thinking liberal – Page 48 – Matthew Green's blog

No health without mental health. The genius of Nick Clegg and the Lib Dems.

What is the point of Britain’s Liberal Democrats? Most Lib Dems would point to the party’s liberal values. And yet these are shared by members of other parties. The same can be said for the party’s attachment to the political centre. Others will talk of community politics – but it is plain that many modern Lib Dems, including its leader Nick Clegg, aren’t really interested in this political strategy beyond a few local campaigns. Many outside the party would simply suggest that there is no point to the Lib Dems. The party is destined to be just a footnote in British politics.

But attending the party’s Spring conference in Liverpool in the run up to May’s General Election, the penny at last dropped. The party is the grit in the oyster of British politics, from which great pearls are produced. It is a serious political party that aspires to govern, not just to protest and complain. It stops Britain’s two main parties, the Conservatives and Labour, from having that ground entirely to themselves. And so it can introduce new ideas to a debate that would otherwise be contrived and stale, confined to a few carefully selected issues, based on focus groups and private polling.

What has given me this insight? It is the party’s campaign on mental health. It is pure genius from a party that looked beaten and irrelevant. The party is demanding “parity of esteem” between mental and physical health, and is in the process of securing serious extra resources for mental health support. It is trying to persuade politicians and the public to talk about the issue more. It is an idea whose time has come.

Consider three things. First is that mental health has an important bearing on just about every aspect of public policy – starting with the NHS, but quickly moving on to crime, employment, social services and onwards – and even defence when we consider the state of veterans returning from active service. And yet almost nowhere is it being adequately addressed. It sums up the dysfunctional element of public service provision better than any other single problem. The failure to handle mental health properly causes untold misery and a huge waste of public resources.

Second: it touches people personally. Most of us will know of people who have had serious mental health problems – depression, anxiety, eating disorders, and so on. And increasingly we are aware that we ourselves are vulnerable, given the stresses of modern life. And people are readier and readier to talk about it.

And third: it’s hard. The reason why dealing with mental health is done so badly is because there are few quick fixes. it goes to the very heart of the centralised and functionalised way in which we organise our state (and much else), our tendency to standardise and dehumanise in the name of efficiency, and our reluctance to consider broader philosophical questions about how we manage ourselves. If politicians and the public now want to take the issue seriously, it is just the beginning of a long, long journey. And yet it is one that could transform the state and the way we live our lives. As an idea, it has huge potential.

This is not a particularly new idea for the Lib Dems. Mr Clegg claims to have brought the matter to Prime Ministers’ Questions very early in his leadership – to the bafflement of mainstream politicians. The policy initiative No Health Without Mental Health, which kicked matters off, came very early in the Coalition government, with Mr Clegg’s imprimatur clearly on it. But it is only recently that it has shot to serious prominence, promoted by the Lib Dem Care Minister, Norman Lamb. Mr Clegg has made it central to the party’s overall policy presentation, giving it a mjor place in his last two conference speeches.

The interesting thing about this is that there is nothing uniquely Lib Dem in the insight that mental health is central to public policy. The first prominent person to promote the idea was Richard Layard, the Labour peer and a close adviser to to Tony Blair. His efforts saw the promotion of talking therapies, like Cognitive Behavioural Therapy (CBT). Lord Layard’s journey is an interesting one. It started with the idea that the promotion of happiness and wellbeing should be the primary aim of public policy, in place of monetary income – he is an economist. Now promotion of mental health is his big idea. This is a journey that I too have followed. But Labour were unwilling to take on the wider policy implications. It is all very well rolling out yet another highly centralised initiative on CBT, but rethinking mental health education and provision from top to bottom would challenge too many vested interests. It wasn’t an issue that the public were bringing up in the polls and focus groups, after all.

For the Conservatives, David Cameron took the first steps on the journey, by taking on the idea of wellbeing as a direct policy goal, But he hasn’t followed the idea through. But, it must of course be recognised, he and his Tory colleagues could see enough merit in the idea to allow the Lib Dems to run with it in coalition. That is part of its genius. Its implications may be radical, but everybody can agree that something needs to be done.

Nick Clegg deserves enormous credit for promoting mental health. While the right obsesses about Europe, sovereignty and human rights, and the left with the demon of neoliberalism and the failures of capitalism, the Lib Dems have found an issue that is concrete, and yet whose implications are profound. It moves us on from the stale old debates.This is disruptive political innovation at its best – something that a mainstream third party is well-placed to do.

Whether or not it helps improve the party’s fortunes in a difficult General Election, it has given the party a meaningful mission in British politics. A political pearl indeed.

Is it right to vilify homoeopathy? Sometimes. Often, perhaps. But not always.

In a brilliant article for the Guardian Tim Lott decried the intolerance of people on the left of politics. He complained that people, like him, who raised questions about gender discrimination, Islamism, feeling English or complaining about political correctness, risk unleashing intolerant invective from the “liberal” left. He was speaking as a Labour loyalist – but I recognise the same issue in the Liberal Democrats. Now let me make my politically incorrect contribution to the genre. It’s about homoeopathy.

Homoeopathy is a branch of alternative medicine developed in the 19th Century. Its theoretical grounding might fairly be called mumbo-jumbo. But it has retained a degree of popularity, and has been available under Britain’s NHS, which supports placebo therapies in some circumstances. It is, however, a popular subject of ridicule, particularly from the liberal left. They condemn its availability on the NHS, and want it to be driven off the face of the earth. This article by Edzard Ernst in today’s Guardian is one of the more temperate ones. It follows some publicity from a recent Australian study showing that there was no scientific foundation for its claims.

Let’s clear the decks a bit. I have no doubt that homoeopathy provides cover for charlatans. And practising homoeopaths are their own worst enemies. They persist in using their outdated mumbo-jumbo explanations. According to Dr Ernst they also cite scientific evidence that is spurious. That goes for David Tredinnick, the Conservative MP who is a public supporter. People that suggest that homoeopathy is an equivalent discipline to modern conventional medicine deserve the ridicule that is heaped on them.

But there is another side to this story. Arguments over the discipline’s scientific basis miss a point that should be understood by everybody. Scientific evidence will only ever get our understanding of the world around us so far. Much knowledge is simply beyond its reach. Homoeopathy may not be an alternative to modern medicine, but it may enter space that modern medicine cannot go.

Conventional medicine it is bound up with the idea that people suffer a series of different ailments, and medicine’s job is to find and test therapies for each of these ailments in turn. These ailments are further described in turns of measurable chemical or biological imbalances. The therapies are likewise usually chemical or biological agents – though other therapies may be admitted so long as they are standardised and repeatable. This line of approach (which I like to call the “magic potion” method of medicine) is extremely powerful. It goes alongside a system of evidence gathering that allows you to place a tick or cross against each therapy. The standard is whether or not the symptoms are alleviated against an alternative “placebo” treatment which uses chemically inert substances. Through this approach medicine has developed a formidable inventory of magic potions over two centuries and prolonged many, many lives.

