22
Dec

New publication: ‘The Power of Ideas’ collects ‘theoretical foundations’ posts


It’s finally arrived! The most anticipated (by me at least) Policy Progress publication of 2010, The Power of Ideas: Decline and renewal in the theoretical foundations of progressive thinking, is now online.

From my foreword:

This report collects together all of my writings on the ‘Theoretical Foundations’ topic, one of the main themes for the Policy Progress website in 2010. This topic goes right to the heart of what Policy Progress has been trying to do as a policy ‘think-site’ devoted to developing and supporting progressive initiatives and ideas. Over the course of this year, I’ve tried to grapple with the history and prospects of progressive thinking and renewal. And, perhaps miraculously, I feel that the 35 or so posts that formed the basis for this report really do add up to something that hangs together.

As I said yesterday, I won’t be able to write for Policy Progress anymore next year, so I’m pleased to have managed to complete this giant compilation as a record of (much of) the year’s work.

You can download a copy here.

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22
Dec

New publication: ‘Reconceiving the Welfare State’

David Craig’s three-part guest-post series looking at the prospects for the welfare state was one of the most-viewed and best-regarded pieces that we published this year. Now, as promised, it’s been collected (in slightly revised form) into a single online publication.

From my foreword:

New Zealand doesn’t generate at lot of profound theoretical analysis of the political economy of institutions like the welfare state. In particular, the New Zealand political blogosphere is the last place you’d expect to see someone grappling with the dilemmas of progressive labour market regulation in the context of Foucaultian ‘governing through freedom’.

Which is why I’m so pleased to have had the opportunity to publish work by David Craig.

In the case of this essay, which appeared in an earlier form as a series of blog posts in September 2010, I can even claim that it was something I wrote that prompted him to start composing it. (Even if he swiftly went well beyond anything I’d said in both scope and depth.)

I fully expect David Craig’s conception of the ‘wellbeing society’ to be developed into a recurring idea in the journals and textbooks of the future. When it does, I’ll be able to say, you heard about it here first!

You can download a copy here.

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21
Dec

Reflections on Policy Progress 2010

This will be the last ‘proper’ post for 2010, although I intend over the next day or so to do two more posts ‘announcing’ further online publications.

It also comes with me having finished (last week) my last post in the ‘Theoretical Foundations’ series, and I am in the process of compiling them into The Power of Ideas: Decline and renewal in the theoretical foundations of progressive thinking.

So it seems appropriate to finish up the year on a reflective note, taking stock of what’s been achieved, and then to say a bit about 2011.

Policy Progress was based on a belief that new policy thinking was important and a bet that this was an opportune time for it. In my very first post, I wrote:

I started Policy Progress because I believe that a clear programme of how we are going to advance as a nation, both economically and socially, is vital for the progressive movement. That programme, in turn, needs to be underpinned by strong theoretical foundations.

. . . I’m not saying there’s a vacuum here at present. Nevertheless, this is an area that always requires ongoing refinement, development and renewal.

Moreover, we’re currently living in turbulent times. Many of the underpinning theories that have dominated policy thinking across the world for the last thirty years are being seriously questioned – particularly in the economic sphere. And the challenge of climate change may require even more fundamental rethinking.

I predict that this will a fertile time for progressive thought. Part of what I aim to do with Policy Progress is to contribute to introducing and adapting these ideas to the New Zealand environment.

That belief and that prediction have continued to inform the 140 posts that I’ve written for Policy Progress over the last eleven months. I’ve traversed a range of different topics and ideas (especially in my Weekend Reading recommendations) and tried a few experiments (Commentary Round-up lasted pretty well; Quote of the Week not so much).

But the two topics that most dominated my work were what I’ve called ‘Progressive Path to Prosperity’ and ‘Theoretical Foundations’. The first related to improving New Zealand’s economic fortunes, and I feel I presented some interesting and original numerical work on understanding the nature of the problem. But there’s certainly still unfinished business to return to there.

Where I feel a real sense of achievement is on ‘Theoretical Foundations’. This topic went right to the heart of what I was talking about in that first post. It tried to grapple with the history and prospects of  progressive thinking and renewal, at a reasonably high level. And the 35 or so posts I produced on that topic really do add up to something that hangs together. There’ll always be more that could have been said on a topic like this, and, of course, new developments happen all the time. But I’m pretty proud of The Power of Ideas and look forward to publishing it online shortly.

