Is the UK becoming a failed State?

How quickly a country can collapse – socially and economically. Lebanon and Sri Lanka are the latest examples.

Mark Blyth is a political economist highly respected across the political spectrum for the clarity and bluntness of his dissection of complex issues. On a 2021 podcast he had expressed the view, in his typically succinct way, that Brexit had been a turning point for the British economy – with the past year in particular suggesting that little was left except an enormous “Rentier Class” living off hundreds of billions of profits of privatised companies. The social media is full of the amazing profits being made by the shareholders and bosses of these companies - which add insult to injury by failing to undertake basic investment in infrastructure. There’s been quite a spate of books recently about “Rentier Capitalism” of which this looks the most interesting

As far as action is concerned, Richard Murphy has been a rare voice pushing in the past decade for tax justice and probably has the most detailed programme. His brief outline is here – and the 30 page detailed programme is here

But forgive me for wanting to focus on the part of the UK I know best – Scotland, from which Mark Blyth also happens to hail. Having been against the idea of Scotland separating in 2014 from the UK, he was “outed” recently on Twitter as having changed his mind – although he has subsequently confessed to finding it difficult “to make a positive case for independence” and has apparently just been axed from the Advisory group he joined a year ago. The Scottish Government last month decided to make a bid for a second referendum on the issue (for October 2023) – with the 2 candidates for the Conservative party leadership both strongly opposed to allowing it.

It’s not easy to find a good discussion on the internet about the issues involved in the idea of Scotland separating – but I’ve just come across a fantastic one superbly chaired by a young trade union woman. All the participants are Scottish and the tone is respectful;

Common Weal is an important Scottish Foundation which has run a podcast for quite some time and here features Richard Murphy to take us back to the UK economy.

The social media are having a great time with such fake ads as this one for the UK government 

https://twitter.com/i/status/1561657960819937282

update; and lo, 2 days later, James O'Brien was also talking of "the failed state" - https://www.youtube.com/watch?v=mPduUCpjkNE

26 August - How Chris Grey's latest post put it -

Domestically, that means a rapidly worsening cost of living crisis. Inflation is at its highest since the early 1980s and still rising, with households facing their largest ever recorded fall in living standards, and the Bank of England predicts five continuous quarters of economic recession. There are multiple strikes in the rail network, the docks, the courts, the postal service and elsewhere, and more to come. With a growing ‘Don’t Pay’ campaign in the face of what for many will be impossible energy bills, talk of civil unrest and disobedience does not seem hyperbolic.

There are now chronic labour shortages in almost every occupation, so that even as food prices rise to a 40-year high there is food rotting in fields for lack of people to pick or harvest it. The NHS, and especially the ambulance service, is at breaking point, as, not unrelatedly, is the social care system. In fact it is hard to find any part of the public or private sector which is not, in some way or other, under alarming strain. The beaches are awash with sewage, like a metaphor. And, though you’d hardly know it, we are still living with the effects of a pandemic, including an estimated 1.6 million people in England alone living with Long Covid, and presumably the possibility of a new wave to come.

Throughout all this, the leadership contest means there has been, in effect, no functioning government. The notional Prime Minister, rather than acting as a responsible caretaker, has spent the summer alternating between sulking, holidaying and squeezing the last drop out of the perks of his office. Any chance Boris Johnson had of a final period of dignity to set against the depraved conduct that led to his ejection has been squandered. Most Prime Ministers end up being judged less harshly by history than they are at the time of their departure; I strongly suspect that Johnson will be assessed even more critically in the future than he is now.

Post-Brexit political instability set to continue

When this strange summer ends, it will not herald the end of the period of political instability any more than the events and crises of the summer are peculiar to the season. This isn’t a holiday that has gone horribly wrong, it’s the latest instalment of a reality there is no taking a break from. That political instability began with the 2016 referendum. Having a new Prime Minister is not going to finish, but is a part of, this post-2016 story. I don’t mean that there were no political problems before, but that since then there has been a particular sort of instability and for particular reasons.

It’s not a coincidence that the new Prime Minister will be the fourth in the six years since the referendum, the same number as held office in the thirty-one years between 1979 and 2010. Nor is it a coincidence that within those six years there have also been two general elections, massive churn in the holding of ministerial posts, an illegal prorogation of parliament, a unique judgment that the government was in contempt of parliament, numerous highly unusual constitutional events, a government openly threatening to break international law, massive stresses in the relationship between Westminster and the devolved administrations, significant pressures on the Good Friday Belfast Agreement, and perhaps the most significant rifts between ministers and the civil service in modern history. All these things reflect the way that Brexit has all but overwhelmed the capacity and norms of the UK state and political institutions.

TINA – and the little Trumpets

In the 1980s, Margaret Thatcher introduced us to TINA – her refrain being that “there is no alternative” (to the liberalisation of national and global markets).

Social democratic parties bought into that argument and have shown no inclination to rethink policies since the global crisis began almost a decade ago. Jeremy Corbyn’s Labour party, I grant you, is one exception – but has attracted vitriolic attack on the basis that there can be no going back to the world of the 1960s and 1970s.

The argument generally consists of the following elements -

- The state can’t get out of the immense debt which it has taken on by rescuing the banks

- Although the operations of privatisated industries are subject to increasing attack, the idea of reprivatisation is rarely presented in social democratic programmes

- The ideology of greed has become so legitimised, lives so atomised and the commodification trend so strong that notions of collective and cooperative effort seem more and more unrealistic

- We can’t stop automation

- Only eccentrics question the worship of growth

Much wailing and gnashing of teeth in the social democratic camp has so far produced little to convince - let alone inspire - people that a feasible programme exists which could attract electoral support. This short 2015 Compass article and book Rebuilding social democracy – core principles of the centre left ed Keven Hickson (2016) give a fair sense of both the mood and policy drift…….

Of course, convincing programmes need to be based on a sound story…..about what exactly has been going on in the post-war period? It’s clearly not enough simply to blame neo-liberalism,,,,,

This week I watched one of the best narratives I have so far come across - Global Trumpism – presented by Mark Blyth, author of Austerity – history of a dangerous idea which I wrote about earlier in the year.

Blyth’s style of historical ideas, colloquial language and slides is a gripping one which puts other economists into the shade….

His starting point is the growth of populism throughout Europe and now the States and the question whether (as I tended to suggest in one blogpost on Brexit) it is a reaction to immigration trends and fears – or has a more basic economic explanation…. He shows how the location of Brexit and Trump supporters correlates with the devastation caused by globalisation and recent Chinese imports; job insecurity et al - but then uses the largely unknown figure of Michael Kalecki to show how the post-war Keynesian consensus unravelled in the 1970s

Kalecki had warned as far back as 1943 of a central flaw in the Keynes’ model – which duly presented itself in the 1970s with the arrival of serious inflation which was dealt with by first monetarist and then neo-liberal policies. The post-war regime slowly gave way to one of secular disinflation; capital assertiveness; global markets; strong central banks; and weak trade unions and parliament

As befits a political economist, Blyth wants to know about losers and winners – none of this cosy nonsense about equilibrium….and uses Branko Milanovic’s slide of global trends in income distribution showing the shape of an elephant to back up his argument about global trumpism….

He returns, finally, to his initial point in exploring the various economic options we seem to have –

- The sort of spending on infrastructure which Trump’s campaign envisaged? (probable but not with anticipated results)

- the return of “good jobs”? (unlikely)

- getting corporations and the rich to pay more tax (“fat chance”!)

- “technological disruption” (the digital disruption has already happened)

All in all a really thought-provoking presentation……from a Professor of Political Economy - a dsicipline which hopefully will be finding a deserved place for itself after almost a century of neglect…….

In Praise of....Political Economy

Trust the Germans to spot a winner!

Some 18 months ago I bought a small book which I have carted from the Carpathians ….and back…briefly dipped into but then abandoned - from my impatience these days with economics….Its title, Austerity (2013), was hardly calculated to bring me to orgasm but its subtitle – “history of a dangerous idea” – should have told me that this was no ordinary pseudo-technical stuff. It took author Mark Blyth’s electrifying youtube performances (a more sedate performance is a recent presentation at the University of Glasgow) to bring the book back down from my shelves (metaphorically – since the book is still in the Carpathians) for more careful reading. 
What I found is a book I would rate as the best read of the new century! 

