Tackling Timorous Economics E-Book

Katherine Trebeck

• Herausgeber: Luath Press
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 193

Veröffentlichungsjahr: 2017

Beschreibung

Timorous: adj, 1) shy, not bold 2) easily frightened. Economics: n, social science concerned with the production and consumption of goods and services. What is the best way to run a country? How long should a person be obliged to work every day? What will the economy look like after Brexit? In this new take on the Scottish economy, experts Trebeck, Boyd and Kerevan address how our economy can serve us, as opposed to the people serving the economy. They believe that current economic policies are not aligned with what we as people need in these times of rampant inequality and inequitable distribution, advocating an increased focus on the quality of Scotland's economy. Using Scotland as an example for the economic workings of any country, Tackling Timorous Economics shows a better way of how economics could work for us.

Leseprobe

STEPHEN BOYD has led on economic and industrial policy for the STUC since 2003. A regular media commentator, he sits on a number of Government task groups and is an Honorary Research Fellow at Strathclyde University.

GEORGE KEREVAN is the SNP MP for East Lothian and a member of the UK Parliament’s Treasury Select Committee. An economist by training, he taught economics at Napier University in Edinburgh before serving nine years as Associate Editor of The Scotsman newspaper, where he was chief leader writer. He is also a documentary film maker and was executive producer of ‘The Fog of Srebenica’, which won the prestigious Special Jury award at the 2015 Amsterdam International Documentary Film Festival.

KATHERINE TREBECK is Senior Researcher for Oxfam GB. She has a PhD in political science from the ANU, is Honorary Professor at the University of the West of Scotland and Senior Visiting Research Fellow at the University of Strathclyde. When working for Oxfam Scotland, Katherine developed the Humankind Index, a measure of prosperity constructed through community consultation.

Open Scotland is a series which aims to open up debate about the future of Scotland and do this by challenging the closed nature of many conversations, assumptions and parts of society. It is based on the belief that the closed Scotland has to be understood, and that this is a prerequisite for the kind of debate and change society needs to have to challenge the status quo. It does this in a non-partisan, pluralist and open-minded manner, which contributes to making the idea of self-government into a genuine discussion about the prospects and possibilities of social change.

Luath Press is an independently owned and managed book publishing company based in Scotland, and is not aligned to any political party or grouping. Viewpoints is an occasional series exploring issues of current and future relevance.

Tackling Timorous Economics

How Scotland’s Economy Could Work Better for Us All

KATHERINE TREBECK GEORGE KEREVAN STEPHEN BOYD

Luath Press Limited

EDINBURGH

www.luath.co.uk

First published 2017

eISBN: 978-1-910324-87-5

The author’s right to be identified as author of this work under the

Copyright, Designs and Patents Act 1988 has been asserted.

The content and views contained in these reports are the responsibility of the authors and do not necessarily represent the views of related parties.

© Katherine Trebeck, George Kerevan, Stephen Boyd 2017

Contents

Introduction: Our Economic System is broken. We need a new one.

KATHERINE TREBECK

Towards a ‘for everyone economy’?

KATHERINE TREBECK

Do we really want a more equal Scotland?

STEPHEN BOYD

No Timorous Beasties Here!

GEORGE KEREVAN

INTRODUCTION

Our Economic System is broken. We need a new one.

KATHERINE TREBECK

The true objective of our politics and economy.

THIS IS A BOOK that worries that we seem to be taking the long route to attain what people and planet need. It is a book that suggests real progress boils down to the sustainable wellbeing of a society; it takes a multidimensional conception of the possibilities people have for leading a good life.1 The first and foremost objective of progress is what people and planet need – as opposed to putting economic objectives before all else. In this sense, ‘progress’ and ‘development’ are not only about Gross Domestic Product (GDP), not merely profits, and certainly not exhausting the planet until it is too late.