But it will take you only so far. Now take two places where homoeopathy might help to provide patients with relief. The first is what might be called “mind over matter”. It has been demonstrated countless times that mental outlook can affect symptoms. This phenomenon accounts for the placebo effect. Scientists do everything they can to eliminate its effects from their evidence. So if homoeopathy is an effective placebo, the scientific studies wouldn’t show it. This is something Dr Ernst’s article is quite careful to state (“no effect beyond placebo”). Of course there is danger if a patient is persuaded to use a placebo when something else is more appropriate – but not to treat a patient with a placebo when this might be effective also poses an ethical problem. Or it should. Conventional doctors often use antibiotics to treat viral infections; this is surely a much more questionable practice.

The second way homoeopathy might work is holism. Homoeopathic practitioners should (even if many don’t) look at the patient’s complete circumstances – from the complete range medical symptoms to anxieties and outlook on life, before selecting a therapy that is individual to that patient. This is another place that scientific method cannot go. It cannot produce the sort of repeatable results that science requires – because everybody is a bit different. That still leaves therapies depending on placebo effects, but it could give that effect extra oomph. One of the causes of disillusion with modern medicine is that patients are treated as disconnected symptoms parcelled out to different specialists, with obvious things (like what the patient eats in hospital) often neglected. Puzzling symptoms are overlooked to focus on ones more within practitioners’ comfort zones. There is much talk of patient-centred medicine, but remarkably little practice. That may be because building up an appropriate evidence base is impossible.

To my mind that leaves space for an ethical homoeopathist who is no simply trying to peddle expensive but inert magic potions. Modern medicine can’t be beaten in the magic potion business. But when it comes to treating mind and body as part of the same human being and looking more widely on how to advance that human beings health and wellbeing – modern medicine does not look so hot.

The SNP is killing Labour north and south of the border

These are exciting times in British politics. The two party system, dominated by the Conservative and Labour parties for s long, is under threat as never before. Other parties are increasing their share of the vote. But the electoral system will mostly shut them out of parliamentary representation. The real threat to the big parties is that they will fragment. This looks increasingly likely after the General Election in May.

Both main parties are in fact coalitions covering a wide spectrum of political values. This is forced by the electoral system, but a tribal, class-based loyalty provides stability. But class identities in British society are slowly ebbing. Increasingly people support political parties because of their political values, and not tribalism. The initial threat to the two parties came from the Liberal Democrats, whose appeal was largely in the middle ground. This direction of attack proved electorally successful, but the party was unable to build a solid bedrock of support. Entering coalition government in 2010 caused their support to evaporate. Conservative and Labour politicians gloated, hoping for a return to two-party normality. Alas for them, new insurgent parties are proving a much deeper threat.

First came the UK Independence Party, with its appeal to the populist right. This was a direct attack on the Tory bedrock. It has forced that party to tack hard to the right, especially putting Britain’s membership of the EU in play. The party’s more liberal and internationalist wing is under attack, as the party gradually ceases to look like a credible party of government. Ukip threatens Labour too, but the threat is less immediate. The Labour leadership seemed to be successful in holding a moderately liberal line.

The Greens are another source of threat. They are appealing to the hard left, with a tack away from their environmentalist core towards anti-capitalist ranting. But they are at once too anarchistic and too ideological to have a very broad appeal. They may be scooping up some of the disaffected Lib Dems that Labour was counting on. But they don’t look an immediate threat to Labour. It is highly unlikely that they will do much more electorally than hold onto their single parliamentary seat.

It is the Scottish National Party that is proving to be Labour’s existential threat. In Scotland they have used the independence referendum to launch an attack on the Westminster parliament. Labour had long since treated this as an unchallengeable fiefdom. They seem to have no idea how to fight a competitive election in Scotland. Polling consistently shows that they are facing meltdown there, with the SNP on course to win the bulk of Scottish seats.

Unlike Ukip and the Greens, the SNP are a cunning opponent. They have positioned themselves to the left of Labour, with firm opposition to austerity economics and nuclear weapons. They suggest that they could come into coalition with English and Welsh Labourites, and the result would be more left wing than Labour on its own. Labour’s counter argument that the SNP might let the Tories in is a clear nonsense. They only way that happens is if Labour themselves prop up a Tory government. If the SNP and Labour have a majority between them, they can keep the Tories out. Labour are struggling to come up with a stronger line of argument.

But the SNP threat is changing the balance south of the Scottish border. Many English leftists rather like the look of the SNP, and they are talking positively about the idea of a Labour/SNP coalition. Scottish Labour supporters must feel like the first wave of soldiers that have jumped out of the trenches and into enemy fire, who look behind them so see the second wave heading for the rear. English Labourites have written them off and are talking up their mortal enemies.

This poses a serious problem for the Labour leadership. Firstly the party line on austerity economics and nuclear weapons is critical to holding their internal coalition together, and to its wider electoral appeal. Rightly or wrongly they are seen as part of the essential core of a credible British government. If they cave in, then they expect to be condemned to life as a left wing fringe, and all the power and status which comes of being a major party starts to melt away. And yet their most vigorous activists, and their union donors, will be highly sympathetic the SNP demands.

And then there is an even bigger problem. What will all this do to the party’s appeal to English voters? The idea of a Labour prime minister being propped up by the SNP would surely be lethal, especially if Labour had fewer seats than the Tories. English nationalism would rise to the benefit of both the Conservatives and Ukip. The Tories have already brought the idea into their campaign literature. Labour could be right that support for the SNP will increase the chances of a Tory government – but because of how it will play in England, not Scotland.

The leftists who are cultivating the idea of a Labour-SNP partnership are astonishingly naive. The SNP’s goal is to fracture the union by driving a wedge between Scotland and England. Such a fracture will not suit the left’s interests – the left has long since lost its grip on the English middle ground, and is clueless about how to win it back (they demonise the last politician to achieve that for them: Tony Blair). The SNP may not be able to obtain a second referendum on independence this parliament, but that is hardly the point. They have a strategic plan and the left doesn’t. The left needs to create a strong unionist political platform that does well north of the border. If they give up on that, they are lost.

But the Labour leadership, not just the current one, but its predecessors, have done much to create the problem. They have viewed the UK constitution purely through the lens of short-term political advantage. They have suppressed serious discussion of the role of Scottish MPs on English politics. Now it is not just too late, but they have no vision with which to fight back against the looming disaster.

The Labour Party is a tribal affair, with a vicious, partisan face that seeks to crush any idea of political plurality outside their own movement. I will not be sorry to see it collapse. But progressive politicians need to start thinking about how to forge a new political movement.

British economy: neither Tories nor Labour have the answers

The political parties are playing a blame game on the British economy. Yesterday another report by the Institute for Fiscal Studies (IFS) was the unedifying battleground. This debate is interesting but unresolvable. And what matters is what the parties might do now if they were in charge. And on that neither Labour nor the Conservatives are convincing.

The controversy starts with the financial crash which began in 2007, and let to wider economic collapse in 2008 and 2009. The crash was a huge surprise to most politicians, and their electors. Before this steady growth of about 2% a year seemed to be a force of nature. There were squabbles about how best the proceeds of growth should be used. The downturn was very sharp, statistically the worst recession since 1945; comparisons with the 1930s are made. But in human terms things were not so bad as , for example, the early 1980s; we are a wealthier country with more fat to draw on – and unemployment did not rise as fast as earlier downturns.

But two things stand out. Firstly, thanks to steady inflation and frozen levels of pay, real incomes have been squeezed since the crash. Previously those in work tended to do better, but there would be more unemployed. Secondly the recovery was very slow – and not the rapid bounce back typical of previous recessions. There is a very powerful graphic in the IFS report which shows how average household incomes changed, adjusted for cost of living, which illustrates both points:

This shows that household incomes were level at first and then dropped steadily for the 22-30 age group until a year ago and then rose. For the 31-59s the squeeze levelled off at the end of 2011 with a gradual rise since. The over 60s have not done so badly, depending on how you measure their cost of living. Individually many people may be better off (things have get better as we advance through the age brackets), but overall the country has not recovered its economic standard of living.

The Labour narrative runs something like this. The economy was hit by a global financial crisis while they were in power, but a rapid fiscal response limited the damage. Measures included a temporary cut to VAT, as well as maintaining benefit levels, and, of course, a big bailout of troubled banks. In 2010 the Coalition took power and cut back these fiscal measures prematurely and increased taxes, causing standards of living to plunge, with only an anaemic recover since. Labour spokesmen claim, and their more partisan supporters fervently believe, that the government’s austerity has been a disastrous policy mistake, especially for the worse off. There is also a claim that the rich have escaped the pain and inequality risen.

The coalition counter-narrative is that the crisis in the first place was Labour’s fault, through profligate public expenditure and lax regulation of the banks. And the fiscal measures after the crash came at a staggering public cost, with a deficit of over 10% in 2010. This was unsustainable, and the current government’s austerity policies have saved the country from huge levels of debt and a huge future tax burden. If the recovery was anaemic, that was because of deeper weaknesses in the British, European and world economies. Now these weaknesses have been largely overcome, we are doing very nicely thank you. And a previous IFS study has shown that inequality has actually fallen, with the richest 10% paying a greatly increased fiscal burden – though admittedly things have been tough for the young and poor.

What to make of these competing narratives? I think the coalition argument is closer to the truth, even if they play up Labour’s mismanagement a bit more than is fair – not so much because there wasn’t severe mismanagement, but because that insight comes mainly from hindsight. But I’m biased and many learned people think that Labour’s narrative is in fact fairer. There is no decisive way of resolving the conflict, which requires the building of counterfactuals with economic models that are deeply flawed. But that’s the past and the important question is what is the best thing to do now.

And the answer to that question must start with this fact: the British economy is displaying a striking level of weakness. Three signs of this are worth drawing attention to. First is the lack of economic productivity growth. The IFS makes much of this. Employment levels are quite healthy, but this has not led to the levels of production that it should – which means there is no money to pay people more. Economists have been stressing about this for some years now, but they have not provided a clear analysis of what this is all about. Personally I think a lot of it comes about from the diminution of the finance and oil sectors. The former’s high level of productivity was in fact a mirage; the latter is trying to make the best of ageing oilfields. I also think there is a wider issue in all developed economies, as we transition to a world where improved wellbeing does not depend on higher levels of consumption – which used to be the motor of economic growth.

The second sign of weakness is more concrete. Our trade balance, which was strongly negative before the crisis, is not getting much better, in spite of a weaker pound sterling. This is strikingly different from the previous recovery from a recession, in 1992 – when a trade deficit was converted to a surplus quite quickly, and was the first part of a period of continuous growth that lasted until 2008. Martin Wolf, the FT economics commentator, has said that in the Euro zone an adverse trade balance was a surer sign of trouble than a fiscal deficit. He seems more relaxed in a UK context, but I think it is highly significant. The country is living beyond is means, and has not solved the problems that led to the 2008 crash.

The third sign is closely related – the other side of the same coin. The vaunted recovery is mainly led by increased consumer demand rather than increased investment. The public (as well as the government) is trying to borrow its way out of the crisis. A strong level of investment would lead us to be more relaxed about a trade deficit – but this is not the case. Investment is recovering, but not by enough. And levels of debt remain stubbornly high.

A lot of the problem is actually beyond the control of any government. It is down to the freely made choices of individuals and businesses, and changes in technology, not just here, but in the countries we trade with. But we do need our politicians to be on the case.

The Conservatives are unwilling to acknowledge the current level of economic weakness. They keep talking about their long-term plan for the economy, but this mainly boils down to further austerity, mainly cuts to expenditure, to bring government finances onto a more stable footing. They hope that private sector investment will pick up, and focus on things that will improve efficiency and wellbeing, rather than the merry-go-round of property prices. But further austerity will cause public investment in infrastructure to suffer, as well as education. Further, the party wants to “renegotiate” the country’s relationship with the European Union and put membership to a national referendum. The country’s international standing has already been a victim of this policy. Since so much of the country’s fate depends on the wider world, this is sheer folly.

Labour gloat about the current weakness of the economy, but have few answers. I have not heard a Labour spokesman willing to talk about increasing the economy’s productivity. They have ideas to tackle some of the symptoms, like raising the minimum wage to deal with low pay, but have no answers for the disease. And the party lacks a unity of purpose. Its left wants an end to austerity and attack on private business bosses; others talk of devolving power from the centre but have little understanding of what this really means. They do not look like a coherent government in waiting.

Meanwhile there are plenty of things we should be talking about. Encouraging weaker local economies to develop without permanent subsidy from the centre; choosing the right public infrastructure investments; developing a more complete and rounded education of our children and young people; working internationally through the EU and other institutions to tackle multinationals and tax evaders. But these do not reduce to bite-size policies and 140-character debates. So we will keep banging away at the unwinnable blame game.

Why the soggy centre is a good place for the Lib Dems to be

The most recent issue of Liberator, the anti-establishment Liberal magazine, has more than its usual quota of groans about how the Lib Dems have failed to define clearly what they stand for. There is particular venom reserved for the idea that the party should be of the political centre, which implies a sort of rootlessness, allowing itself to be defined by others.

Much of this comes from seasoned campaigners, and there is much wisdom in what they say. But I also sense a rather wilful failure to address how politics really works.

For example, in his article, the veteran Kingston campaigner Roger Hayes says this:”And why do they think people are turning to UKIP and the Greens? Because they seem stand for something and aren’t afraid to say so.” And yet earlier in the same article he says this: “For all their noise and bluster Ukip are likely to take less than a handful [of] seats if they are lucky. The Greens will probably see their national vote soar….but in terms of seats they won’t do better than see Caroline Lucas returned…”. Which leads to the question: if the Lib Dems articulated themselves more clearly, like Ukip and the Greens, would they end up in the same frustrated but powerless place?

Or take another perspective, from talking to a party worker in one the Lib Dem held seats: she explained carefully that they aren’t looking for votes from just liberals. They needed a broad spectrum of people to vote for them. And that is real politics. Talking to diverse groups of people and trying to forge common ground. To be fair on Mr Hayes, he knows all about this – the Kingston Lib Dems are brilliant at it. But it is easy to see how parliamentary campaigners, when trying to move into a winning position, find sharp, clear messages on where the party stands not entirely helpful. For example, the party has some rather clear views on immigration that many candidates would like to soft-pedal.

And this reflects a wider truth about politics that often seems to be overlooked by people who craft political messages. If you want to say something to persuade voters that you are sincere, you need to say something that hurts; which means saying something that will lose you votes. Otherwise you are just uttering cheap words. Voters used to respect the integrity of politicians like Tony Benn and Enoch Powell, and say things like “their voices should be heard.” But they were politically toxic. And under the British electoral system if you don’t appeal to a broad spectrum of voters, you are unlikely to win any sort of representation. Both Benn and Powell needed to tap tribal loyalties or rank populism (Powell’s disingenuous statements on immigration were intended to stoke up racism) in order to maintain their political platform – and even then they were frozen out of actual power.

Politicians can have a sharp ideological edge and be successful. Margaret Thatcher is the obvious example. But that requires both strong political skills and a thirst for change among the electorate. When for Mrs Thatcher both of these ran out in her third term, she was soon gone, replaced by the un-ideological John Major. Today there is much discontent amongst the electorate, but none of the sense of direction that might support change. The electoral system, for example, is clearly failing, but there no strong political movement to change it. And I don’t think our current crop of political leaders and their “strategist” advisers (including, but not restricted to, the Lib Dems) have the political skills to pull off a platform for radical change. And if there is a clear case for strong, liberal political reforms (and there is…) it is far to late to make these part of a winning platform for the next election.

So sharp political clarity is a quick route to electoral failure. There’s something else though. There is a political gap in Britain’s political centre at the moment. Both Britain’s main parties are tempted by their ideological extremes, and by populism. This partly reflects the rise of the Ukip and Green insurgents, who are eating into both parties’ bases (especially Ukip and the Conservatives). But it is also reflects their own memberships, which are becoming more ideological. Increasingly these two main parties are not fighting each other. Instead they are fending off the insurgents and trying to persuade disgruntled non-voters to come out in their support. They are also trying to secure the votes of the Lib Dem supporters, or rather, their former supporters, some 15% of the electorate.

But because both Labour and the Conservatives are being pulled away by their extremes, the appeal of a party without such extremists, that seems to stand for sensible, pragmatic government, is surely growing. The Conservative Party is no longer trying to shake off its image as the Nasty Party, opposed to diversity and environmentalism. The Labour Party isn’t so openly tempted by the extremes, but its policies don’t look as if they are thought through, or fully accepted by their MPs. So amongst their ideas for regenerating the economy they put forward devolving powers to the cities of England. But as soon as the government suggests devolving powers on the NHS to Greater Manchester (negotiated by local Labour politicians, even), their leading spokesman comes out with the usual anti-devolution tropes. Likewise their policy on cutting student fees looks like gesture politics that doesn’t even convince its own side. A sensible, pragmatic government in waiting Labour is not.

Filling this gap in the centre, however uninspiring, is surely the best idea for the Lb Dems right now. There may be an ideological liberal vote out there to tap, but frankly the party is not in a good place to win it right now. There is too much anger over the party’s role in the coalition. But if the party can prove its worth as a party of the pragmatic centre – and shows its skill in winning parliamentary representation even when times are tough – then this is a platform from which liberals may be wooed in future elections. I don’t have a better idea.

The Coalition wrong-foots Labour on its (lack of) NHS policy

Labour’s plan for winning the General Election in May has a special place for the NHS. They are seeking to “weaponise” it, and promote themselves as the only party that can be trusted to run this great British institution. And yet their NHS policy has deep flaws. Now the Conservative/Liberal Democrat coalition government has come up with a plan to integrate health and social care budgets in Greater Manchester. To maintain the warlike metaphor, this looks like surgical strike on Labour. In fact the story arose from a leak in the negotiation process, and seems to be the brainchild of Simon Stevens, the politically neutral head of NHS England. But the policy poses serious questions for Labour.

The details of yesterday’s news are a little vague. The Coalition had already announced plans to devolve more powers to Greater Manchester, working through the local councils (mainly Labour, but with Conservative and Lib Dem ones too) and an elected Mayor. And integration is everybody’s favourite reform idea for the NHS. It refers to merging the health budget with that of social care (currently controlled by local authorities), so that the policies for the two can be coordinated properly. This is important because one of the main problems at NHS hospitals is that they cannot release patients to social care beds. Integration of this sort is already being piloted in such places as Torbay. This looks like a pilot on a grander scale.

As a reform idea, the Manchester proposal looks entirely sensible. Sarah Wollaston, a Conservative MP who is a doctor, and no government stooge, offered a knowledgeable and effective advocacy on Radio 4 yesterday lunchtime. Integration has been one of Labour’s big ideas. But Labour can’t bear to give the government any credit for policy on the NHS – as this undermines their weaponisation plan. So their spokesman, Andy Burham, rubbished the idea. He attacked it as undermining the “National” in the NHS, because it was a localised solution rather than being dropped from a great height from Westminster. He also suggested it would be another “top-down reform”, which the government had promised not to do.

And yet both these lines of attack expose weaknesses in Labour’s own NHS policy. In the first place, if they are serious about promoting NHS integration, how on earth are they planning to do it? The quid-pro-quo of an integration plan is surely more local devolution – otherwise you simply create a monstrous bureaucracy, and a feeding frenzy of large consultancy firms proposing over-engineered implementation plans (er, like the last Labour government’s reform of NHS commissioning). And secondly, are Labour or are they not planning a top-down reform all of their own? Their proposal to scrap the government’s Health and Social Care Act suggests just that. And if they intend to implement integration across the whole country at once… well, that just proves it, doesn’t it?

