Economic Prospects for 2017: Andrew Simms – New Economics Foundation

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As John Nightingale who sent the link says, this ‘reads well’: 

Each year the Financial Times conducts a survey of leading economists on the UK’s upcoming prospects. The New Weather Institute is part of that survey and predicts a bumpy ride. A lot of the FT material sits behind a paywall, so for interest here are the answers we gave to their questions (which are themselves interesting in terms of locating mainstream concerns) on issues ranging from economic growth, to Brexit, monetary and fiscal policy, inflation, immigration and, unavoidably, Donald Trump.

Highlights (full text on WM New Economics Group website):

It is time to stop measuring the health of the economy using orthodox economic growth measured by fluctuations in GDP as the primary indicator. By mistaking quantity for quality of economic activity, worse than telling us nothing it can be actively misleading. It tells us nothing about the quality of employment, the intelligence of infrastructure, the economy’s resilience, the environment’s health, or the life satisfaction of the population. As the United Nations Development Programme pointed out (as far back as 1996), you may have growth, but it might be variously jobless, voiceless (denying rights), ruthless (associated with high inequality), rootless (culturally dislocating in the way that fed Brexit, for example) or futureless (as now, based on unsustainable resource use) . . .

. . . tax breaks, subsidies and the way investment portfolios get managed means that money flows cheaply in fossil fuel infrastructure and operations. At the same time, necessary and successful emergent sectors like solar and other renewables can still struggle for affordable, patient capital. The privatisation and weakening of the mission of the Green Investment Bank is deeply concerning in this regard . . . prevalent economic uncertainties seem to be having the effect of putting everyone, the MPC included, on ‘watch’, and unlikely to do anything radically different in the ‘phony war’ period of approaching Brexit negotiations . . .

If anything, far from being downgraded by the Brexit debate, the economic importance of immigration to key UK sectors has been made more acutely obvious, ranging from higher education, to food, retail and a range of other service industries. Importantly, many of the drivers of population movement from inequality to conflict and environmental degradation show no sign of lessening and, if anything, growing worse.  The tone and promise of government policy seems mostly to affect the degree of xenophobia experienced by immigrants rather than significantly changing their numbers. With all these things in mind, I doubt trends in immigration will change much in 2017 and that this will buoy-up a UK economy facing a wide range of threats . . .

There is no reason in principle why QE cannot be used in a more intelligent and focused way. The UK is weighed-down with an aging, creaking, high-carbon infrastructure. The case for public investment as necessary to rebuild the foundations for a modern, clean and efficient economy to underpin our quality of life is overwhelming. The cost of money for conventional borrowing is cheap. And the decision by the Bank of England to expand its quantitative easing (QE) programme from £375 billion to £445 billion in the wake of Brexit, demonstrates that public money creation is also possible when the situation demands it. Up to date, QE has benefited the banks, and the holders of certain assets, with broader economic benefits being questionable. But, as Mark Carney has previously indicated, there is no reason in principle why it cannot be used in a more intelligent and focused way to aid the productive, low carbon economy. I and others have consistently argued that far more good could be done if the same basic mechanism was used, for example, to capitalise a much larger and more ambitious green investment bank via bond purchases. The work subsequently undertaken such as large scale energy efficiency retrofitting of the UK housing stock and the roll out of renewable energy would generate good quality local employment and better prepare Britain for the future. There is no sign yet that the government intend to seize this opportunity and rather too many signs that any borrowing that is undertaken will not be put to as good use . . .

Combined with the sentiments unleashed by Brexit, and the UK government’s active new embrace of industrial strategy, it is possible that the economic pendulum may swing back some degrees from globalisation toward localisation. Done in a purely autarchic way this might be negative. Done with respect to international cooperation and obligations, and to help build a more environmentally sustainable economy, it could snatch success from the jaws of chaotic self-destruction.

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A better way to challenge trade deals

One of the upsetting things  about both Brexit and Trump’s victory in America, is that they have taken some solutions from the progressive left and green movements, intermingled them with the nastiness of far right rhetoric, and made far more headway than we have by doing so. For years while the Labour machine was busy joining the Conservatives in telling us that There Is No Alternative, that they were intensely relaxedgreat_offers about the stinking rich, and that free market economics would raise us all, we have been saying that many are left behind and made insecure by this economic model and entire cities and districts are written off by it as collateral damage, while inequality rises. The trade deals opposed by many Trump supporters and many Brexiters, have partially caused this, alongside other factors such as automation and poor domestic industrial and regional policy. Mainstream dogma economists sneered at us for querying the success of neoliberalism, while those experiencing the inequality and insecurity got neglected and disenfranchised.

In both countries, the rightwing media has for decades peddled the myth that immigration (or, for the nastier media outlets, immigrants) and benefits-scroungers are to blame for workers’ predicament, following the age-old pattern of splitting the oppressed into factions to fight each other. This has been the fuel for the success of the Trump and Brexit rhetorics. Now the neoliberals are saying “The people have spoken.” Well, kind of. The people have spoken through the distorting sound system of a very rightwing media, powerful megalomaniacs, and, for some, extreme desperation. As a friend said yesterday, we must not “pander to prejudice and division because we mistake that for listening”. At least there is a trace of understanding this in the new mainstream interest in so-called “inclusive growth”.

International trade and protection need to be refined collectively, not unilaterally, and with care that we’re aiming for the outcomes we really need. Hence the call of “Another Europe Is Possible” which sought reform from within Europe rather than the UK leaving it. Freedom of movement applies to people (or “labour” as it charmingly gets called), capital and goods, and capital is currently the freest of those. We should reverse this. Put simplistically (of course negotiations would be complex in reality) more restrictions on the flow of capital, some on goods, and less on people, could enable these better outcomes. It could mean that we still value our connections and the opportunities of travel, but can ensure that the industries that meet domestic needs can be protected, that countries get and contribute the goods required from other places, and that the profits this ‘labour’ generates can stay within each country to benefit its citizens more fully. Meanwhile we should ensure strategies to develop alternative industries where whole places have relied on one globally-relevant sector (Sunderland’s ship-building).

LWM is a regionally focused organisation, so although we are interested in the reform of world trade our role is more to tell the story of, and get policy change for, economics that is built on increasing local ownership and control over the economy of a place, as per Localising Prosperity. The Institute for Local Self-Reliance does a similar job in the states. The International Alliance on Localization  calls for this approach globally.

Seeking a positive from both the Trump presidency and Brexit, there is now the tiniest opportunity to challenge the neoliberal approach to trade with more solidarity and inclusivity. But only if we can challenge the scapegoating of the vulnerable and join together to demonstrate better economics.

Karen Leach