Tag Archives: political economy

Politics and economics

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There’s a sentence I underlined twice in Ben Ansell’s Why Politics Fails: “Politics makes growth.” This is my main takeaway from editing a series of policy essays from my colleagues in the Productivity Institute, which will be out at the end of November for National Productivity Week. If you ask people what are the two main causes of the UK’s dismal productivity in recent times they will pick what’s close to their own interests – various skills policies (the madness of the student loan system, the dreadful FE system, the madness of tearing up painstakingly-agreed T-levels for a new system…), R&D policies and the lack of institutions to enable the commercialisation of innovations, low investment levels because of a gazillion tax changes and low saving. But every essay circles back to politics: the politics of ‘announceables’, of over-centralisation, of silos, and so on.

Anyway, Why Politics Fails is an excellent introduction that does what it says in the title: it analyses political failures through the lens of five traps or, more accurately, trade-offs. The first chapter is about the tension in democracy between honouring majority preferences and protecting minorities. The equality trap is the trade-off between equal rights and equal outcomes. The third chapter is about solidarity, manifested only in situations of individual need. The security trap is the  balance between (too much) anarchy and (too much) order. And the prosperity trap concerns the short-run economic (and electoral) gains looking more attractive than long-run decision-making that will enable prosperity over time.

The book has lots of examples, contemporary and historical. It would make an excellent additional read for students, as well as being accessible to the general readership (and Reith Lectures audience). I liked its emphasis on the delicate role played by a country’s institutions – for example, the book suggests an argument against UBI is its institutional fragility, compared to making improvements in existing, well-established welfare states. And the prosperity chapter rightly points to the importance of institutions as bulwarks against short-termism. It occupied me for a trans-atlantic flight & I enjoyed reading it.

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Numbers, objectivity and meaning

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I’ve carved out as many empty days as possible this summer to make significant headway with my next book, and as well as writing I’ve been re-reading some golden oldies. One is Theodore Porter’s classic Trust In Numbers: The Pursuit of Objectivity in Science and Public Life. For those who haven’t read it, it’s a historical exploration of the pursuit of quantification in economic domains (accounting, cost benefit analysis) as an expression of objectivity. A core argument is that the assertion of quantified objectivity is a signal of a group’s lack of power rather than the opposite; powerful groups or people expect to have their judgment trusted.

This is counter-intuitive if one has read so often that the deployment of numbers is the way social and political power is exerted by economists and others. But the case Porter makes is persuasive, certainly as far as the historical origins of quantification go. He also acknowledges that objectivity has become a desired characteristics of societies governed by the rule of law: “A decision made by the numbers … has at least the appearance of being fair and impersonal. Scientific objectivity thus provides an answer to a moral demand. … Quantification is a way of making decisions without seeming to decide.” But he adds: “Objectivity lends authority to officials who have very little of their own.” So numbers have the dual purpose of signalling impartiality and thereby giving authority to the number-producers: “The reputation of accounts and statistics for grayness helps to maintain their authority.”

My book will be anything but gray. It is looking at how economic statistics are constructed and how inadequate they have become as metrics of social progress (or its absence) given the technology-driven changes in the structure of the economy as well as the imperatives of making the environment count. These changes have been under way at least since my first book The Weightless World was published 26 years ago, but the social process of constructing the statistics is a slow one, carried out within the expert community of national statisticians. Thinking about how to replace what we have now – given the issues I highlighted in GDP – involves some deeply conceptual and philosophical questions.

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Private government?

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I’d previously read about Elizabeth Anderson’s Private Government, but hadn’t actually read it until this weekend. The book consists of her two 2014 Tanner Lectures and the four responses, so is quite old. The lectures draw an analogy between public government – “the people free under the state” – and the private government workers experience when their bosses boss them in unaccountable ways. In other words, the state’s exercise of power in a democracy is justified whereas employer’s exercise of power is not. Along the way, the lectures trace the evolution of the idea of a free market as a means of exercising freedom (in the 17th century with the Levellers and the 18th with Adam Smith) to the 21st century ideology of ‘free markets’ as essentially a means of exercising corporate power.

As respondent Niko Kolodny asks, though, what’s wrong with being governed, even at work? And Tyler Cowen argues that the costs of exiting a job are relatively low – Anderson compares leaving a job as a path to freedom is like saying Italians under Mussolini were free because they could leave the country (until they couldn’t, of course). This is surely hyperbole. There are without question abusive employers of marginalised workers and it behoves those of us with good jobs to appreciate this. But an argument about employer abuses is an argument about the need for the state (public government) to do a better job with legal protections and their enforcement. For instance, governments (and the legal profession) are finally bearing down on the extensive use of NDAs; good. It is harder than it was even 10 years ago to fire an employee over their sexual preferences. People can be fired for expressing some views on social media – when these are illegal or just vile and damaging to their employer’s reputation, also good.