Which highlights the real problem for Labour. Their plan is to ride the tide of anger amongst NHS insiders over the government’s record on the NHS. They headline attempts to outsource some services as an NHS “sell-off” or privatisation. This is vastly exaggerated – no major hospitals are being outsourced (private businesses would be mad to take them on) and GP surgeries, er, have always been private businesses (a fact that confused the hell out of a save-the NHS campaigner that called on me a couple of months ago). But any plan to reform the NHS in any serious way involves taking on these insiders. The idea of integration to insiders is popular probably because it is seen as a way of hitting the ball into the long grass: the setting up of some toothless committees of professionals who purr about “collaboration not competition” and achieve very little except requests for yet more money. The more serious and specific Labour gets about reforms that promote efficiency, the more dissent they will get from their core supporters, and especially the trade unions. The hard fact is that Labourare proposing to dismantle the Coalition’s health reforms at the moment they are starting to show some promising results, like this devolution initiative.

Now the public probably don’t think much of the Coalition’s record on the NHS, but they surely accept that reforms will be needed to make the organisation more efficient. And if Labour appear not to be serious about that, then their line on the NHS is undermined, and their line on tax-and-spend, already weak, gets shot through. With enough pressure this weakness will become more and more apparent – and there will be a greater and greater risk of dissent in Labour ranks. They are offering just bluster. Far from trying to avoid the NHS as a campaigning issue, the coalition parties have the opportunity of a devastating counterattack, especially if Labour persists in opposing the Greater Manchester plan.

All of which shows how fatally bad is Ed Miliband’s leadership. He has valued party unity over making serious political choices. He has chosen sound and fury over policy substance. He hoped to craft clever policy positions that cover the cracks in his own party while providing credible ideas for saving the country. Alas serious policies mean taking on vested interests in your own ranks, not just the usual villains. The unity of silence in Labour ranks is not a token of assent – it is a token of denial. Labour’s most vocal supporters, and the providers of the bulk of their funding, do not think that Labour is serious about public sector reform and austerity. As Labour is pressured by the coalition parties the greater it is in danger of falling apart just when unity is most important. It is a political strategy put together by policy wonks and campaign tacticians – and not those with serious nous about taking on political responsibility.

The Coalition parties have their own weaknesses of course. These may yet save Labour. But a meltdown for Labour cannot be ruled out on this form.

Can any of Britain’s political parties break the deadlock?

The rise of fringe parties takes British politics into a whole new era. and yet the outcome of the election due on 7 May 2015 seems strangely predictable. The parties seem to be stuck in a deadlock where none can win. What are the chances of one of them breaking free?

Britain’s electoral system (misleadingly referred to as “first past the post”) is capable of producing dramatic swings in the balance between the parties. But a plethora of constituency polls allows pundits to make some quite stable predictions this time. The main features are these: the Liberal Democrats will lose up to 30 seats of their current 57. The Scottish Nationalists (the SNP) will pick up a similar number, or perhaps more, giving them 30-40 seats overall. The new insurgent parties, Ukip and the Greens, will only pick up a handful of seats, and the latter maybe none at all. Overall Labour will advance, and the Conservatives will fall back. The main debate is whether Labour will be able to overhaul the Conservatives to become the largest party. Interestingly, the fortunes of both major parties will be largely determined by how well they do against the smaller parties rather than each other. But neither party will win enough seats to form a government with one of the smaller parties; they will need to do a deal with each other to form a stable government. This is the outcome nobody (except the SNP perhaps) wants.

Can any of the parties break out of this stalemate? Sudden changes of fortune can happen. Two stand out in recent history. The first was in 1992, when John Major’s Conservative government suddenly overhauled Labour in the last week of the election campaign to win a comfortable majority, under the slogan “Labour’s Tax Bombshell”. The second was Cleggmania in 2010, when the Liberal Democrats surged forward after the performance of their leader, Nick Clegg, in the first of the television leadership debates. The surge faded, but the party avoided the drubbing they were heading for, defending their record result in 2005.

Such sudden surges are entirely possible this time. No political leader dominates the scene as Margaret Thatcher did in the elections of 1983 and 1987 or Tony Blair in 1997, 2001 and 2005. As in 1992 and 2010, political leadership is weak, and so things can be more fluid. Public frustration with politics is high.

To understand that we only have to look at Scotland, where the SNP have surged forward after last year’s referendum on independence (or, more precisely, they are consolidating their spectacular gains in the Scottish Parliament in 2011). Labour, who are defending 40-odd seats at the election are in serious trouble. That surge, however, is already built in to the forecasts. The surprise might be if the anti-SNP vote rallies and votes tactically. That’s a real possibility, though – and it would mainly benefit Labour (whose majorities are generally big), and might stem some of the Lib Dems’ anticipated losses. It would be particularly satisfying if the Lib Dem candidate Christine Jardine is able to hold off former SNP leader Alec Salmond.

What of the English insurgents, Ukip? They won the European Parliament elections as recently as last year. But their support has sunk to 15% (less than the Lib Dems achieved last time) and it is too thinly spread. Their novelty is wearing thin, and there is quite a strong anti-Ukip reaction, visible in their leader’s negative approval ratings in polls. The press, who often set the news agenda, found it convenient to boost them, but they are now poking fun at them. Yet they are well-funded and in some regions (along the south and east coasts especially) they might yet hit the zeitgeist, and pick up a few more seats than the pundits expect. There is a more remote possibility that they do well in northern urban Labour strongholds – but this looks too high a hurdle for them this year.

How about the other insurgents, the Greens? They have done well in the polls this year, catching up with the poor old Lib Dems quite often. They have picked up the “none of the above” vote that dislikes Ukip. They have the possibility of repeating Cleggmania and advancing into teens of %age of votes, if not better. But they could suffer if they come under scrutiny. They have a rather mad collection of policies and their leader, Natalie Bennett, struggles to break out of fringe appeal. There is a challenge for the party. If they could dump Ms Bennett as their figurehead and replace her with their only MP, the impressive Caroline Lucas, and if they ditch most of their silly policies as “aspirations”, with a more mainstream manifesto – then they might be in business. It would be a big moment of growing up – but, my sense is that they can’t. Too many activists would see such a move as a betrayal. A further difficulty is translating an advance in the polls into seats, as their vote is thinly based. They seem to do well where Labour are already strong – and they lack the time and organisation to marshal a stronger vote in particular seats.

Could the Conservatives repeat their feat of 1992, and break through to an overall majority? They have an impressively disciplined campaign. They could even repeat the tax bombshell line of 1992 line with some justice (Labour’s instincts are free-spending); and Labour’s leadership is seen as not up to it, again as in 1992. Their leader, David Cameron, may not as impressive as Mr Blair or Mrs Thatcher, but he is more convincing than John Major was. But. But. I just think that the Conservatives are on the wrong side of history and will find it impossible to extend their appeal enough. Back in the 1980s they were the party that broke the unions (which most people saw as a good thing) and made the country self-confident again. Mass affluence broke out – even if a lot of it was through the false wealth of rising property values. Now we seem stuck; the rich do well, but few others. Even increasing property values are seen as double-edged, forcing youngsters from even affluent families back onto “the bank of Mum and Dad”. In the 2000s the Tory brand became toxic; they haven’t done enough to reverse that. Tactically they are in a bind too. They need to win back Ukippers with sour policies on Britain’s international role and immigrants – while at the same time as appealing to more optimistic, liberal voters. I just can’t see a breakout. Their only hope of a breakthrough comes from the collective weakness of everybody else – which remains possible.

