Wednesday, 27 July 2016

Planning a 'New Economy' politics for the post-Brexit age

I've been off the air for a while, partly because I've been away, and partly because there seemed, initially, almost nothing to contribute about British politics in the post-referendum maelstrom. Everything was already being said, with most theories and speculations only lasting about five minutes before events overtook them.

Now, however, with the dust beginning to settle, it seems worth reiterating something I said in my post of 21 June, that "the outcome of the referendum does not hugely matter in economic terms".  The markets dived, and then they rose to the surface again; conventional demand is weakened and fiscal policy may be relaxed to reflect that, but the people who voted for Brexit - because their communities are depressed and marginalised, their jobs badly paid and insecure and their public services cut to the bone - are still exactly where they were, with no change in prospect despite a replacement prime minister's fine words.

Those words are worth noting, nonetheless. Here's a flavour:
"If you’re one of those families, if you’re just managing, I want to address you directly.
I know you’re working around the clock, I know you’re doing your best, and I know that sometimes life can be a struggle. The government I lead will be driven not by the interests of the privileged few, but by yours.
"We will do everything we can to give you more control over your lives. When we take the big calls, we’ll think not of the powerful, but you. When we pass new laws, we’ll listen not to the mighty but to you. When it comes to taxes, we’ll prioritise not the wealthy, but you. When it comes to opportunity, we won’t entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you."
When the new government fails to deliver on these promises, it will not be because it is a Conservative government rather than a Labour one. It will be because the economic system in which we operate - a system that existed in Britain before the referendum, will exist in Britain after Brexit and which pervades the institutions of the European Union - cannot deliver a fairer, more productive, more equal society. It is neither designed nor intended to do so.

The reason is this: neo-liberal economics are predicated on maximising money wealth, by allowing it to flow freely to wherever it can extract the best investment return. The social wealth of affordable, good quality housing, accessible public services, fair trade, well-paid, secure employment, etc., counts for nothing in this system or, worse still, counts as a cost against the money economy.

As money wealth inevitably flows upwards towards the already-wealthy, governments have to take extraordinary measures to get it back. If, however, they subscribe to the prevailing neo-liberal view that wealth has to be made by private businesses before anyone else can get a share of it, they cannot risk disincentivising the already-wealthy from becoming wealthier still.

The debate that is tearing Labour apart offers no escape from this dilemma. The mainstream parliamentary faction, like social democrats across Europe, has bought into a slightly more people-friendly version of the neo-liberal consensus; the Momentum faction is re-fighting the economic and class wars of the 1970s. Neither is offering a modern alternative to a system that is fundamentally broken.

Meanwhile, all talk of new political alliances and alignments seems pointless until a coherent new framework for economic renewal is put in place. Policy must come before parties and personalities. We need to agree, at least in broad terms, the changes that are needed to re-engineer the economy for the benefit of all.

The building blocks are well known - a form of basic income; new ways of providing affordable housing; a new way of measuring production, including social as well as money wealth; new, fairer trade rules and new forms of corporate governance. The question is how to put these together to create that coherent new framework we so urgently need.

The parameters are quite straightforward. They are (i) a New Economy model that (ii) brings significant benefits to the quality of the lives of ordinary people and (iii) is described in terms that ordinary people can make sense of in order to gain their support. By "ordinary people" I mean people living busy lives who have little time or patience for economic and political theorising.

I'm starting to collaborate on such a project, so it would be great to know what you think are the important issues for the New Economy, both in your own life and that of people around you. After all, unless this addresses people's real needs, it's a non-starter!