In many ways, though, my own work was just the ballast, and the real grace notes on Policy Progress have come in the Guest Posts. Thank you to Darel Hall, Peter Harris, David Craig, Josh Williams, James Caygill, Rob Salmond, Jordan Carter, Ayesha Verrall, Bill Verrall and Donna Wynd. I’m very pleased that two trilogies of posts by Peter Harris and David Craig have been compiled into online publications that will hopefully help them find a wider and ongoing audience (Peter’s one came out last week; David’s should be out shortly). But there is a wealth of other fine guest-posts there, as well.

2010 has also been a learning experience for me at a technical level. I’d been a keen reader of blogs for a few years now (it was RSS readers that really turned me into a convert), so I had some idea what I was letting myself in for. But the ongoing week-to-week experience of producing a blog and keeping it going has been an insightful and at time challenging one. Looking back with hindsight on some of the things I hoped to produce, some of my initial ambition gives me pause (but not regrets). But I’m very pleased that I always gave myself and my readership very clear expectations about what would be produced and how often. I feel that has been the key to maintaining the blog’s momentum.

Thanks too to those who helped get the website off the ground (you know who you are!), and to my Education Directions colleague Dave Guerin who embarked on the blogging adventure in tandem with me.

If this is beginning to sound a bit like a valedictory . . . well, it is, really. I’ll be taking on a new role in the New Year. I can’t say much about it at this time, as the final details haven’t been signed off just yet. But, not only will it involve increased hours and thus reduce my availability for blogging, it will also mean it wouldn’t be appropriate to carry on writing Policy Progress.

So what does that mean for the site? Well, to be honest, we shall have to see. I’ve approached some of my more regular guest-posters about carrying things on without me in 2011, and I’m hopeful that we’ll see Policy Progress entering a new, better and stronger phase. But these people all have jobs and lives of their own, so it may be that the volume of posting reduces a little, or a lot, at least at first. I would anticipate that when new material does go up, though, there’ll still be a newsletter advisory about it, so stay subscribed!

Finally, I’d like to thank you, the readers of Policy Progress. This site has often been more demanding than a standard blog, not just of me, but of the readership as well. Some of the content has been pretty difficult, and the long-running series of posts have often asked a lot of your patience. So thanks for sticking with it, and in particular thanks to those of you who have provided feedback and comment — it really is the fuel that keeps a blogger going!

I won’t be leaving the blogosphere entirely though. I’ll continue to report on my experiences on the Capital & Coast District Health Board on my Care not Cuts website in 2011. In the meantime, here’s wishing you all a pleasant and relaxing Christmas season and a progressive new year!

Regards,

David Choat

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17
Dec

New publication: let’s look at the workplace


I’m pleased to announce another online publication from Policy Progress. This one is written by Owen Harvey and it’s all original material, looking at the issue of workplace productivity, why it’s important and why we never get to grips with it.

From my foreword:

We all know that New Zealand could do better and be more effective in its economic performance. But when we discuss solutions, too often we gravitate to ‘big-picture’ macroeconomic ‘fixes’, which may (savings rates) or may not (tax cuts) have anything to do with the problem at hand.

Owen Harvey doesn’t. His has been a consistent voice, urging to us to look at and think carefully about what happens within the workplace – and what we can do to improve that.

Owen brings together the best and most progressive work in the ‘management’ literature with an appreciation of public policy settings and the contribution they can make.

This short pamphlet provides a useful introduction to his ideas and their implications, which extend to achieving a more environmentally sustainable way of working.

Owen’s discussion of that last point links in nicely to some of the questioning of the ‘growth agenda’ from the likes of Tim Jackson, Wilkinson and Pickett, and Stiglitz and Sen, that I’ve been writing about recently.

You can download a copy here.

And if you’re interested in reading more of Owen’s work, I’d recommend Being More Like Ourselves: Smart New Zealand Enterprises (with Peter Harris and Andrew Huddart), Lean Thinking and Productivity and a conference presentation, Productivity: making skills count.

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16
Dec

Our first publication – collecting Peter Harris on superannuation

I’m very pleased to announce our first online publication: a collection of the three guest-posts that Peter Harris wrote on superannuation and retirement savings issues back in May, June and August.