Anderson – whose Value in Ethics and Economics is a terrific book* – doesn’t bring in to the argument two issues that seem relevant. One is the Hirschman triptych of exit, voice and loyalty, which is a useful way of thinking about power in economic relationships and could have shed light on this context. The other is Elinor Ostrom,** whose private governance model by definition takes a form that is not arbitrary and abusive but consensual – it would have been interesting to see her design principles discussed in the context of the worker-employer relationship. The master key to governance design seems to be information asymmetries and the possibility of monitoring – I think this is why in the context of modern digital technologies we see on the one hand increased surveillance of workers in some jobs and firms, and on the other hand increased autonomy in decision-making for workers in different jobs and firms. The latter are high-trust and more productive organisations.

So I have every sympathy with Anderson’s criticism of bad workplace relationships, and the value of worker autonomy. But the lectures aren’t all that persuasive.

*I have an old copy – not sure why it’s so expensive even 2nd hand now.

**Also weirdly priced at £226.84 for the paperback on Amazon today – maybe the algorithm doesn’t like the heat?

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It’s the economy, stupid

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Collapse: The Fall of the Soviet Union by Vladislav Zubok was unexpectedly gripping. It’s a large tome, and I can’t remember how it came to be in my pile. But perhaps it’s because the events collectively described as the collapse of Communism marked history as part of my own life that I found the detailed descriptions here of Soviet politics over the years from the arrival of Garbachev and the collapse of the USSR so compelling. In the late 1980s I was working for DRI Europe where my job included trying to understand perestroika and the Soviet economic reforms to explain to clients. We were on holiday in remote Herefordshire watching the fall of the Berlin Wall on a small black and white TV, whose grainy footage felt somehow appropriate for a world historical event. Then came the Czechoslovak Velvet Revolution and the not-at-all-velvet overthrow of the Ceaucescus in Romania over the Christmas holiday. German re-unfication. And of course the collapse of the USSR and western ‘victory’ in the Cold War. If only we’d realised then that the West was a construct of the same system, except that its collapse on our side of the Iron Curtain would be a slower business.

Anyway, aside from the fascinating detail, the message I took away from Collapse was the perennial: it’s the economy, stupid. If there’s high inflation and people’s living standards are falling because of food shortages and other problems, you will have zero political room for manoeuvre and will open the way to political snake-oil peddlers to offer “easy” solutions. Oh.

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Rawls, reloaded

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A few weeks ago I read Thomas Aubrey’s All Roads Lead to Serfdom, which argued for an alternative philosophical foundation to simple-minded utilitarianism for economic policy, if market liberalism is to survive. In Free and Equal: What Would A Fair Society Look Like, Daniel Chandler offers a modern interpretation of Rawls as an alternative to Aubrey’s Ordoliberalism.

The first part of Free and Equal is a clear and useful summary of what Rawls said. It’s over 40 years since I read A Theory of Justice, so this was a terrific refresher. And indeed for a liberal-minded person there is much to like in the Rawlsian approach, which is presented here as both comon sense and yet quite radical given where we are.

The second part of the book takes the themes – freedom, democracy, equality of opportunity, shared prosperity and democracy at work – and analyses the current state of the world in the light of each. It has many policy recommendations, many of them familiar such as UBI, worker rights in gig jobs, proportional representation in elections, all justified in terms of the underlying Rawlsian philosophy. Again, there are some unexpected overlaps with the ordoliberal case for power dispersion: Chandler writes: “Properly understood, the difference principle is concerned not just with the distribution of income and wealth but with the concentration of economic power and control.”

It seems hard to disagree with the contention that both wealth and power have become too concentrated in the western democracries and some things badly need fixing. But reading Free and Equal so soon after All Roads Lead to Serfdom crystallised for me an uneasiness I have with both underpinning philosophies, namely their individualism. Take Universal Basic Income for instance. Chandler is an advocate, but recognises there are critiques – such as undermining the sense of purpose people get from work, or the cost. The one critique he does not address is the one I’m going to label the Coyle Critique: you can’t buy a public realm – transport services, decent schools, waste collection – with your UBI.

Both books have plenty of specific recommendations, and a fine liberal individualist philosophy, but no positive account of the public realm. Improving economic and social outcomes will require a shift in public philosophy away from the bankrupt post-1980 set of assumptions; while there is much to like and much sense in Free and Equal, it doesn’t achieve this, although recognising the need to get away from the false dichotomy of market fundamentalism vs statist socialism. It argues that Rawls’ ‘difference principle’ lays the foundation for “a richer and more nuanced conversation about our economic structures,” but for me it doesn’t add up yet to “a new and inspiring political economy.”

Still, it’s unfair to expect a ready-packaged answer. Free and Equal makes an important contribution to the conversation, also explored in the recent special issue of Daedalus and elsewhere. It’s an optimistic take, and it’s interesting to revisit Rawls in such depth.

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