So it is also a book about putting economics back in its place as servant of the people (rather than people being valued only as factors of production). It confronts the origins of unequal distribution of human wellbeing. It calls out the economic system as insufficiently configured to deliver real progress and instead too often operating so as to reward the powerful and give power to those with most rewards. It highlights that the wrong sort of growth can be harmful – more is not always good. And it recognises that the nature of economic growth as currently pursued may destroy the environment which is so important for economic and human wellbeing.

In recognising where things have gone awry and holding onto a sense of the extent to which things could be better, this book dives into the heightened possibility of one country – Scotland. Scotland has an economy shaped by a range of forces – political, global, geographical, cultural, historical and technological. It can be a self-aware place poised for change and rich with potential.

It is an over-used cliché, but Scotland does stand at a crossroads. The UK vote to leave the European Union has created a state of suspension in that we know much will change, yet in what way and with what impact is far from clear. Already more powers are shifting to the Scottish Parliament, Holyrood; people are discussing what sort of country we want to be; and organisations and government are responding to this ‘democratic renewal’ by recognising the need to really engage communities, rather than just consult those who reply.

So in a way Scotland is the playground for the authors of the book to allow our ambitions for the country to clamber over and beyond the obstacles and hurdles of short term and constrained policy making. Scotland is the terrain in which this book seeks to envisage an economy that supports the real needs of people and planet, but the messages within are not for Scotland alone.

Where we are now

In developed countries such as Scotland, indications are that we are going beyond ‘enough’: we have passed the point of saturation. In 1989 Max-Neef pointed to a ‘threshold’, explaining that:

in every society there is a period in which economic growth contributes to an improvement of the quality of life, but only up to a point, the threshold point, beyond which if there is more economic growth, quality of life may begin to deteriorate.2

Quality of life deteriorates because after this point the costs of increasing GDP are higher than the wellbeing it provides; defensive expenditures become dominant and economic growth becomes un­economic.3Demand for many services is driven by inequality and ‘failure’ to get things right in the first place.4

This is caused by and is simultaneously manifest in multiple crises – climate change, environmental destruction, inequality, alienation and disengagement.

Yet the crisis the world’s leaders (as opposed to people and communities) woke up to with most alertness was the financial crisis. To this the default response was to push down further on the accelerator and stoke the engine with more fuel. In other words, we got the opposite of the profound change of direction sorely needed.

Instead, according to recent analysis from the Office for Budget Responsibility, the UK economy is exhibiting many features of the pre-2008 style economy. There is no sign of the much vaunted ‘rebalancing’ (from finance to manufacturing, from consumption to investment, and from wealthier to poorer regions). In Scotland, like the UK as a whole, we have seen a recovery of financial and business services more rapid than in manufacturing (where at the time of writing output has yet to recover to pre-recession levels).

This pathway has seen a large majority of workers in Scotland experience a historically unprecedented decline in the real value of their wages between 2009 and 2014. But some occupations received real terms increases, namely corporate managers and directors.5 Another indication of the extent to which the economy splinters people’s economic standing, rather than supports it, is financial insecurity: according to the Centre for Social Justice, household debt in the UK is at a historic high of £1.47 trillion and 8.8 million people struggle with over-indebtedness.6

The long way around

This economic model represents an approach to progress and development that demands more resources, more effort, more political agreement and more patience than need be. It is an inefficient approach to delivering good lives sustainably. And it is bumpier, has more distractions and diversions and flimsy bridges to cross than the route we could be taking.

At its simplest, this long way to good lives entails:

Firstly, get the economy to grow bigger, but don’t fret too much about the damage to people or the environment that this does

Secondly, take a chunk out of this economy via taxes

Thirdly, channel this money to helping people cope with step number one

Step three is evident in symptoms such as: tax credits for those in jobs which do not pay enough to live on; interventionist medical treatment for those alienated and stressed by the precariousness of this economy; welfare payments for those cast aside by companies who downsize in their quest for short term shareholder value; and via flood defences and shelters for those whose homes are flooded as climate chaos worsens. All this provision is undeniably vitally important for recipients in the short term, but arguably it is also a sign of attempts to heal and ameliorate rather than prevent harm in the first place.

