Chris Giles said this in the FT this morning:
Here is a simple question. Has the UK economy already recovered all of the ground lost during coronavirus, or is the damage wrought by Covid-19 so severe that it will take another two years of normal growth rates to return activity to its pre-pandemic level?
I added the emphasis, and for good reason. Giles says far more about himself and the state of economics than I suspect he thought by using that one phrase. He is saying four things.
The first is that growth is normal.
Then he is arguing that there is a state of equilibrium to which economies always return.
And he is suggesting that nothing - even a pandemic - changes this.
There is then an immutable law, and we will follow it.
None of this is true. As a conventional economist, Giles might think these things. They are, after all, what he was taught to think, and unquestioningly he accepted that instruction as truth. But that does not mean they are true.
Growth cannot continue forever on a finite planet.
And there is no state of equilibrium in an economy - because market theory - which is the only thing that suggests that possible - is based on a series of premises we know so implausible it could never deliver this outcome.
Disturbingly though, Giles has not noticed that the premises on which his claim rests have been proven to be wrong and are now being openly challenged. He only needs to look to Glasgow. COP26 is about constraining emissions to save human life on earth, which is a goal incompatible with ever-increasing human consumption, which he seems to think possible. This seems to have passed Giles by.
This worries me. Whilst the mainstream media puts out such conflicted messages how is saving life for future generations going to be possible? What will make the neoclassical economist realise that there is something more important than their market equilibria, and that is life itself?
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Walras (1834-1910) has a lot to answer for; and notably the generations of economists who have managed only slowly to discredit the reputation of the discipline economics by following his empirically flawed system. Has any other discipline managed to establish worldwide economic tenure and the obedient support of business and economics by contributing so little or nothing at all to the advance of knowledge, or a peddling a ‘science’ demonstably incapable of producing any usable, reliable predictions at all?
What Giles and others don’t realise is that it is the quality of life that is important, not the frantic quantitative expansion of consumption. Factors such as clean air and water, healthy productive land, and other land left undamaged by the ravages of “more civilization.” Instead of ever-increasing production and consumption, our economy should be more geared to ensuring a basic standard of living for all and much-improved health and social services, education for life rather than exam scoring, and a flourishing of art s and creativity. Citizens assemblies would be more of an accurate guide to what the population needs rather than small directed focus groups which tend to be run by people who support the status quo or probably endlessly damaging economic growth.
“COP26 is about constraining emissions to save human life on earth, which is a goal incompatible with ever-increasing human consumption”
This statement about Chris Giles could have been about a large number of media people.
They cannot be ignorant of facts such as those above. To work for an organisation as prominent as the FT, they must be reasonably intelligent. Could it be that they simply set their integrity aside and write what is expected of them?
Do they think, ‘Others do it. I would lose my job if I was honest. I have to maintain my family (and I want to maintain my lifestyle)?
Does conscience not trouble them? Do they look their children in the eye when they think about the future?
Are they now aware that lawyers have been engaged to challenge life-destroying policies?
Some (perhaps the younger generation) are getting angry and might come after them.
The ‘Good Law Project’ launched its challenge to government energy policies:
https://goodlawproject.org/case/energy-policy/
Client Earth challenges Drax:
https://www.clientearth.org/drax-legal-case-taking-uk-government-to-court-over-europes-largest-gas-plant/
The Transport Action Network challenges the Road Building Programme:
https://transportactionnetwork.org.uk/ris2-legal-action/
Cumbrian coal mine – submit an objection (perhaps too late now) or offer help: https://keepcumbriancoalinthehole.wordpress.com/2020/05/18/great-news-green-light-for-coal-mine-is-now-amber-thanks-to-you
The FT let’s their journalists write their own opinions
I am sure Giles is honest in believing what he writes
I just think it wrong, far too often
YES – life IS to be lived…. and the primary role of Government is to enable its citizens to live it to the full (in a manner that is sustainable and respectful of others).
Every other target of government policy is an intermediate target aiming at the true goal. So, GDP growth is a valid target as long as it is a route the the true goal of government. Once upon a time, it probably was a good proxy for “increased national wellbeing” but that is no longer the case and we seem to have fallen into the trap of mistaking the intermediate target for the true goal.
I would also add that growth is NOT the problem – it is growth that uses carbon that is problematical. Increased caring, educating, ‘greening’ and the writing of poetry all contribute to GDP growth in a way that does not destroy the planet. We CAN grow economically without destroying the planet.
I agree that we can grow without destroying the planet
But that is not Giles’ ‘normal growth’ so I think my comment fair
yes – your comment is certainly fair
This immutable economic law bollocks has led only to one thing – the pushing of two many square pegs into round holes to the extent that we’ve broken the structures that support the game we’ve been trying to play.
If we survive this, the world will be a much slower place and we might realise that growth is only about money anyway and why grow it when you can print it?
It comes down to that doesn’t it – the desire for those with money to expand their wealth through society selling and consuming more year on year versus the ability of States to print and tax money which has the capacity to benefit more people and to change things.
“Economics is the religion of perpetual exponential growth on a finite planet.”
Discuss!
“Growth for the sake of growth is the ideology of the cancer cell.” (Edward Abbey)
I fear you’re reading too much into 4 words. Mr Giles may well believe the 4 things you attribute to his phrase, but I don’t think you can deduce that from the phrase itself. I’m not even sure that the concept of economic growth is compatible with the notion of equilibrium.
Neo-classicists would disagree with you
After the 2019 election, and having a little free time, I started a company (registered at Companies House), called The Green New Deal Party, and during lockdown and since I have been reading more and more about how we could transition to a Green Economy. My artwork has been tackling this for a number of years now, (using the Extinction Symbol long before Extinction Rebellion started to use it) but my written work has lagged behind. Although I’ve always been an avid reader, I realised my knowledge of detailed Global Warming and Ecological Collapse was patchy, so I increased my reading of academic studies and also peer reviewed papers. I started writing a Manifesto for the GND Party, but this eventually stalled for quite some time as I learned more and more about how the coming Global Collapse is taking shape. The more I read, the more I knew I didn’t really understand, so the more I read. I’m convinced most of our political class are environmentally illiterate, as well as economically illiterate. The have no idea of what money really is, and even less idea of what oil is to the world economy. They see it as a resource, whereas the economy is fossil fuel. Without it, there is no economy and thus no current civilisation. During this period of writing, I have improved my understanding of Economics and MMT, vastly improved my knowledge of environmental niches, as well as threading through the interweaving of Global Warming and Ecological Collapse. I learned a lot about soil, about pollution, about unsustainable fishing, about how Capitalism is paired, indeed inseparable from Imperialism and Colonialism, and that Indigenous people have, and still are, being persecuted and erased in the face of this ravenous beast that is devouring more and more of the Earth’s resources. I understand that eventually, slowly at first but then with vigour, Gaia will strike back. We have entered an extinction event. As we trudged toward COP26, my expectations grew less and less hopeful and as we have seen, it was a COP-out, a tragedy and a farce.
Thank you
Distributional issues should be prioritised in an “ideal world” to achieve economic effectiveness as well as economic efficiency.
To whom? The issue is attention to basic commodities such as water, bread, vegetables and fruit, basic, planned and regulated housing, sewerage systems etc. At present, these are unfairly and illogically distributed globally. Unfairness will always exist in a free world but could be regulated and controlled with clear principles of fair distribution.
Real, global wealth is based on human endeavour. From global working class uprisings over the last 100 years or so, we know now that intelligence, creativity etc. is nurtured collectively by high quality health services and public education for all. The “consumption society” we have created is due to the success of such uprisings throughout the present, “developed” world.
So what went wrong? The basic message was lost. Inequality, a poorly developed and maintained civic infrastructure reigns ( insufficient public resourcing of education, health, housing for all, roads, etc). On an individual level, for instance, poor life styles with constant snacking, too much advertising of stuff we don’t need, unhealthy food products, too many toxins in our too cheap meat, a very low concern for the environment… etc. ALL are political, distributional issues.
From all this I conclude that “Growth” can be a positive as well as negative concept. As you seem to imply, Richard, present “economic growth” has a negative impact and I agree, there is no “economic equilibrium”. BUT, I believe, there are different types of economic growth and each type of growth would continue to grow in a way determined by the main, political decision makers. “Equilibrium” is a mathematical concept completely unsuitable for application in any economic resource context.
Regarding the question Chris Giles poses
We know for a fact that the UK economy has not recovered all of the ground lost during coronavirus. So it will take further growth – ‘normal’ or otherwise – to return activity to its pre-pandemic level
Regarding Clive Parry’s comments
GDP growth has never been a good proxy for increased ‘national wellbeing’. Just consider the lives of working people in 19th Century Britain caught between the wretchedness of the workplace and the wretchedness of the workhouse. Hence the emergence of welfare economics to consider alternative (non-market) ways of judging ‘national wellbeing’ beyond orthodox concerns with productive and allocative efficiency, which the state is tasked to address
But such is the scale of environmental destruction, it exceeds the capacity of welfare economics to address the ‘negative externalities’ for which the market is responsible. Hence the threat posed by environmental destruction to capitalism’s profit-based ways of judging human welfare – no wonder its orthodox advocates are worried
Finally, COP26 is not just about saving ‘human life on earth’ – it’s about saving myriad forms of life that have evolved over millions (possibly billions) of years, depending on how great the devastating caused by global warming will be
I can only agree.
I mean ‘carbon taxes’ and the ‘carbon market’ was just a form of permission to pollute like road tax is a permission to use a road with a car (and pollute as well and maybe kill a few people in the bargain).
The problem is that instead of seeing this as a time to stop and change, the powers that be see it as a time to grab as much as they can before it goes belly up.
Throughout my life at 56 I’be been reading about this stuff and now it is coming to a head.
It has been dominated by greed and the imbalance of power by rich countries to get as much as they can out of poorer countries.
And whats’ more, the rich countries have been peeing in the wind. Where are those people living in countries that will be affected by rising seas going to live? Are we going to let them drown?
The companies are after your “beautiful moment in time” from the other day
It’s the chase for growth that I have issues with; all that that achieves is dividends for shareholders. I think that companies are best served by a degree of stability; the output/sales can rise or fall within a range but the staff numbers don’t need to change as a result – and profit can either be re-invested or distributed to staff.
Definitely worth reading Steve Keen’s new book: The New Economics: A Manifesto.
He eviscerates Neoclassical economics, its empirically false models, and its pathological disdain for ecology.
Also, in Chapter 2, through modelling on his Minsky software, he essentially proves conclusively that the money used by banks to buy bonds was already created by government deficit spending (hence it is not ‘necessary’ other than to create the illusion that the Treasury cannot fall into negative equity).
Good to have a resource to point to when someone spouts the ‘Loanable Funds’ fallacy.
I still have not finished it – but it’s good
A very thought provoking blog post. I think the answer lies in the world shifting to a new economic paradigm – Doughnut Economics as put forward by Professor Kate Raworth is a good start: https://en.m.wikipedia.org/wiki/Doughnut_(economic_model)
(Also it’s worth watching her 15 minute TED talk on this subject)
She is very good….