From my foreword:

National’s decision to suspend contributions to the New Zealand Superannuation Fund last year renewed fears about the sustainability of Superannuation. There are concerns, including amongst some progressives, that perhaps our ageing population means that we cannot afford to maintain the current wage relativity and universal entitlement from the age of 65 indefinitely.

This is an important issue for progressives (and all New Zealanders) to debate, and there’s no one more qualified to write about it than Peter. He has a long involvement with these issues from his time as economist for the Council of Trade Unions and later as economic adviser to Dr Michael Cullen. Following that, he went on to chair the Savings Product Working Group, whose report was the founding document for what evolved into the KiwiSaver scheme. His views on superannuation, savings and retirement are always worth hearing and considering carefully.

You can download a copy here.

Very handy for passing on to friends who refuse to read blogs!

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14
Dec

We value what we measure

This is the third and final part of a series of posts about contemporary progressive thinkers who challenge the ‘conventional wisdom’ about economic growth. Part one looked at Richard Wilkinson and Kate Pickett’s The Spirit Level and part two looked at Tim Jackson’s Prosperity without Growth.

Wilkinson, Pickett and Jackson suggest that economic growth should no longer be — even cannot be — central to the progressive project. But what about those within the economics profession itself?

Joseph Stiglitz is a U.S. Nobel prize-winner, former chief economist of the World Bank, and author of Globalisation and Its Discontents and Freefall: America, Free Markets, and the Sinking of the World Economy. Amartya Sen, born in India, is also a Nobel prize-winner, and the author of Development as Freedom and The Idea of Justice. Both are highly-regarded progressive economists.

In 2008 and 2009, together with Jean Paul Fitoussi (a distinguished French economist), they headed a Commission on the Measurement of Economic Performance and Social Progress set up by President Nicolas Sarkozy of France, who felt that existing measures like Gross Domestic Product (GDP) didn’t tell a full and proper picture of the economy or society.

The Stiglitz-Sen-Fitoussi Commission produced a lengthy, thoughtful and thorough report. They argued that GDP was indeed a partial and often misleading measure, and proposed reform across three dimensions. First, classical GDP statistics needed to be refined to better take account of things like income distribution and the actual value of public services. Secondly, there was a need to complement GDP with measures of ‘quality of life’, including both purely subjective aspects such as happiness, and more objective factors drawn from Sen’s ‘capability framework’. Thirdly, we need to measure and track the sustainability of our economy, defined quite precisely as whether “at least the current level of well-being can be maintained for future generations” — for this the Commission argued that an approach based on changes in resource stocks (which Tim Jackson would recognise) would be needed.

Across all three dimensions, the Commission’s arguments are well-developed and compelling, although they were clear that their report was very much a starting point for what would be a complex exercise of statistical reform.

And, while predominantly an expert technical process, their work is likely to have important policy consequences and implications for progressive thinking. This is because the way we account for things helps determine the way we see the world. What we measure, we value; and, too often, if it isn’t measured, it slips out of view. This was a central theme of New Zealand politician and academic Marilyn Waring’s feminist critique of economic statistics, Counting for Nothing, back in 1988, and this work is very much in that vein.

In a ‘Reflections’ paper accompanying the main report, Stiglitz, Sen and Fitoussi are more explicit about this aspect of their project:

It is our belief that an open discussion of the issues – and problems – involved in measuring economic performance and social progress provides an important context within which societies can engage in critical debates about societal values. (p. 27)

Otherwise, the “risk is that as countries strive to increase measured GDP, they take actions which now, or in the future, may actually lower societal well-being” (p. 10). This can be seen with the environment:

Countries that enjoy high living standards today by depleting their inheritance of natural resources – without investing the proceeds – are “robbing” future generations. It is possible that doing this does not even increase their welfare, as people usually care about the well-being of their children, but they may unintentionally act this way, at least partially because they are not informed, absent the right metric. (p. 10)

And even with the recent Global Financial Crisis:

Many concluded, for instance, that financial deregulation was good, because it led to rapid expansion of the financial industry and an increase in measured GDP. We now know that that growth was not sustainable; that much of the profits earned in 2004-2007 might more appropriately be looked at as winnings in gambling by some, which were more than offset by the losses in 2008, and the following years, by others. (p. 11)

What, therefore, are the likely implications of measuring things in a broader and more accurate way? How would this approach, if implemented, be likely to inform the further development and renewal of progressive ‘theoretical foundations’?

