The next few posts from Robert de Vries will cover some issues raised by a recent event held at the University of Westminster; ‘Increasing Inequality: Causes, Consequences and the Great Recession’.
This past Friday, the University of Westminster held a day-long event on the causes and consequences of inequality, particularly as it relates to recession. A lot of questions were raised: Why has almost every developed country suffered stagnating wages and increasing inequality? Does increasing inequality make financial crises and recessions more likely? Can we grow our way out of our current crises and increase equality and the same time?
These are all pressing questions, and I’m going to spend the next few posts discussing some possible answers. But first I just want to quickly note a strong impression I got from the day overall, and that is the complete mismatch between what seems to be ‘mainstream’ economics, as far as a good number of working economists are concerned, and what is considered mainstream by our current crop of politicians.
From the way politicians of all three parties talk about the economy, you’d be forgiven for thinking that the ideas of John Maynard Keynes had been completely discredited; that he’d been proven wrong decades ago, and was now regarded by serious people as some kind of crackpot idealist. Almost no one outside of Guardian journalists and Paul Krugman seriously talk about spending to promote demand as a possible route out of recession. Certainly the current leader of the UK’s left-wing party does not. Imagine my surprise, then, at seeing several serious, mainstream, decidedly un-crackpot-like economists discussing Keynes and demand-led growth as if they were the most normal things in the world. Did they not get the memo?
To be clear, I’m in no way economist enough to unpick the evidence for and against Keynesian solutions for our current economic woes. But for now I’m more interested in why Labour seem so scared of the guy. It seems to me that there are two possible explanations for their reticence:
Possibility number one is that it’s just politics. Labour know that the Conservatives (with the enthusiastic assistance of their coalition partners) have won the propaganda war on spending. The public mind has been so thoroughly won over to the idea that the national budget is like a household budget, and that we have just ‘run out of money’, that the barest peep about stimulus would go down like a whole crate of lead balloons.
In this scenario, the Labour higher-ups are just pragmatically deciding not to expend more political capital on a battle they’ve already lost. The frankly colossal problem with this approach is that it leaves them with very little scope to differentiate themselves from the Conservatives on the economy. As poorly as spending to stimulate the economy might go over with the current public mindset, “we won’t cut spending quite as much, or we’ll cut it a bit differently” will scarcely go down any better.
The second possibility is that Labour are going along with the idea that we’re out of money, and that the only way to fix things is by cutting spending, because they actually believe it. Maybe the Conservatives have done such a good job selling the idea that ‘serious’ people don’t do Keynes that they’ve even got the opposition buying it. If you believe that austerity isn’t working to grow the UK economy, it is this second possibility that’s the most deeply troubling because it means that even a Labour victory at the next election would be unlikely to bring about a substantial change of course.
This is a problem that I think touches a lot of our discussions on this blog, at least on the UK side of things. We try to highlight research that we think speaks to something important in the way we function as a society. But what use is this research and debate if mainstream politics had become constitutionally blind to a whole class of possible results?
Right, with that out of the way, we can get back to something more substantive. In the next post I’ll bet talking about some interesting work done by Özlem Onaran, who suggests that decreasing inequality, rather than being something we put off until we’re back to the good times, might actually be the way we get back there in the first place.