How about Labour? They have the opposite problem. They are much more in tune with the popular zeitgeist. They understand a lot of what people feel is wrong about society. But their narrative is chaotic. They look like a coalition of grumpy protest groups rather than a coherent government in waiting. I am reminded a little of Labour under Jim Callaghan in 1979: when they try to make a clear stand on a policy, one of their number undermines it. Tough on immigration? Protests from London MPs. Stop any serious reform of the NHS (which they call “saving” it) – yes one moment, no the next. The current awkwardness is on a promise to reduce university tuition fees. They want a headline policy to whack the coalition with (especially to consolidate former Lib Dem voters) – but how to do so without damaging universities or giving a gift just to the richer students? It seems as if the party has lost the discipline of the New Labour era. But the party does have some strengths – in particular an army of younger canvassers, especially in London, and probably the strongest central organisation of any UK political party.

Like the Tories, the main hope for Labour seems to be the weakness of others: the Lib Dems, the Greens, Ukip and the SNP. On the other hand, it is easier to foresee some sort of implosion by Labour than it is for the Tories. A public rift on economic policy could be the cause: the tension between their trade union backers and the more realistic parliamentarians is palpable. There is rather strange paradox here. Ed Miliband has kept the party together much better than expected over the last four years. But this has been achieved by placating rather than resolving the tensions within it. Which makes the unity and discipline less easy to achieve when it is most needed.

Which leaves the Lib Dems, in my review. Their fall has been dramatic. They commonly show up with a poll rating of just 7%, compared with the 23% they achieved in 2010. In many places they would do well to get 2-3%. But they have strongholds, and a strongly focused constituency-led campaign strategy is helping to limit the damage. They are helped by Ukip undermining the Conservative vote, though they seem to have fewer defences in the minority of seats where Labour is their main opponent. In terms of popular vote it is difficult to see the party falling much further – but there is a risk that their constituency-led strategy falls apart, and they are left with very few seats indeed. But they do have upside potential. Their hope is to be seen as a sensible, liberal party, with none of the extremist politics of Ukip or the Greens. The more Labour and the Conservatives move to the extremes to face the threat of Ukip in particular, the more appealing the Lib Dems might look. There is reason for them to hope that their poll ratings will rise – though this may make surprisingly little difference in terms of the number of seats that they lose. Indeed a surge in the polls might undermine the party discipline needed to make the constituency strategy work.

All of which leaves British politics in a predicament. An electoral system that used to practically guarantee a succession of stable single party governments, is now moving towards one that simultaneously disenfranchises most voters (by stranding them in seats where their vote makes no difference), while delivering a result from which it is hard to form a governing majority. And yet such is the conservatism of Britain’s politicians and public, that it is difficult to see any successful move to change it.

Greece: can you have reform without austerity?

The standoff between the Greek government and most other EU governments continues. The other governments are happy to extend loan facilities, but only if Greece stands by the conditions it had previously agreed. For the Greeks that is anathema, because it means holding to austerity. Many observers here in Britain seem to sympathise with the Greek side. And they offer a middle way: reform without austerity.

Three columns in the FT make the case. I have provided links, but beware – the FT operates a paywall with a very limited number of free goes. First was the weighty (intellectually) Martin Wolf. He condemns the EU programme for focusing too much on austerity and not enough on reform. Austerity sucks demand out of the economy, causing mass hardship; reform would make Greece’s economy more efficient. Next came the intellectually much lighter Tony Blair: Two false paths for Europe – and a new third way. This puts the idea into more overt political terms, though conjuring up memories of his own British “third way” that was politically successful for a while, but whose reputation is now somewhat tarnished. As an aside this is interesting because it shows that Mr Blair accepts uncritically the basic left wing economic narrative – looser fiscal and monetary policy will lead to growth. On Monday was regular FT columnist Wolfgang Munchau: Athens must stand firm on failed policies. This is positively vitriolic about the EU conventional wisdom on austerity, which he regards as economically illiterate and a complete failure. This article contributes to the picture by exploring Greece’s options in the event of breakdown, including the intriguing one of the country printing its own money.

So what to think? Austerity refers to the reduction of public spending and the increase of taxation. It is considered economically counterproductive because it sucks demand out of the economy, which in turn knocks tax receipts – which makes things worse by creating a downward spiral. In Greece’s case the object of vitriol is the target that the government should run a primary budget surplus of 3% , to pay for debt interest, which comes to about 3%, after the recent restructurings (and a remarkably low figure for debt of 175% of GDP). Surely even prudent governments should be allowed a deficit in a recession? So what about reform? It is here that each of these commentators is awkwardly silent. Just what on earth do they mean?

Economic reforms to promote efficiency usually mean changes to product and labour market regulation to make them more open to free market forces. These are undoubtedly required in Greece. But they promote short-term insecurity to jobs and businesses. They are not politically popular, and I doubt very much that there that the Greek public distinguishes between these reforms and austerity. They all part of the same hateful phenomenon.

And the problem goes deeper. Regulation tends to create public service jobs., which deregulation threatens. Besides it is the scale of the public sector, both in terms of jobs and transfer payments, that is a large part of the problem. In several ways this undermines a dynamic private sector. They tie up resources; they undermine labour markets, and so on. For too many people the way to wealth involves politicking rather than delivering things that people actually need and want. And so reform often means cuts – which is back to austerity.

In fact to find ways of stimulating demand without blocking reform is quite hard. There is the economists’ old favourite: investment. But efficient public investment requires an efficient state to direct it. Otherwise the money simply lines the pockets of well-connected people. Surely Greece is vulnerable to this? More bank lending? Another can of worms. Frankly I will not be convinced that reform without austerity is a possibility until somebody can spell out a programme which delivers it. The Greek government is proposing a reversal of both austerity and reform. Once again British (and American) economists are guilty of using macroeconomic analysis to skate over practical problems that turn out to be the very heart of the issue.

There may be some hope a middle way though. Perhaps some fudge around economic cycles can be used to cut the target for primary surplus. And there must be some opportunity to reshape the austerity/reform programme to put more weight on collecting tax from wealthiest – which the new Greek government seems much better placed to do that the last. Alas I am too far away from it all to have any feel for how likely such a deal might be. All I will say is that British commentators are generous with the taxpayers’ money of other nations, but their credibility would rise if they suggested that British taxpayers should join in. All the talk of respecting Greek democracy would then be put into a clearer perspective.

