Martin Wolf noted in an article published yesterday on the FRT that:
As chancellor of the exchequer and potential prime minister, Rishi Sunak is an important figure in British public life. This makes his Mais lecture worthy of close attention. It represents his credo. It is also lucid and intelligent. Yet it falls far short of what is needed. Crucially, it fails to confront the failures of Margaret Thatcher's legacy.
As he noted, 43 after Thatcher became prime minister, with consistent neoliberal government ever since, none of the UK's economic problems - whether they be low GDP or productivity - have been solved. We remain in the doldrums on these issues now, as we were in 1979. And low tax has definitely not delivered for the UK: if anything, the exact opposite is true since high-tax states have been very definite winners over this era.
Wolf summarised his argument, saying:
It would be unfair to say that Sunak, like the Bourbons, has learnt nothing and forgotten nothing. But it would not be all that unfair. He must think harder.
What he should have said is that neoliberalism has failed. Anyone looking to it for an answer now is clearly very mistaken. It's not that Rishi Sunak needs to think harder now. What he needs to do is think again. And when doing so, unfettered markets are not the solution to his problem.
It is worth noting that Martin Wolf was not brave enough to say that.
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I regularly debate with people my age and older (60s) who were part of Thatcher’s youth vote in 1979 (people forget her messages won over young people) and most of them credit neoliberalism for their comfortable lives, while I credit my equally comfortable life with being a Boomer who enjoyed the fruits of the post war consensus. They often talk approvingly in terms of modernising society, sweeping away outdated institutions and embracing change – the language of Thatcher and New Labour etc. But I’ve noticed that in everyday life they don’t seem able to accept change from the neoliberal order. On a whole raft of things – reducing car use, walking to lots of local businesses instead of driving endlessly to the same supermarket, bringing utilities back into public ownership, they don’t seem able to comprehend the reality that nothing is permanent, even neoliberalism. I don’t know what the answer is, but a credible yet reassuring narrative about the changing world has to be built for this group. Because these are the people who vote, both through the ballot box and with their wallets. A final thought – did the ruling class notice that some in this group were getting restive about life under neoliberalism and persuade them to blame EU membership instead, as the UK joined the EU around the same time?
Just “Thinking” is uncommon, “Thinking harder” is very rare and “Thinking again” is even rarer – I fear that Rishi Sunak lacks the capacity to think again.
This should not surprise or disappoint us. That Labour won’t think again IS disappointing…. so we must keep trying.
I just looked at a Wiki page listing average growth of GDP between 2013 and 2018. UK came in above France, Germany, Netherlands, Italy, Denmark, Norway, Switzerland, Finland, Austria. Sweden and Ireland grew a bit faster but at least one of these was recovering from a very large drop after the 2008 crash. As always, the facts are probably not on your side. As for Wolf, I suspect you are doing your usual cherry picking exercise.
Wolf looked over 40 years
Kind of compelling….
What is GDP?
For instance, on average, Jeff Bezos and the readers of this blog are multimillionaires, but the average would be misleading.
Richard could give a better critique of GDP, but I suspect it excludes a lot of the economy where it matters to people. Always beware of averages.
It also includes a lot of made-up figures – e.g. the rent it is assumed owner-occupiers of hours pay to themselves to pay for the right to live in their own properties.
GDP
Gross
Data
Problem
Look please George Groves……………..
…………………every man and his dog knows that GDP as a measure of ‘success’ is a house of cards and has been for sometime as other factors like environmental degradation and wealth disparities have eaten away at the sustainability of the planet, resources communities and individuals.
Even Mark Carney admitted that markets don’t value rainforests or elephants until they are gone/destroyed and turned into farms, executive home plots or ivory. There’s one of GDPs problems right there – it’s ignorance of the full cost of producing things. How anyone can adhere to such a bogus measure of anything as GDP when you even consider that statement is beyond any reasonable intelligence as far as I am concerned.
GDP is a busted flush. It’s not my blog of course, but if you wish to engage in self deception, please do go somewhere else and celebrate it – not here.