In some respects, it would likely be compatible with the arguments of The Spirit Level and Prosperity without Growth. We would become more aware of which types of societal and economic development were having the most positive (or negative) impact on quality of life, and whether we were on a sustainable path. The Commission’s work can’t at this stage point to whether a strict path of de-growth is necessary, as Jackson argues, but would nevertheless encourage us to see the quantum of economic activity as just one set of factors in achieving progressive goals of equitable wellbeing. Metrics on things like leisure, happiness and political voice would help to provide a broader picture.

A secondary but still important consequence might be to counter negative images of the effectiveness of public services. The modern image of the public sector languishes under the constant suspicion of inefficiency and dysfunction, a far cry from the chilling efficiency of ‘bureaucratic authority’ depicted by Weber and which (I have argued) helped underpin the Keynesian-era confidence in the state. Cautiously, without wishing to prejudge, the Stiglitiz-Sen-Fitoussi Commission suggests that if we could better measure the value and not simply the input costs of non-market public activity, we may see a more positive picture of improved value over time (often in form of better quality and more effective services in areas like health and education, rather than larger volumes).

That may be one more way in which the seemingly mundane process of statistical reform could transform the way we see things, and deconstruct some of the statistical ’story’ that neoliberalism has constructed about the primacy of growth and markets.

Links:

  • The main Stiglitz-Sen-Fitoussi Commission report.
  • The accompanying ‘Reflections and Overview’ paper from Stiglitz, Sen and Fitoussi.
  • My earlier post on Weber.
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9
Dec

Why taking GST off fresh food won’t help the poor, improve their health, or make them slim


There has been quite a bit of fuss of late about GST on fresh fruit and vegetables. The Maori Party’s Rahui Katene put forward a private members bill that would have exempted healthy food from GST, and more recently Labour has announced that will remove GST from fresh fruit and vegetables.

Reasons for removing GST off particular foodstuffs vary but tend to fall under two main headings: “struggling” families need a break to be able to afford good quality food; and removing GST on fresh fruit and vegetables will encourage people to eat more of them, and this will be better for their health.

These are worthwhile goals in themselves. The question is, will removing GST off fruit and veges achieve them?

Before answering that, we need to consider what removing GST would mean in practice. At present New Zealand’s GST captures everything except housing, rents and financial transactions, all of which can be ignored for our purposes. This universal application makes administration easy for both IRD and businesses processing GST returns, and it means organisations don’t waste time trying to squeeze their service or product into a GST-exempt category to gain a competitive price advantage. This saves everyone time and money.

The trade off is that GST is regressive. Because GST is an across-the-board tax, everyone pays the same GST on a carton of milk so low-income households pay more GST as a proportion of their income than higher income households. Taking GST off fruit and vegetables does not make it ‘less regressive’ – on the contrary because high-income households are more likely to buy fresh fruit and vegetables it further tips the scales in their favour. How do we know this?

The 2003 Children’s Nutrition Survey[i] found that children in low-income families ate less fruit and vegetables. More recent research done for the Families Commission[ii] also found that low-income households ate fewer fruit and vegetables, and that buying more would be difficult on their current budgets. Conversely, the Auckland Regional Public Health Service[iii] has shown that junk food outlets are more likely to be found in low-decile suburbs.[iv] Here’s why: if, at the end of the week, there’s $5 to feed the family, do you buy carrots and lean chicken breast or a loaf of cheap bread and some greasy chips? Carrots might be better for the kids but they’ll complain about being hungry. On the other hand, children love those cheap chicken nibbles.

Going back to the $5. Suppose a loaf of bread costs $1. That leaves $4. Suppose vegetables are GST exempt, that means they cost $3.48, that is an additional 52c is available to spend on food. That’s the equivalent of about an apple. For $4, the choice is hot chips, or some fresh veges and an apple. Only one of these is guaranteed to be childproof – ergo, chip butties it is!

The problem is not the absolute price of fresh fruit and vegetables, it’s that even if they are GST exempt the price difference between healthy food and less healthy food means many households will continue to purchase less healthy food. As well, there is now a lot of evidence that here is people on low incomes tend to purchase calorie dense foods with the money they have available. These foods are high in fat, and often highly processed with little or no nutritional value.  This is a major contributor to obesity and overweight in low-income people because they, quite rationally, buy as many calories as they can for their money.[v] Junk food may have little nutritional value, but that doesn’t matter if the goal is to feel full.

Nor does removing GST address the important issue of socioeconomic inequality. Obesity rates are higher in countries with high rates of income inequality as measured by the Gini coefficient.[vi] The graph below plots obesity rates of OECD countries against their Gini coefficient.[vii] The trend line shows that there is a correlation (0.6) between income inequality and obesity. (Note this is only obesity, not obese and overweight.)

Food is more than just fuel, it is also a comfort and a treat. People on low incomes are more likely to be stressed, and for them junk food that is engineered to taste good is stress relief, and perhaps even be an affordable luxury.

Until we attend to issues of low absolute levels of income that favour the purchase of cheap bad food, and high levels of income inequality that are correlated with high levels of stress and associated overweight and obesity, then we might as well collect the GST off fruit and vegetables and use it for something socially useful. The relative prices of fresh fruit and vegetables and poor quality food is such that removing GST off fresh food might change the buying patterns of a few individuals and families on the margins, but will not significantly alter the buying habits of low-income households.

This should not be taken as an argument that all poor people eat junk because they don’t know any better or can’t cook. Most families are perfectly aware of basic nutrition, but low incomes restrict their food choices. The Families Commission research found that low-income families were no different from other groups when it came to planning, cooking and eating meals.

Two other points are relevant here. The first is that, for the reasons above, attempts to prevent beneficiaries buying junk food by issuing them with so-called ‘smart cards’ won’t work. Beneficiaries will quickly find ways to circumvent the system, and as anyone who has watched food stamps being misused can attest, retailers are perfectly happy to help them. It is also incorrect to assume that only beneficiaries have low incomes, and patronising to assume only they are incapable of making ‘sensible’ food choices.

The second is the argument that New Zealand is one of the few countries in the developed world that doesn’t make some GST exemptions for food. If that made a difference we would expect our problems – poor food purchasing choices by low-income families, heart disease and high densities of junk food outlets – to be unique. But they’re not. Other countries are struggling with the same issues and the medical consequences of high rates of obesity. The UK, which has food exemptions on VAT, has higher rates of obesity that New Zealand, and equally low rates of fresh food consumption. In the US, the fattest country in the world, millions are now dependent on food stamps, and sales tax exemptions are not making a shred of difference to food affordability or the problems associated with unhealthy diets. If removing GST made a real difference, we would expect other countries to be eating better than us, but they’re not.

Eating habits are a complex mix of learned behaviour, education, food preparation and cooking skills, cultural expectations, food availability and affordability, income, expectations, and personal preferences. Playing around the margins of one small aspect of this mix – price – is unlikely to move those habits. Policies need to address the harder issues of income and socioeconomic inequality to begin to make a difference.

Footnotes

[i] Ministry of Health. 2003. NZ Food NZ Children: Key Results of the 2002 National Children’s Nutrition Survey. Wellington: Ministry of Health.

[ii] Smith, C, W Parnell, and R Brown. 2010. Family Food Environment: Barriers to Acquiring Affordable and Nutritious Food in New Zealand Households. Wellington: Families Commission Blue Skies Report 32/10.

[iii] Auckland Regional Public Health Service. 2006. Improving Health and Well-being: A Public Health Perspective for Local Authorities in the Auckland Region. Auckland: Auckland Regional Public Health Service.

[iv] Here ‘junk’ means highly processed food that is high in some combination of fat, salt and sugar.

[v] Drewnowski, A, and N Darmon. 2005. The Economics of Obesity: Dietary Energy Density and Energy Cost. American Journal of Clinical Nutrition 82(suppl):265S-273S.

[vi] The Gini coefficient is a measure of income inequality. I is perfect inequality, 0 is perfect equality. Most OECD countries have a Gini coefficient of 0.2-0.4, with higher numbers being more unequal.

[vii] Two outliers have been taken out: Japan because with an obesity rate of about 3% it is well outside the normal OECD range, and diet is a big factor; and Turkey because it exhibits a Gini coefficient that is more consistent with a developing economy.

