Miliband, Obama & "middle-out economics"

The Labour leader follows the President in growing the economy from the middle classes.

Yesterday, Ed Miliband laid out his cards on his economic vision. He argued that to get to the kind of strong and steady economic growth that will lower unemployment and support deficit reduction: “the starting point is that the recovery will be made by the many not just by a few at the top,” he said.

One reading of this speech is that he is talking about economic growth only to cover for a concern over fairness. Thus, the mansion tax can be interpreted as a way to make sure that the rich pay their fair share, but this really may have nothing to do with growth. But, another reading of the speech is that he — like President Obama — is pushing for a debate about economics that is based on facts, not fiction. Middle out economics or an economics that begins with the many, not the few may sound like good old-fashioned political pandering, but, in fact, there is solid economic evidence for this perspective.

Both Miliband and Obama are pushing against a story of what makes the economy grow that goes like this: Cut taxes or reduce “red tape” or regulation on those who are the “job creators” and they will invest more and hire more employees and the economy will grow. For decades, this trickle-down logic has been an unvarying constant in the political discourse in both the US and the UK. Yet, this model has failed both nations repeatedly and most colossally over the past few years of deep recession and sputtering recovery.

It’s not just that the trickle-down model isn’t fair and that progressive leaders don’t like the idea of giving tax cuts to millionaires while too many struggle to make ends meet, although that may be true. The deeper problem is that this model isn’t consistent with the evidence on what makes an economy grow.

If you ask any group of economists - left, right, center - what drives economic growth, they will give you a list of ideas that will fall into a few categories: the level of demand for goods and services, the skills and educational level of the potential workforce, the quality of the infrastructure, the potential for innovators to bring ideas to market, the quality of governance in both public and private institutions, and access to financial capital, including access to debt and savings.

That’s a long and complex list. The trickle-down story certainly plays a role in how much individuals can save — higher taxes means less savings. But, that’s clearly only one small piece of the puzzle. And, it’s a piece that may stand in opposition to the others: cutting taxes for millionaires may give them each a little more money to invest, but that means less money for schools to educate the next generation of employees, less investments in updated infrastructure that will improve the productivity of private investment, or less funding to support innovation.

The fact is that it is the business owners job to always focus on the bottom line. It’s their job to boost their productivity or sales to add profits to their bottom line. A tax cut helps them do that in the short-run. But, even the best businesses cannot on their own address the gaps in educational attainment, make sure that high finance doesn’t become too big to fail, or address climate change.

Focusing on growing the economy from the middle out is a better reflection of what economists know about what makes an economy grow and thrive. Over the past couple of years, my colleagues and I have been sifting through economics papers and talking to leading economists around the world about this question. We have found that there is a growing body of research pointing to the conclusion that high inequality hinders economic growth and stability through a variety of mechanisms. While there isn’t one perfect, econometrically unimpeachable paper that proves that the economy grows from the middle out, there’s a lot out of research out there - from top tier institutions - pointing to the conclusion that the strength and size of the middle has a strong effect on the all the key factors that propel the economy forward.

For both Britain and the US, the best bet for the economy is on the middle. Both nations have won before on building an economy from the middle out and by developing and investing in the skills and infrastructure necessary to support broad-based growth. That's the winning hand.

Photograph: Getty Images

Heather Boushey is a Visiting Fellow at IPPR and senior economist at the Centre for American Progress in Washington DC

Getty
Show Hide image

The dog at the end of the lead may be small, but in fact what I’m walking is a hound of love

There is a new, hairy face in the Hovel.

There is a new, hairy face in the Hovel. I seem to have become a temporary co-owner of an enthusiastic Chorkie. A Chorkie, in case you’re not quite up to speed with your canine crossbreeds, is a mixture of a chihuahua and a Yorkshire Terrier, and while my friend K— busies herself elsewhere I am looking after this hound.

This falls squarely into the category of Things I Never Thought I’d Do. I’m a cat person, taking my cue from their idleness, cruelty and beauty. Dogs, with their loyalty, their enthusiasm and their barking, are all a little too much for me, even after the first drink of the day. But the dog is here, and I am in loco parentis, and it is up to me to make sure that she is looked after and entertained, and that there is no repetition of the unfortunate accident that occurred outside my housemate’s room, and which needed several tissues and a little poo baggie to make good.

As it is, the dog thinks I am the bee’s knees. To give you an idea of how beeskneesian it finds me, it is licking my feet as I write. “All right,” I feel like saying to her, “you don’t have to go that far.”

But it’s quite nice to be worshipped like this, I have decided. She has also fallen in love with the Hovel, and literally writhes with delight at the stinky cushions on the sofa. Named after Trude Fleischmann, the lesbian erotic photographer of the Twenties, Thirties and Forties, she has decided, with admirable open-mindedness, that I am the Leader of the Pack. When I take the lead, K— gets a little vexed.

“She’s walking on a loose lead, with you,” K— says. “She never does that when I’m walking her.” I don’t even know what that means, until I have a think and work it out.

“She’s also walking to heel with you,” K— adds, and once again I have to join a couple of mental dots before the mists part. It would appear that when it comes to dogs, I have a natural competence and authority, qualities I had never, not even in my most deranged flights of self-love, considered myself to possess in any measurable quantity at all.

And golly, does having a dog change the relationship the British urban flâneur has with the rest of society. The British, especially those living south of Watford, and above all those in London, do not recognise other people’s existence unless they want to buy something off them or stop them standing on the left of the sodding escalator, you idiot. This all changes when you have a dog with you. You are now fair game for any dog-fancier to come up to you and ask the most personal questions about the dog’s history and genealogy. They don’t even have to have a dog of their own; but if you do, you are obliged by law to stop and exchange dog facts.

My knowledge of dog facts is scant, extending not much further beyond them having a leg at each corner and chasing squirrels, so I leave the talking to K—, who, being a friendly sort who could probably talk dog all day long if pressed, is quite happy to do that. I look meanwhile in a kind of blank wonder at whichever brand of dog we’ve just encountered, and marvel not only at the incredible diversity of dog that abounds in the world, but at a realisation that had hitherto escaped me: almost half of London seems to have one.

And here’s the really interesting thing. When I have the leash, the city looks at me another way. And, specifically, the young women of the city. Having reached the age when one ceases to be visible to any member of the opposite sex under 30, I find, all of a sudden, that I exist again. Women of improbable beauty look at Trude, who looks far more Yorkie than chihuahua, apart from when she does that thing with the ears, and then look at me, and smile unguardedly and unironically, signalling to me that they have decided I am a Good Thing and would, were their schedules not preventing them, like to chat and get to know me and the dog a bit better.

I wonder at first if I am imagining this. I mention it to K—.

“Oh yes,” she says, “it’s a thing. My friend P-J regularly borrows her when he wants to get laid. He reckons he’s had about 12 shags thanks to her in the last six months. The problems only arise when they come back again and notice the dog isn’t there.”

I do the maths. Twelve in six months! That’s one a fortnight. An idea begins to form in my mind. I suppose you don’t have to be a rocket scientist to work out what it is. But no. I couldn’t. Could I?

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism