20 years on and still in a state

The subtitle of Will Hutton’s new book How Good Can We Be? conveys the message very concisely: ‘ending the mercenary society and building a great country’. It is the heartfelt product of the times we’re in, the post-crisis, mid-austerity, fractured-politics state of the UK. Readers of Will Hutton’s Observer columns will not be surprised by his diagnosis of the country’s ills. Nor will readers of his first bestseller, The State We’re In, which was published in 1995.

  

That first book caught the mood of the nation. We had had enough of Thatcherism, of the short termism of finance and the divisiveness of class in Britain, the inequalities of opportunity and outcome. The book became a sort of handbook for people on the left of politics working to bring about what turned out to be Tony Blair’s landslide first general election victory in 1997. Hutton is clearly disappointed by how Britain turned out after three Labour terms in office, as well as by the post-2010 coalition. For the new book – although quite measured in how it says so – clearly sees New Labour as misguided in its adherence to the Thatcherite insistence on the pre-eminence of markets, markets, markets. “Craven attitude to private is best notion,” goes the index summary of one of the passages about New Labour. The Blair governments turned out to have no interest in the kind of ‘stakeholder’ capitalism advocated in The State We’re In. It was seen as too close to the traditional Labour approach to the economy, perhaps. New Labour was very keen – understandably – to ensure it was seen as business-friendly.

How Good Can We Be? uses different terminology and of course notes the different political context – the devolutionary forces, the impact of austerity, the  fragmentation of support for the major parties and rise of UKIP. But it insists on essentially the same analysis and approaches. The book emphasises the importance of the institutional fabric of the economy and society in between ‘state’ and ‘market’, and on the fact that government and private sector have to work in harmony in any successful advanced economy, rather than seeing each other as incompatibly opposite ways of organising economic activity.

My sense is that many voters have strong reservations about the role of markets, and big business is hardly admired these days; but the simplistic Thatcherite approach to economics still has a far, far stronger grip on officialdom and the public policy conversation than it has inside the economics profession. It’s dispiriting to read, after two decades, that many of the same long-term British economic problems (skills, infrastructure, short-termism in finance) have not abated.

I hope it will be widely read during the election campaign. Hutton has plenty of interesting policy suggestions – if anything, they add up to quite a modest programme. Even people who disagree with his politics ought to be willing to consider with an open mind proposals that might help address some of the glaring issues such as the need for economic devolution around the UK including English regions, or the fraught question of corporate taxation. It remains to be seen whether this new book catches the national mood as the first one did 20 years ago.

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Famine, hunger and markets

Cormac Ó Gráda knows more than most people about famines, historical and modern, and his short book of essays, Eating People is Wrong, is superb. It encapsulates in five chapters some key messages.

First, that cannibalism – ‘famine’s darkest secret’ – does occur, occasionally. Most often when it does, desperate people eat the bodies of those who have already died. Occasionally, people are murdered to be eaten. But the taboo is strong so cannibalism is rare even in terrible famines. Yet Ó Gráda concludes that we cannot assume ‘some silent cultural shift or civilizing process’ has made it a thing of the past.

The second chapter takes a careful look at the Bengal famine of 1943-44, and broadly agrees with Amartya Sen‘s famous conclusion that it was a famine of policy rather than nature. “The famine was made inevitable by the authorities’ failure to recognize publicly that there was a shortfall, abd by the extra demands on food imposed by the war effort. The famine was the product of the wartime priorities of the ruling colonial elite.”

The third chapter interested me the most. It looks at several famines to test whether free markets make them worse (because food is shipped out of the famine region); or better (because higher prices induce higher food supplies); or worse because of information failures and uncertainty. Another, related issue is how well markets work in normal times – if they are not competitive normally, perhaps profiteering by middlemen and landowners is worse during a famine. The empirical work described in the chapter points to the importance of context: the response of markets to price signals does not function well in conflict zones – in Somalia, for example, the conflict segmented markets for grain. However, during other episodes, “markets worked more smoothly than might have been expected on the basis of a reading of qualitative and fictional accounts.” A key piece of evidence is the reduction in variation in food prices linked to greater integration of different regional markets due to increased flows. Movements in grain prices seem to have prompted supply responses and trade flows. Recent examples include Malawi and Niger in the 2000s. The same mechanism – greater integration, via mobile phones in these cases – has led to reduced variation in food prices in contexts ranging from Indian fisheries (Rob Jensen) and crops in Niger (Jenny Aker). This is a fascinating chapter. The important issue it doesn’t address is the strong sense so many people have that markets should not be allowed to operate at times when fairness matters more than efficiency – reflected in those ‘qualitative’ accounts. Wartime rationing is a clear example. I think it would help to make clear the efficiency/equity trade-off in these extreme contexts.

The fourth chapter is about China’s Great Famine. It is a critical account of some recent books, including Frank Dikötter’s Mao’s Great Famine, which Ó Gráda regards as too ‘engage’ and insufficiently dispassionate. However, he does not dispute the huge scale or human costs. The chapter is really about the role of human agency in causing famine. It also raises the question of how at the time the famine was so invisible to the rest of the world, and also to many in China but outside the worst-affected areas.

