Ann Pettifor

Build back better? Rebalancing the global economy

A federal highway near Mayschoss, western Germany, after major flooding, July 23, 2021|© CHRISTOF STACHE/AFP via Getty Images

My book reviews of WHAT WE OWE EACH OTHER by Minouche Shafik, GO BIG by Ed Milliband and RESCUE by Ian Goldin, were published by the Times Literary Supplement on 10 September, 2021. 

In the preface to What We Owe Each Other, Minouche Shafik quotes the opening line of W. B. Yeats’s famous poem, “The Second Coming” (1919), written as the poet’s pregnant wife lay gravely ill from the flu pandemic. It is a strange choice, given the positive and often upbeat tone of Shafik’s book. Yeats’s poem is, after all, a cry of despair at the follies of humanity, warning of the risk of civilizational collapse; Shafik, by contrast, is optimistic, packed with useful, well-evidenced, orthodox policy prescriptions for a new social contract.

The choice is, however, apt, given the subject matter – even if Shafik’s hopeful framework ultimately stands in contrast to it. Things are falling apart; the world is in a mess. The multilateral coordination that provided a platform for Shafik’s remarkable career as an international policy practitioner is now on shaky foundations. At the height of a global pandemic, the world’s most powerful nations proved incapable of working through the World Health Organisation to fund and distribute a vaccine that could save millions of lives and stabilise the world economy. Instead they capitulated to vaccine nationalism and the private interests of global corporations.

Global financial mayhem, stock and crypto market bubbles are everywhere. Obscene levels of inequality prevail, helping to fuel political populism. There are imbalances in trade, leading to global political tensions and the threat of a new cold war. Volatile capital flows imperil economic and political stability in emerging markets. To cap it all, extreme weather events are erupting all over the planet. Yeats’s poem was apocalyptic, and that was without climate change.

This is the context in which a clutch of books has appeared over recent weeks, most written during the pandemic’s various lockdowns, published in haste and assembled around the theme “Build Back Better”. The three under review all argue for a new social contract. Two of them assume readers now require titles with big letters – a publishing fad one hopes will not endure.

Of the three, Ed Miliband’s GO BIG: How to fix our world is the most willing to confront the threats posed to civilization. In an early chapter entitled “The End of the World” the author asks us to embark on a familiar thought experiment: imagine if we knew a meteorite was heading towards the Earth. We would mobilize all the resources at our disposal to stop it. That understanding of the urgent task facing us is present throughout the book and also informs its broader approach. “If we treat the climate crisis as a technical or technological problem to be solved and think we can do so while leaving other injustices in place – without renewing the social contract in its broadest sense – we will fail. That is true globally, and at home.” Even while Miliband contemplates the possibility of the world coming to an end, he is driven by optimism, the theme of his joint podcast with Geoff Lloyd, Reasons To Be Cheerful – a platform that has transformed his previously dour, cautious and clumsy image. Thanks to the podcast, and now this book, we discover a funny, modest, intellectually robust individual, serious about the range of policies needed for transformation. Miliband assures us this is not a manifesto. To my mind it should be.

Shafik’s approach is to offer a compassionate analysis of the state of our world, and she then outlines detailed policies to address the needs of children and the elderly, for the improvement of education and health systems, and to sustain the world of work. To make these policies “economically viable”, Shafik – the Director of the London School of Economics – relies on her institution’s well-established, liberal policy prescriptions: increased productivity; “flexible” labour markets (everywhere in the book the word “labour” is prefaced with “flexible”); and growing the economic pie, “so that there is more to share”.

These prescriptions should worry us. The world’s economic pie has already grown so big that it is intruding on wildlife habitats and triggering pandemics. The production and consumption of ever increasing quantities of goods and services – “growth”, or what the Harvard economist Kenneth Rogoff in 2012 described as “the be-all and end-all of policy” – is the LSE mantra set against M. Keynes’s attempts in the 1930s and 40s to ensure that levels of economic activity were counted and managed – to avoid unsustainable levels of growth in credit, interest and output.  Above all, growth is set against the Keynesian determination to regulate and manage the financial and monetary system so that it does not fuel (finance) excessive production and consumption, or conversely starve production and consumption and precipitate crises.

Shafik provides no prescriptions for managing the financial system and takes “globalization” as a given. Her formula for improved “productivity” stems from her belief that the macroeconomy, and in particular the global financial system, should be left to the “invisible hand” of markets, while changes should be made to policy at the micro level. So her proposed social contract would ensure that labour is flexible (albeit with increased “security”); and that technology and management practices are improved, inefficiencies removed and competition increased, while more should be invested in education. This is a recipe for Business as Usual.

In RESCUE: From global crisis to a better world Ian Goldin warns that returning to “business as usual”, “bouncing back”, “rebooting” or “resetting” the economy means “we would be heading in the same direction that brought to where we are today”. What is needed, he argues “is a different operating system”, because “building back on unstable foundations guarantees future collapse”.

Goldin has form in this area. In The Butterfly Defect: How globalization creates systemic risks and what to do about it (2014), written with Mike Mariathasan, he warned of “a significant probability that a pandemic will strike a financial sector such as New York or London, and, through disease, quarantine, panic, or the collapse of secondary services … lead to at least a temporary isolation of major players in the global system”. This prophesy was largely ignored. In RESCUE he rightly tells us that “the pandemic has brought us to a crossroads in geopolitics, economics, technology, urbanisation, education, globalisation and social relations”. He believes that “the only certainty arising from a continuation of our current ways would be more nasty surprises”. As with Shafik, his proposals for “radical reforms” apply to domestic policies and include “high levels of public investment in health, education and social safety nets, funded by highly redistributive tax systems”. Goldin goes further and, in a reference to the Franklin D. Roosevelt administration, notes that in 1933 the US “recognised that radical reform of national policies and of the international system was necessary … and that it [could] only be achieved by countries working together”. However, he stops short of calling for the radical reform of “globalization” itself. Instead, and without explaining how this will be achieved, he places his hope in the creation of a “more inclusive globalization”.

While all three books provide much food for thought, and offer constructive policies for change, right now the world needs more than hope, and much more than micro fixes to a global economy and ecosystem dangerously out of balance. Until our intellectual leaders rise to that challenge with greater boldness and radicalism, we will continue to find ourselves “turning and turning in the widening gyre” of economic turmoil and ecological anarchy.






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