We need to reject the fantasy economics of the conservatives of both parties

Luca Calafati, Julie Froud, Colin Haslam, Sukhdev Johal and Karel Williams, When Nothing Works: From Cost of Living to Foundational Liveability (Manchester University Press, 2023)

 I had the very great pleasure, along with Grace Blakeley and Aditya Chakrabortty, to say some words about the above book at its launch at QMUL recently. I’ve written up my comments on this most book below.

This book represents one of the most hopeful and important developments in political economy for a long time. It points to new ways of thinking, new programmes and policies, ones with a chance of working in the new context in which we live.

It suggests a new way of knowing, of understanding the world, which means we see things differently, and we see things we did not see before.  It also suggests a new way of acting, a new politics, and one very different from that on offer from the two main parties, and from the think tanks.  Its critique is powerful and ambitious one. As the authors note:  ‘The UK system of economic knowledge production is centralised and hierarchical, so regional universities promote conformism and Celtic nationalists favour independence but so that they can more effectively deliver the consensus aims of Westminster economic policy.’ That is a stinging and powerful charge.

What they call techno-centrist and free market partisans both want more growth and higher wages (that is higher productivity). They differ in the nature of the supply-side drives they highlight – inventions and entrepreneurs, though both are typically closely linked.  To this programme are added measures to narrow geographical productivity differences, by, guess what, encouraging local invention and entrepreneurship.  This is the policy of both the Tories and Labour.  

These policies have been central for decades, yet have failed  to increase rates of growth over those of the long post-war boom and even more so the growth of incomes for the many.  Yet, not recognising this, advocates claim their ideas have not yet been tried, much like Brexiters explain the failure of Brexit to work. 

Underlying the critique is a sense that a lot of our economic ideas are left-overs from an era when industry dominated economies as well as imaginations, and where we did have high growth rates.  We are still focussed on good jobs in manufacturing, on industrial policy, on research and development when today the economy is 80 per cent services, and there are different dynamics around productivity and around imports and exports, and new problems which make the old industrially-driven growth rates not only unlikely but unsustainable.

Instead of this economics of fantasy they call for a political economy of improvement. Instead of wishful thinking about science and entrepreneurship they want to make things better based on systematic knowledge rather than the consensus of the think tanks.

So, what are the elements of this new approach?  First there is a renewal of focus on the household rather than the individual, on the distribution of household income and how it has changed over time. This leads to the realisation that broadly speaking today the single breadwinner household implies poverty for dependents, and that if we were to return to 1970s levels of equality, most households would be considerable richer.  The family wage has gone; the promises of trickle down have hidden the reality of forcing up of the share of capital of the national cake.

Second, there is focus on all sorts of incomes, and focus on essential expenditures.    What they call foundational empirics show the importance of bought essential services (from the internet to buses to food) and free services like health and education.   A startling revelation is the extent of the importance not so much of benefits (now vital to the working poor), but of free services to the poorest, which is worth more to many than either wages or benefits.  The upshot is clear – liveability depends not just on wages and benefits, but on the availability and quality of free services, as well as social infrastructures (from parks to pubs). In other words, we depend not just on money, but on infrastructures, material and human which cannot simply be bought.

So a proper economics has to be about much more than the income of individuals (even aggregated) but one of the structures people live in (households) and the multiple infrastructures which sustain life, including the foundational economy.  Improvement has to be about much more that providing more cash, it is also about the provision of services, free and paid for, and amenities of many kinds.

This kind of thinking is necessary because the effects of the market revolution, and its privatisations and drives for efficiency, have led to decrease in wages for the poorest, the fall in benefits, and reductions in the provision of foundational goods and services (free or paid).  There is thus a multiple crisis of liveability. 

But it is also necessary because of the challenges of decarbonisation.  This clearly requires action (which will be forced on the country) focussed on transforming infrastructures. It directly affects key costs and requires massive investment.  You cannot think it through as if it were a green industrial revolution, or as a programme for new R&D programmes and entrepreneurial start-ups.  It is a systemic issue which must be dealt with as such, and at the centre needs to be a multi-dimensional analysis of the households nearly all of us live in.  For the challenge is to change the housing and transport infrastructures of the many without imposing impossible costs on people.  Decarbonising electricity and making wind turbines is the easy bit.

One common and often powerful critique of radical policy proposals is that too often they in effect say: I wouldn’t start from here.  That is, they are cries of despair that we have the wrong politics and demands for a kind of politics we do not have.  Here too our authors innovate.  What shines through this book is the need to understand where we really are, and that includes not just the problem, but the possible solutions, that we really do need to start from where we really are.  And here that implies rejecting the fantasy economics of the conservatives of both parties.  That political economics of fantasy has become the British norm, spreading from Brexitism across the political spectrum, from wishing to be a science superpower, to dreaming of having the fastest rate of growth in the G7, to boasting of being a world leader in green technology.  We desperately need a more modest politics, a politics of improvement, rather than one of rhetorical excess and social misery.  And this book opens our eyes to this necessity.