Mainstream economics is lost, and the price is political chaos

Joe Swinson is a director of Partners for a New Economy and a former Liberal Democrat government minister in the UK

Former UK Prime Minister Liz Truss was right about one thing: Economic conservatism is a real problem.

Unfortunately, his recipe for tax cuts for the wealthy and encouragement of casino banking went disastrously wrong. Yet, neither current Prime Minister Rishi Sunak nor Labor leader Keir Starmer will solve the United Kingdom̵7;s problems if they conclude that we need a return to austerity or that there is no room to be bold – especially Considering the rapid energy transition.

And politics will continue to falter in its core function of improving people’s lives until economics rises to the challenges of the 21st century.

The roots of Britain’s current political chaos go back at least two decades to an apparently booming economy, leaving many places and people behind. For a time, discontent was concealed by increased public spending by the government of then prime minister Tony Blair – but the financial crash hit hard.

Markets demanded austerity, and back in 2010, my Liberal Democrat colleagues and I touted the economic orthodoxy that deficit reduction was paramount. However, given the Conservatives’ reluctance to raise taxes on the wealthy, our public services and those on low incomes were left with a much greater burden.

But actions have consequences. And cuts in the name of “efficiency savings” have made our society far less resilient.

Personal protective equipment stocks were depleted when the coronavirus pandemic hit, leaving our front-line health workers shamefully unprotected. Drastic wage restraint – though, clearly, not over the top – made life difficult, leaving society more vulnerable to the divisive tactics and rhetoric of the far-right expats.

Of course, this is not a uniquely British phenomenon. Brazil, France, Germany, India, Italy, Sweden, the United States, and many more—all of them have seen significant polarization and populism, with the far right gaining ground. Even when a more consensual politician takes the lead, the slim margin is just a precarious step away from the brink.

The problem is one that has been well diagnosed, whether expressed in former Prime Minister Theresa May speech on dealing with the burning injusticeFormer Prime Minister Boris Johnson’s“leveling up” rhetoricor former Labor leader Ed Miliband call for “predelivery”, However, rather than turning back to history for solutions – whether through former Labor leader Jeremy Corbyn’s brand of socialism or truce flashbacks to Thatcherism – we must focus firmly on the future.

The time has come to move past GDP as a representative of progress, and to end our obsession with a metric that has flaws, which 1968 US presidential candidate Robert F. Kennedy memorably critiqued : “It measures everything in a nutshell, except that which makes life worthwhile.

The arguments are well rehearsed – and many: GDP matters most; Disasters increase GDP; It doesn’t tell us anything about who gets what. For living things, growing is helpful and desirable only up to the point of maturity. And as a society, we need to support the development of other things – our health and wellbeing, the abundance of nature in our parks and green spaces, the flourishing skills and self-esteem of our young people, as well as our collective curiosity. , creativity, caring and cooperation. We are social animals by nature and cooperation is the defining force of humanity.

The pandemic taught us what really matters – if we care to learn the lessons. The race to develop a vaccine was achieved in record time through unprecedented collaboration between governments, scientists and business. The virus was slowed by remarkable public solidarity. And each of us saw the value of things that cannot be measured with money. We eased lockdown restrictions to allow a domestic bubble – not for our economy, but because we realized you couldn’t put a price on a hug.

Yet, as the rainbows in our windows fade, the essential workers we clapped for are clearly underpaid and undervalued, and the younger generations who have sacrificed so much for their superiors, They feel that they are facing a bleak future. These problems were evident before Covid-19, but they cannot be avoided now. The current course of economics has broken the social contract, which is in dire need of repair.

And while we’re at it, we need to rethink sustainability too. Economists agree that we are always attracted to equilibrium, but as we leave the Holocene period of Earth’s history and enter the Anthropocene, we are far more uncertain, with shocks such as floods, fires, droughts, hurricanes and pandemics. Let’s face the future. Often. Yet, economics is willfully ignorant – catastrophically – when it comes to the important role the environment plays in our economy.

Current economic models are too simplistic – they do not acknowledge the full consequences of climate change, and too little attention is paid to the many ecological warning signs on species extinction, nitrogen and phosphorus runoff, land use change and chemical pollution. Environmental literacy should be essential to economics, as economist Professor Progar Dasgupta powerfully sets out in his 2021 review for the UK Treasury,

rather than simply assessing the risk of ecological disasters To financial assets, we should focus on more material risks to the financial system makes To our home planet.

Economists should also show some humility. Whether it’s the invention of “warmbanks” while energy companies make record profits, 30 million people are being displaced by floods in Pakistan Or last summer’s heat Giving to the London Fire Brigade Busiest day since WWIIPeople don’t need a degree to see the difference between current economic theory and their own lived experience.

Fortunately, there are many avenues to a future where our economic system can play a positive role in regenerating our planet and nourishing its people.

For example, the work of Nobel-winning economist Elinor Ostrom and the field of ecological economics have much to do with how to manage limited natural resources. And as demographic changes challenge labor markets, feminist economics also offers a new perspective on how to value care work – both paid and unpaid – as the foundation for all other economic activity.

While long-term tracking is notoriously difficult in both business and politics – given the constant short-term pressures of quarterly reporting and frequent elections – here the rules of corporate governance can be changed to give employees, and nature, a seat at the table, and the pioneering work of Future Generation Commissioner for Wales may provide inspiration for present-day political responsibility to our children and grandchildren.

Escaping the demands of endless economic growth and natural resource use is certainly a tricky puzzle, but here too there is reason for optimism. Recently Professors Jason Hickel, Julia Steinberger and Giorgos Kallis Won major European Research Council funding to explore subsequent paths to economic growth, and with next week Beyond Development Conference In the European Parliament, the issue is firmly on the agenda at the highest levels of the EU.

Finally, to reframe the fundamental question of what economic policy is for, Professor Kate Raworth’s idea of ​​”doughnut economics” is both simple and compelling: design an economy that operates within the two rings of a doughnut. Be – the social basis of everyone’s access to the essentials of life, and the ecological limits of planetary boundaries.

Of course, no one is suggesting that all of these are easy to put into practice. Challenging orthodoxy risks derision, and supporting the status quo seems a safer bet – even when that path hits social and environmental tipping points. Not all ideas of change will work, and others may make sense but be unpopular. Meanwhile, vested interests are powerful, and they are ready to defend their position.

These ideas are exciting, however, and the course has to be prepared. It is the work of each one of us – whether as academics, business leaders, activists, journalists, thinkers or citizens – that will either drive us down the current impasse, or help find a better path to an economy that Whatever is fit will do. For the future.