Journal

Our World is changing. Why isn’t our economics?

Words by Sophy Campbell, Rethinking Economics Nottingham

This crisis was no-one’s fault. No banker took too much risk. The IMF did not hand out conditional loans and ask for COVID to be one of the conditions. The housing bubble did not burst and out came the virus. It’s time to accept our issues are not to do with individual agents but with our economic thinking itself.

The first known case of COVID 19 appeared in the Hubei province on the 17th November 2019. The first UK case was on the 29th January. We had over 2 months to prepare but used it poorly. Our politics was so concerned with maintaining GDP that life continued as normal until 16th March. No distancing, no masks, nothing. This is sadly nothing new.

Australia was burning for over two months early this year. Response: Mobilise 3000 members of the Australian defence and deny climate change exists.

UK’s social mobility is in decline. Response: close schools first and then close the pubs. Then reopen the pubs and possibly schools a few months later. Then create an A level grade system where independent schools see a 4% rise in A grades in comparison with 2% for secondary comprehensives and less than 1% for sixth form colleges.

The government has been telling us for years they are doing the best they can. However, COVID has taught us something. Change is not something unattainable or very slow. Rough sleeping had been on the rise until the government saw the homeless as a threat to the spread of COVID. Within a few days they were bunking out in hotel rooms. ‘We don’t have enough money’. How many times have we heard this? Then comes the biggest relief package ever. Change comes when needs must, and change is very much needed in economics.

Ok, so why pluralism?

Rishi Sunak, the UK chancellor, has carried out some rather unconventional policies during the pandemic. Eat Out to Help Out would not be found in any economics textbook. Yet it was one of the biggest policy successes of the post lockdown budget with over 100 million meals claimed.

The UK economy still lies in tatters. Clearly it is time for more of these less conventional, non-textbook responses.

Much can be drawn from Isaiah Berlin. He saw the enlightenment as dangerous. Thinkers from that period assumed there was a correct answer to every problem. There was also thought to be a clear methodology to finding answers (usually mathematically demonstrated). All correct answers will fit in with each other until a perfectly formed system of ideas is created. There is only one solution.

This kind of thinking has obviously influenced economics. Macro models are built from microeconomic models and their assumptions. Everything apparently works in harmony.

However, humans are not automated machines. Our behaviour is not always predictable. We are always changing. Therefore, there is no lasting single solution. Keynes, Smith, Marx, Veblen all used economics to describe their own worlds. Our world has changed since theirs; our economics must change too. Unfortunately, top economics journals publish orthodox views. The way to career progression is through conformity. So, our economics is stuck in the past.

Now let’s look at how some heterodox economic thinking may have provided different perspectives on the current crisis. 

Feminist economics

First feminist economics. Feminist economists think the system perpetuates gender inequalities as females are dominant in informal sectors like housework, volunteering or childcare. These sectors are not included in the GDP statistic.

There is another side to this though. During recessions informal sector work tends to increase. GDP including these sectors would fluctuate less. Maybe if the work of the 1m NHS volunteers and the care of all those bored children had been included, our GDP would not have fallen 21%. Also, maybe economists would not be struggling with trying to increase GDP in any way possible. The new fad is luxury face masks costing up to £180. Still this is better than hiking prices of basic face masks!

Ecological economics

Now let’s turn to ecological economics. Mainstream economics sees the economy as a whole, containing the natural world. Ecological economics takes the opposite view. The economy is part of the whole and interacts with the environment. It relies on it and certainly doesn’t dominate it.

Now this whole happens to contain an estimated 1.7m viruses, 263000 of which are capable of infecting humans. The cost of finding them all: $7b. This would’ve helped scientists prepare for threats before a full-blown pandemic evolved. Before COVID, governments considered this unnecessary. Reducing the government’s budget was the key goal. However, when a crisis hits, this all goes out the window. The UK government’s total spending for Covid currently: over $200b.

Maybe if we had realised that the economy is submissive to the natural world, we might not have been so complacent. As it stands, the global cost of COVID could reach $12t.

Cooperative economics

Cooperative economics has been used as a response in some cases. South Korea used UBI payments in local currencies as relief for COVID. The local currencies target shops with revenue less than 1 billion won and the relief payments can only be used locally. This helps small businesses from falling under during the pandemic and makes sure jobs stay local. Local currencies have since popped up in the US. A monetary revolution may be on the rise after the crisis has posed the vulnerabilities of a highly globalised world.

What next?

We need to learn from COVID. We cannot live life like normal until the situation has become out of control. Yes, as humans we don’t like change, but accepting smaller changes (in comparison to the alternative) earlier are better than suddenly finding  yourself only allowed out of the house once a day in lockdown!

One of these crucial changes is introducing and accepting pluralism within the economics mainstream.

Our world has changed. This autumn our economics students will return to a very different university campus and experience. Yet, they will have the same textbooks and receive the same education as if nothing has happened. Something has to give.

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