Jo Swinson is the director of Partners for a New Economy and a former minister in the Liberal Democrat government in the UK.
Former British Prime Minister Liz Truss was right about one thing: economic orthodoxy is a real problem.
Unfortunately, his prescription of tax cuts for the wealthy and encouraging casino banking was disastrously wrong. However, neither current Prime Minister Rishi Sunak nor Labor leader Keir Starmer will solve the UK’s problems if they conclude that we need a return to austerity or that there is no room for bravery, especially given the rapid energy transition that we need
And politics will continue to falter in its primary task of improving people’s lives until the economy catches up with 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. The discontent was masked, for a time, by the government of then prime minister Tony Blair who increased public spending, but the financial crash hit hard.
Markets demanded austerity, and in 2010 my Liberal Democrat colleagues and I conceded to the economic orthodoxy that deficit reduction was paramount. However, given the Tories’ reluctance to raise taxes on the rich, our public services and those on low incomes were left to overburden.
But actions have consequences. And cuts in the name of “efficiency savings” left our society much less resilient.
Stocks of personal protective equipment ran out when the coronavirus pandemic hit, leaving our frontline healthcare workers shamefully unprotected. Harsh wage restraint, although obviously not at the top, made lives more difficult, leaving society more vulnerable to the divisive tactics of the far right and the rhetoric of migrants as scapegoats.
This is not an exclusively British phenomenon, of course. Brazil, France, Germany, India, Italy, Sweden, United States and many more; all have seen significant polarization and populism, with the far right gaining ground. Even when a more consensual politician advances, slim margins are only a precarious step from the brink.
The problem is one that is well-diagnosed, whether expressed in that of former Prime Minister Theresa May discourse on how to deal with burning injusticesformer Prime Minister Boris Johnson”rhetoric of leveling upor former Labor leader Ed Miliband calls for “predistribution.” However, rather than reaching back into history for solutions, whether through former Labor leader Jeremy Corbyn’s socialism or Truss’s flashback to Thatcherism, we should be firmly focused on the future.
It’s time to move beyond GDP as an indicator of progress and end our obsession with a metric that has had obvious flaws since long before 1968, when US presidential candidate Robert F. Kennedy made the memorable critique: “In short, it measures everything except what makes life worth living.”
The arguments are well rehearsed, and many: GDP ignores much of what matters most; disasters drive up GDP; it tells us nothing about who gets what. For living things, growth is useful and desirable only up to the point of maturity. And as a society, we need to support the growth of other things: our health and well-being, the abundance of nature in our parks and green spaces, the blossoming skills and self-esteem of our young people, as well as our collective curiosity, creativity. , care and cooperation. We are, by nature, social animals 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 create vaccines was achieved in record time thanks to unprecedented cooperation between governments, scientists and companies. The virus was contained thanks to remarkable public solidarity. And we all saw the value of things that cannot be measured with money. The lockdown restrictions we eased to allow domestic bubbles, not for the sake of our economy, but because we realized you can’t put a price on a hug.
Yet as the rainbows in our windows fade, the essential workers we cheer for are clearly underpaid and undervalued, and the younger generation who gave up so much for their elders feel that they ‘faces a bleak future. These problems were evident before COVID-19, but now they are inescapable. The current path of the economy has broken the social contract, which is in desperate need of repair.
And while we’re at it, we also need to rethink stability. Economists assume that we are always drawn toward equilibrium, but as we move out of the Holocene of Earth’s history and into the Anthropocene, we face a much more uncertain future, with shocks like floods, fires , droughts, storms and pandemics that will become more. frequent Yet economics willfully, catastrophically, ignores the crucial role of the environment in our economy.
Current economic models are too simplistic: they fail to recognize all the consequences of climate change and pay little attention to the multiple ecological warning signs of species extinction, nitrogen and phosphorus flows, land use change and chemical pollution. Environmental literacy must be essential to the economy, as economist Professor Progar Dasgupta forcefully argued in his 2021 Review for the UK Treasury.
Instead of assessing only the risk of ecological disasters for financial assets, we should focus on the more material risks that the financial system creates for our planetary home.
Economists should also show some humility. Whether it’s the invention of “hot banks” while energy companies make record profits, 30 million people displaced in Pakistan by floods or the extreme heat of last summer donating his to the London Fire Brigade busiest day since World War IIpeople don’t need a degree to see the disconnect between current economic theory and their own lived experience.
Fortunately, there are many paths 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 Prize-winning economist Elinor Ostrom and the field of ecological economics have much to offer about 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 of all other economic activity.
While keeping an eye on the longer time horizon is notoriously difficult in both business and politics, given the constant short-term pressures of quarterly reports and frequent elections, here the rules of corporate governance could change to give employees and nature, a seat at the table. And the pioneering work of the Commissioner for Future Generations in Wales can provide inspiration for current political responsibility to our children and grandchildren.
Escaping the demand for endless economic growth and natural resource use is also a complicated conundrum, but even here there is reason for optimism. Professors Jason Hickel, Julia Steinberger and Giorgos Kallis recently obtained major funding from the European Research Council to explore post-growth economic avenues, and with next week’s Conference beyond growth in the European Parliament, the issue is firmly on the agenda at the highest levels of the EU.
Finally, in reframing 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 works within the two rings of a donut: the foundation social of everyone who has access to the essentials of life and the ecological ceiling of planetary boundaries.
Of course, no one is suggesting that putting all of this into practice is easy. Challenging orthodoxy risks ridicule, and supporting the status quo seems the safest bet, even when that path crashes into social and environmental tipping points. Not all ideas for change will work, and others may make sense but be unpopular. Meanwhile, vested interests are powerful and ready to defend their position.
However, these ideas are exciting and the course is there to chart it. It is the actions of each and every one of us, whether as academics, business leaders, activists, journalists, thinkers or citizens, that will move us further down the current dead end or help us find a better path to a nested economy for the future
