Rethinking Economics

On Saturday 10th November the Young Fabians Economy & Finance Network ran a ‘Rethinking Economics Workshop’, hosted by Nadia Islam and Mark Whittaker and with three invited speakers. This was a timely event, coming off the back of an underwhelming autumn budget at a time when, as described by the IPPR, the economy ‘is not working for millions of people and requires fundamental reform’ and with the prospect of a potentially ruinous Brexit looming on the near horizon

The first speaker at this event was Joe Earle, chief executive of and co-author of The Econocracy. Ecnmy aims to provide universal economic literacy by holding workshops and adult community courses. In addition, they campaign to change the way economics is communicated to the electorate. He began by briefly outlining the main faults with the status quo:

  • Inequality of access to economics education with privately educated men being dominant in the field
  • Economics is currently discussed in a way that cannot be understood by many, leading to loss of trust in economists

Earle argued that increasing economic literacy and expanding participation in discussion / decision making will be of paramount importance in fortifying the health of our democracy. To illustrate the shortcomings of current economic language, it was noted that typical definitions of ‘the economy’ focus on wealth, jobs, and growth, framed within an individualistic world with no limitations. However, some modern economists view the world through a different lens. If the economy is framed from an ecological point of view, economics then must consider, as Earle put it, the ‘incommensurability of natural resources – you cannot put a price on the Amazon rainforest’. Likewise, it can be considered from a feminist angle, putting a greater emphasis on the unpaid labour largely conducted by women in terms of housework and childcare, especially in developing economies. Taking different approaches to economics leads to different questions being asked and will yield different solutions.

Ecnmy takes the view that the perception of economics within the wider electorate goes through the following four stages: Aversion -> Interest -> Understanding -> Action. Most people are trapped within the ‘aversion’ stage and changing the language of economics will allow people to take more interest and, ultimately, lead to action.

Earle concluded by stating that of course it is rational to pursue left-wing or right-wing economic objectives, but no single framing of the economic system will suffice. To avoid narrow views and blindspots, future policy makers must consider that economics is intertwined with ethics and politics and it cannot simply be viewed as an algorithm for producing ever more growth.

Following the first seminar was a roundtable discussion chaired by Nadia Islam. The focus of this was to examine the best industrial strategies to promote the reduction of socio-economic inequality. The Young Fabians discussed how the severity of the economic crisis highlighted the weaknesses in Britain’s recent industrial strategy: the overreliance on the financial sector and of South-East England as a main source of national revenue. In addition, the policy response to the crash (i.e. austerity) has most negatively impacted former industrial regions, deepening the imbalance in Britain’s economy. Policy ideas were therefore examined that would help rebalance Britain’s economy across both geographical and social divides.

The next speaker was Alexander Guschanski, a lecturer in economics at the University of Greenwich. The focus of this talk was to examine the definition and causes of inequality. Guschanski shared some of his latest research data, highlighting how the bottom 90% of society are losing out to the top 10%. Increasingly over the past decade, the top 1% of society have enjoyed soaring incomes both in terms of wage and profit share whilst the bottom 50% of society have experienced declining wage share and economic stagnation.

The workshop discussed how the current political narrative puts the blame of this on three major reasons: automation, declining power in bargaining relations, and the rise of super productive industries. Guschanski argued his research showed that although new automated technology can explain inequality amongst working people it cannot fully explain a decline in wage share. By far the most influential factor was instead to do with bargaining relations, changed by declining union density, globalisation and financialisation. Globalisation has led to increases in both mobile labour and capital. Importantly, his research indicates that migration has no overall negative impact. Instead, the most robust explanatory factors are financial capital being held offshore and household indebtedness acting as a potential disincentive to collective action. These are therefore the fundamental problems that must be tackled by our politicians.

The final organisation to speak at this event was Positive Money, a research and campaign group arguing for a fair, democratic and sustainable economy. The seminar began with a quote from Adair Turner, former member of the Bank of England’s Financial Policy Committee, outlining the fundamental cause of the 2008 financial crisis: ‘We failed to constrain the private financial system’s creation of private credit and money’. It was noted that since 2009, the Bank of England has created £446bn of new money through the process of quantitative easing (QE). Therefore, when politicians emphasise that there is ‘no magic money tree’, they perhaps should consider the genesis of vast sums generated through loans by private banks and by QE through central banks.

Positive Money therefore argue that we should instead campaign for a QE programme to fund society’s needs rather than those of financial markets. Positive Money call for central banks to change their monetary policy to finance the spending of government schemes such as infrastructure projects, as well as more vigorous regulations for financial markets and private banks. Additionally, Positive Money argue for so called ‘helicopter money’:  distributing large sums of money to the public in order to promote economic stimulation.

This was a stimulating event covering a significant range of economic ideas. Speaking to Young Fabians after the event, it was clear that people who had previously limited exposure to economics had had their interest piqued and their understanding of the field raised. This and future events will consequently lead us a step closer to action being taken.  


Alistair Greatorex is a Young Fabian member. Follow him on Twitter at @AliGreatorex

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