© Donna Wynd 2010

_______

Donna Wynd is chief research and policy analyst for the Child Poverty Action Group. She was co-editor of CPAG’s cornerstone report Left Behind: How social and income inequalities damage NZ children (2008) and the author of CPAG’s report on foodbank use in NZ, Hard to Swallow, along with many other submissions, articles and presentations for CPAG and others.

She has a background in law and economics, and also represented New Zealand in cycling at the 1996 Olympics.

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7
Dec

Macroeconomics without growth

This post follows from last week’s, which discussed how Richard Wilkinson and Kate Pickett’s The Spirit Level argued against the continued value of further economic growth. This week’s post looks at the work of Tim Jackson, who, as discussed previously, also argues that it is both possible and desirable for modern economies to operate without growth.

Economic growth is not good for our society or our environment, argues Tim Jackson, the author of Prosperity without Growth: Economics for a Finite Planet.

That’s not a new position for someone coming from an ecological perspective. What is a bit more unusual that he also faces up to the economic problems that a “steady-state economy” would face, and goes some way towards demonstrating that they can be overcome.

The new ecological macroeconomics that he is developing has the potential to become an important contribution to the ‘theoretical foundations’ of progressive thought in the 21st century.

But, before addressing this, it is worth touching on another important aspect of Jackson’s book, which is his refutation of what he calls the ‘myth of decoupling’. A standard feature of more mainstream economists’ efforts to take climate change seriously is an effort to show that it is, while not easy, manageable for us to make the transition from our current carbonised economy to a much less carbon-intensive one, which could otherwise carry on much as before. The work, for instance, of Nicholas Stern falls into this category.

Jackson, by contrast, makes a convincing case that this is arithmetically impossible. In 2007 a global population of 6.6 billion had an average income level of $5,900, with a carbon intensity of 760 grams of CO2 per dollar. This produced 30 billion tonnes of CO2 emissions.

The IPCC’s targets for 2050 is 4 billion tonnes of CO2per annum. In order to reach that, assuming a population of 9 billion (the UN’s mid-range estimate) and per capita income growth of 1.4 per cent a year (the same as between 1990 and 2007), we get the following equation: 4 billion tonnes of of CO2 = 9 billion X around $10,700 income X a carbon intensity of round 36 grams per dollar! That’s a 21-fold improvement on 2007 levels of intensity.

If we were to assume a higher-end population projection projection of 11 billion and allow for the developing world’s incomes to converge with those of the EU, the target gets harder again. Moreover, there would then be a need to continue to reduce carbon intensity beyond 2050. By 2100, writes Jackson, “to all intents and purposes, nothing less than a complete decarbonisation of every single dollar will do to achieve carbon targets.” Looked at this way, ongoing growth begins to look rather problematic.

But non-growth (decroissance, to use the French term) has its arithmetical problems too. Jackson points out that our modern capitalist economy has, as its basic driver, investment. And investment produces returns for the investor by increasing the productivity of labour and other resources. Therefore, over time, the amount of labour needed to produce the same bundle of goods and services declines. And so, if growth were to cease, but investment and productivity gains continued, then the economy would shed labour each year.

That would create an unstable spiral, as increased unemployment led to reduced consumption and thus a drop in investment.

Jackson calls this the dilemma of growth: growth is unsustainable but de-growth is unstable. But he believes it is possible to get around this. Drawing on earlier work by Herman Daly, Avner Offer and Peter Victor, he sets out both an idea about the kind of non-growing economy that might be stable and some thoughts about how we might develop a macro-economics to analyse the dynamics of such an economy.

Very broadly, a non-growing and environmentally-friendly would have three characteristics:

  • Firstly, the logic of pursuing productivity growth would be turned on its head by deliberately seeking to focus growth in the lowest-productivity (i.e. most labour-intensive) sectors of the economy, such as ‘personal and social services’.
  • Secondly, there would need to be a deliberate process of sharing out the work, via reductions in working time, rather than allowing the reduced labour hours to be borne by a minority of unemployed people.
  • Thirdly, the drivers and expectations around investment would need to change significantly, with the growth of ecological investment. In many cases, this would have much longer return -horizons than currently, or no returns at all. This would imply a much greater role for the public sector in leading this sort of investment.