However – you might want to stay and look at Richard’s ideas on resource accounting which gives a much fuller picture of what is being lost in order to gain or produce things – a much better model in my view and one that is sorely needed.
GDP measurement is always a statistical guess, based on estimates and assumptions. It includes activity that is damaging to health and the environment, and excludes (for example) labour within the home. So, perversely, the benefit of growing a tree or looking after your own children, or the damage from bombing a city, is not measured, as it can’t be monetised, but burning gas to generate electricity to sell or employing a nanny, or selling arms, would be. It measures flows of value but not infrastructure or stocks of resources. The single figure gives a misleading precision, and oversimplifies a complex situation.
As the economist Simon Kuznets, the statistical economist who largely invented GDP, cautioned in 1937, “Economic welfare cannot be adequately measured unless the personal distribution of income is known. And no income measurement undertakes to estimate the reverse side of income, that is, the intensity and unpleasantness of effort going into the earning of income. The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above.”
And as Robert Kennedy said in 1968, “the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.“
It is a deeply flawed measure, particularly in a closed system where growth forever is impossible. Fortunately other better, more coherent and holistic, economic measures have been developed, such as national happiness or wellbeing. Most of our stupid politicians are obsessed by GDP growth, as if the rising tide will raise all boats, while we know that unfettered capitalism is a great sucking machine that delivers excessive returns to capital, and so makes the rich even richer, impoverishes everyone else, and destroys the planet.
I always tell students that if they want an immediate increase in GDP induce a wave of divorces. But that will not add to the sum of human happiness.
Socialism and MMT are the answer.
Did not work out too well for the USSR Empire and those who lived under it.
Many years ago I the looking on the Internet to explain why the Irish GDP increased 25% in one year and in doing so found the MMT equation for GDP. As an engineer this was an revelation and I started following this and several other blogs ever since. The reason for the 25% increase was due to a large order of aeroplanes booked to Ireland for tax purposes.
But remember too ouch GDP in Ireland is purely tax driven profit in transit
The leprechaun economy as Krugman called it
I’m still reading ‘The Road to Mont Pelerin’.
Never has so much been written about nothing.
When I say nothing, I mean in terms of content of intellectual rigor or tangibles. It seems to me that most if not all neo-lib ‘theory’ is ephemeral only. It’s almost like wishful thinking. It’s a ‘fiat theory’ of economics – they simply said the words and the theory existed – that’s it. They made it all up and even competed with each other to tell the best stories – especially because of the way they were funded (by greedy self-interested capitalists) and that they were scared of Governments because they’d seen the Nazis and Japanese in WWII. Ahh, bless…………….
My opinion is that those who adhere to neo-liberal dogma are just incapable of nothing but self delusion. The people who harbour these views are usually those that never see the real dark side of the naivety or wilful ignorance that neo-liberalism dishes out. Because such people can afford such naivety and wilful ignorance in the first place.
Tell me: Why should these people apologize when this confection has worked for them all these years? I mean look at them – they’re all mostly unassailable.
For a different angle on how little GDP tells us about people’s lived experience, Resolution foundation pointed me at an ONS dataset that highlights the difference between average and median incomes. It is only when you look at median incomes that you see the extraordinary inequalities in income that averages disguise and GDP could be said to be an average of averages.
Check out Kensington in London – where the ‘average income’ is £74k but the median is only £40k. Extraordinary wealth alongside extreme poverty – epitomised by Grenfell Tower
(https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/placeofresidencebylocalauthorityashetable8)
GDP is way past its sell by date. Wellbeing or something like it is what we need.
I think Robin was very aware of this
Diane Coyle is another economist who has just written a book – Cogs and Monsters – that is an attempt to defend present day economics and argue that it has taken on board criticisms. However, like Martin Wolf, she cannot bring herself to admit just how flawed it is, how dominated by neoliberal thinking.
Sadly we have far too few people in the economics world with credible and respected voices, prepared to take on the discredited beliefs of neoliberalism.
I have tried to warm to Coyle’s work, and failed
Why have you bothered?
Because I care