Duncan’s Economic Blog

A New Political Economy?

Posted in Uncategorized by duncanseconomicblog on July 2, 2009

Paul has an excellent post up arguing in favour of ‘common sense economics’.

 As he says:

 I’ve also written about how the now dominant narrative of neoliberalism and money supply control became so dominant; despite the fact that the fundamental assumption of a finite world money supply is flawed, the ‘good housekeeping’ / ‘you cannot spend what you have not got’ narrative  has continued to hold sway over public opinion for a generation and more.

Further, I’ve written copiously about the ‘myth’  that raising taxes on the wealthy (personal or corporate) will drive investment down and away.  There is no evidence to support this – indeed the evidence suggests that taxing the wealthy actually leads to investment via an improved welfare state – yet it has again become a dominant narrative and, in public policy terms, part of a self-fulfilling prophecy of nation states seeking to outdo each other in a race to the taxation bottom.

All in all, then, the neoliberal narrative of economic policy has become all pervasive, to the extent that it is regarded as simply common sense.   It has become an easy tale to tell, and when Cameron stands up in PMQs and bleats about ‘the coffers’ being empty, few people actually question what he means by the coffers, and even fewer challenge the consequent logic that the way to refill the coffers again is to do nothing at all about the global circumstances which have emptied the coffers.

 He then quotes Post Keynesian Observations:

 ‘The same $10 million dollar salary spread over 100 people generates much more spending that it does if it’s all one person. Income distributions have been deteriorating for the past 40 years and they did the same thing before the Great Depression.

Economic growth, when it comes, must be directed toward wage earners and not those scraping the profits off the top’ (my emphasis).

And links this back to Don Paskini’s comments on the JRF report on the worst off in society suffering more in this downturn. And goes on to say:

 Consequently, there is an economically coherent case for redistribution, not on the grounds of ‘fairness’ , but in terms of increasing overall consumer demand, and consequently more sustainable growth.

 Second, and conversely, if we do not redistribute wealth to those on lower incomes, that wealth which is not distributed will simply end up as savings in the hands of the wealthy.  That, in the context of the global imbalance between savings and spending, and consequently between national surpluses (e.g. China) and debt (e.g. the US) is the opposite of what we need (see Graham Turner on this).

 I fully agree. This is very much the agenda I have been arguing for over the past few months. 

This economic ‘common sense’ agenda cannot be isolated from politics or indeed ideology . 

Neo-liberalism (or New Classic Economics, or whatever we choose to call the dominant paradigm of the last three decades) was more than an economic theory. It was a model of political economy. 

We can’t simply tear it down and replace it with some new economic ideas. 

In this light I find the ‘ideological map’ offered by Stuart White at Next Left very interesting. 

It maps out four broad positions in developing debate on progressive politics. 

Centre republicanism

Basic idea: ‘The task of progressive politics is to radically disperse power and opportunity. This requires a restructuring of the state in a much more decentralised direction; individual empowerment in public services; a wider distribution of assets; and a stronger policy of protecting – indeed, expanding – civil liberties and lifestyle freedom. The left should get over its fixation on high taxation of labour income and put more emphasis on taxing unearned wealth and environmental bads.’

Supporters: Richard Reeves, Philip Collins.

Guiding Spirits: John Stuart Mill, Thomas Paine.

Texts: The Liberal Republic.

Least likely to say: ‘The man in Whitehall really does know best.’

Left republicanism

Basic idea: ‘The task of progressive politics is to radically disperse power and opportunity and to rebuild a deliberative public sphere. This requires restructuring the state in a way that brings individuals into more direct participation in decision-making, e.g., through measures of decentralization and collective co-production. It requires resituating Labour politics in the context of a wider grass-roots social movement politics. It also requires a new politics of ownership, one that seeks both to widen individual asset ownership and democratize the control of capital, e.g., through new social pension funds.’

Supporters: yours truly. (Yes, I am going to blow my own trumpet!)

Guiding Spirits: Thomas Paine, Jean-Jacques Rousseau, John Rawls. (Also considered useful to quote Barack Obama at opportune moments.)

Texts: Building a Citizen Society.

Least likely to say: ‘The police did a fantastic job of policing the G20 protests.’

Left communitarianism

Basic idea: ‘The task of progressive politics is to fill the moral vacuum of neo-liberalism. To this end, we must articulate a shared account of the good and promote a sense of community based on a recognition of how we are all interdependent in attaining this good – indeed, realizing our interdependency – fellowship – is an integral part of the good. In policy terms, this implies a reassertion of the importance of economic equality and traditional collective action, albeit perhaps with a stronger role than in the past for civil society and forms of solidarity and mutuality that are not mediated through the state. The market must be kept firmly in its place, which is not in the public sector.’

Supporters: Jon Cruddas, Jonathan Rutherford, possibly Madeleine Bunting, Neal Lawson.

Guiding Spirits: R.H. Tawney, Raymond Williams, Charles Taylor, Liberation Theology. (Also considered useful to quote Antonio Gramsci at opportune moments.)

Texts: review of The Liberal Republic by Jon Cruddas and Jonathan Rutherford.

Least likely to say: ‘Let’s privatize the Post Office.’

