Why life is good

A dangerous gap exists between our personal experience, which is mainly happy, and our view of a soc

Progressive ideology relies on the capacity of human beings to live fulfilled lives in a just and co-operative society. That people whose beliefs imply optimism seem to spend most of their time wallowing in pessimism is one reason that leftists sometimes lack personal credibility (another reason being that egalitarians so clearly enjoy being very well-off). But miserable idealists need to make a New Year resolution to look on the bright side. Pessimism is becoming an impediment to progressive politics. It is 50 years since J K Galbraith coined the phrase "private affluence and public squalor"; today, the dichotomy is between private hubris and public pessimism.

It is pessimism of a particular and pernicious kind. People are not generally negative about their own lives. In fact, we systematically exaggerate the control we have as individuals. As Malcolm Gladwell, among others, has shown, we tend to give our conscious minds credit for many reactions that are in fact instinctive. Other studies - of what we say has made us happy and what has actually increased our levels of contentment - show that we have a huge capacity to rationalise our life choices. When we are forced to make a choice between limited options, we are as likely to end up claiming the choice as our own as we would if it were unconstrained. And the more we like a future possibility in our lives, the more inclined we are to believe it will happen. The human mind is hard-wired to be personally Panglossian.

In contrast, we are unduly negative about the wider world. As a government adviser, I would bemoan what we in Whitehall called the perception gap. Time and again, opinion polls expose a dramatic disparity between what people say about their personal experiences and about the state of things in general. Take attitudes towards public services. In a recent poll, 81 per cent of respondents said that they were happy with their last visit to hospital. Yet when the same people were asked whether they thought the National Health Service was providing a good service nationally, only 47 per cent felt able to declare it was so, and most think the NHS is going to get worse.

This perception gap is not restricted to public services, as a recent BBC poll on families confirms. Some 93 per cent of respondents des cribed themselves as optimistic about their own family life, up 4 per cent from the previous time the survey was conducted, 40 years ago. Yet more people - 70 per cent, across race, class and gender - believe families are becoming less successful overall. While we apparently thrive in our own families of many shapes and forms, as social commentators we prefer to look back, misty-eyed, to the gendered certainties of our grandparents' generation.

What is true for families is true for neighbourhoods: we think ours is improving while community life is declining elsewhere. We tend to like the people we know from different ethnic backgrounds but are less sure about such people in general. We think our own prospects look OK but society is going to the dogs.

The media seem to be the most obvious cause of this phenomenon. Bad news makes more compelling headlines than good. Tabloids and locals feed off crime stories, middlebrow papers are dismayed at the chaos of the modern world and the alleged venality and ignorance of those in power, and left-leaning broadsheets enjoy telling us that global instability is endemic and envir onmental apocalypse inevitable. Mean while, the content of television programmes - from dramas to news bulletins - contributes to what the communication theorist George Gerbner called "mean world syndrome": people who regularly watch TV systematically overstate the level of criminality in society.

Yet it is too easy to blame the media; the job of commissioning editors is to give us what we want. We make our own contribution to social pessimism. In the burgeoning industry of reputation management, it is generally argued that people are much more likely to tell others about bad experiences of services than good ones (5:1 is the usual ratio). Academic research suggests that people tend to exaggerate in the direction of the general mood. Viewing our own lives positively but wider society negatively, we will tend to pass on and exaggerate evidence that supports these prejudices.

Evolutionary determinists may seek an explanation of our predilection for bad news in neurological hard-wiring; perhaps, for the survival of hunter-gatherers, warning is more important than celebrating. But it is in two of the mega-trends of modernity that more likely reasons for our social pessimism are to be found.

First, there has been the inexorable rise in individualism since the Enlightenment. As Richard Sennett brilliantly argued in The Fall of Public Man, aspects of modernity such as the power of consumer capitalism and the ubiquity of the idioms of psychotherapy have accelerated the process by which we see our authentic selves as revealed in the private and personal spheres, rather than the public and social.

Unstoppable force

Hand in hand with the rise of individualism, we have seen the decline of industrial and pre-industrial collectivist institutions, including the organised church, trade unions, political parties and municipal elites. Robert Putnam's work on social capital suggests this decline in collectivism reaches down into our social lives, with people choosing to spend less time with acquaintances and more with intimates. Putnam's more recent work controversially argues that trust levels are lower and loose social networking less common in more diverse communities.

This points to the second of modernity's mega- trends. Increasingly, we feel that we are the victims of processes set in train by human activity but no longer under anyone's control. Globalisation is the gravity of modern society: an unstoppable force that will knock us over if we try to defy it. The origins of the current credit squeeze in the US sub-prime mortgage market show a financial system that is beyond not only its managers' control, but even their capacity to chart.

Illegal immigration, terrorism and pandemics are seen as the inevitable flip side of cheap travel and consumer goods. Philosophers and policy-makers argue about how best to regulate emerging science and technology in genetics, nano technology and artificial intelligence. But can anything long delay the advance of knowledge - especially if it has commercial applications?

It is not only that we as ordinary citizens feel beset by forces beyond our control. We are ever less likely to believe in the power or authority of our elected representatives (although we much prefer our own MP to MPs in general). At a time when they have more to prove to us than ever before, our leaders are diminished by the politics of a populist consumerism. In this time of uncertainty, is it surprising that the more politically successful national leaders - think Chávez or Putin - are those who offer strong leadership in defiance of democratic constraints?

