Time Out with Nick Cohen

Poets and novelists have often tried to describe happiness. Andrew Oswald has found a way of countin

I quickly learned that it was pointless to invite Andrew Oswald to engage in fanciful speculation. He is an economist to his bones, who believes in what he can count - and little else. I saw him at Warwick University, and it felt fitting that he should have found a professorship in a monument to the modernism of the mid-1960s. Warwick's blocks show only straight lines; no place here for the decorative. In Oswald's bright, white office there are few individual touches and no unnecessary clutter. Oswald is at home: a numbers man in a suit and tie with nothing to distract him from his calculations.

Yet this meticulous academic, cooped up in a machine for learning, has released a shockingly hippie version of economics into his dry discipline. When Labour's female politicians worry that the party will lose the next election if it doesn't think about the strains on families, when Iain Duncan Smith talks about the importance of marriage and David Cameron says it is time we looked at general well-being as well as gross domestic product index, they are unconsciously passing on ideas that Oswald developed in the early 1990s.

Novelists, poets and psychologists have always thought about happiness. Oswald has found a way of counting it. And this miserabilist approach, this calculus of contentment whose utilitarianism seems against all the spontaneity we associate with happiness, may be a great intellectual breakthrough, precisely because it translates feelings into figures.

If the political interest and the sales of popular "happiness economics" books are a guide, Oswald has provided a tool that will change the way people think, as his once sceptical colleagues are beginning to realise.

"I just have to click on the internet now, and every week there are new papers on happiness written by people I've never met, never heard of," he says. "It has reached some take-off point, so that if someone were to tell me that economists had taken a random sample of 10,000 Koreans and asked them about happiness and mental health, I could bet you that marriage will come through with the same positive coefficient in Korea as in France and the United States. Edu cation will be as important there as here, and the Koreans' happiness will follow a U-shape through life, with a greater chance of unhappiness in people's thirties, just as it does in every country. Human beings are very similar. We're uncovering something deep about them."

Oswald speaks without bravado. He is too good-natured to brag, even though he has every right to be pleased with himself. His is the classic story of the independent-minded researcher with a new idea, who finally forces his indifferent colleagues to take notice.

He is the son of an academic family - his father taught psychiatry at Edinburgh University - whose intellectual life was determined by the crisis of the early 1970s. "I was very committed in my youth to improving the world. I remember sitting on a train reading in the Guardian about stagflation when I was very young, and thinking: 'Yes, I'm going to work on this. I'm going to solve this problem.'" At the time, the decisive response came from Milton Friedman and the free-market right. One aspect of Friedman's work, which was more of an assumption than a detailed argument, profoundly unsettled Oswald and stayed with him for years. In common with most other economists, Friedman supposed that people were rational. In his work on unemployment that was to win him the Nobel Prize, he took it for granted that inflation made sensible people choose unemployment over work - they simply calculated that more leisure compensated for the loss of income, and went on the dole.

The idea that joblessness was voluntary was incredibly useful for Conservatives presiding over the mass unemployment of the 1980s. Norman Tebbit told the 1981 Conservative party conference: "I grew up in the 1930s with an unemployed father. He did not riot. He got on his bike and looked for work, and he kept on looking until he had found it." By implication, the unemployed who didn't get on their bikes wanted to stay at home and riot, and nothing could be done for them.

Disproportionate misery

Oswald thought Friedman and his acolytes were talking nonsense, but how to prove it? His conceptual breakthrough was to use the statistical technique of regression analysis to isolate and measure the happiness and misery of people's lives. Put simply, regression analysis involves assigning values to variables. For instance, suppose you are asked how happy you are on a scale of one to ten and you say "five". The next year your pay doubles from £20,000 to £40,000 and you say you now feel at "six". If you are fired a year later and your happiness falls to two, the price a statistician can assign to your unhappiness is huge: £80,000. As Oswald and his colleagues found when they did slightly more sophisticated calculations than mine, the effect of unemployment is irrational, out of all proportion to the actual loss of income. People weren't sitting on the dole coolly weighing the benefits of more spare time against loss of wages. They were wracked by a disproportionate misery.

As with unemployment, so with marriage, divorce, being placed under an airport flight path . . . any event or pheno menon that can impact for good or ill. Nor was it hard to find raw data. Most governments in the rich world produced vast surveys of their citizens' contentment. Oswald and his colleagues ran them though their equations and began to churn out figures. A good marriage was far more important than the liberal-minded imagined, they found. Getting married brought happiness equivalent to additional income of £70,000 per year. Good health was hugely important, as might be expected. Widowhood brought a degree of unhappiness that would take, on average, an extra £170,000 per annum to offset. Maybe that was not too surprising. But many of their results were unexpected. Long-distance commuting was like unemployment, for instance, and imposed far more stress than outsiders realised.

As Oswald went through his figures, I made the romantic objection that he was trying to monetise the human condition: to turn its joy and despair into pounds and pence.

Many others have said that to him. And although he tried to take my objection to pricing seriously, it clearly baffled him. "It may be because of my training that monetary units come to mind, but they don't have to. I could say that having your partner die is the same as being unemployed for 17 years. But that would be even stranger than saying a marriage is worth £70,000 in happiness terms. I'm not making a moral judgement about money. I just need to get some units."

Growing prosperity

His colleagues were worried not by the vulgarity of his work, but by the fact of his doing it at all. Economists didn't ask people how they felt, because they weren't concerned with happiness. It took Oswald five years to get a paper published by the American Economic Review, the world's most respected economics journal. The editors sent it back for revision seven times, and, Oswald suspects, published him only when other economists began to replicate his results.

There was a second reason for their suspicion. Oswald was not the first economist to look at happiness. In 1974, Richard Easterlin, a California economist, had examined studies that asked Americans how happy they were and found not a shred of evidence that America's growing prosperity had made Americans happier since 1945. His colleagues dismissed or ignored his work at the time, and a dispirited Easterlin gave up. Everyone knew that the business of governments was to increase national wealth. An oddball's insistence that the effort was futile was not something economists and politicians wanted to hear. Oswald helped rescue Easterlin's reputation, and today "Easterlin's paradox" is a vital issue for the social sciences - the vital issue, according to Oswald.

He thinks there is no way out of it. Once you have removed the fear of famine and thirst and provided security and shelter, increases in the gross domestic product have no effect on contentment, because man is a social animal who compares himself with other members of the species. Oswald's favourite cartoon encapsulates his point. It shows an employee bellowing at his boss: "I was so happy when you gave me a pay rise, then you spoiled it by giving one to everyone else."

"There's only so much rank in society to go around," he explains. "We can look at a society in 1900 and there's just this amount of rank, and look at it now and there's the same amount of rank. The way to happiness is to lower our aspirations and concentrate on our relationships."

If the work that Oswald and now hundreds of other economists are producing sounds warmly green and co-operative, it can be like that, but there is no necessity that happiness economics and vaguely leftish sentiments will always march in step. It still makes sense for individuals to seek status and reward, even though if everyone in their group does it, most are likely to end up forlorn. Equally, happiness economics has all the philosophical flaws of utilitarianism. If the Serb residents of a Balkan town say that they would be far happier if the police put the Muslim minority in a concentration camp, the utilitarian who believes in the greatest happiness of the greatest number has no way of objecting to the outrage.

The American economist Paul Krugman pointed out that happiness economics might lead you to advocate government policies that slow down the rat race, impose high taxes on the wealthy, and grant generous benefits, long holidays and short working weeks to everyone else. France has all of these policies, and its unemployment rate is more than twice as high as America's as a result. As happiness economists say that unemployment is a great social evil, which hits people with disproportionate force, conservatives could argue back that their market policies bring greater happiness.

As I thought about the objections, I felt the temptation to shrug my shoulders and conclude that all that the happiness economists have done is to recast the old arguments between left and right without settling them. But that isn't fair. New ways of thinking produce new results. If the government goes ahead with the planned expansion of airports, protesters will now be able to put an exact figure on how much distress living under a flight path will cause - just as those who object to new commuter towns will be able to say that regular long-distance travel is a good route to mental distress.

In the past, economists counted growth figures and household incomes and assumed that if they went up, society's contentment went up with them. Professor Oswald and his colleagues have blown that idea out of the water and forced them to look elsewhere. We are ruled by statistics; by changing what is counted, Oswald is also changing what will count.

Nick Cohen is an author, columnist and signatory of the Euston Manifesto. As well as writing for the New Statesman he contributes to the Observer and other publications including the New Humanist. His books include Pretty Straight Guys – a history of Britain under Tony Blair.

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.