Time and times

I went into my office on Friday to pick up some books out of their quarantine, mainly things i need to get papers written, but I also rescued Changing Times: Economics, Policies and Resource Allocation in Britain Since 1951 by Martin Chick. I’ve torn through it, a very interesting book.

As the subtitle indicates, it’s a history of postwar economic policy in the UK, ranging over six decades and issues spanning industrial policy, macro and trade policies, environmental, labour market, health and education policies. It’s also only 400 pages, to give an indication of the quite long focal length it necessarily requires. Given this broad span, the structure of the book is provided by the theme of time. Time in two senses: how policies relate to the distribution of economic welfare between generations; and the importance of assets, stocks as well as flows, and in particular the state’s withdrawal from investment in the future over this period.

This doesn’t 100% work as a thematic structure but it is nevertheless extremely interesting to reflect on some familiar trends and episodes in postwar economic history through this lens. Chick also draws on a huge range of the economics literature in order to cover the various policy areas, and has obviously spent hours in the National Archives reading Treasury papers and other policy documents. (Indeed, by the <6 degrees of separation rule, he lodged with my in-laws while staying at Kew to do the archive work.)

My favourite chapter was the one on privatisation of state-owned industries, which politely eviscerates the rationale for the policy. As Chick writes: “What was perhaps under-appreciated at the time of privatisation was the historical novelty of trying to induce large sunk investment from utilities operating in competitive markets.” After all, profit rates in the utilities sector are never spectacular. He goes on to interpret nationalisation as being “preferred to regulation as a means of extracting for consumers the benefits of improvements in productivity.” Privatisation was introducing risk into areas “from which it had been absent for decades”, the risk of costly, lumpy investments not delivering an adequate return, and technological risk – as well as altering the distribution of returns.

However, there is loads of interest in every chapter even for someone who has read a lot of the economic and political history of this period. For instance, the London smog of 5-8th December 1952 is thought to have led to the deaths of 4000 Londoners, a staggering number. Yet it wasn’t until 7 months later that the government even appointed the Beaver Committee on Air Pollution. The same chapter on environmental policy is super-interesting on the relationship between stocks and flows of different types of natural asset – fish vs oil.

Chick concludes the book: “Considerations of time and space affect all of the major issues of concern today (housing, utility output, global warming, infrastructure, educational opportunities, access to healthcare, trade, the internet and so on).” I have quibbles about the book – for instance, it would have been nice to replace dense paragraphs describing data and trends with some charts. But in the end, what’s not to like about a book with references ranging from Derek Parfit and Frank Ramsey to articles about the Cod Wars of the 1970s or technical reports on council house sales?



Angry Man

Angrynomics by Eric Lonergan and Mark Blyth is a rip-roaring read, and I wish I’d been in the pub with them as they discussed the state of the world and how to set it to rights. Not that I wholly agree with them, although disagreeing would obviously be half the fun. Normally I hate dialogue formats, as they’re usually constructed as a kind of semi-polite Punch and Judy show, presenting polarised views that are never intended to be reconciled. Lonergan and Blyth – it even sounds like a Victorian music hall act – agree on the basics so they riff of each other here in a more positive way.

Their basic thesis is that there are two kinds of anger abroad in the world: moral outrage (good) and tribal anger (bad), both reactions to the way the global economy has affected people since 1989.

Increased inequality is part of the story, genuine economic grievance in the rust belt and its equivalents, and another part is the cynical exploitation of tribalism or identitarianism by some politicians. So Lonergan and Blyth wear their left-of-centre hearts on their sleeves. The dialogues then describe and discuss the economic aspects of the political changes amply described in the now-extensive ‘decline of democracy’ literature – the micro, the macro/monetary, inequality (including, importantly, intergenerational), technological change – concluding with what to do now.

One huge gap evident right at the start is a passing parenthesis that the expression of anger is a largely male phenomenon. The book never picks this up; there is surely an important gender aspect to the way work has changed.

I disagree with dating the anger phenomenon to the collapse of communism in 1989, which removed a coherent (albeit flawed) ideology to oppose neoliberalism. Surely the hinge was the crisis of the 1970s, Thatcher and Reagan, and the early 1980s recession. That was the start of de-industrialisation, and the scarring of people’s economic prospects for the rest of their lives, and their children’s. These sea changes take time and there is never a single moment. As the book notes, too little has been reformed since 2008/9, but my view is that looking back with the hindsight of 2030, the combination of the Financial Crisis and the Covid depression will prove to be another hinge. (The book pre-dates the pandemic.)

As for the proposals, I think they get the role of competition all wrong, blaming excessive competition in tech and telecoms – whaaaaat??? – for the race to the bottom in employment practices. Amazon reports low profits because it reinvests so much revenue in continuing world domination, not because it has scrappy margins due to competitors snapping at its heels. I understand little about current monetary and alternative proposals, but as a diehard microeconomist find it hard to understand how administered negative prices in a market dominated by the state (ie central bank) can function well. Regulate the financial sector firmly – a big yes. The book has an interesting idea about government auctions of collective data rights – like spectrum auctions – which answers my profound objection to the proposal ‘create property rights in personal data and sell them’, namely that the value in data is collective, is due to aggregation.

Anyway, my copy has a combination of big ticks and scrawls of ‘nonsense!’ in the margins. A very satisfying read.




Enlightened liberalism: a reckoning

I’ve torn myself away from Twitter, horrified by the disintegration of the United States, the end point of its years of institutional racism and grotesque inequality, fuelled by Trump. George Packer’s brilliant article in The Atlantic a few weeks ago captured it: “We are Living in a Failed State.”

How did this come about? Well, The Light that Failed: A Reckoning by Ivan Krastev and Stephen Holmes seems like a pretty good diagnosis of how modern democratic liberalism has come to an end since 1989. The book starts with Eastern Europe, and moves on to Russia, China and finally the US. It uses the device of imitation: the post-Communist countries of eastern and central Europe wanted to be like the West in its idealised, peak-End of History image. They wanted to modernise, ‘normalise’, and become just like the countries of the EU. Yet the 1989 revolutions imitating liberalism have ended up in illiberal counter-revolutions, for there was a chasm between the ideal and the reality. “If we examine the gap between Western expectations and Eastern realities after Communism, we can discover an important source of the mental stress created in Central and Eastern Europe by a revolution aimed at importing ot imitating a foreign version of normailty.” I take this to allude to the importation of western economic and political institutions without consideration of local history and realities. Much has been written about the naive and ultimately counterproductive economic ‘shock therapies’ of the early 1990s.

Moving on to Russia, the authors argue that Putin’s imitation of the west has taken an aggressive, sarcastic turn – “ironic mimicry and reverse engineering of American hypocrisy.” His aim in interfering in elections and setting bots and trolls to run amok on social media is to dishearten and confuse, sow discord. “The West has started to resemble Putin’s Russia more than we are ready to acknowledge,” they write.

As for Trump, they argue that the irreversible damage he has caused to American democracy has involved deploying a populist gambit, corroding trust “not by lying but by telling truths selectively, especially half truths with which liberals are inclined to agree – globalization has only served the financial elite, US troops should not be entangled in Syria or Afghanistan, ‘the system’ is unfair. “The Trump movement fits into a global culture of grievance and victimhood,” the same culture exploited by Orban in Hungary, or indeed the authoritarian populists of western Europe such as Le Pen or Farage.

This an essential and sobering read. This is far from my expertise, but it seems to me to capture something essential about the political psychology about the past 30 years. The book ends by presenting today’s situation as a fork in the road: tragedy or hope. Is there hope for a chastened liberalism? It’s certainly worth working for it, and in a different frame of mind one can certainly see this book as a polemic that ignores countervailing forces. But today’s images and headlines, in the context of a global health emergency and economic catastrophe, make it hard to feel optimistic.




Varieties of neoliberalism

I’ve polished off Angus Burgin’s The Great Persuasion, recommended to me by a colleague after Daniel Stedman-Jones’s Masters of the Universe cropped up in conversation. I read the latter when it came out in 2012. It made a strong impression on me with its account of the way the creation of the climate of ideas conducive to Thatcherism and Reaganism came about as a conscious long-term project on the part of a number of free market think tanks on both sides of the Atlantic, as well as some leading economists.

Of these, Milton Friedman, features as the key figure in The Great Persuasion. This is an account of the same political project, told through the evolution of the Mont Pelerin society specifically. At its 1947 formation, it was both firmly interdisciplinary, fostering a debate about society’s moral values as well as its economic organisation, and also resigned to the interventionist climate of the times. The Victorian laissez faire version of liberal markets was firmly rejected. The aim was to ensure there remained space for market forces in the context of the Keynesian, planification spirit of the times.

However, as the postwar decades went by, and founding figures moved on (with some acrimony in some cases), Milton Friedman’s vision came to predominate. The society turned into an economics-only shop. Conservative foundations funded ever-more free market research. The restrained neoliberalism of the 1950s – so named as a contrast to laissez faire liberalism –  gave way to the harsher, ‘neoliberal’ version of the 1980s on.

Two things particularly struck me in reading the book. One was the importance of patient funders, not demanding short term political ‘impact’, but instead understanding that the wider intellectual climate needed to change and they would be in for the long haul. The other was the conviction of both Hayek and Friedman that ideas can move mountains. Burgin writes: “Friedman maintained a relentless faith in the ability of unpopular ideas to gain recognition and over the course of decades to effect political change.” I share the view that ideas are powerful but am less sure it always needs decades: people seem able to jump from one moral universe to another relatively quickly, as we have seen in other contexts.



The politics of depoliticisation

A while ago I had one of those brilliant dinners when you sit next to someone new and strike up a fascinating conversation. The occasion was the dinner celebrating honorary graduands of Bristol University (a boast – I had the honour of being awarded an honorary degree there this year), and Prof Paddy Ireland, my neighbour at the table, recommended in the course of a fab two-hour conversation, Globalists: The end of empire and the birth of neoliberalism by Quinn Slobodian.

It is indeed a deeply interesting book, a history of what Slobodian terms the Geneva neoliberals – those, including Hayek, who were globalists avant la lettre because they looked back with nostalgia to their youth in the Austro-Hungarian Empire. I hadn’t known that these folks, many based at the Graduate Institute in Geneva, named themselves neoliberals (at the Walter Lippmann Colloque in Paris in 1938) (although this makes it seem all the more absurd to me that some people now apply the n-term to  *all* economists.)

Slobodian emphasises that this school of neoliberals were by no means against a government role in the economy, seeing it however as a matter of setting the framework for a globalised economy. In particular, private property across borders was to be held sacred. The domain of the global economy had to triumph over the domain of national politics. Geneva neoliberalism was a “project of politics and law”, as the ambition was to create a system of governance that would “encase and protect the space of the world economy”. Individual rights, particular investors’ rights, would gain the protection of the courts against potential expropriation.”The ongoing depoliticization of the economic was a continual legal struggle, one that required continual innovation in the creation of institutions capable of safeguarding the space of competition.”

What I found particularly enlightening about this account is the way this particular strand of thought eventually got embedded in world trade rules in the form of the steady expansion of investment protections and third party arbitration. Economists tend to find, not necessarily the arguments against such aspects of trade agreements, but the emotion they arouse, a little hard to understand. I think the historical context helps us.

Another fascinating section covers Hayek’s interest in cybernetics – not so surprising when you think about his views on the role of markets as information-processing devices. Slobodian writes: “Radical in its own right, the neoliberals’ own dream of a new international economic order was a world economy of signals – a vast space of information transmitted in prices and laws.” It reminded me of Chile’s Project Cybersyn in the Allende years (described by Eden Medina in Cybernetic Revolutionaries), the same systemic vision from the left.

As Globalists makes clear, depoliticization – what I’ve termed in another context the ‘separation protocol’ – is a political project too. Its fortunes, having flourished during the mid-80s to mid-2000s, are clearly waning now. Politics is baaaaack, bigtime.

51kcoHzJqyL._SX329_BO1,204,203,200_Globalists: The End of Empire and the Birth of Neoliberalism

And for amusement, me in robes…..EAQsyhCXYAcgXcZ