More incompetent than neoliberal?

“Neoliberalism is a term which should, I think, not be used,” writes David Edgerton in his chapter in The Neoliberal Age? Britain Since the 1970s edited by Aled Davies, Ben Jackson and Florence Sutcliffe-Briathwaite. I agree. It’s handy shorthand for a philosophy of government that has had some prominence since 1979/80 but is used in ways that obscure rather than illuminate ideas. Some writers (eg Wendy Brown) using the term seem to class *all* economists/economics as neoliberal, yet lumping Joe Stiglitz with Eugene Fama really seems bizarre even though both think about how information shapes people’s individual economic decisions.

This conference volume is an exploration of the nuances and hence the question mark in its title. The broad conclusion is that something more complex and even contradictory than an ideological neoliberal movement has been going on. This is despite the rhetoric deployed by some UK politicians since Thatcher – the reality has been messier. As my colleague Peter Sloman puts it in his chapter on the welfare state: “The conjunction of anti-welfarist discourse with welfarist practice is not unique to the UK but is perhaps particularly striking in Britain.” We’ve never walked the talk fully – because politics. The editors’ intro sums this up nicely: not only have there been other intellectual influences than any neoliberal or free market ideologies, but to paint everything for the past 40 years as part of a grand neoliberal tide ignores “the role of economic and social change in setting broad constraints on the path of public policy.”

In fact, just revising a paper some co-authors and I are about to resubmit on the UK’s levelling up plans has made me glumly ever more certain that the dominant trend in UK politics is sheer incompetence, wired in to structures of government. We have a centralised state so determined to cling on to its power to determine policies that it repeatedly undermines the capacity of all the devolved and local governments and other agencies either to feed information in to the policy-making process or to implement the resulting decisions. Sovereign Westminster/Whitehall omnishambles.

Anyway, I haven’t read all the chapters yet but this is an interesting book, testing the neoliberal lens on a range of policies and perspectives, and finding it distorts the messiness of the historical landscape.

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Books about books

It’s turning out to be a bit of a week, but I have read (a) Thomas Piketty’s new book, A Brief History of Equality – out next month, am reviewing it for the FT. All I’ll say for now is that he presumably got the title idea from my GDP: A Brief But Affectionate History….; and (b) The Bookseller’s Tale by Martin Latham and No-one Round Here Reads Tolstoy: Memoirs of a Working Class Reader by Mark Hodkinson. These were comfort reading, and I enjoyed them both in different ways. The former is a bookseller’s reflections with some personal history threaded through. The latter is a personal history by a reader/writer/publisher with some thoughts about books and literature threaded through.

This meant that although I liked The Bookseller’s Tale I *loved* No-one Round Here Reads Tolstoy because it is so much about my life with books. Hodkinson grew up one town over from me in Lancashire (Rochdale rather than Ramsbottom) at almost the same time (1970s), in a house with one book in it (we had one shelf of books) on a council estate (we were on the first street outside the estate). A key difference between us is that I got selected to the local grammar school by the 11-plus exam, that narrow but effective ladder up the social scale available to bright kids until the introduction of comprehensive schooling.

The memoir absolutely captures the flavour of time and place, and the sense of alien abduction that affected a voracious working class reader. All the details down to the trade-in market stall where my dad bought his westerns for 10p and sold them back for 5p, while I scoured the boxes for Penguins. Highly recommended (along with my all-time favourite on this theme, Jonathan Rose’s The Intellectual Life of the British Working Classes.)

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Facing up to disorder

I read the proofs of Helen Thompson’s magnificent new book Disorder: Hard Times in the 21st Century a while ago, and specifically before the Russian invasion of Ukraine. Having just read the finished product, it seems all the more prescient and timely. Take this observation, for instance: “For five decades, Central and Southern European energy dependency on Russia has been a geopolitical fact of life. Indeed, since the First World War’s end, the periods in which Germany has eschewed Russian/Soviet oil and later gas have been short … Since it has endured three decades into a post-Cold War world where Moscow uses gas as an instrument of power, Germany cannot escape responsibility for whathappens to states with borders with post-Soviet Russia.”

The book braids together three themes in its synopsis of present disorder and instability. The first is energy-driven geopolitics entwining the fates of the world’s major powers, destabilised periodically by discoveries or technologies (eg fracking in the US) and by events (eg Fukushima and the German abandoment of nuclear). Secondly, and relatedly, there is a sequence of economic crises with their own internal dynamic (the rise of market-oriented philosophies, China’s admission to the world trading system) but also “structural material causes”, in particular the energy shocks of the 1970s and increased energy demand due to China’s economic rise. The final section turns to democratic politics, related to the economic upheavals, and the challenges posed to liberal democracies by plutocracy and inequality, mass migration and the various shocks – the China effect on manufacturing, the GFC.

Along the way, the book weaves in much more – the institutional history of the EU, the breakdown of Bretton Woods, Middle Eastern politics. I’m in awe of Helen’s ability to take a synoptic view of underlying structural trends while mastering so much detail. How much must she read?? The book ends with some observations about what various (democratic) governments might do to tackle these linked predicaments, but it’s pretty pessimistic. I’m left with a sense of not just the length of the shadow of history but also its tenacity: instability is baked in. And as the final words put it: “How… democracies can be sustained as the likely contests over climate change and energy consumption destabilize them will become the central political question of the coming decade.” Read it to be informed, but not to be cheered.

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Grasping the intangible nettles

Second albums after a huge first hit are always tricky, but the famous econ duo of Jonathan Haskel and Stian Westlake pull it off with Restarting the Future: how to Fix the Intangible Economy, a sequel to their best-selling Capitalism Without Capital.

That title was missing a ‘Physical’ in parenthesis before ‘Capital’, because the point was to underline the relative importance of intangible capital in the economy now – everything from patentable drug formulae to reputation to social trust to the tacit know-how that makes complex organisations function. While intangibles have always been important in the economy, they now predominate in the creation of economic value. Indeed this has been the case for decades now (my book The Weightless World is 25 years old this year). Jonathan and Stian (who are friends of mine) set out the special characteristics of intangibles – fours Ss, scalability, sunkenness, spillovers, and synergies – and explored the implications.

The new book starts with the observation that all is not well in the economy, with a litany that has become all too familiar: stagnant productivity, excessive inequality, a lack of resilience, ‘dysfunctional’ competition and what they term inauthenticity. They note, too, that investment in intangibles has slowed down markedly. Their diagnosis is that while existing institutions (in the broad sense in which that term is used in economics) were able to support intangible growth up to a point, progress now will depend on institutional reform: “institutions are out of sync with the intangible economy”. In their sights for reform are institutions and policies to support better (and fund) research and development, a redesigned competition policy, improvements to the financial architecture and monetary policy, and fixing cities.

The first half of the book is diagnosis, including rejecting some alternative diagnoses. In particular, they reject the idea that markets have become too concentrated, arguing that firms’ mark-ups have not risen when their intangibles are measured properly. I must say I don’t find this persuasive, given for example the steady consolidation of service sectors (pharmacies, vets, private healthcare, accountancy firms, financial advisers….) or simply observing the steady degrading of big tech service offers (eg Amazon searches being dominated by paid-for items). Still, competition policy certainly needs (and is getting) a refresh. Nor does this mean the intangibles explanation is invalid – on the contrary, it seems to be an integral part of the way production has been restructured.

The second half of the book then goes on to recommendations for reforms of policies and institutions, all rather sensible albeit not tangling with the politics of how these changes might come about except to observe that winners from the old regime will use their power to lobby against change.

I have some other quibbles. Jonathan and Stian put James Scott (Seeing Like A State) and Ernst Schumacher (Small is Beautiful) in the same ideas basket, which seems a bit odd to me although it’s decades since I read Schumacher. I don’t really understand their argument about inauthenticity, which draws on Graeber’s ‘bullshit jobs‘ and on Baudrillard, as an economic phenomenon – I decided it was about (lack of) trust or social capital but am not sure. The chapter on competition seems to claim that the debate about big tech etc only has one proposition, namely break-up, whereas in fact there is a rich debate about reshaping competition policy and enforcement in these large scale, spillover-laden markets. It also shoehorns in positional arms races in the jobs market into the ‘dysfunctional competition’ basket, when this is ja distinct labour market phenomenon.

But these really are quibbles about an excellent book. Their fundamental point about institutions lagging the structure of the economy is spot on, as is the implication that different kinds of collective approaches are needed to the economy. In the world of the four Ss, individualism and market-knows-best policies make for stagnation and discord. A final note: the book is published as the Russian invasion of Ukraine reminds us that tangibles from tanks to wheat really matter too. Simon Schama writes in the Financial Times that Ukraine’s ‘software’ has so far held out better than anybody might have feared against Russia’s hardware. But the world of the post-1989 era is changing.

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Firms and households

Harold Demsetz’s essays in From Economic Man to Economic System are an interesting read. They range over a few subjects, including the selfish gene versus the selfish economic agent, and demographics. But most circle around the idea of property and markets, and Coase’s analysis of externalities on the one hand and firms on the other. Demsetz’s main aim, in my reading, is to argue that the proper scope of markets is wider even than in the free-market interpretation of the Coase theorem. It will be familiar territory to many readers. But there was one point that I’m mulling over, which is that transaction costs don’t determine what happens inside the firm versus in the market – rather, they may change the way firms are structured (more or less verticallyintegrated) but mainly affect the division between household and ‘economic’ production. “Zero transaction cost maximizes the importance of firms in the economic system by raising the percentage of total output of goods produced withing specialised production units as compared to the percentageĀ  produced within self-sufficient households.” This is wrong – there are other reasons for firms to exist – but interesting. Another reason why economic analysis needs to bring household production fully into the picture.41V9pDSQlqL._SX331_BO1,204,203,200_

 

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