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People are finally realizing the truth about our economy

Economy
By Sydney Barrett
People are finally realizing the truth about our economy

Die City of London ist das Zentrum der britischen Finanzwelt, aber immer mehr Menschen wollen ihre Ideen nicht mehr unterstützen <i>(Image: PA)</i>” data-src=”https://s.yimg.com/ny/api/res/1.2/WXp2OaTiRtvwE37UIDIzIw–/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTY0MA–/https://media.zenfs.com/en/the_national_181/ced2db4eb0726a7f01dd4b0980 c27d3e”/></p> <p>The City of London is at the heart of Britain’s financial world but a growing number of people are unwilling to support their ideas (Image: PA)</p> <p><strong>This is the latest newsletter from Scotonomics. To get the email straight to your inbox every Tuesday for free, click here.</strong></p> <p>The National: Scotonomics and The National have teamed up for a new weekly newsletter</p> <p>The accelerating march toward consumption-led climate catastrophe is shedding much-needed light on the real-world views of heterodox economists.</p> <p>Last week, the FT’s energy editor wrote a column arguing that “capitalism will not implement the energy transition fast enough” to prevent the worse effects of climate change.</p> <p>This week the Labor Editor of the FT and guest on ep. 66 of SCOTONOMICS tweeted a thread with the line “GDP is important but let’s not confuse means with ends.” separates from saving us from man-made destruction, it seems to be slowly slipping towards a more heterodox view of economics. And they are not alone.</p> <p>Last week, Olivier De Schutter, the United Nations Special Rapporteur on extreme poverty and human rights, published a report on a job guarantee – effectively positioning national governments as “employers of last resort”. He said a job guarantee “can protect workers from the greatest global employment challenges of our time”. The United Nations believes that conventional wisdom in promoting work as a human right must be challenged. A job guarantee has long been a policy recommendation by modern monetary economists who are as far removed from conventional wisdom as they can get!</p> <p><strong>READ MORE: How modern monetary theory could help Scotland in the short term</strong></p> <p><strong>Organizations with even more neoliberal views are challenging the general economic view</strong></p> <p>The International Monetary Fund’s Deputy Managing Director, Gita Gopinath, said last week: “All other things being equal, if inflation is to come down quickly, companies must allow their profit margins – which have skyrocketed over the past two years – to decline. “</p> <p>Christine Lagarde, President of the European Central Bank, admitted last week that corporate earnings are driving prices higher in 2022.</p> <p>The story goes on</p> <p>National governments also narrow their eyes at the orthodoxy. Since the beginning of the year, Spain, under the leadership of its socialist government, has adopted a different approach to fighting inflation than most western democracies. Unexpected taxes on banks and energy companies, price caps on electricity generation and new rent cap laws were passed. The Spanish government is directly challenging orthodoxy by taking a more proactive role in the markets. The result? At the end of June, inflation in Spain was 1.9%. In the UK it was 9.7%.</p> <p>The Spanish government’s actions may sound obvious to you as a way to limit inflation in a cost-of-living crisis, but they pose a fundamental challenge to the orthodox models. In a fully competitive market, competition between firms would quickly eliminate inflation and return to their “natural level”. As we discussed last week, according to their model, persistent inflation must be due to workers’ wage demands. Even Orthodoxy admits that this is not the case. More and more policymakers are realizing that the models they rely on are broken.</p> <p>A job guarantee is an even greater challenge. It is the ultimate heresy for national governments to actively empower workers in economic downturns: it would crowd orthodox models out of the discussion.</p> <p><strong>The cost of living crisis is the tip of the (slowly melting) iceberg</strong></p> <p>Since the 2008 financial crisis, it has become clearer that capitalism is on the brink. Financial crises, huge government subsidies, rising inequality, inflation and rising interest rates are not anomalies of the system, they are built into the system. Capitalism is structurally weak. No system can survive based on constant growth. A cost-of-living crisis, however detrimental to millions of us, is a minor symptom. It is the ecological crisis that could spell our downfall. And it’s caused by the growth paradigm.</p> <p>Climate scientist Will Steffen and his colleagues stated in 2015: “The quest for growth in the global economy continues, but responsibility for the impact on the Earth system is not being taken.”</p> <p>It’s worse than nobody taking responsibility. Policy makers are trying to make it worse. UK political parties are like rabbits caught in the glare of growth headlights. Last year, Keir Starmer said Britain needs “growth, growth, growth”. The Conservatives embody the growth paradigm more than any other British party.</p> <p><img class=

The National: Labor insiders have claimed Keir Starmer plans to appoint dozens of colleagues if he wins

READ MORE: Stephen Flynn: SNP needs to stop talking about independence process

But Scotland has its own growth supporters. Last week the leader of the SNP Westminster said that as an independent nation, Scotland would “invest in sustainable growth to ensure a prosperous future”. Independence is possible. But the conventional wisdom of “sustainable growth to ensure a prosperous future” is impossible. Just because there are enough people who say something doesn’t make it happen.

In 1958 JK Galbraith wrote: “There is strategic advantage in what exists.”

“Because familiarity is such an important test of acceptance, there is great stability in the acceptable ideas,” he added. The growth paradigm is familiar but does not appear to be as stable in another hot European summer.

In Beyond Growth, written at the end of the last century, ecological economist Herman Daly wrote that mainstream economics “provides a number of arguments and techniques that can be used to avoid overthinking the basic model.” These arguments and techniques have been used over the past half-century to obscure the clarity conveyed by heterodox economists such as Daly, Keen, Lee, Raworth, Weber, Pettifor, Jackson, and many others. They have blinded policymakers to the causes of inflation, inequality and the climate crisis.

The past week has given some cause for hope. Heterodox economists are no longer ignored. But it is time for politicians to act.

Join us on July 26 at 2:30 p.m. to discuss his month’s issues in the Economics of the Real World newsletter.

Sydney Barrett 38190 posts 0 comments
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