Essentially the long road is ‘end of play’ redistribution and putting sticking plasters over the wounds caused during the match. As Danny Dorling has warned, we cannot keep plastering over ‘wounds caused by inequality by building more prisons, hiring more police and prescribing more drugs’.7

But we continue doing this because our current path is ostensibly unable to get the distribution right first time around, let alone creating healthy people and a sustainable planet. Globally, of all the income generated by GDP growth between 1999 and 2008, the poorest 60 per cent of humanity received only 5 per cent of it; the richest 40 per cent of people, by contrast, received 95 per cent.8 1.1 billion people live in extreme poverty – but the Overseas Development Institute has shown that this figure could have been reduced by 200 million if poor people had benefited equally from the proceeds of growth during the Millennium Development Goal period.9

Not only is a deluded reliance on trickle-down economics an incredibly inefficient pathway to poverty alleviation, it is environmentally unsustainable.10 It depends on a growing economy which is dangerously pushing beyond planetary boundaries.11 In many countries this growth is premised on exploiting natural resources and has been described as a ‘neo-extractivist’ model (Brazil’s mega-projects in agriculture, oil, and mining; or the UK’s North Sea oil come to mind as examples).12

And the current route to good lives is also flimsy – vulnerable to fleeting and flippant political will. It further depends on the consent of those being taxed – a consent undermined by the inequality that separates communities from each other and undermines solidarity across society.

This bears out Karl Polanyi’s observation of what he termed a ‘Double Movement’ – the inevitable reaction of society to the impact of the spread of market economy (the reaction comes in the form of protective labour, civic, social and political movements, and various legislation [public health, factory conditions, social insurance, public utilities, municipal services, and trade union rights])13. Polanyi warned that as the consequences of unrestrained markets become obvious, like an elastic band there are two scenarios – either it snaps (social disintegration) or it reverts to its previous position (laissez faire is constrained).

Wouldn’t it be better not to over-extend the elastic band in the first place?

Why we are where we are

Until Scotland allows itself to discard conventional wisdom and orthodox thinking – becomes less ‘timorous’ – and until it ceases unquestioning adoption of agendas and positions, it will struggle to benefit from a vigorous, nuanced and ambitious discussion about the purpose and structure of the economy we sorely need.

There seems to be an ‘intellectual uniform’ prevalent in some parts of Scottish life: adoption of certain stances because of party membership or organisational affiliation. This can be seen in the (almost) hysteria that breaks out if someone dares to question ‘universalism’. Rather than a steady, clever and thoughtful conversation about what is provided from public funds on a universal basis, there is polarised and unhelpful outburst along the lines of all or nothing universalism – a false binary if ever there was. Groupthink can also be seen in the cry from some that all Scotland’s problems stem from a neoliberal agenda imposed from outside. But not only is there a plausible argument that in fact, it is not neoliberalism we have had, but an ‘assetisation’; there is also plenty that all levels of government in Scotland could do now to begin to build, cajole, and enhance a more people-focused economic model 14.

Seeking out the analysis of those more expert than us is one thing, but simplistically assuming an intellectual uniform means we come to rely on others for our positions, which leads to an unhealthy, if energetic, deference to groups (be they political parties or campaign groups or others). And within these narrow spaces people seem anxious not to be the first one to stop clapping – resulting in too much adulation and not nearly enough querying of the logic, insufficient probing of the consistency, and scant asking to see the whole picture. Even if there are several groups, it is still groupthink…

So we get an immaturity of discussion and hints of intolerance of diversity; somewhat like two year olds, just learning to walk, waddling about, bumping into each other, and beginning to wail. Instead we should be gently and thoughtfully negotiating our different positions, and maybe even holding hands at some stage.

But the prevailing mood and mode boxes us into positions. Boxes are never helpful – instead they are about containment; they simplify complexity and nuance; and they force us to focus on the symbolic rather than the substance. Just look at the criticism Scottish Labour faced back in 2014 when it worked with the Conservatives in the Better Together campaign (when the two put aside differences to focus on a shared goal). Or, the following year, when ill-fated Labour leader Ed Miliband suggested he might step away from government if government meant coalition with the Scottish National Party.

