Review: “Be outraged; there are alternatives…”

It was only four years ago that John Maynard Keynes, for so long deeply unfashionable amongst those with serious economic and political clout, seemed to be making a comeback. As recession loomed, ‘stimulus’ was the word on every politician’s lips. What worked for Roosevelt in the thirties should work for us now, albeit with only a fraction of the conviction.

And then as the markets got the jitters the neo-liberal consensus picked itself up off the floor and gave us austerity, the beauty of which is that it is nothing more than common sense: if you are in hock, the only way out is to spend less, not more. Countries, after all, are nothing more than households on a grand scale and we all know what to do when we have large debts and our incomes fall.

Of course Keynes knew that this is nonsense, that household debt and national debt are two very different things, something that Richard Jolly and his colleagues reminds us of in this manifesto for alternatives to austerity. Importantly, they acknowledge Keynes’s biographer, Robert Skidelsky, who has been ploughing a lonely furrow on behalf of his subject over the last couple of years. (Skidelsky even brought his Keynesian alternative to austerity to Belfast in 2010 when his pearls fell before the somewhat unresponsive members of what passes for our economic policy community.)

But now, with the publication on Monday of ‘Be Outraged: there are alternatives’, is Keynes on his way back? I doubt that the neo-liberals will be impressed and they will be delighted to note the lack of numbers that might show that the policies outlined by Jolly et al would not drive developed countries into rippling debt and therefore deeper recession, which common sense, after all, tells us would be the consequence.

And I guess this is where the authors of ‘Be Outraged’ are up against it; such is popular acceptance of the common sense of the austerity agenda that advocating increased public spending just seems a bit bonkers. On the other hand, we are not fools and may yet be outraged as austerity fails to deliver recovery and on current form that may be quite soon.

Tackling unemployment, transforming the financial sector from ‘bad master to good servant’, reducing extremes of inequality and coordinated global action are this publication’s prescription for the short term , followed by longer term goals including supporting the care economy and equality for women. The expectation is that such policies will get us back to growth but growth with a more human face, a future of a more equitable prosperity.

Lurking beneath the surface, and occasionally coming up for a brief breath, is the issue of ‘Human sustainability over the 21st century’. It breaks the surface rather dramatically at one point with the astonishing statement, ‘A quarter of under 16s in Europe today are now expected to live to 100 years of age or more. They will have to survive with whatever is today’s legacy after tackling – or not tackling climate change and environmental destruction. Is economic growth merely to support ever rising consumption or to help with these fundamental challenges?’

And therein lie several 64 trillion dollar questions. Is ‘not tackling climate change’ seriously an option? If it is something for Europe’s 16 year olds to worry about for their old age it is something for pretty much everyone in sub-Saharan Africa to worry about now. Can economic growth really help tackle climate change or is it the engine of environmental destruction?

How do we confront the reality that we need exponential growth to maintain and grow employment but this comes at a huge environmental and therefore human cost? And how do we cope with the fact that not growing means leads to a downward spiral of job-destroying recession?

For all the fundamental justice on which ‘Be Outraged’ is based, I can’t help feeling confirmed in my view that economists from both left and right, so single-mindedly focused on growth, are taking us to hell in the same hand-cart while simply arguing which road to take.

Meanwhile others have spotted that the wheels are about to come off as the planet’s life support systems collapse under the strain.
This is not to suggest that Keynes was wedded to exponential macro-economic growth for ever.

He saw the economy as a means to an end, that once prosperity was achieved we could come ‘out of the tunnel of economic necessity into the daylight’. But Keynes did not anticipate the toll that such exponential growth would have on the planet nor the widening inequalities of recent decades. One man who did was his protégé, E F Schumacher, the author of ‘Small is Beautiful’.

Schumacher didn’t see the economy as a means to an end but as an essential part of a good life. He would have approved of Jolly et al’s description of unemployment as representing a great ‘waste of human energy and creativity’ and ‘a destructive denial of opportunities’ but he would not have shared their regret that unemployment causes ‘a loss of output with the production of goods and service being below what would otherwise be’.

For Schumacher the function of work as production was ‘to bring forth the goods and services necessary for a becoming existence’, a signpost, perhaps, pointing our hand cart in a rather different direction.

John Woods is the course director of the Schumacher Ireland Summer School

  • Professor Yattle

    This really is desperate stuff.
    Keynes advised running deficits of a few percent for a few years, in specific and dire circumstances, and even then he was clear of the downsides and limitations of the policy.
    We’ve been running deficits an order of magnitude greater, for longer, during a boom. Any intelligent reading of Keynes makes it clear we can’t just crank it up even more during a bust.
    Further reading of Keynes, especially his post-war work, would have a great deal to add on the role the international trading system has played in helping us live disastrously and delusionally beyond our means. He had prescriptions for that too, but none of them involved deficit financing. The man was a visionary genius. That’s why it’s so annoying when self-serving second-raters throw partial analysis back at you to demand more made-up money.
    Also, as a general rule, anyone using the term “neo-liberal” is an eejit. Schumacher Ireland Dinner Party, more like.

  • andnowwhat

    The extraordinary rate at which retailers are closing is as basic an indicator that the ConDem’s policies are not working, as any. Whilst we are all told to tighten our belts, Gideon ploughs QE money in to the banker’s wallets, money never to be seen again, most notably, by the much vaunted SMEs. So lost are Gideon et al that they threw their arms up last week and told companies to work harder and to go look for markets themselves. How can SMEs be expected to go forth and multiply when the flow of finance is strangled by banks unwilling to lend to even those with good credit histories?

    As I said on another thread, Christine Lagarde gave the barest face saving nod to Gideon’s policies and then advised those of the party opposite. As Keynes would approve, she advised HMG to invest in infrastructure and reduce VAT whilst looking for other tax raising methods, a little over a month after the top rate of tax was reduced by 5%.

    Tory loving commentors seem to love boasting at how Cameron is some sort of Flashman, totally uninterested in the detail. It shows

  • Alias

    “How can SMEs be expected to go forth and multiply when the flow of finance is strangled by banks unwilling to lend to even those with good credit histories?”

    That’s because the banks aren’t lending to each other but are choosing instead to deposit their cash with the ECB at a much lower return than they could earn from lending it to other banks. So why are the banks not lending to each other and thereby foregoing larger profits? Because they know that the EU’s so-called stress tests were a confidence trick played on gullible rank-and-file depositors and where designed to disguise how financially unstable most of these banks actually are, not reveal it.

    Of course, the ECB is lending the deposits of the stronger banks to the weaker banks, which are in turn using the borrowed money to repay other debts that they would otherwise default on, and not to lend to businesses. However, as the member states are shareholders of the (massively overleveraged and junk asset laden) ECB who will be called upon to make good the losses they have underwritten, the banks know that their losses will all be socialised when the ECB collapses under its own weight.

    It’s better to stick your money into the ECB than it is to stick it into a bank that only has no member state underwriting its loss. Unfortunately, there is no resolution for SMEs and others this side of an EU banking collapse.

  • Alias

    Typo: “…a bank that only has one member state underwriting its loss”