Finally, the book discusses the problem of famine – rare, now, outside conflict zones – and that of hunger, not at all rare. It is critical of NGOs whose raison d’être was urgent famine relief for switching to their own self-perpetuation. They do not leave a country after a crisis, and the book points to the adverse effects imports of foodstuffs have on local supplies, once a food crisis has ended. The intrusion into the operation of local markets is in this kind of context very damaging. “Food aid in a crisis situation may avert famine; granted continuously in ‘normal’ times it may simply injure or destroy an already vulnerable domestic agricultural sector.” Non-famine malnutrition now causes far more death and disease than does famine. Eliminating hunger is proving far harder than eliminating (mostly, for now) famine.

Moral cultures of capitalism

Smitten over the past week by a winter bug that has kept me tucked up on the sofa like a delicate Victorian lady, I’ve been reading Tony Judt’s When the Facts Change. This posthumously published collection of essays he wrote over 25 years has been edited by his wife Jennifer Homans, author herself of the terrific ballet history, Apollo’s Angels. I’ve long been a Judt admirer and this collection – only a few of which I’d read before – lives up to expectations. (And anyway, essays are about the right length for a convalescent.) An untimely and unimaginable death anyway (he suffered from Lou Gehrig’s Disease), the current state of Europe particularly makes one wish such a thoughtful historian of the continent were still alive to comment on Greece and the EU, on the long term effects of the financial crisis on the European ‘project’, on Russia and Ukraine.

Judt’s perspective was political rather than economic but his observations on the economy are always interesting. I liked this observation about globalization triumphalism, written in 2002:

It is a cardinal tenet of the prophets of globalization that the logic of economic efficiency must sweep all before it (a characteristics 19th century fallacy they share with Marxists). But that was how it seemed at the peak of the last great era of globalization, on the eve of World War I, when many observers likewise foresaw the decline of the nation-state and a coming age of international economic integration.

” What happened, of course, was something rather different.

He continued:

“The contingencies of domestic politics trumped the ‘laws’ of international economic behaviour, and they may do so again. Capitalism is indeed global in its reach, but its local forms have always been richly variable and they still are. This is because economic practices shape national institutions and legal norms and are shaped by them in their turn; they are deeply embedded in very different national and moral cultures.”

It has taken the centre of gravity in the economics profession a decade to get to the same perspective, and many economists are naturally prone to economic determinism.

Tea, tears and TV

Joe Moran’s Armchair Nation: An intimate history of Britain in front of the TV is a fantastic read in two ways: as a history of TV and as a social history of post-war Britain. I have a special interest in broadcasting but think this has much wider appeal. It’s very well-written, often funny, a terrific read.

I learned all sorts of wonderful factoids. Serendipitously, given that the late Colleen McCullough has been in the news recently, one was that the ending of the Thorn Birds in 1984 brought a rise of 2200 megawatts in electricity demand, the biggest in the history of the National Grid as the tearful nation went to make a nice cup of tea – until the 2800 megawatt surge at the end of the penalty shoot-out between England and Germany in 1990, when a stunned 8 minutes after Chris Waddle missed the goal a further reviving cuppa was required.

Or that the 1990 edition of Delia Smith’s Christmas, showing a recipe for chocolate torte requiring liquid glucose, led to stocks not only in the UK but in the whole of Europe selling out. Which was as nothing compared to the Great Cranberry Shortage of 1995 – a time when cranberry juice could still be prescribed on the NHS as a treatment for cystitis.

But as well as all the delicious facts, much thoughtful reflection on the shaping of the country in the latter half of the 20th century, the relationship between the regions and London, changing social mores (remember the effect of seeing David Bowie as Ziggy Stardust, anyone?), the shifting quicksands of class in Britain, and much more. Highly recommended.

The puzzle of profit sharing (not)

After I posted recently about the new book, Climate Shock, by Gernot Wagner and Martin Weitzman, Frank Koller (author of the excellent book Spark: How Old-Fashioned Values Drive a 21st Century Corporation about Lincoln Electric) alerted me to an earlier (1986) book by Martin Weitzman, The Share Economy. This argues for linking wages to the success of the business – profit sharing. Frank wrote to me that recovering from prolonged slow growth: “[I]s only possible in an environment where employees can trust that over the long term, as they share with management in the firm’s ups and downs, everyone will bear the risk and rewards equally. That kind of trust is pretty rare, of course. It’s at the heart of the system I explored in my book about Lincoln Electric and others with no layoff policies.”

   

Many others have noted that this was of course Henry Ford’s great insight when he doubled the pay of (some of) his workforce – although he had to battle a lawsuit from his minority shareholder Dodge, as they argued it was damaging to shareholders’ interests to pay workers more and invest more in the business. (Ford lost the case, but bought them out.)

It’s interesting in political economy terms that profit sharing is so rare, despite the reasonable amount of economic evidence that it does increase productivity and profitability. The one UK example always given is John Lewis, a hugely successful business, but I can’t think of any others of large scale. Does anybody have an explanation other than short-sighted greed?