (i.e. those who openly profess themselves as such), and those who are likely in an election to believe that they will be better off under a Conservative government. The first are small in number, though powerful. The second group are dwindling and often increasingly disillusioned. The third and, electorally at least, most important will probably vote either Tory or UKIP at the next election. Those who vote Conservative will probably do so on the basis that their is a perception, unchecked by the Party themselves, that Labour were responsible for all the ills leading up to, and arising from, the Global financial melt down of 2007/8.
Of those who elect to vote for Farage and his jolly japesters it will largely be as a two fingered gesture to a party that plainly holds them in contempt. Unable to find it in themselves to ever vote for anything ‘socialist’, they will turn instead to UKIP, the only party that appears to stand in the without of the Westminster village.
But herein lies the delicious irony. Say to those voters that ‘this party believes in the socialist plan of nationalisation of the means of production’ and watch them head for the hills. Say instead that this party would refuse to renew franchises for rail companies, instead recreating British Rail and they’ll vote for it!
The truth is that the British model of socialism, whilst perhaps not perfect, worked better than any other system before or since. And though large swathes of the electorate, fed for decades on the ‘four legs good, two legs bad’ rhetoric of our so called free press are unable to assign their loyalties to ‘socialism’, they have witnessed the depressing failure of predatory laissez faire capitalism with every spiralling energy bill, every cancelled train, every failed breast implant.
A new millennium requires a new party, new economics, new thinking.
I have on my desk a manifesto of 25 ideas that would crush the Conservatives in the Shires, woo the disenfranchised Labour voters and put UKIP to flight once and for all. And that’s just me. What wealth of talent writes on these pages every day, to no great purpose, other than informing discussion amongst like minds?
2015, I firmly believe, will be the last chance for democracy in this country. We are already seeing the first steps to open repression of free speech. There is so much already that is reminiscent of post-Weimar Germany, what will they do given another five years?
Every movement requires a nascence, a moment of being born out of something else. That moment is now, or it is never.
What is in your manifesto?
Richard, apologies for the delay…
The SP Party Manifesto
ED NOTE:
As it appeared this promoted a particular party’s view I felt it inappropriate to post the rest of this comment
Apologies Martin
Martin – about a year ago there was a howling gap waiting to be filled by a true opposition party that would educate the public about the REAL causes of their debt slavery misery and the syphoning of wealth to the financial sector. Labour’s silence was cavernous and the opportunity lost for every. For those that want deep-seated reform of money creation and over financialization, there is NO-ONE to vote for. 2015 is not the last chance for democracy-I’m afraid that chance has passed-we will now have to wait for debt peonage, oligarchy, kleptocracy to worsen to such an extent that light bulbs go on in the narcoleptic populaces mind and they stop swallowing the Tory rouse that it is all the fault of the poor and ill because they ‘just don’t work hard enough’ (now a 35 year old mantra).
I’m not sure the left/right paradigm has any mileage left to it to be honest. I feel we need to move to a rational economy that is based on real, objective issues: environment, genuine price discovery, wealth diffusion and an end to the land/housing scam that is enslaving the majority.
A lot of good stuff, but all undermined by what you refuse to come to terms with:
‘providing work for all who want it is the most obvious way of using our economic resources sustainably as well as socially acceptably’
When means of subsistence is so fundamental to how we live and to the nature of our economy overall, but when, also, the labour/capital balance is so much the basis of any power to change things, I ask:
Is that providing work here for all who want it, from whereever, or what?
Because as jobs are created, people come in to fill them (pretty much what the ONS shows over and over).
A reserve army of unemployed or, similarly, unlimited labour migration, means that labour power is continually undermined and the labour/capital balance is further tipped in favour of capital.
This is why the City of London uses its huge resources for PR to overtly and covertly promote borders open to foreign workers and the continual expansion of the EU to include more and more low wage countries. The big players are deeply involved in this, but the Left is off with the fairies.
This is not a side issue to discussions of economic model. Its central.
I thought I was acknowledging that