Meanwhile it seems quite likely that there will be some kind of Greek default. Following Mr Munchau it looks quite likely that the Greek government would issue some form of electronic currency of its own, in the from of IOUs, to keep things going. This may well be against the letter of the rules for the Euro area, but it could buy enough time for a compromise to be reached. And perhaps the development of a safety mechanism for the Euro currency area. The Eurozone needs to find some sort of middle way between the inflexibility of a gold standard, and the creation of a federal state without democratic consent. Might what amounts to local currencies be part of this?

Meanwhile, as the saying goes, if something looks too good to be true, it probably is. That is surely the case for reform without austerity. Sorry Mr Blair.

How far will liberals go to defend their values? Putin poses the question.

Liberal values are under attack by people happy to use violence to stop their advance. Two main groups of attackers have emerged: various flavours of Islamic extremism, and Vladimir Putin’s Russia. This onslaught is causing stress for traditional liberals.

We are used to dealing with constitutional opponents: from the collectivist ideas of the left to the social conservatism of the right. But these opponents play by a set of rules which, though they include some manipulation of the media, by and large do not involve killing people. The debate is engaged on liberal terms and settled democratically. But what happens when our opponents do not accept such rules? What happens somebody else has declared war on liberalism?

We have an ideal that we defend ourselves using the minimum level of force, while trying to move the dispute on, and into a liberal and democratic form. In particular we want to maintain peacetime rights and methods as far as possible – since the idealisation of war is itself a rejection of liberal values. This is largely appropriate as we confront Islamic extremism. This is guerilla activity from within our societies. But there are some types of threat where we have to accept something far from the peacetime ideal. Hitler was stopped in Stalingrad, by forces whose methods were no less ruthless than his own. Sanctions and a peace conference would not have liberated Germany. The problem arises when a state decides to project its military power to evil ends. In recent memory we have the appalling example of the former Yugoslavia. There the state power of Serbia was used to promote ethnic cleansing. Liberals in the West tried to step back, not takes sides, and talked of promoting dialogue. But to Serbia this was just weakness. It was not until the appalling massacre of Srebenica that Western countries realised that they had to take sides.

And now Vladimir Putin’s Russia poses a similar threat. Ethnic cleansing may not be on their agenda, though defence of Russian-speaking people is supposed be one of their motivators. The Russian aim seems to be to maintain the power of its ruling elite, not just in Russia, but across a broad sphere of influence outside. This involves a cordon-sanitaire of neighbouring client-states, and undermining the multinational organisations of NATO and the EU that represent opposing value systems. In this they are building on a deep sense of Russian otherness to the rest of Europe, and widespread suspicion, or outright hostility, to liberal values. Persecution of gays, for example, is something of a totem. The Economist this week has published an analysis, though some might doubtless it to be a little paranoid. Russia is prepared to use a projection of military power to secure its aims, and it is also projecting “soft power” of propaganda and sponsorship of extremist political parties, such as the National front in France. They are deploying great subtlety on both fronts, having learnt much from previous adventures, for example in Georgia.

And I worry about the reaction here in the West. I recently had a din-dong on Facebook after somebody started posting a series of stories (from respectable sources) to suggest that the Kiev government were a bunch of ruffians and that we should leave them to their fate. I will quote at length from this conversation, perhaps stretching Facebook etiquette a little (Facebook is regarded as “semi-private”, but the person publishing these views is using a political label rather than their own name, so I feel fewer scruples about quoting them here).

We are talking apples and oranges. You seem to be more concerned with the geo-political battle between Washington and Moscow. Liberals should be more interested in protecting the rights of minorities in Ukraine rather than standing up for a nationalist state who wants to crush opposition by violence. Very few people seem to be speaking up for the innocent civilians caught up in what is a classic proxy civil war, with the USA and most of the west supporting and funding one side and the Russians the other, no doubt with covert support. The constant blame game by both sides means little to people who have had their homes or family blown up.
There is no military solution for Kiev, Putin will increase his support for the rebels to match anything that we can provide. Even if Kiev could conquer the rebel territory, what then? Journalists who have been there report real anger by local people with the Kiev government. In the Ukrainian parliamentary elections last October in government held areas of the Donbass the turnout was less than a third and in those areas less than 20% of voters voted for government parties. There clearly needs to be proper political dialogue between Kiev and the rebels, anything less than this will prolong the misery for everyone. It was not a wise move for Kiev to declare war on their own people and call them terrorists. Kiev is very dependant on western financial support, we need to start pressuring Kiev to stop breaking international law on human rights and war crimes and start entering serious negotiations with the rebels as we did with the IRA. Russia needs to do the same with the rebels. Ultimately, this conflict needs to be resolved by the will of the people through a proper referendum not through violence.

This is interesting because it is largely accurate on the core facts. The people of the Donbass never trusted the Kiev government; the war has polarised their views against it; a projection of Russia’s military power means that a military reconquest by Kiev looks impractical. The Kiev government has been responsible for indiscriminate shelling of civilian areas, and some fairly robust enforcement of its conscription laws, which can, of course, be described as violations of human rights.

But hang on. Moscow’s intervention is what prevented any kind of peaceful or constitutional solution. The “anti-terrorist operation” by the Kiev government was only started after the “little green men” had appeared to stiffen up the rebels, and persecute anybody that supported a united Ukraine. Russia was building on genuine discontent by the people of the Donbass, but ultimately it was and is a projection of Russian military power. It is not wrong to respond to such a projection of power by military means, and if the Ukrainian government had not, the “rebels” would control a much broader area of territory – to say nothing of encouraging the Russians to push their luck elsewhere. And when wars start, things get messy – especially when the Ukrainian military is not the fully modern, professional and well-equipped forced force that we are used to seeing in the West. They have not, so far as I know, bombarded civilian areas that were not part of a military conflict zone (i.e. containing Russian weapons) – unlike the indiscriminate recent attack by Russian rockets on Mariupol, or, indeed, the attack on MH17. Finally, the Ukrainian government has the backing of its citizens in the areas it controls, even Russian speaking ones, as Kiron Reid’s article in the current edition of Liberator makes clear (and also my limited personal contacts in the country).

The best chance of promoting liberal values in Ukraine remains a strong government in Kiev that is aligned to the West in outlook, if not formally a member of NATO or the EU. The current government is the best prospect so far of achieving the sort of reforms that will push back the influence of the malign oligarchs and security aparatchiks that are the hallmark of the Putin way. It is clear that the sort of peaceful settlement that Russia would allow in Ukraine would fatally undermine such a government and give it (or its puppets) a veto over any serious effort at reform. Liberals in the West can’t use the familiar formula from Yugoslavia that there is bad on both sides, and wash their hands of it. We must take sides. This does not necessarily mean supplying arms, still less military assistance, though we should not rule out such support on principle.