This is the anatomy of social impotence. By definition, progressives argue for the possibilities of progress; but is anyone inclined to believe us? A hundred years ago, Joseph Rowntree established his charitable works after analysing the social evils of his age. When, last year, the Joseph Rowntree Foundation asked today's public for its definition of the "new social evils", the list had changed very little. Greed, poverty, crime, family and community breakdown all featured on both lists. But at a seminar to discuss the findings, advisers from the foundation and elsewhere agreed on one big shift between the late-Victorian era and today: while Rowntree had seen his evils as the unfinished business of society's onward march, today we see social patho logies as the inevitable consequences of an idea of progress that itself feels imposed upon us.

Brainier than before

And yet. There is a different story to be told about our world. It is a story of unprecedented affluence in the developed world and fast-falling poverty levels in the developing world; of more people in more places enjoying more freedom than ever before. It is a story of healthier lives and longer life expectancy (obesity may be a problem, but it is one that individuals have more chance of solving than rickets or polio). Think of how we thrive in the diversity of modern cities. Think, in our own country, of rivers and beaches cleaner than at any time since the Industrial Revolution. When you read the next report bemoaning falling standards in our schools, remember the overwhelming evidence that average IQs have risen sharply over recent decades. If you think we have less power over our lives, think of the internet, of enhanced rights at work and in law, or remember how it was to be a woman or black or gay 30 years ago.

As for the powerlessness of leaders, the Bali deal last month may leave much to be resolved, but isn't this at last a sign that nations can unite in the best interests of the planet? And should we really lose faith that human determination and ingenuity ultimately will win through? Despite the power of international finance, this is a world where it is possible to be economically successful in societies as deliberately different as those of Sweden or the United States.

We rightly worry about rogue states and terrorists with dirty bombs; but let us also remember that since Nagasaki we have managed to carry on for 60 years without anyone unleashing the power of nuclear warfare. Not only have there been three generations of peace in Europe, but when in the past has a project as grand as EU enlargement been accomplished, let alone accomplished in a decade?

Progressives want the world to be a better place. We bemoan its current inequities and oppression - yet if we fail to celebrate the progress that human beings have made, and if we sound as though the future is a fearful place, we belie our own philosophy. Instead, we need to address a deficit in social optimism that threatens the credibility of our core narrative.

There are many aspects to this; we should, for example, be making the case for a more balanced and ethical media. But my starting point is the need to forge a new collectivism. It is in working with others on a shared project of social advance that we can be reconnected to the sense of collective agency so missing from modern political discourse. It is the attitude of the spectator that induces pessimism, the experience of the participant that brings hope. The problem is not that change brings fear and disorientation (there's nothing new in this), it is that we lack the spaces and places where people can renew hope and develop solutions.

The old collectivism is dead or dying. Its characteristics - hierarchical, bureaucratic, paternalistic - are no longer suited to the challenges or the mood of the times. The institutions of the new collectivism must be devolved, pluralistic, egalitarian and, most of all, self-actualising.

For all the talk of the decline of social capital, people are doing more stuff together. Twenty-five years ago, with falling audiences, commentators assumed that the cinema and live football were dead: we would all rather stay in the safety and comfort of our new, hi-tech living rooms. But then the multiplex, the blockbuster, the all-seater stad ium and foreign players showed the problem to be no deeper than the failure to keep up with modern tastes and expectations.

Self-actualisation is the peak of Maslow's hierarchy of needs. There is evidence that more of us are trying to climb that hierarchy. It is in the crowds at book festivals and art galleries, in ever more demanding consumerism with an emphasis on the personal, sensual and adventurous. We want to enjoy ourselves, to be appreciated and to feel we are growing from the experience. Compare that to the last Labour Party, trade union or council meeting you went to.

Roll up your sleeves

The failure to provide routes to collective fulfilment means we assume that our journey is best pursued alone. In the 1970s and 1980s, new left movements at home and abroad placed emphasis on forms of political organisation and debate that were innovative, exciting and (dare I say it without mockery) consciousness-raising.

Today, there are signs of a yearning for new ways of working together. There is the growing interest in social and co-operative enterprise and the emergence of new forms of online collaboration. Gordon Brown's citizens' juries are a tentative step in the right direction, albeit without much fun or risk-taking, but generally, progressives seem more interested in bemoaning the state of the world than in rolling up their sleeves and getting to work on building the institutions of a new collectivism.

Despite the huge impersonal forces of the modern world, people are prepared not only to believe in a better future, but to work together to build it. Tackling climate change offers a fascinating opportunity to interweave stories of action at the individual, community, national and international levels. This potential will be fulfilled only when we provide spaces for collective decision-making and action that speak to the same vision of collaboration, creativity and human fulfilment that progressives claim to be our destiny.

Matthew Taylor is chief executive, Royal Society for the Encouragement of Arts, and former chief adviser on political strategy to Tony Blair

Matthew Taylor became Chief Executive of the RSA in November 2006. Prior to this appointment, he was Chief Adviser on Political Strategy to the Prime Minister.

This article first appeared in the 07 January 2008 issue of the New Statesman, Pakistan plot

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt