No such thing as ‘business as usual’ after the recession

In a post last week I argued that the talk of green shoots in the economy was nonsense. The hopes of a return to ‘business as usual’ are slim for reasons explained there.  A report in today’s Financial Times bears out the more likely scenario of a period of stagnation. The general hope is that the regime of low interest rates brought in after the banking crisis will encourage more economic activity. There is little sign of this happening yet. Yet this seems to be the total strategy of our political class.

In the same Financial Times report an analyst had the following to suggest about the future;

Financial services and the City of London will take the lead. There will be takeover bids, management buy-outs and innovative investment products,One of the biggest areas of financial engineering will be how to get around the 50p tax rate.

How grim does that sound? The phrase ‘innovative investment products’ sums up everything that is weak and wrong about western economies. Rather than focussing on productive investment in new industries the search is on for new and better ways of making money out of financial instruments. It is all about reflating the financialisation bubble by finding new asset classes which can be leveraged.

Yet this ‘business as usual’ approach is all our political leaders have to offer. The real problem now lies not so much in the economic sphere, but in politics. Last week’s G8 summit had little to say and nothing to do about the recession. We appear to have entered a period of policy drift towards the economy, at least in the west. Stagnation in the economy and stagnation in politics has at least a silver lining. It should open a space to debate new and better ways of thinking about our economy and how it can be improved.

Why Bob Crow is right and Danny Finkelstein is wrong

Danny Finkelstein makes a case in today’s Times for the end of political parties as we have known them. His argument is that political parties used to represent what he calls ‘tribal’  or what were otherwise known as ‘class’ interests. Now these ‘tribal’  interests have been abandoned in favour of a more detached, sceptical and managerial view of politics.  As he says in the article:

In his book Tides of Consent, the American political scientist James Stimson argues that voters can be divided into three groups. The first group he calls “the Passionate”. These are people “who care a great deal about public affairs, have strong views, and form lasting commitments to one side or another”….A second group he labels “the Uninvolved”. These are “people who think politics isn’t important in their lives (and they are probably right), don’t pay attention and don’t want to be bothered”….Which leaves Stimson’s third group – “the Scorekeepers”. The Scorekeepers “are non-ideological pragmatists who trust or distrust each side equally. They tend to see politics not as a contest of world views, but merely as alternate teams of possible managers of government, each contending that they can do a better job. The Scorekeepers are not choosing directions in their votes, they are hiring managers.”

Finkelstein’s argument is that the decline in numbers of the ‘passionate’ and the increase in numbers of the ‘scorekeepers’ accounts for the volatility of electoral politics today. As a narrow structuralist description of politics today Finkelstein is obviously right. There are less ‘passionate’ people around. But the reason is that there is precious little to be ‘passionate’ about in terms of the mainstream political parties.

Finkelstein’s description of the ‘scorekeepers’ as looking for ‘alternate teams of possible managers of government’ chimes with the narrowness of politics today. The problem is that a narrow managerial approach to the economy, for example, is precisely what led the British government to allow the credit bubbles to develop which laid the basis for today’s recession. The government saw its role in the economy as merely ‘managing’ the artificially induced boom.

Politics is more than managerialism or it is nothing. Politics has to be where challenges are made to the status quo, because the status quo is not good enough. The political sphere is also the place where different interest groups fight out their differences in public in order to convince others that they are right. Not everybody in society has the same interests and the disappearance of class politics in its old form does not change that.

Today’s tube strike is a reminder of the fact that not everyone’s interests peacefully coexist with other peoples’. Sometimes confict is inevitable. Politics should be the battleground where these differences of interest and opinion are played out. For all his old style ‘class’ rhetoric Bob Crow understands this. That is why he is right and Finkelstein is wrong.

What I think about when I think about the economy

This was the focus of my opening speech at the Battle for the Economy conference on May16. 

During the course of this recession we have all become familiar with the concept of zombie banks, that is banks which are technically bankrupt but which are kept afloat by government support. It has now become clear that we also have zombie governments and zombie political parties, brain dead organisations which have only remained upright through support from the various financial bubbles over the past ten years. Recently, these bubbles have burst and the living dead are falling around our feet.

Austerity or innovation?

What kind of society do we want to live in? In Britain we have reached a crossroads. One path is the one that most politicians seemingly want to take us down, the road to austerity, public spending cuts, wage restraint, the sharing out of misery. At the moment these are the loudest voices. The other, less mentioned path, is the path of economic growth, innovation, technical and scientific progress, and rising living standards.

We have been preparing for the path to austerity for some time. Even during the boom years loud and influential voices proclaimed the pointlessness, misery and environmental damage created by materialism. In the process reality has been turned on its head. The truth is that all human progress, in health, education, science, technology and democracy is built on rising living standards. The poorest countries in the world are not paradises , they are inflicted with disease, despotism, ignorance and the desperate routine tragedy of the needless death of their children.

The new politics of austerity are the politics of low expectations. Such politics do not expect us to lift ourselves out of a recession through hard work and application. It does not inspire us to have a positive sense of where we are going as a society, nor does it challenge us to put the pursuit of science and innovation at the core of what we do.

The alternative

What is the alternative?  Politics and politicians have shrunk to insignificance and to levels of humiliation unknown in the modern era.  At this point it is vital that those of us who believe in the potential of humans to fix things and to change our circumstances for the better, should raise our voices louder than ever and act wherever possible to influence an agenda of change.

I would say there are three big issues facing us which are both economic and political and how we act on them will determine the future:

1) any western economies, with the UK at the forefront, have become relatively less and less productive and more dependent on financial services, credit and state spending. What can we do to encourage innovation and an increase in productive activity, and what are the barriers to this? Societies which are economically sluggish are rarely vibrant or dynamic in other ways and our culture of risk aversion is holding back the future.

2) China and other developing countries are demanding (and rightly so) to reshape the world order. This will create enormous tensions at a global level.

3) the lack of any contestation to managerial capitalism has shrunk the worlds’ options and led to the diminishing of politics and human aspirations in general. Anti economic growth sentiments have become rife in response to the perceived failures of the market.

So, I think it is important to remember that when we talk about the economy, we are not just discussing numbers and statistics, but the substance of our lives and the future of our people.

Have a productive day!