It is now four decades – exactly four decades – since I took my A Levels, the heady, long hot summer of 1976. The drought, the heat, the way – for the first time in my life – the restaurants began putting their tables outside on the pavement, like Paris.
They have never gone away again. In fact, I have a feeling that the summer of 1976 changed the English: no more pinched, puritanical fear, but a more continental outdoor spirit took hold of us that year, and has remained (at least until Brexit).
It is also almost 40 years (not quite so exactly) since the Thatcher-Reagan approach to economics swept through the world, reaching a crescendo under Blair and Clinton. This blog is about how that is beginning to change too.
Like so many others, I felt surprised and excited by the way Theresa May chose to characterise her government, a clear response to the disaffection revealed by the Brexit vote.
But it raises some rather critical questions about the way we do economics, and have done since my A Level year, because that kind of hands-off approach may have increased prosperity for some (maybe even many across the world), but it has also led to a culture of powerlessness in government which I believe is at the root of the disaffection.
What can we do in the face of market forces? Maybe not very much, but mainstream economic policy discourages anything. It is a culture whereby policy-makers wash their hands of the world, which corrodes their ambition. People’s disaffection stems partly from this sense that, on both sides of the Atlantic, the feel abandoned by those who rule them.
So when the new prime minister says she’s going to govern for the many, the reason I doubt it is not because I doubt her integrity – I doubt the intellectual shift among her cabinet. I see no evidence of new economic thinking there, and there will have to be for it to work.
Yet the new economic age is emerging nonetheless.
I have been writing for some time that the new age of political and economic thinking is upon us, in time for the regular 40-year shift (1979, 1940, 1909, 1868, 1831 in the UK, and so on). What makes this time different from the others is that there has been remarkably little mainstream debate about what this new age will mean.
If you manage to engage mainstream policy-makers in debate (I don’t mean economists who are much more flexible) they tend to be wedged so much into the old thinking that they can’t extract themselves without more intellectual effort than they are prepared to put in, So how do we know the shift is coming?
My answer is that there is more than a whiff of the 1970s about economic policy now, driven by the feeling that the establishment is clinging to the old truisms beyond the point when they are useful.
Here are three examples. You know we are in the endtime of the old economics…
- When the middle classes can’t buy their own homes without government subsidy.
This is true mainly in London and the south east, but it is still true. One of the original purpose of Nigel Lawson and his economic reformers in the 1980s was getting rid of mortgage interest tax relief, and similar subsidies for the middle classes. Now, even with the so-called Bank of Mum and Dad, housing is unaffordable in our capital city unless you work in financial services. The fact that subsidies are back is a sign that the housing market no longer works – something else is going to be required.
- When public services can no longer be run without mass immigration.
This is not to criticise immigration, but the fact that the NHS is now quite impossible without major foreign labour inputs – because we can no longer afford to pay or train our own people – is another sign of the economic endtime. This will become horribly apparent unless Theresa May gets off the fence and guarantees the right of EU nationals to stay in this country, because – if she doesn’t – they are liable to get up and go.
- When ministers defend indefensibly bad contracted out services, you know the 1970s have returned.
The former rail minister Claire Perry was so constrained that – when Southern Rail services unravelled thanks to indefensible incompetence – her only option was to defend operators GTR and their managers. Again, it reminded me of the 1970s when ministers found themselves defending bad services purely because no other option seemed available.
Taken together, all three are signs that the present assumptions about economic policy are exhausted. The establishment will continue to cling to the old dispensation, but they will increasingly be looking for something, anything, that has some chance of making sure that civilisation continues.
There is no doubt that 2016 will go down in history also as one of those watershed events which will change our economic certainties forever. Perhaps the Wall Street Crash of the new age. But it all takes time to shift.
What the Americans did in response to the first crescendo of the Great Depression was to elect the very wealthy and well-connected Herbert Hoover, who tried tentatively to adapt to the new dispensation, but was unable to think boldly enough.
It took the arrival of what was then known as the ‘new economics’, under a president who understood the right questions to ask, to see a real shift. Franklin Roosevelt also brought in people like Harry Hopkins to run his programmes, who were prepared to cut through the red tape to keep people alive through the winter.
The next new economics will be different. But there will be some parallels, and among them will be that innovative people like Hopkins will rise to the top to make things happen.
Jonas Söderström says
“The establishment will … increasingly be looking for something, anything, that has some chance of making sure that civilisation continues.”
For some time, of course, they have been putting their faith into more and bigger IT systems as that fix, that silver bullet. But as you’ve pointed out, it increasingly does not deliver the promised utopia.