On my book shelf is Francis Fukuyama’s 1992 book “The End of History and the Last Man”. The book came out of a long essay for The National Interest in 1989 (that you can find here), the central argument being that we were witnessing (at the time) the “unabashed victory of economic and political liberalism”. To Fukuyama, the ideology of political liberalism established the foundations for what he calls “The Wall Street Journal school of deterministic materialism”. And the success of deterministic materialism, in turn, allowed political liberalism to become more entrenched and then spread even further around the world. Ironically, the economic travails of the three countries that did most to give birth to political liberalism—France, the U.K. and the U.S.—has brought the study of political economy back from the dead. So history lives! An example of this reborn genre is Brad de Long’s post here.
And political economy lies at the core of George Orwell’s writings, whether journalism or novels. The editor of The New Statesman, Jason Cowley asks in The Financial Times (here) why we haven’t produced another writer of Orwell’s stature who can write explicitly political novels or journalism that deepen the national debate. Indeed, why are there no writers who can deal with the death throes of The Wall Street Journal school of deterministic materialism in an intelligent manner?
On a parallel topic, the same edition of the FT (one of the few newspapers to have got better over the last 10 years) has an article by Martin Sandbu reviewing a series of books on the “Occupy” movement. Sandbu takes issue with the movement’s decision not to propose a political agenda. I agree. Occupy‘s stance reminds me of the Judian People’s Front in Monty Python’s film “The Life of Brian” who commit suicide in front of the Romans as a political statement. The Romans just shrugged at the eccentricity of this act and carried on as normal, much as the bankers have done with Occupy’s general assemblies, working groups and the “people’s microphone”.
More on Thatcher’s track record: This is an insightful article by George Eaton in The New Statesman looking at public spending. And in the same edition of the magazine, Kiran Moodley has a go at the myth of Britain as a failed state prior to Thatcher taking charge (something I have already blogged about here). Why do I think this topic is important? Because Thatcher’s death in the U.K. has led to calls for a return of Thatcherism to counter the country’s growth woes. The logic appears to go as follows: since Thatcher’s actions worked for one growth crisis in the 1970s, why not try her ideas with another one—i.e. now? This is wrong on so many levels: 1) there wasn’t actually a growth crisis in the 1970s, 2) Britain’s reinvention in the 1980s and 90s was partially made on the back of Northsea oil, which has almost now all gone and 3) if deregulation, tax cuts, privatisation and the neutering of the unions haven’t allowed us to maintain 2% or so economic growth, why on earth would doing more of the same have any effect?
A couple of years ago, the economists Reinhart and Rogoff came out with a very influential paper showing the relationship between debt and growth for a country’s economy. The original paper (here; it also morphed into a book, here) was interesting not only for its conclusion (when government debt gets to 90% of GDP, a country is basically stuffed) but also its historical detective work—they constructed a database containing thousands of debt crises going back centuries. Moreover, from a policy perspective, the paper appeared to provide an empirical justification for austerity. Now it seems that they got their sums wrong. This is the paper by Herndon, Ash and Pollin that called them out here. And here is Reinhart and Rogoff’s rebuttal in The Wall Street Journal. Since then, everyone and their mother in economics-land has entered the fray (go on Economist’s View to see the fun). Krugman, who loves a good fight, has gone in with his boots flying as usual (here). Personally, I don’t think either more debt or more austerity will restart growth.