The UK economy after the recession-Part 8

18 02 2009

The struggle for democracy and for economic growth

Some countries, such as Britain, which has hitched its prosperity more completely to the wealth generated by the City of London, may wish that their economies were more ‘real’ in 2009. The idea that Britain’s economy can rely solely on finance-exporting banks and importing goods-is surely dead. 1

The UK has been living beyond its means. We have been consuming the product of somebody else’s labour, in the form of loans from the more dynamic countries in the world. The relative over exposure of the UK to the global financial system means that within the current parameters the UK is over dependent on international developments. This is not sustainable in the longer term. The instinct of UK politicians is not to confront this problem but to put off the day of reckoning by finding ways to continue financing consumption. The issue of ‘quantitative easing’,however it is dressed up, is a short term attempt to stimulate the economy by printing money. This could have potentially dangerous long term consequences.

There is always scope for the economy to recover, for example the falling value of the pound may accelerate foreign direct investment. It is also the case that the compliance of British workers in pay freezes and wage cuts gives business more scope to recover. British capitalism will not collapse as a consequence of the recession. Economic activity will revive eventually. But the fundamental problem of the long of a dynamic economic engine will not go away.

The failures of the UK and other western governments to react effectively to this crisis are a product of the lack of real democracy and leadership in the west. The concept of TINA,There Is No Alternative to the market,has lulled politicians into the mistaken belief that the market always works and that governments need merely tinker with the economy. Unsurprisingly interest in politics has diminished. If,after all, economic activity is out of human control,what’s the point in politics?

Even worse is the trend to interpret the many failures of the market as a reason to oppose economic growth. Even in the middle of this recession, when world trade is collapsing and capital flows between countries are drying up, with potentially disastrous consequences for the health and well being of the people of this planet, there are those who argue that falls in consumption are a a good thing. We need to argue that continued economic growth is vital. If the market cannot deliver economic growth then we need to look at alternative ways of delivering it.

We should see this recession as an opportunity to develop arguments for democracy and for economic growth. The economy is the sum total of human activity. We made this mess and we can unmake it. But to do this requires a revolution in our attitude to politics and a renewed belief in our ability to change the course of human activity through conscious activity. The UK requires a political and cultural revolution in order for the economy to recover and thrive into the future. A more innovative business environment cannot thrive in a generally risk averse culture and one which is wedded to welfarism, state intervention and regulation.

[1] Financial Times editorial December 31 2009

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5 responses

18 02 2009
CharlieMcMenamin

Hi, I thought I’d stop by and say how interesting I find your blog – the question of what we, as a country, are going to do after this recession seems me to be the key question. I also agree with your comments on the need for a political economy, not just a narrow, technocratic ‘economic’ approach to the problem.

Having said that, I am, in general, coming at the question from a very different point of view to you. I think the problem has been one of unrestrained free markets and attacks on the social wage over a generation. There is, as you intimate, a ‘cultural problem’ – but it’s a cultural problem around exclusion, inequality and isolation of most of the workforce from decision making inside enterprises. & the political economy I would advocate would find other measures of dynamism than simple GDP growth – it would look at ecological sustainability and fair trade justice as well.

So our policy prescriptions – and parts of our analysis – may end up being very different. But you write in a concise and clear way and are focusing on the key issue so I shall continue to read you with respect.

18 02 2009
Rob Killick

Hello Charlie, thanks for the kind words.
I can see we disagree on the way forward. My take is that we have become culturally risk averse and that this is stifling our collective imagination. I am all in favour of more pariticipation, especially in politics, but on what terms?
It is striking that for the first time probably in human history the main critics of the market are saying that growth is a problem, mainly because it threatens the planet but also because the acquisition of material things is in itself morally distasteful.
I find this outlook quite shocking in that it overestimates the importance of ‘the planet ‘ as opposed to those who live on it and it also exhibits a western contempt for the problems of the third world, where they could do with a lot more material acquisition.

18 02 2009
CharlieMcMenamin

Rob,
Thanks for the response.

Growth is surely a means to an end, not a end in itself. I’m not a utilitarian, but let’s call that desired end ‘personal fulfillment and relief from drudgery’ to be getting on with. It is the content, international spread and nature of growth that determines its desirability. There has been some quite interesting initial work to try to quantify this e.g.http://www.neweconomics.org/gen/uploads/iglzyk45xj2jksb01c14fvq424012009010050.pdf

iI won’t answer your other points because I look forward to exchanging views on those and other matters on your interesting blog.

19 02 2009
Rob Killick

Thanks Charlie,I have been meaning to look at the discussion about new ways of measuring wealth for a while.
I agree with you that material growth is a means to an end. The ends in my view being the abolition of global poverty,the eradication of treatable diseases and the further creation of labour saving technologies. And then the conquering of outer space.(only half joking).

1 03 2009
Mark Rowlinson

“The concept of TINA,There Is No Alternative to the market,has lulled politicians into the mistaken belief that the market always works and that governments need merely tinker with the economy. ”

Surely it’s really TINA,There Is No (real) Alternative to the economic management offered by our political parties. It all comes down to that risk aversion again. Politicians are too risk averse to try something different and I suspect the public would be too risk averse to elect someone putting different ideas forward.

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