It is not just the people of Ukraine that would suffer if Ukraine is humiliated further. There is no reason to think that Russia’s adventurism will end there. The Russian elite has never accepted the loss of the Baltic states, all of whom have large Russian-speaking minorities. Russian adventurism there could involve Western, and British, troops.

At its best liberalism means the defence of the weak and the promotion of universal human dignity. At its worst it can be camouflage for avoiding difficult choices. In the face of the lethal threat posed by Mr Putin, please let it be the former.

Economics in the age of information. Why are so many conventional economists wrong?

It feels an unequal battle. On the one side are ranged distinguished Nobel laureates, such Paul Krugman and Joseph Stiglitz, formidable intellects such as the FT’s Martin Wolf, together with any number of media economics correspondents, bristling with PhDs. On the other there’s me with a trifling 2:1 BSc (Econ) awarded in 2008 by UCL. But I’m hanging on in there. Clever as these people are, I think that they are working in the wrong paradigm. The world has changed but their basic views as to how the economy works hasn’t.

In my defence I can usually quote some formidable intellects, though, pronouncing very similar views to mine, such as Adair Turner or The Economists’ Buttonwood column. In this post I sketch a narrative that explains how this divergence of views came about, and why so much intellectual firepower might be ranged on the losing side of the argument.

My narrative pictures the developed world economy moving through a series of ages, each of which required its own style of economic management and analysis. This is a giant oversimplification, of course. But then the science of economics is a giant oversimplification, and not physics applied to the human sphere.

I start my narrative in what I will call “the age of heavy industry”. This is not the beginning of the story, of course, just a good place to start. This is the century leading up to 1945. In this period economic development is led heavy industry and the construction of public facilities. These include infrastructure such as railways, ships, roads, and houses; intermediate facilities such as coal mines and steel works; and, we should not forget, armaments. Other things were important, of course: agricultural development released workers from the countryside; the textile industry provided an important consumer goods sector. But world leaders saw their nations’ status in terms of the big, dirty, heavy things. Railways and steel works; dreadnoughts and artillery pieces. “Guns will make us powerful; butter will make us fat,” Hermann Goering said, capturing the spirit of the age. Such concepts as GDP were hardly developed; by modern standards rates of economic growth were unexciting. The view that inflation rates should be small and positive was alien, as the world swung between bouts of positive and negative changes to prices. Classical economics dominated conventional wisdom. “Working class” was synonymous with “poverty”, something which cut through political discourse, and many simply assumed was an inevitability.

After 1945, and starting in America, this morphed into the age of light industry. Suddenly the domestic consumer became the leading driver of the economy. Technologies developed in wartime – such as plastics, motor vehicles, antibiotics – transformed the lives of ordinary people, and their production and distribution created stable blue and white collar jobs in a virtuous circle of job creation and consumption. Growth was led by increased consumption of ordinary things like cars and fridges; alongside this grew a service economy to support the growing wealth of ordinary people. The Soviet Union, stuck in the mentality of the age of heavy industry, was caught out completely, and in the end collapsed from a complete loss of faith in itself. All those steelworks, nuclear missiles and coal mines did not lead to economic power. Economically the management of GDP started to dominate everything, and an orthodoxy of demand management, whether through fiscal or monetary policy, became taken for granted. Arguments between different schools of economics were vitriolic, and yet they agreed on much. That inflation should be low but positive, for example, or that productivity growth would generate a steady, long term increase of national income, or again that distribution of income and the workings of finance were of secondary importance in economic management. And this is the world still inhabited by the those Nobel laureates, modified only slightly by recent events. The problem with the modern economy, they say, is a lack of demand. It needs to be stoked up with fiscal or monetary policy; once this has been achieved rising productivity will get us back onto the road of steadily increasing income and the repayment of debt.

But the world has changed. Since the 1990s the age of light industry has been supplanted by the age of information. To understand this, think about a few ideas. First is the idea of satiation. People only need a certain number of things, after which increased consumption becomes pointless. There are still plenty of poor people, of course, but they are in a minority. and it is increasingly hard to understand poverty in terms of a lack of volume of goods in circulation. Many observers define poverty in relative terms, not in terms of physical benchmarks like nutrition and shelter. Thus you might be poor because you lack a flat-screen TV. Not because you need it, but because you feel excluded without it. It is clear that this kind of poverty is not going to be solved by cranking up the volume of goods produced.

Secondly, consider that often what people buy when they spend money is actually rather intangible. They pay a lot of extra money for the right label or provenance. These goods aren’t really being bought for their direct utility, but for what owning them says about the purchaser and where they belong. Again, these things aren’t driven by quantities that are consumed and plays havoc with quantitative notions like productivity.

Thirdly consider how the nature of technology has changed. Information and communications technology, and the services delivered by the new devices, lead the way. These advances are not, by and large, driving us into an ever rising cycle of consumption of physical things or even services. We are consuming experiences and information. and these things do not follow the standard laws of economics developed by Marshall and Walras who laid the foundations of modern economic theory.

And fourthly look what is happening to the nature of work. Those steady blue and white collar jobs are disappearing. Once they were considered demeaning and soul-destroying. But we valued the social stability they brought. Instead we have a world of work that is increasingly polarised, and where stability, in all jobs, is becoming rarer.

A further point is worth mentioning. Globalisation, and the rise world trade, especially between the West and the Far East has obscured many of these changes. Driven by the law of comparative advantage, developed economies gained from cheap manufactured imports in the 1990s and 2000s. But this economic principle is driven by differences in the makeup of the trading economies. But each of the Far eastern economies, starting with South Korea and Taiwan and moving on to China, progressed and became more like the developed world. Comparative advantage, and gains from trade, are falling away. That party is now over. And as for the effect of global financial integration on national economic management… suffice it to say that this has profoundly changed the way nation monetary and fiscal policy works.

All these things point to a world that doesn’t follow the old macroeconomic patterns. Fiscal and monetary policies don’t seem to working as they once did. Variables such as inflation and productivity misbehave. These then join forces which old-fashioned economists understand, or should. Demographic change is reducing the number of workers as demand for labour-intensive health services is rising.

This creates a world in which economic growth cannot be assumed. Distribution of income and wealth becomes of primary importance, as does managing finance, and especially levels of debt. The world is ill equipped with economic models for this new age, and many distinguished economists are contributing nothing, especially when pontificating rather than basing their views on deep and up to date analysis of the data.

We have cause to be worried by the new trends, as it appears that much government and private debt might never be repaid. If that is gloomy, we should also reflect that this is a problem of success. The ages of heavy and light industry have achieved their wider purposes and left us with societies of unbelievable wealth and comfort. But we need to understand that improving the human lot requires a new way of looking economics.