Policy Research in Macroeconomics

Taking back control

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In the latest edition of the Times Literary Supplement I review a range of new books that converge around the theme of responsibility.  My theme of generalized irresponsibility was challenged by Harvard’s Yaschca Mounk, who in his book The Age of Responsibility argues that  “the notion of personal responsibility has become central to our moral vocabulary, to philosophical debates about distributive justice, to our political rhetoric, and to our actual public policies”.  Also reviewed are John Nickson’s book
Our Common Good subtitled “ Surviving an age of irresponsibility”; Polly Toynbee and David Walker’s Dismembered. How the attack on the state harms us alland
Yannis Varoufakis’s book,  Adults in the Room in which he argues that
“there was a dearth of adults in many of the rooms where this (Greek) drama unfolded.”

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We live in an age of irresponsibility. Reckless politicians, lacking sufficient evidence, led us into prolonged and costly wars in Iraq and Afghanistan. Regulators, economists and policy makers passed up responsibility (in the 1960s and 70s) for the management of financial markets. Instead, something akin to Dante’s Sorcerer – the “invisible hand” – was deemed sufficiently responsible. Bank chief executives were irresponsible about speculative and often fraudulent activities carried out on their watch. Once the crisis broke, political and technocratic elites (including economists) denied responsibility and blamed the public: too many “sub-primers” wanted something for nothing. They had succumbed to NatWest Bank’s siren call to “take the waiting out of wanting”. Private bankers lent irresponsibly to Greece, knowing that politicians and taxpayers would bail them out in the event of default. Elected Westminster council politicians, along with their officials and agents, abdicated responsibility for the lives of tower block residents in their community. Instead they ceded responsibility to the unaccountable market. The same could be said of the urban planners of hurricane-struck Houston. But it is not only elites that act irresponsibly. As individuals, we tend to be careless about managing the use of water, heating and insulation in our homes. We are often irresponsible about our own health and safety. By 1990 we had been fully warned of the risks to the climate posed by airline travel, yet air passenger numbers have climbed steeply from 1 billion flights per year then to almost 4 billion today.

Yashca Mounk disagrees with this general hypothesis. In his absorbing, if philosophically dense book, The Age of Responsibility, he argues that, over the past thirty years, “the notion of personal responsibility has become central to our moral vocabulary, to philosophical debates about distributive justice, to our political rhetoric, and to our actual public policies”. He cites in evidence the American politicians on both sides of the political dIvide, who conspired to “end welfare as we know it” in the 1990s. The most fundamental overhaul of the American system for social provision in half a century is named the “Personal Responsibility and Work Opportunity Reconciliation Act” (1996). Tony Blair and Gerhard Schröder justified their own welfare reforms in strikingly similar language. Tough reforms were implemented to ensure that welfare was not distributed indiscriminately to both the “deserving” and “undeserving” poor. A bipartisan consensus evolved “around the idea that a citizen’s claim to assistance is fatally undermined if he or she is found to be responsible for that bad outcome”. While older generations thought that “responsibility entails a duty to help others, the conception of responsibility that now prevails”, writes Mounk, “is deeply punitive”.

The trend towards responsibility has been as marked in academia – especially in philosophy and political theory – as among the general public. According to Mounk, today most Anglo-American philosophers look to the past actions of individuals when trying to determine the entitlements to which they have a just claim. Even most far-Left philosophers now emphasize the importance of choice. Mounk cites Marxist theorist G. A. Cohen who wrote with biting sarcasm that by recognizing the “centrality of choice”, this increasingly influential tradition “has in effect performed for egalitarianism the considerable service of incorporating within it the most powerful idea in the arsenal of the anti-egalitarian right: the idea of choice and responsibility”.

Mounk is critical of the narrowness of left-wing responses to right-wing charges that the poor have individual responsibility for their conditions. Rather than challenging the normative premise that gives rise to this rhetoric – the idea that peoples’ bad choices in the past undermine their claim to assistance in the present – the Left has focused its energies, he argues, on “denying that most people are responsible for their lots in life”. He cites Lady Gaga’s role in founding the Born This Way foundation “to foster a more accepting society, where differences are embraced and individuality celebrated”. It is now politically incorrect, writes Mounk, to call homosexuality a “lifestyle choice”, and it is politically correct, by contrast to express our conviction that homosexuality is a biological trait. But why, asks Mounk, should it matter, normatively speaking, whether homosexuality is an in-born or a chosen trait? Should we not respect fellow citizens’ lifestyles, precisely because they are chosen? If homosexuals are “born this way” does that mean we cannot ascribe responsibility for their actions to them?

What then is the way forward? Mounk argues for a positive conception of responsibility: one that is empowering not punitive. Most citizens, he argues, cherish the responsibilities that they feel give much of the meaning to life. But we should not start with questions about individual responsibility. Instead we should start with an account of the very purposes of the welfare state and its institutions, and set reasonable expectations that would help sustain those purposes.

While Mounk’s book is a serious philosophical exploration of modern-day attitudes and approaches to welfare, and while there is much to commend in his forensic analysis, he misses the bigger picture: namely, the idea that the state, or the institutions of the state, are, or should be, responsible for managing the economy as a whole. Many of society’s deprivations are best tackled before they become deprivations or ‘welfare’ issues.  Responsible regulatory institutions include elected bodies at municipal and national level; the Central Bank, the Treasury and the judicial system. Mounk accepts as given a society that has replaced the post-war macroeconomic architecture (Bretton Woods) for economic stability, with a microeconomic architecture: one that largely devolves responsibility for economic outcomes to markets and individuals.  Responsibility for the health and prosperity of a nation goes beyond the welfare arms of the state.

