The Pursuit of Fallacy

Economic policy for the past thirty years has been geared towards “growth”. This has been a tragic error; our economic policy has been geared towards a fallacy. The consequence of this has been an explosion in social inequality and unemployment, and a disintegration of communities. Money has, rather predictably, not made us happy or fixed all our problems. Although as a nation we are more affluent, as a society we are no better off. Economic policy should shift its focus from “growth” to employment.

Growth is arbitrary. If the economy grows by 2%, does that make me 2% richer? No, and even if it did everyone would be 2% richer, therefore everything would be 2% more expensive and taxes would be 2% higher. Wealth is relative, so if everyone in society gets proportionally “richer”, no-one gets richer. Likewise, if the economy shrinks by 2%; does that make me 2% poorer? I don’t feel any poorer. What's the fuss about? Why are millions of people losing jobs because some banker or speculator "feels uncomfortable"? Did he miss breakfast? Is his mansion not yet big enough? What is “growth” anyway? Will we keep growing? To what and why? This “growth” only happens at the top and yet the effects of the inevitable bust are felt at the bottom.

Yet it is the quest for this phantom called “growth” that causes governments to accept neo-liberalism as an economic policy. Policies thus followed are deregulation, privatisation and competition. Schools, hospitals, prisons and security forces cannot be exposed to any of these factors. For one, these sectors all lack the ability to make a profit, the only incentive for doing anything apparently. But critically, such an approach will make them unfair. Just look at the USA; up to 20% of Americans cannot afford basic health care, their state schools are notoriously poor and their prisons turn petty thieves into hardened criminals while also trapping them in a cycle of depravation and crime. This is not the model to emulate, but these are the policies the quest for “growth” will produce. If economic “growth” means social depravation and institutionalising inequality, it is not a worthwhile price.

Neo-liberals proclaim freedom of the market as a fundamental freedom; employers should be free to pay whatever they want, get materials from wherever and charge whatever. It is liberty; the freedom of individuals from government interference. But what about the freedom from want and the freedom from fear? The freedom from wanting more is surely a freedom against consumerism and the freedom from fear of losing one’s job and fear of poverty is fundamental. The pedestal of liberty and freedom from which neo-liberals stand is flawed; freedom, paradoxically, means limitation (JS Mill).

Bertrand Russell: “The aim of politics should be to make the lives of individuals as good as possible. There is nothing for the politician to consider outside or above the various persons who compose the world”. The doctrine geared towards “growth” does not fulfil this aim. The neo-liberal doctrine is not the answer because prosperity and growth are not the questions; the questions are welfare and social wellbeing, to which the answer is employment.

Economic policy should be geared towards employment. The elimination of poverty is the number one priority of any and all government; unemployment is the biggest factor in poverty, which itself is a factor for crime and other social problems. Employment is so central to wellbeing and a happy lifestyle; an employed person is less likely to commit crime, an employed person is less dependent upon state welfare, an employed person is generally healthier not to mention more self-determinant. An employed person, generally, has a better life and is more useful to society. Ultimately, employment is not only beneficial to the individual but also to the state.

The focus on growth emphasises statistics rather than the social reality. Statistics blur the reality; if one man has ten cows and nine men have none then statistically each man has a cow. The social reality is that one man has all the cows and nine men are in poverty. Irish GDP per capita was higher than Britain; yet Irish poverty rate was also far higher. Statistically, the Irish were richer than the British; the reality was that the Irish were poorer. Economic policy needs to move beyond statistics. Employment gets back to the social reality.

Labour needs to get back to the social reality; out of the chambers of Whitehall and back onto the streets to become a social movement once again. We are a people’s party, the people’s party, and we need to reflect that. Yet our practise betrays our; Blair earns millions giving speeches, Prescott has two Jaguars, our Labour politicians live in mansions and travel first class. Are we still the people’s party?  Labour was founded on the toil and oppression of the working man with the aim of improving their conditions – we succeeded, but the fight is not over. It’s been said time and again, Labour lost touch with the social reality.

Politics is about helping people; eliminating poverty, allowing the individual to fulfil his aspirations and potential, and, ultimately, making people happy. We are not reaching some utopian end, there are no scientific formulae whether it’s Marxist or Hayekian, politics does not serve some higher authority or concept. Economic policy has been misguided; it does not eliminate poverty nor does it help the majority of the people. To this end, it has resolutely failed. To this end, Labour has failed. Labour’s economic policy should a priori put employment at its centre, yet for the past fifteen years it hasn’t. Labour, in theory, represent the working man, we know the social reality of the current economic system and if we are not fighting for fairness and for a change in this economic system then who is? Labour needs to go back to representing the people. A fundamental shift in how Labour conducts its politics is needed, and its economic focus needs to be realigned. Simply put; if we don’t, who will?

The capitalist economy is always and will always be boom and bust; the bigger the boom the bigger the bust. Therefore, regulate and limit the boom in order to manage the bust. The less drunk we get, the better the hangover. A few bad eggs does not mean we should kill the chicken. Let’s not be blind to the benefits of capitalism and the flaws in socialist economics. The system needs reform, not revolution; an increase in regulation, not full state control; a focus on co-operation over competition, not enforced redistribution and requisitioning. And yet we need a new consensus, a new economic model that enshrines our European welfarism above American marketism, a model which puts people before profit and rights before riches. We need a new European consensus; there has never been a better time to create one. Only European socialists are willing, but we need to unite to stand up to American ideology.

Our economic policy should reflect our social values and aims; do we value egoism? Ethically, no, it is an undesirable quality. Do we value competition? Again, no; co-operation is of greater value in our society. Socially, benevolence is desirable. Practises commonly seen in the economic sphere would be deemed socially unacceptable though not always illegal. Our social aim is the elimination of poverty, yet our economic aims are profit and prosperity, for a few arbitrary numbers to become bigger. To echo the sentiment of Lionel Jospin; “Yes to market economy, no to market society”.

A system where some people make a profit from millions losing their job, where a few make money from the suffering of the many, where they are willing to spread rumours to encourage a nation to default ("they" did this to Greece the other week), which rewards greed and punishes nations which value workers dignity, where there is still over three million children in poverty yet houses billionaires - that system is not the system to pursue or be proud of. Hopefully, in the future people will look back with disgust. But why wait then?

Unfortunately, the market economy has permeated to create a market society of competitive consumption and egoism. Friedman argued that the only social responsibility of the markets is profit, and Hayek said that altruism and solidarity are virtues to overcome; these are the founders of the Washington consensus – their ethics are abominable. A fiscal deficit is no excuse for a moral deficit.

To this end, there are two economic principles useful for both domestic and national economics; never owe anything to anyone (no debt), and never spend more than what is raised. These are two fundamental pragmatic principles to be held in order to avoid the pain of the boom where bankers over step their boundaries (see how the IMF is dictating policy in Greece, Spain and Portugal).

Growth will not tackle poverty, employment will. Growth will not make people less dependent upon the state, employment will. Growth does not allow all to achieve their aspirations and potential or make each man an inclusive member of society, employment does. Growth creates social inequality, employment unites. The success of economic policy must rest on employment and its effect on the social reality, not growth. While the aims of the economy are different and contradictory to our social aims, we cannot have a stable order. The economy must serve society, not vice versa. By changing this focus, we can better serve what and who is important.