Unwillingness to work with opponents bodes badly no matter which party (if any) one gravitates towards: it undermines efforts to put aside party differences for the greater good (however that is defined) and blocks much needed deliberation and dialogue. This is hardly grown up politics, instead it entrenches tribalism rather than encouraging shared agendas. As Gerry Hassan observes, ‘a proper debate involves being able to empathise with your opponent, to be able to understand them and better inform your own views’.15

A narrow terrain

But of course Scotland’s deliberations (and efforts to position competitiveness and tackling inequality as ‘mutually supportive goals’) operate in the context of another narrative: a narrow economic orthodoxy.16 This is perpetuated by the mainstream media, by most political parties (again with notable exceptions, often in the form of individuals within them), by establishment academia and many funding bodies. This orthodoxy positions the ‘Global race’, the mantra of competitiveness, efficiency and GDP growth as goals in themselves, rather than the sustainable wellbeing of our society. It focuses on ring-fencing down-stream spending (important though that might be in the short term) rather than a desperately needed shift to preventative investment. Anything outside this narrow bandwidth is dismissed as ‘radical’ or ‘unrealistic’ or ‘naive’. As Zoe Williams has noted:

This is the whole of British politics encapsulated in two lines: unless a policy looks exactly like what the mainstream parties are suggesting… unless it will leave the fundamental structures totally unperturbed – then it is the most outlandish idea that anybody has ever heard.17

Getting it right in the first place

This long way around (growth-based economic model) would be tolerable if economic growth (that is, ever-rising GDP) could be recoupled with poverty reduction and decoupled from environmental degradation.

But this is a big – nae a huge! – task.

So why not find other means to deliver what people and planet need? How about delivering our objectives of a more equal, more humane and more sustainable society in the first place, rather than constantly having to beg for resources to heal the damage done by a growth-first, long way round model?

Getting this right might mean a smaller police force – even a smaller NHS – because people are safe and healthy. Already. It would mean less tax being diverted to top up poverty wages because jobs pay enough to live on. In the first place.

Getting it right means creating an economy that does more of the heavy lifting: configuring our economy so it generates jobs that deliver basic needs like security and sufficiency of income, but also important psychological needs such as control, autonomy, self-esteem and meaning. It means putting the objectives of good lives and greater equality at the very forefront of decision-making – rather than some rather unimpressive means to get there (you know who you are GDP).

This book

The authors in this book argue for greater attention to the quality of our economy and the three chapters offer a range of ideas to get there – necessary perhaps, but not sufficient. They are areas in which we urge experimentation – with Scotland as a laboratory made possible by, inter alia, the 2014 Scottish independence referendum which opened a popular (if imperfect) debate regarding new solutions to old economic problems.

Recommendations for change include:

The taxation we need

Taxation is an important lever to help shape the sort of society and economy we want:

It can build in incentives so that managers take account of long term social and environmental goals18

It can tax unearned good fortune19

It can redistribute by ensuring the whole tax system is robust and progressive20

Stephen Boyd, for example, explains why increasing tax revenues as a proportion of GDP is necessary if anything close to Scandinavian levels of equality are to be achieved (with the tax take then used to fund the transfers that reduce inequality). But within a higher tax take Boyd also recommends raising the top rate of income tax – out of a recognition that high marginal tax rates may have indirect effects, especially on corporate behaviour, that are socially valuable.

George Kerevan reminds us that taxes on capital are an important tool in three senses: (1) taxes on profit streams; (2) taxes on capital gains; and (3) taxes on gross wealth itself. Kerevan also recommends taxing profits at a higher rate (rather than inputs such as labour and property). A global wealth tax would eliminate distortions in allocation between nations, as the same tax would prevail everywhere.

