Stumbling and Mumbling

Author: chris dillow   |   Latest post: Fri, 5 Mar 2021, 12:07 PM


The death of economic policy

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One of the great and under-appreciated changes of recent years has been the disappearance of serious economic debate from Westminster politics.

For decades the big political divide was about economics: the causes and cures for the UK's relative economic decline; the precise mix of state and private sector; what to do about industrial relations; monetarism vs Keynesianism; how to achieve macroeconomic stability; how to redefine social democracy in the 90s; and austerity after 2010.

Today, though, mainline politics is largely innocent of economics. The Tories, Stian Westlake has said, "seem to have stopped talking and thinking about economics." We see this, for example, in the decline of John Redwood from being a serious Thatcherite to a sub-North Korean driveller about juche. More starkly, it was once inconceivable that any Tory would utter the phrase "fuck business" - let alone become Prime Minister having done so.

It's not just Tories, though, who have abandoned economic thought. So too have centrists. The TIG (or whatever they called themselves) were silent on economics except for waffle about fiscal responsibility. And Chris Leslie's Centre Ground pamphlet (pdf) said nothing about how the financial crisis requires us to rethink economics, despite his boast that centrism chooses "an evidence-based rather than ideologically-driven approach to the world."

I fear that Labour might go the same way, and lose its McDonnell-inspired interest in fundamental change of our economic institutions.

There is a justification for this lack of interest. Raising medium-term economic growth is hard: in fact, growth rates might well be determined more by international factors than local ones. And it's not worth the effort. You don't have to subscribe fully to the Easterlin paradox to suspect that economic growth doesn't translate into great improvements in well-being; the fact that well-being seems to have improved in recent years despite our sclerotic economy is consistent with this.

What's more, many important issues can be addressed without policies to raise general economic growth - such as food poverty, the housing crisis or climate change.

You might add a further justification for the declining importance of economic policy. It's that voters don't care about it. As Stephen Davies says in The Economics and Politics of Brexit, that "the main division in society has switched from being primarily about economics to being about culture and identity" - that there has been a realignment in politics along cultural lines.

These, I suspect, are justifications rather than reason. Voters' attitudes are not exogenous. They are instead the product of both economics (stagnation tends to breed reaction) and of political forces - the way in which eurofanatics forced what was once a fringe issue to the top of the agenda.

Instead, I suspect there are two reasons for the loss of interest in economic policy.

One is that centrists and the right just don't have a clue.

From the 70s to 2008, the question for neoliberal economic policy was how to unleash capitalism's incipient dynamism. Whether it was Thatcher blaming the unions or high inflation or Brown blaming unstable macro policy, politicians thought that the role of government was merely to create the right conditions for growth and that capitalism would then deliver it.

Subsequent events have refuted this view. The 2008 crisis showed that lightly-regulated capitalism was unstable. And weak trend growth since then suggests that governments might have to intervene more in the economy to stimulate growth. Not having answers to these problems, the centre and right have gone quiet.

Secondly, there are fewer interests that are served by economic growth. As Brett Christophers has described, the economy is dominated by rentiers. Their wealth depends less upon revenue growth and more upon maintaining and securing rights to assets, sometimes via cronyism. It's not just companies for whom this is true. Many retired pensioners with expensive houses are in the same position.

In fact, for many of these, economic growth might actually be a bad thing. Sustained strong growth would raise real interest rates. But this would depress asset prices by raising the discount rate applied to future rents and by increasing the cost of leverage. Fordist capitalism required a large and growing mass market; rentier and financialised capitalism do not.

Perhaps, though, politicians were never really that interested in promoting growth even when they claimed to be. Leyland

Sure, they all talked about the UK's relative economic decline in the 50s, 60s and 70s. But maybe this was less because they wanted to raise living standards and more because they feared the UK's loss of power and prestige on the global stage. And if they did care about raising living standards it was less out of concern for workers' well-being and more out of the desire to buy off discontent - to show, in the face of the communist threat, that capitalism could deliver the goods.

And perhaps Thatcher's assertion of "managers' right to manage" was not a means of increasing efficiency but rather a desire to impose traditional hierarchies and put workers back into their subordinate place. As Corey Robin has argued, the one common theme in conservatism is its love of hierarchy.

Traditionally, Marxists have thought that capitalists need economic growth. Which is true of capitalism operating within markets. But it is not true of all types of exploiters: feudal lords did perfectly well for themselves in stagnant economies. Perhaps, then, the loss of interest in economic policy is a symptom of the fact that capitalism today in fact is characterised by powerful elements of feudal exploitation. Rightist and centrist politicians are no longer interested in economics because they no longer need to be.

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