On economics

Lurking behind my thesis topic of the purpose of universities in society are questions about how society is organised; i.e. how we put our various resources to use and to what ends. My interest in these questions has directed me towards texts about economics, some of which – e.g. Rabbi Jonathan Sacks’ The Dignity of Difference – I started reading without realising economics was a big part of what it was about. When we talk of difference in and between classes, cultures and civilisations, we mean differences in our values and priorities, which influence how we allocate and use resources.

I suppose what really bugs me – and what is motivating me to do my thesis project – is the extent of disagreement about the means to which we work towards our end of universal prosperity. In his 2016 report for CUSP on consumer capitalism, Jackson defines prosperity in terms of its social and psychological dimensions as well as its material ones. This would include the respect of peers, the contribution of useful work, a feeling of belonging, and a sense of security in the face of uncertainty.

That all makes sense to me. But does everyone feel the same? And how difficult is it to remember that ‘meaningful participation in the life of society’ is what we actually want, when we’re bombarded with conflicting messages by people and companies who seek to manipulate us for their own financial gain? We are adapted for selfishness as well as altruism; some of us more than others, it would seem.

I’ve recently finished reading ‘Island’, in which Aldous Huxley imagines a utopian society where, among other innovative practices, pre-school children are tested for certain tendencies and educated appropriately. For example, those with a tendency to seek power over others are taught awareness and sensitivity, and given physically strenuous tasks that ‘satisfy their craving for domination’. I wonder how such a scheme would go down in modern Britain; would it be spun as labeling, differential treatment, and a compromise to our individual freedoms (bad), or early intervention and prevention-over-cure (good)? We already have national schemes for the identification of sporting potential (including mental attributes), but it’s not compulsory to take up the resulting opportunities, and it is probably less troubling for an individual to be identified as a future athlete than a future megalomanic.

While I did recently encounter an advert for a couple of PhD studentships in what sounds like a similar area of activity, I expect the idea to languish in the realm of fantasy as we slip further under the control of Huxley’s ‘Peter Pans’ and ‘Muscle Men’. But let’s move on…

Economics – how we put our resources to use – is a field of study that is constantly in flux as we discover new resources or applications, learn how finite they are, and what the effects and opportunity costs are of using them, among other things.

As well as being constantly in flux, economics is highly contested. Even if there is a broad consensus on the utilitarian view that we seek the greatest prosperity for the greatest number, and even if we agree on what prosperity looks like, the limits and boundaries we conceive around this principle are fluid. Are we concerned only with the prosperity of our own nation, or humanity as a whole? What about future generations? Other species, even? It is tempting to focus only on the here and now; indeed, to do otherwise demands more knowledge from us than we have. Maybe this is why sustainability debates can get so heated; no-one really knows what they are talking about; the absence of a scientific explanation for the end of the last ice age, for example, is convenient for those who believe that climate change is independent of the activities of man.

Jackson points out that the financial economy exists in the service of human prosperity. Why are they so often conflated? One reason for this may be that that GDP is perceived as easier to measure than happiness. I’m highly skeptical of this view; not only does the World Happiness Report seem to be going strong as a comprehensive measure of social and psychological prosperity, it also appears that GDP includes consumer spending and business investment; both highly dependent on debt that – in the UK – is literally created by banks. According to Jackson (2016), 95% of the money in the UK is created in this way; when banks agree loans. When ‘real’ money is subsequently ‘made’ and paid back to the bank, then all good; the cash comes into its promised existence. If it isn’t then the balance sheets become very fragile; a state of affairs that apparently led to the financial crash of 2008. Is it the case that our position (5th, I believe) on the GDP-per-capita league table is down to high levels of lending? If so, I’m not impressed.

Another reason why money is conflated with prosperity may be its ubiquitousness; money is the currency through which we are most commonly remunerated for our work and with which we obtain goods and services; an exchange that can become rather circular. I saw the Dalai Lama on a rainy Sunday morning at Glastonbury a couple of years ago, where he shared the following gem:

‘Man sacrifices his health in order to make money.
Then he sacrifices money to recuperate his health.’

He didn’t attribute it as such, but this happens to be word-for-word identical to a 2001 poem by James J Lachard called An Interview with God, itself reminiscent of the 1975 Eagles song Take It To The Limit:

‘You can spend all your time making money.
You can spend all your love making time.’ 

Many believe that industrialisation improved living standards across the board, and over the longer term this could be argued to be so. But Jackson (2016) agrees with Marx (1867), that industrialisation and capitalism has contributed to the concentration of financial wealth in the hands of the few. Polyani (1944) also noted how the emerging capitalist economy had ‘disembedded’ economic activities from social relations, leading to a loss of accountability in economic relationships; a point that was more recently taken up by Sacks (2002).

I attended a book launch in September for Rethinking Capitalism (Mazzucato & Jacobs 2016), which takes a similar line to Will Hutton’s (2015) How Good We Can Be. Both take a well-reasoned approach that is framed independently of beliefs about human motivation and purpose. Hutton is big on addressing national inequality but not so vocal on global issues and the environment. I rather suspect this is because he doesn’t want to risk being written off as a hand-knitted lefty or enemy of progress, rather than because he doesn’t care. While Hutton, Mazzucato and Jacobs are definitively pro-growth and Jackson is not, all of them provide excellent ideas for ways in which things could be better – far too many to summarise here, but none of it is rocket science. They all constitute a call for action – but to whom?

Even more interesting than the contents of Rethinking Capitalism was the make-up of the discussion panel at the launch. Joining Mariana Mazzucato and Michael Jacobs were Wendy Carlin, an economics professor at UCL, and a chap called Richard Davies, former Chair of the Council of Economic Advisers at the Treasury. What I found intriguing (and also, not surprising) was that Davies, with his position of great influence, didn’t seem to agree with anything in the book. Despite the editors citing powerful examples like Huawei and Eriksson reinvesting all profits, the direct investments of the German State Bank into green technology and transport R&D, and the golden days of NASA when the top rate of tax was 90%, Davies believes that the economy can be left largely to market forces and that competition (rather than state support) drives innovation. 

Essentially, if the advisor to the Chancellor doesn’t agree with you, then the prognosis for your ideas is possibly not good. I could have suggested this during the questions at the end but instead chose to ask the panel why they thought growth was so important. I wasn’t satisfied by Davies’ response that we get better (i.e. more effective/efficient) at what we do year on year. I lean towards Jackson’s (2016) view that productivity gains and increased automation justify us working fewer hours (as Keynes himself suggested in his 1930 essay Economic Possibilities for our Grandchildren), and shifting to areas of activity that are inherently labour-intensive and sustainable such as care, craft and culture. I suggested as much to Davies but he dismissed it, claiming that humans are ‘naturally competitive’. Certainly many of us are. If only we could catch them early and perform some sort of intervention…

*with 91% of growth going to the top 1%, according to Mazzucato & Jacobs (2016).


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