Right communitarianism (aka ‘Red Toryism’, which might or might not be the same as ‘Progressive Conservatism’)

Basic idea: ‘The task of progressive politics – or conservative politics – is to fill the moral vacuum created by a combination of neo-liberalism in the economy and life-style liberalism in society. This requires that we rebuild a strongly moralistic civil society to meet social needs which neither the free market nor the traditional welfare state can meet satisfactorily. To this end, we must build a new political and economic localism. We must ‘recapitalize the poor’ in order to empower them to crawl out from under the welfare state. The welfare state itself must be cut back, with government switching its emphasis radically to assisting independent groups in civil society to carry out welfare functions. State policy will limit market freedoms and will be informed, e.g., in developing a new civil society of welfare, by authoritative accounts of good behaviour. A nihilist liberal politics of arbitrary freedom must be replaced with one of collective morality.’

Supporters: Phillip Blond, possibly Frank Field and David Green (Civitas).

Guiding Spirits: Hilaire Belloc, John Neville Figgis, Helen and Bernard Bosanquet, theology of Radical Orthodoxy, Rerum Novarum.

Texts: ‘The Rise of the Red Tories’.

Least likely to say: ‘What a pity the government dropped that plan for supercasinos.’

 The post, which is a must read, then talks of overlaps and differences.

 Paul, who has also been on top form this week, alluded to this yesterday:

 The other day, I wrote of my concern that Amartya Sen’s work on ‘basic capabilities’ suddenly appears very in vogue with New Labour and its apparatchiks, and that might be the start of an assault on some of the most basic assumptions we make in the Labour party about equality; that a focus on minimum capabilities might be a really neat cover for a pernicious erosion of core Labour values about social justice based on egalitarian principles, and in practice for an erosion of principles of universal entitlements in a modern welfare state (a threat also picked up by Don Paskini in this perceptive post).

I was very interested to note that Chris Dillow agrees about this threat, adding a good deal more substance and detail on Sen’s work than I can currently claim. 

 This evening, Luke Akehurst has joined the defence of the most distinctive of all Labour values, as he reacts to Communities Minister John Denham’s  speech to the Fabian Society and associated Guardian review (also covered by Next Left). Luke says:

I’m not impressed by John Denham’s argument to the Fabians, reported in the Guardian as that ‘that the egalitarian ideal that has dominated left liberal thinking since the 1960s is redundant, saying Labour’s traditional emphasis solely on the poor leaves the vast bulk of the population alienated and left out.’

The creation of a more equal society is not an abstract ideal, it’s one of the reasons – along with providing a political voice for the trade union movement, why a separate Labour Party exists. Take away that mission and we cease to have any distinctive social democratic purpose or identity and might as well merge with the Lib Dems.

 I think that the current industrial policy agenda is a great development. As the TUC’s Touchstone Blog notes the announcement of such a policy once seemed a long way off:

 When the TUC published its paper, ‘An Industrial Strategy for the United Kingdom’, back in 2005, we were a lonely voice. Now, four years and a severe economic downturn later, Peter Mandelson puts the case for industrial activism and the EEF, the voice of employers, seeks an industrial strategy.

 But an industrial strategy alone is not enough. As I’ve noted post-recession Britain will look very different to pre-recession Britain.

 An industrial policy can  help rebuild the supply side of the economy. That is a necessary but not sufficient step. We also need action of the demand side of the economy. 

A more equal distribution of income is vital to Britain’s long term economic future.

 The interesting debate on ideology between the different strands of communitarianism and republicanism needs to bear this in mind.

 John Cruddas & Jonathan Rutherford noted this in their review of Reeves & Collins ‘The Liberal Republic’: 

Reeves and Collins have little to say about the defining issue of the economy, at a time when unemployment and inequality are increasing, the value of pensions is collapsing and there is a chronic housing shortage. There is food and water insecurity, and oil production will peak in the next few years. And looming over all these problems is the threat of global warming.

 We don’t simply need a new ideology and we don’t simply need a new economic structure. The left needs a working model of political economy.

 To me this feels like ‘Left Republicanism’ or ‘Left Communitarianism’ guiding a Post-Keynesian economic policy.

 The fight for egalitarianism is no longer just morally right, it’s become economically necessary.


8 Responses

Subscribe to comments with RSS.

  1. […] More here:  A New Political Economy? « Duncan's Economic Blog […]

  2. Twitted by reenymal said, on July 3, 2009 at 3:03 am

    […] This post was Twitted by reenymal […]

  3. Paul said, on July 3, 2009 at 9:08 am

    You know, I think you might just be on to something.

  4. voteredgogreen said, on July 3, 2009 at 1:22 pm

    Then it seems that we are of one mind! Another Duncan tour de force.

  5. rommeldak said, on July 4, 2009 at 2:23 am

    Quite right, Duncan–it’s not a moral issue, it’s an economic one. I always remind people that the countries where the rich are richest are called Third World countries! Nowhere will you find a more uneven distribution of income.

  6. tim f said, on July 7, 2009 at 1:15 pm

    Only just saw this post. Not entirely happy about being lumped in with Compass! Tawney, Charles Taylor & the early liberation theologians are all good, though.

  7. […] At least, it will be a significant symbolic statement if we succeed in making it such. […]

  8. Clifford Singer said, on July 8, 2009 at 10:17 am

    Excellent piece Duncan. It made me also think of this one that Larry Elliott wrote last year:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: