The hole in the political landscape

The one option you don’t mention is “prosperity without growth”, which happens to be the name of a major report from the Sustainable Development Commission, the UK government’s official ‘watchdog’ on sustainability. It even includes a 12-step plan.

“It may seem inopportune to be questioning growth while we are faced with daily news of the effects of recession, but allegiance to growth is the most dominant feature of an economic and political system that has led us to the brink of disaster. Not to stand back now and question what has happened would be to compound failure with failure: failure of vision with failure of responsibility. Figuring out how to deliver prosperity without growth is more essential now than ever.”

The report proposes a plan for government to develop a new macro-economics for sustainability, which does not rely for its stability on growth and expanding material throughput.
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Recommendations include:
* Creating the conditions for people to flourish
– Includes tackling systemic inequality and removing incentives for unproductive status competition; sharing available work and improving work-life balance, and reversing the culture of consumerism
* Building a sustainable macro-economy which is no longer structurally reliant on increasing consumption
– An economy which can succeed without growth must be based on financial and fiscal prudence and improved macro-economic accounting, and prioritise investment in public assets and infrastructures over private affluence
* Putting an awareness of ecological limits at the heart of economic decision-making
– Treasury thinking must be governed by clearly defined resource and emissions caps; policy should promote technology transfer to developing countries and international ecosystem protection

The most likely alternative for the UK, at least as I’d guess it, will be even more of the same dressed up in disciplinary clothes. All from yesterday I know, but listen to @08:33 on yesterday’s Today Programme, where various people say that we’ve spent all the money on the banks and will now have to hollow out the state. This, combined with the Tory strategy towards the next election taking its inspiration from “the 1979 election manifesto of Margaret Thatcher, which gave a sense of the general approach of a Tory administration but little hint of the painful monetarism and privatisations that followed” (bollocks revisionism I know, but a hint of where we’re headed) and what with “private companies that supply what has been a growing £80bn market for public services [welcoming] the cuts in public spending yesterday as “a real opportunity”,” the GFC is looking increasingly like another opportunity for even more transfers to our capitalist rentier heroes.

Oh to be in a more optimistic mood…

By contrast, and as I predicted, the National-ACT government in NZ is offering stimulus packages and abandoning promised tax cuts.

Or maybe not… having talked up a stimulus shortly after the election, they’re now talking about trying to cut their way out of recession instead.

As long as there no real danger of mass-revolt, I don’t see any reason for anything to change; and crisis is a perfect opportunity to dismantle more of the safety net.

Even when there’s a real danger of mass-revolt, my first impulse would be first to tighten the screws, then to shoot some of the troublemakers (just to see how serious they are), and only then maybe to think about compromising by introducing something “new and better.”

JoB @ 5 might be the only seemingly proper use of the ;-( -smiley I’ve ever seen.

Other than snadwichman @2, don’t we have a second 800 billion pound gorrila complicating matters. That second gorilla, is resource depletion, and the likelihood that the post GFC world will be dominated by resource scarcity, and the reactions to it. Some even argue, that a good part of the motivation for the blowing the various bubbles, whose collaspse we are now experiencing, was to mask the fact that the traditional growth model was failing. Any rational response has got to include significant efforts to move towards sustainablity, and the development of techniques to maximize the longterm utility of our remaining resources.

Of course there is no quarantee that rationality will dominate the response. I suspect that considerable energies will be expended hunting for scapecoats. It is quite possible that one -or several countries may end up with severely reactionary governments. That can certainly be seen from the last great financial collapse (1929-1930s), from which several seriously illiberal nations emeged.

Interestingly, the range of political positions that have been rendered untenable include the entire range of acceptable political positions in the United States, thus leaving the government with no justification for doing anything on the basis of principles. And yet they have to do something, so they have to do the same things they’ve been doing in the past, except with no good reason for it.

“For that is what economics is all about, the allocation of scarce resources, no?”

Well recently most of the more well known economists seem to have been pretending resources such as oil are either infinite or that we don’t need to worry about it running out because somebody will invent a replacement.

This post seems a little naive about the extent to which politics is driven by intellectual or even ideological consistency. What makes positions untenable politically isn’t events but votes. The emergence of a new voting majority united behind an alternative. We are a long way from that.

JQ: I think the Northern Rock nationalization-in-all-but-name preceded any of Bush’s nationalizations.

The only tenable position for anyone who wants to maintain any part of the existing economic and social order is Keynesian social democracy

How about the financial sector shrinks for a generation because most investors learnt their lesson, a lot of ex-bankers earn a lot less money, massive government debt renders governments incapable of applying further Keyneisan stimulus and life trots along as normal? Until at least that is a new generation of investors who don’t remember 2007 and 2008 take power again.

And it seems incredibly strong to claim that “any part of the existing economic and social order” is dependent on adopting Keynesian social democracy. What, the police are going to disappear, judges will all be fired, and prisons are going to be shut down unless we adopt Keynsian social democracy? Governments are going to stop funding public education systems? Defence spending will disappear?

One may think that any or all of those aspects of social life should be reformed or destroyed, but since they’ve all survived the Great Depression, WWII, the collapse of Bretton Woods, the 1970s stagflation and the rise of neoliberalism, then I find it hard to believe that the criminal system, public education, and defence are going to be changed drastically if Keynesian social democracy isn’t adopted.

Incidentally, how do you define “social democracy”?

Walt: Hearing someone say “For that is what economics is all about, the allocation of scarce resources, no?” as if this was an unquestionable claim brings to mind a certain overused quote of Keynes about being the slave of some defunct economist.

If economics is not about the allocation of scarce resources, then what is it about?
Serious question here. Questioning this is like questioning whether physics is about “the science of matter and energy and the interactions between the two.”
Now, one could argue that a particular economic theory is designed to allocate resources towards the already-rich-and-powerful, or one could argue that a particular economic theory is dead wrong, and some theories have clearly been disproved, but that’s different to saying that economics isn’t about the allocation of scarce resources. What would be the point of economics in a world with no scarcity? As far as I can imagine it, in such a world at best economics would be a mental exercise, like Sudoku.

“some sort of laissez-faire gold-standardish straw man”

Hey even gold standard laissez-faire represented substantial state intervention – the imposition of a fixed gold-based exchange rate. Of course once you established this rule and let it fall into the background you can quickly forget about it for practical purposes and advocate that the market be allowed play itself out – contrived spontaneity. The imposition of private property rights (the sine qua non of any functioning market) is the highest form of this art but I think monetary policy executed by independent central banks (seen as technocratically applying the Taylor Rule or some other formula) can qualify.

“As a general point, Bob, I don’t appreciate snark in the context of serious policy discussions. If you have a point to make, please do so clearly and constructively. If you want to play “lefter than thou”, there are plenty of venues where you can do so.”
John you’ve blogged/read this site before right? I would say a good third of the comments posted here are at least part snark. It is part of what makes me visited Crooked Timber everyday. Take away the snark and you take away the fun. You can learn from humour just as fast, if not faster, than more restrained material.

“the system was stable enough to maintain equilibrium without substantial government intervention and without collapsing into crisis.”

I understand that this is a normal human goal, but is there really evidence that any human system is stable enough to maintain a positive equilibrium with or without substantial government intervention and without at least sometimes collapsing into crisis?

I’m not sure how it would look, but maybe it would be better to build systems that are generally stable, but also really good at letting things change when there is a crisis?

It might look like a system in which no person, no class of persons or no institution has the critical mass to bend the system in a specific direction amenable to the interests of a person, class of persons or institution.

Just a thought (and avery Marxist one at that). It baffles me more and more that there is almost no reference whatever to the persistent increases in scale over past decades – worse: the typical response to current woes is to increase scale & concentrate power.

Small wonder that evolutionarily we’re doomed to progress in leaps & bounds.

Re: Bob at 23 and the linked Romer paper.

It is depressing that Romer represents the “Left” in the Obama administration, considering that she argues for fundamentally conservative positions, and argues weakly. For example, she says “the 1960’s (specifically, the Johnson administration) introduced the country to the phenomenon of persistent peacetime deficits”. It somehow eluded her that Vietnam was not peacetime, Congress’ failure to declare war being a legalism of no economic significance. She compares this period unfavorably to the 50’s. So how does she deal with Korea? Um, well, she explicitly excludes it from consideration as an “unusual circumstance”. But the Vietnam period is central to her argument.

She then claims that the electoral results of the 70’s support the policies she favors. The clearest electoral referendum on the monetary and fiscal looseness she condemns would have to be Burns opening the floodgates to re-elect Nixon. In fact, Romer dings Burns specifically. Newsflash: electorally, it worked. Chalk up one for looseness. I assume she means the defeat of Carter, but the vote against Carter, to the extent it was not about Iran, was a reaction against the Volcker policies and their deliberate recession, which are precisely what Romer praises. Romer is free to argue that the voters were wrong, but wrong to argue that they voted for her position.

Her conclusion is to praise copiously the monetary policies of the last 30 years, but to decry the generally high levels of deficits. Because of the first position, she generally praises the post-1980 economy. But, of course, that is also when the deficit spending she so opposes really got going, well beyond the 60”s and 70’a, though with an exception during the later Clinton period. And what damage does she attribute to the deficits? Well, not much yet, but it’s only been 30 years. The problems of deficits may take a century to show up – she says this – but we know they will because “most economists agree” on this point. Three decades should be enough time to at least be able to point to the trends that lead to ruin. There is a serious failure of epistemological skepticism in feeling she can simply assert and not even have to argue for the long run consequences. And now that ruin is upon us, it seems to have much more to do with the basic nature of the world Volcker created than with government deficits, though the foolish and unproductive nature of the deficits of the Bush years were not helpful.

Romer is praising as “splendid” the period from 1980 to 2007 (when she wrote the paper). It is not clear that the median standard of living improved during this period, other than improvements in technology, especially when costs (longer working hours, more instability, higher personal debt) are factored in along with benefits (larger homes, bigger TVs). Indeed, she praises this period for its stability, when people’s personal lives were not very stable, largely because of the sacrifice of high employment for the sake of low inflation that she glorifies. By contrast, the median standard of living did increase from 1960 to 1980 as a consequence of political and economic choices: medicare, vastly expanded public colleges and financial aid for college, expanded welfare, etc. She attacks this period for its instability but it seemed to do pretty well from 1960 to 1973. Inflation was somewhat higher than previously, but unemployment was lower. It seems Romer buys the idea that higher inflation must eventually lead to higher unemployment too, but is that really what we saw in the 1970’s? By Romer’s own account, the recession of 74 was largely a result of Fed tightening : a policy she criticizes only for not going far enough. And the same thing in 1978. But if she advocates these policies, and thinks they should have gone even farther, she doesn’t get to condemn the instability they caused: that was part of the intended effect.