Jackson sets out a complex typology of different investment ‘dimension’, each with slightly different  targets and conditions:

He sees a more detailed and complex understanding of the differing dynamics of these different types of investment as a distinctive feature of a new ecological macroeconomics.

Jackson’s model is a work-in-progress, but even in its current form it stands as a powerful rebuke to the notion that ‘zero-growth’ proponents must always be utopian, a bit fluffy and unwilling to really work through the hard analytical issues.

The question of whether progressives should abandon growth, as The Spirit Level counsels, or continue a champion it remains unresolved. But attempts to short-circuit that debate by dismissing de-growth as ‘pie-in-the-sky’ now face the demanding task of refuting this impressive work. I look forward to Im Jackson’s further elaboration of it.

Next week, I’ll look at the claim against GDP as a measure of progress, and particularly the work of the Sarkozy Commission.

Links:

  • An electronic copy of a slightly older version of Prosperity without Growth than the one in the bookstores can be accessed via the Sustainable Development Commission website, here.
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30
Nov

The Spirit Level versus the ‘investment state’


Written by two epidemiology researchers, Richard Wilkinson and Kate Pickett, The Spirit Level has become the progressive publishing sensation of the last couple of years. Based on a broad range of cross-country comparisons, it takes the progressive championship of inequality to a new level.

According to Wilkinson and Pickett, greater equality doesn’t just produce better outcomes (life expectancy, educational performance, mental health etc) for the poor. They claim that (as their subtitle asserts) “equality is better for everyone”. In other words, even relatively well-off citizens are likely to achieve better outcomes in more equal societies than in less equal ones.

Why? Because, they say, more unequal societies suffer from higher levels of insecurity and status-related anxiety. This is associated with a focus on self-promotion and a weaker sense of community. These characteristics permeate the whole society, and afflict rich and poor alike. So even those who in a material sense may have ‘done better’ out of inequality may be sicker, less happy and generally less well-off as a result.

Such a theory strikes at the heart of anti-progressive political outlooks, in both their traditional-conservative and free-market manifestations. It is no wonder then, that while avowedly non-political (and occasionally cited approvingly by UK Conservative leader David Cameron), The Spirit Level has come under heavy barrage from the political ‘Right’. Policy Exchange and the Democracy Institute have each published counter-publications, by Peter Saunders and Christopher Snowden respectively, aiming to discredit it.

My main interest, however, is not the threat that The Spirit Level poses to the ‘Right’, but the challenges it presents to the theoretical foundations of much of modern progressive thinking.

Because another central plank of the Spirit Level platform is that the beneficial effects of economic growth in the advanced capitalist countries have now largely been exhausted.

The graph above illustrates that as countries develop economically, there is a reasonably close relationship with life expectancy — as the country grows and develops, its population lives longer. But the graph also suggests that, beyond a certain point, that relationship breaks down: among the rich countries life expectancy is not related to national differences in average income. The same pattern, say Wilkinson and Pickett, applies with happiness and other measures of wellbeing as well:

Sooner or later in the long history of economic growth, countries inevitably reach a level of affluence where ‘diminishing returns’ set in and additional income buys less and less additional health, happiness or wellbeing. A number of developed countries have now had almost continuous rises in average incomes for over 150 years and additional wealth is not as beneficial as it once was . . .

At the same time as the rich countries reach the end of the real benefits of economic growth, we have also had to recognise the problems of global warming and the environmental limits to growth . . .

We are the first generation to have to find new answers to the question of how we can make further improvements to the real quality of human life. What should we turn to if not to economic growth? (pp. 10-11)

Moreover, they go on to argue that the cultural logic of economic growth is intrinsically bound up with the unhealthy ’status anxiety’ that permeates unequal societies.

This, I would argue, is a major challenge to mainstream progressive thinking. Similar propositions have been put solely in ecological terms, but this takes the argument right into the heart of progressive territory: concerns about poverty and inequality.

It is hard to exaggerate how much of a departure this implies from standard Marxian, Keynesian and ‘third way’ prescriptions. (Although Marx, Keynes and Giddens themselves do each, in their own ways, conceptualise a post-materialist end-point).

This is particularly true of the ‘third way’. The success of Keynesian social democracy came from its perceived ability to keep the ‘motor’ of the economy going by acting as the ‘consumer of last resort’. As Przeworski writes, ”it was a theory that suddenly granted an universalistic status to the interest of workers” as a way of stimulating aggregate demand.

