The Institute for Public Policy Research, one of the most influential political thinktanks in the UK, launched its new flagship project at a meeting last week. IPPR is definitely on the left wing of politics, but one of the speakers was Danny Alexander, Chief Secretary to the Treasury, who seems positive about the ideas.
It’s not much more than a framework for future research at present, but looks important to follow, not least because it’s likely to be influential on Labour party policy, but it’s also likely to be the most well-thought-out view of the future from a progressive pro-growth position. Some meat can be put on the bones by looking at outputs from their existing “New Era Economics” project which gives their economic thinking, plus their institutional aims, which include the very promising:
Creating a sustainable economy: Not only through better regulated financial markets that move away from greed and debt, but through a commitment to a low carbon, less consumerist and more inclusive prosperity that helps alleviate the plight of the global poor and protects the future of our planet.
In brief, they’re arguing:
- that the current neo-liberal economics has failed and needs radical reform
- but that returning to some sort of Keynesianism isn’t good enough either. The economic system we have now is far too complex to permit such simple analysis, and we need to allow for that – the so-called “Complexity Economics” popularised by Eric Beinhocker (and speaker at the event) and “evolutionary economics”
- for policies that lead to less inequality, full employment and sustainable growth
- and that this will be achieved by macro-economic stability, a long-term view, better innovation (including in a low-carbon economy) and investing in people
All this sounds very positive, particularly if you accept their analysis that the neo-liberal financial orthodoxy almost inevitably leads to the kind of instability and crisis we’ve had over the past few years. (It would be hard to find anyone arguing against things like innovation though.)
The one question, and it’s a big one, is how they understand the term “sustainable”. They want to take a long-term view, but I can’t find anything in the New Era Economics summary paper to suggest that they are allowing for the likely costs of future climate change, or shortages of oil and energy generally which will increase the price of almost everything. They presume continued economic growth – indeed they say that this is inherently part of capitalism – despite warnings to the contrary. Today’s Times (16th May 2011, page 3) , for instance, reveals details of a DECC report on oil prices which they’ve obtained, which predicts that every 10% rise in oil prices would damage the economy to the tune of £2-4 billion, and if oil prices were to double in a short period (which happened in 1973) we would be struggling for 30 years.
The debate is still ongoing as to whether we can continue to expect economic growth and how much, but certainly any attempt to plan for the future has to take these possibilities into account. I hope the IPPR do.