Mark Blyth is that rarity – a Scot and political scientist (but with an American post-graduate specialism in “economic ideas and political change in the 20^th century”) whose book reminds us of the Scottish tradition of political economy. Since 2009 he has been Professor of International Political Economy at the Ivy League Brown University - quite an achievement for a Dundee lad from a poor working class background who generally pays warm tribute to the support he owes to the welfare state....  

The book can be read in its entirety at Austerity – the history of a dangerous idea and you can get a good sense of the respect with which its being treated by colleagues in the special symposium Comparative European Politics ran on the book in 2013 – with this being Blyth’s powerful response

For those impatient with academic jousting, Le Monde Diplomatique ran this good summary

Blyth’s book is divided into two parts. The first is an account of the crisis, starting with the United States and moving on to Europe. Blyth’s narrative does not drown in financial jargon. He sets out to explain as simply as possible what the jargon means and what role it played in the crisis.

For those interested in understanding collateral deals in US repo markets, the structure of mortgage-backed derivatives, repo transactions, correlation and tail risk, Blyth’s book is a good place to start.

His explanation of the crisis is compelling: innovatory financial instruments were allied with a set of ideas about how the economy works, and in particular about how one should evaluate risk in the economy, which together contributed to a build-up of risks within the global financial system and their explosion in 2008. These ideas also facilitated the transfer of the crisis from the US to Europe.

Blyth dismisses the popular notion that the crisis is somehow the result of the moral failing of particular individuals — the ‘Fred Goodwin problem’. It is, for Blyth, a failure of the private sector as a whole. That it has been paid for by the public purse can only be explained by the contradictory set of ideas, which prevail today, about the dangers of state intervention. It is these ideas that Blyth calls ‘austerity’. 

The second half of the book is a great primer in political economy. Describing the intellectual origins of the idea of austerity, Blyth gives us potted accounts of the ideas of Hume, Locke, Smith and Ricardo. He ties these ideas together with political developments, presenting us with a picture of the 20th century that sees Keynesian ideas fighting it out with older ideas about austerity and government probity. A short-lived victory for Keynesian economics after the Second World War was eventually overthrown by a mixture of economic crises, public choice theories of democracy and the rational expectations revolution in economic theory.
This journey through the idea of austerity ends with a chapter on its implementation.

This is a devastating account of how attempts at putting the idea into practice — from the struggle of governments with the Gold Standard in the 1920s and 1930s to the travails of more recent ‘austerity successes’ like Sweden and Ireland — never seems to work.

But it took those canny Germans to appreciate Blyth’s genius. Given the choice last year to award a prize for the economics writing of the year which included Thomas Pikety’s highly profiled (but, I suspect, seldom read) "Capital", they chose Mark Blyth’s "Austerity" – for reasons they explain here  

"Political economy" sank out of fashion in the 1970s as the pretensions of economics to be treated as a science overwhelmed academia......Blyth's book (and chair at an Ivy league University) is yet another welcome sign of the grip of "scientific" pretensions being broken..... 

historical note

The phrase économie politique actually first appeared in France in 1615 with a book by Antoine de Montchrétien - Traité de l’economie politique - with the world's first professorship in political economy established in 1754 at the University of Naples, Vienna University following suit soon thereafter (in 1763). And it was to be Thomas Malthus who, in 1805, became England's first professor of political economy, at the East India Company College.

As it happens. I graduated (in 1964) with an MA (Hons) in ”Political Economy and Politics” from …..no less than the University of Glasgow where Adam Smith occupied a chair (in Moral Philosophy) from 1753 for more than a decade – attracting students from many parts of Europe to his lectures which increasingly focused on the causes of national wealth. He then acted as tutor on the Grand Tour (engaging then with the French physiocrats) but returned after a few years to Kircaldy to write his magnum opus “The Wealth of Nations” which appeared in 1776. 
The Glasgow course in Political Economy must be one of the longest running - it disappeared (as a name) only in the early 1990s....