Shifting the tax burden to capital, wealth and harmful activities should be intuitive, yet governments often claim that doing so would lead to ‘flight’ of the ‘wealth creators’. Leaving aside that ‘trickle down economics’ from such wealth creators has yet to prove itself, the reality is that the number of people who move for tax reasons is negligible, even amongst the wealthy (usually only a few celebrities). Another form of unearned wealth is that which gets handed down from one generation to another – so Boyd recommends a ‘fair’ level of inheritance tax. He warns: ‘choose not to have a fair inheritance tax; deserve to have society run by the rentier class’.

Beyond tax: the economy we need

If we are to truly transform and lighten our impact on the planet we need to transform how we manufacture products and dramatically alter how we use them. In my chapter I suggest that part of this is about a shift from a take-make-waste linear business model to ‘lease the resource, make the product, recover the resource and then remake it’.21Simultaneously, consumers need to be better at sharing capital goods (such as sharing cars, tools, or white goods). In other words, we need an economy that is circular and collaborative.

Boyd adds that it is necessary to develop a ‘foundational’ economic strategy for Scotland which concentrates on ‘mundane’ economic sectors like supermarkets and other retail, utilities, transport, retail banking and the public sector where most people actually work. Such franchises underpin much economic activity and should be utilised to boost job numbers and quality.

This is a far cry from the deference to wealth that seems to characterise the current configuration of policy-making and economic decisions. As Boyd observes, growing the financial sector as an end in itself has been a consistent priority of all administrations since devolution.

The businesses we need

Currently businesses externalise many costs – one corporation’s actions and assets become liabilities for other parties, such as taxpayers, businesses, families and the ecosystem.22 Behind this transfer of cost is an interpretation of fiduciary duty (many would say mistakenly) as a duty on corporate managers to maximise shareholder return (in the short term). As I argue in this book, such an interpretation means that social and environmental externalities (bad and good) are both over- and under-delivered.

Instead, businesses need to be driven by a sense of purpose to enhance communities and conserve the ecological systems where they operate. One mechanism would be to ‘re-purpose’ businesses so they internalise costs currently seen as externalities and to imbue in private organisations a wider, more collectively orientated purpose (so they generate positive externalities). For example, ensuring company boards represent a range of constituencies could begin such re-purposing. But, there are other mechanisms beyond the board: employees and managers can be incentivised differently via long term value creation targets that determine reward and promotion; and new business models that democratise ownership. Employee and community co­operatives present a way to do business that is better aligned to the needs of people and planet, rather than simply profit.

As Kerevan highlights in his contribution, this is about democratising the market economy itself; providing broader access to productive resources and opportunities. Firms and factories managed by worker cooperatives decide what they produce, how they produce it, and what they charge for their products; while the incomes of all workers are profit shares, not wages.

The work we need

Within all enterprises, the way work is managed and controlled; the type of work; the pay and conditions of work; and the relationship workers have with each other, are all an opportunity for better alignment between the economy and what people want and need.

All three authors support what is perhaps the simplest immediate labour market intervention: to ensure every worker receives a living wage. However, given that the increase in inequality over the longer term has been driven more by runaway wage increases at the top end of the distribution rather than stagnating wages at the bottom, it is important not to claim too much for the impact of increasing the minimum wage or wider introduction of the living wage.

The amount of work is also a factor contributing to inequality: simultaneous over- and under-work suggests that better sharing the available work is needed. Both myself and Kerevan point to the ­Netherlands as a model for better sharing work.

The security we need

Support when people encounter misfortune – such as ill-health or unemployment – is crucial in underpinning a decent society, enabling the economy to function and ensuring people are secure. But much change explored in this book will only be facilitated by a shift away from the tyranny of short-termism which seems all too pervasive in both business and politics. Instead we need upstream, preventative spending (as opposed to ‘failure demand’), connected polices, long term budgets and enabling government departments to benefit from results that accrue down the line or in another department’s balance sheet.

Scotland is gaining more control over various aspects of benefits – and of course already has control over the NHS. But recognising the interaction of the benefit system with the realities of the labour market is important.

The things we don’t really need

M