The Blog

Britain's Economic Bubble Re-Inflated

Britain's economy is recovering, we're told. More people in Britain are now in work than ever before. We have "growth". Whoopee! Why then do I (and just about everyone else I know) feel such disquiet?

Britain's economy is recovering, we're told. More people in Britain are now in work than ever before. We have "growth". Whoopee! Why then do I (and just about everyone else I know) feel such disquiet?

Well, first there is my own reluctance even to consider that George Osborne and the Coalition, the least convincing assemblage of inadequates ever to occupy a government front bench, might actually have got it right. But, also, many of the new jobs - "the unprecedented upsurge" -- are spurious: graduates are loading shelves in Tesco's. More broadly, with inflation at 2%, wages are increasing by less than 1%. The not-so-rich keep growing poorer while the country as a whole apparently grows richer, the already rich minority certainly do.

What is worse, the present economy is just a game of money. It has nothing to do with the real realities of the world: people, other living creatures, and the fabric of the Earth itself. Most obviously, economic growth is measured by increase in GDP and there is virtually no relationship, once we move beyond abject poverty, between GDP and human wellbeing; and absolutely no relationship at all between GDP and the state of the world, where we all live.

The present economy began 30 years ago when the world's governments, starting with Margaret Thatcher and Ronald Reagan, adopted the formula of the neoliberal, free global market. "Free" in this context means unconstrained by any considerations that are not purely commercial. Indeed the unconstrained market is free to create its own morality: what people will pay for is deemed to be OK (barring a few taboos, such as child pornography) and what people will pay the most for is the most valued.

But there is no sense that any of this frenetic commercial activity has any goal - apart from making money, which in practice stays in the hands of the rich. What is it all supposed to be for? Governments are forever "spelling out" their "vision" but none (from Thatcher to the Coalition) have made clear what they actually want to achieve. Sometimes they throw in cuddly concepts like "justice", "care", or even "compassion" - and all are sure to spare a sentence for "the environment". But none has had the courage, the true "vision", to distance itself from the neoliberal scrabble for "growth" and none therefore has produced political strategies or economic models that are remotely capable of delivering justice or indeed any long-term prospect of survival. Milton Friedman himself, founder of neoliberalism, acknowledged that the free market could not by itself deliver social justice.

If we truly want a world that works - do we? - then we need to acknowledge that the economy is not just about money. It is the medium by which we translate our aspirations into reality; so we have to make sure, first, that our aspirations are worthwhile and that the economic model is fit for purpose. In short, if we truly desire a compassionate society that delivers social justice, then the economy must be shaped not simply by economists who see themselves as accountants, but by moralists too. Most of the truly great economists from Adam Smith through Karl Marx to, say, J.M. Keynes and Amartya Sen have been moralists. Politicians should certainly be moralists, certainly more than career politicians. There has to be real concern for humanity, and for our fellow creatures. There are perfectly good economic models out there that do reconcile the desire for physical comfort with concern for justice. They shelter under the broad umbrella of "social democracy", rooted in the "mixed economy", a balance of private enterprise and societal need that was the western norm, the natural underpinning of democracy, until neoliberalism. There is nothing in social democracy to frighten the horses, as Mrs Patrick Campbell demanded of the Suffragettes. We just have to rediscover and somewhat refine it. The over-simplified algorithm of neoliberalism should be seen as an aberration.

Crucially, the economy must acknowledge that the world itself is finite. Year-by-year economic growth, which in practice soaks up more and more "resources" of which many are non-renewable, is not possible. This is just physics of the most elementary kind. The economy must have a biological dimension. We need seriously to acknowledge that we, humanity, are key players in the biosphere, and behave accordingly. A paragraph on "the environment" in the party manifesto, with a bit of legislation to allow "wildlife" to spin out its existence round the margins of agro-industrial fields, just will not do. Agriculture is key to ecological security, and the hyper-industrial kind we have now is a disaster. But then, we haven't had a secretary of state who understood farming, or gave a damn, in the past 30 years and the present incumbent is probably the worst of them all.

In short, the economy will start to convince, and "economic recovery" will mean something, when a government (certainly not this one, and almost certainly not what now passes as Labour, or any in the US) comes up with an economy in which, as Keynes recommended, money is merely a means to an end, and the end is human wellbeing, within a flourishing biosphere. Such an economy must rest on twin pillars: morality, based on compassion, and ecological reality, based on sound biology. The present economy is a bubble, with no foundations except for the flimsy theorizing of neoclassical economics and the free market dogma. Right now, in Britain, the bubble is being puffed up, after the collapse of the past five years. But nothing is solved; and next time round, with the world further decayed, the collapse will be worse. The next collapse but one, or two or three, could well be terminal.