Wednesday, January 16, 2013

On the economy: looking backwards or forwards?

My sister drew attention to an article in Monday's Guardian, 'Austerity? Call it class war – and heed this 1944 warning from a Polish economist' via Facebook. It begins,
The single best guide to what happened in Britain last week was published in 1944. Naturally, its author was a Polish economist. Even economics students may not have heard of Michał Kalecki – but it's the discipline that got small, rather than his legacy. In his time, Kalecki was recognised as having anticipated some of Keynes's most important ideas, years before the Master published his General Theory, and he exerted a big influence on such legendary Cambridge thinkers as Joan Robinson and Nicky Kaldor.

His article, Political Aspects of Full Employment, explains with an almost eery [sic] prescience why the coalition is attacking our wages, our working terms and conditions and our welfare state.
I don't think that Kalecki's ideas are particularly relevant today. Why?

The circumstances are very different now and far more complicated. For one thing, the population has grown; it was 62.3m in June 2010. In 1944 (the year I was born) it was about 49m. At the same time, most people have come to expect far higher living standards and the job situation has changed - manufacturing industry has declined while service industries have increased. There's far too much emphasis on retailing in most economic forecasts, which isn't sustainable. Having more cash "to buy more things" isn't good in the long term. Where are these "more things" to come from? What about peak oil and other diminishing resources, and the waste that's generated? In 1944 the emphasis was on food security, because of the war. It's even more important now, with climate change and some countries reducing or banning exports. We're now reliant on imported food, with food inflation at 6% last year, while British farming is suffering.

No one is willing to face hard facts about any of this. To create jobs according to out of date economic theories, without an audit of their value in terms of sustainability, wouldn't help in the long term - it would just postpone the inevitable. What is inevitable is that, sooner rather than later, UK people must learn that increasingly higher living standards are a fantasy, if everyone expects the latest Sunday supplement must-haves, and that the population can't go on increasing. This could even affect the wealthiest who've been using to buying their way out of any difficulties, as money isn't much use when the there's nothing to spend it on - nothing useful, that is.

The only sort of economy worth bothering about is a sustainable one, and, so far, hardly anyone has addressed this issue, least of all politicians tied to short-termism.

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