But the ‘third way’ went further, framing the idea of an ‘investment state’ whose job it was to work hand-in-glove with capital to achieve the most innovative, competitive, productive, successful national economy possible. Areas like education and science were seen more strongly than ever before as mechanisms to be used to attain national competitive advantage.

And social goals were largely seen as being achieved through the tax dividend from all this growth. Rather than worrying about an economy that was driving increasingly unequal conditions in the marketplace, the state would focus on ameliorating those effects through redistribution (via tax credits like Working for Families in New Zealand, other targeted assistance, and social spending designed to combat inequalities).

The theory and prescription of Wilkinson and Pickett stands starkly opposed to the logic of this approach, which can be seen as essentially Rawlsian.

John Rawls was perhaps the most important liberal political philosopher of the late 20th century. His “difference principle” held that inequality could be justified insofar as it contributed to general prosperity in a way that made even the poorest members of society better-off than they would be in a more equal society.

To be fair to Rawls, this could be interpreted as permitting only a very small amount of inequality. But, in practice, the Rawlsian approach was primarily taken up by those who accepted that there was a capitalist equality-prosperity trade-off, but that some of the fruits of that prosperity should be invested in making the poorest better off. They were, in other words, what John Kay has called ‘redistributive market liberals’.

And to a large extent ‘redistributive market liberalism’, and a Rawlsian view of economic growth, were at the heart of the ‘third way’.

The Spirit Level, on the other hand, seeks to turn the ‘difference principle’ on its head. Rather than inequality-generating growth being good even for the poorest, it is to be seen as detrimental even for the very richest.

Rather than the state trying to run ever faster to ameliorate inequality after the fact, Wilkinson and Pickett counsel us to abandon the culture of consumerism and reorientate towards a steady-state economy in which everyone has much more equal shares.

To this it might be objected that, even if such an approach were desirable, it is not feasible. The basic logic of a modern capitalist economy, it can be argued, is not compatible with a steady-state — without growth, it would become unstable and generate increasing levels of unemployment. This is the dilemma that Tim Jackson in his book Prosperity without Growth has sought to address with a new ecological macro-economics. And it is to this work I will turn in next week’s post.

Links:

  • Wilkinson and Pickett’s Equality Trust website.
  • Perhaps the best example of the debate over The Spirit Levela session at the Royal Society for the Arts (RSA) where Wilkinson and Pickett squared off against Saunders and Snowden [audio and presentation slides].
  • A recent policy forum at the Institute of Policy Studies in Wellington entitled Does Inequality Matter? started with a video-linked presentation from Wilkinson, and spurred me to write this post. [presentation slides plus audio/slides for Wilkinson] The presentation by Tony Blakely (University of Otago Wellington) is one of the best critiques of The Spirit Level I’ve come across (and comes from a broadly progressive perspective).
  • My earlier post discussing Przeworski’s view of Keynes.
  • Four posts I’ve written on the ‘third way’: (1) (2) (3) (4)
  • Wikipedia on John Rawls’ A Theory of Justice.
  • An earlier post I did on Tim Jackson.
  • Two posts I did on James Purnell’s arguments about the limits of the redistributive strategy are also relevant: (1) (2).

Further Reading:

  • Richard Wilkinson and Kate Pickett, The Spirit Level: Why Equality is Better for Everyone (revised edition, 2010).
  • John Rawls, A Theory of Justice (1971).
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24
Nov

Postscript on ‘The New Politics’

One must of course be careful about reading too much into titles and labels. I shared an advance copy of yesterday’s post with Peter Harris and Chris Eichbaum and they advised me that the ‘Third Way’ subtitle to their book was included largely at the urging of their publishers, who wanted to connect the book more explicitly to the global ‘third way’ debate. The original title had been something like “The New Politics: the search for a post-Washington consensus in NZ”.

Nonetheless, they went along with the idea, reasoning that (as they say in the book) NZ had had its first and second ways with Muldoonist statism, and the neo-liberalism of Douglas, Richardson & co. So a ‘third way’ was relevant here too, even though NZ Labour needed distance from its past for rather different reasons to UK Labour.

They did insist on the subtitle being “a third way” rather than “the third way” though! (Which is consistent with the specifically NZ ‘third way’ character that I’ve tried to outline.)

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