The first part of John Nickson’s book Our Common Good is entitled “Surviving an age of irresponsibility”. If the state provides less, Nickson asks, who will provide more? His book is an exploration of projects across Britain aimed at alleviating suffering, and supported by public institutions, philanthropists and civil society. The stories are both instructive and inspirational for those civil society activists maintaining and building local networks and capabilities. Nickson’s conclusion seems to be that the state must play an enabling role – “enabling others to flourish”. This requires, he writes, a fresh approach from both the public sector and those working in the voluntary sector – applying the lens of the common good. He devotes a chapter to the rebirth of Blackpool, currently plagued by unemployment (above average and increasing), family breakdown, crime, drugs, poor education attainment, low aspiration. Blackpool has the highest alcohol-specific mortality rate for men and the second highest for women in the UK. Life expectancy for men there is the lowest in England. Nickson lauds the work of Blackpool council and its strategy of investing in cultural as well as social and economic regeneration. They have done this by for example buying up sub-standard properties, reducing the number of units in them, and improving the quality. Neil Jack, the CEO of Blackpool argues that it is important for the Council “to lead on these issues, we are only interventionist to the extent that we need to be; we want to bring better-quality private providers into the market, but we need to show that it can work.” However, argues Nickson, there are limits to what public funding alone can achieve. “There is significant wealth in north-west England amidst great poverty”. In his view Blackpool needs a new foundation, philanthropy and social investment – and an exceptional person to be a champion for the town. The public authorities need to work more closely with social entrepreneurs that “spring up to fill the gaps, led by passionate people who want to get things done”. He concludes that it is the macroeconomic institutions that must provide: “Blackpool remains vulnerable unless economic revival brings more prosperity to the town and creates more jobs and, crucially, there is affordable, high-quality housing that encourages people to put down roots”. In other words, economic revival is not SOLELY the responsibility of either local authorities, philanthropists or social entrepreneurs.

Polly Toynbee and David Walker have in their book Dismembered. How the attack on the state harms us all a retort for Nickson’s “who will provide more?” “A tide”, they write, “is flowing towards more not less government, towards rethinking and remaking the capability of state to provide more not less. Look at what is on our doorsteps, let alone what lies ahead, and increased collective action is unavoidable.” Their book meticulously documents the state’s parlous state “after forty years of ideological assault”, and it makes for painful reading. They concede that the task of government has become more difficult: not just because the power of global companies has grown or because of the internet, “but also because people, households and communities have become more demanding, and as their needs grow they do not ‘self-heal’ as the theorists think”. ‘Standing on your own two feet’ while looking after your own and despising those who cannot manage without help was a hallmark of what Toynbee and Walker define as “the Thatcher-infected decades.” The book is unflinching in its critique of both Thatcherite and Blairite policies, and provides a comprehensive audit of Britain’s ‘dismembered state’. While there is much to depress the reader, the book documents examples of heroic efforts by individuals and local authorities to maintain critical services – and it is these examples that inspire the hope that society can step up to the challenge of once again reconstructing the dismembered state.

The question of responsibility is a central theme of Yannis Varoufakis’s book, Adults in the Room. In a gripping account of the former Greek Minister for Finance’s role in helping to alleviate his country’s financial crisis, Varoufakis found that “there was a dearth of adults in many of the rooms where this drama unfolded”. The construction of the Euro’s financial architecture deliberately stripped European countries of responsibility for maintaining the value of their exchange rate, and for the management of credit/debt creation and interest rates. Before the launch of the Euro in 2001, Greece had struggled to raise finance from the private financial system. Once Greece was accepted into the Euro system, private investors and creditors rushed to lend to the impoverished country – no longer regarded as a grave risk, and a safe bet for high returns. After all, German, French and British taxpayers, among others, now acted a backstop for all EU sovereign lending.

As evidence of this private sector exuberance, in January 2010 Greece’s auction of €8billion five-year bonds was oversubscribed four times. Yet just four months later, in May 2010, the country was effectively in default. The EU, ECB and IMF moved in to bail out private creditors’ risk-taking to the tune of €110billion. EU political leaders ignored their own role in the construction of the Euro and the evolution of this crisis. They relieved the private sector of responsibility and instead blamed and demanded retribution from the poor people of Greece.

Varoufakis writes about his role in this tragedy with passion and verve. The book is littered with references to English literature and Greek drama, making it one of liveliest texts about the dismal science to be published this year. I am personally uncomfortable with his deference towards members of the British political establishment like Lord Lamont and George Osborne who clearly had their own reasons for befriending someone they perceived as an “enemy” of the European Union. That aside, Varoufakis shines a useful light on the complex workings of the EU’s technocracy and political bureaucracy.

I cannot but agree with John Nickson that “the way our country has been run for decades is irresponsible”. He, like Polly Toynbee and David Walker, holds “those in power” responsible for the irresponsibility of the state. These include, we must assume, both politicians and technocrats. This leaves open a theme for new debates: how to wrench power from the irresponsible, and begin to rebuild a responsible state. Above all, how to finance such a reconstruction? The answer, in my view, lies in the transformation of the economics of individualism – the economics that subordinates the interests of society to those of private markets. We need to re-discover the economics of collective responsibility for the society and ecosystem that we want to live in. Collective responsibility for that which we need if we are to sustain human health and prosperity in a liveable ecosystem.

The TLS operates a paywall, but the review can be read on the TLS site here:

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