Speaker 1: Welcome to zero. I am Akshatrati this week rethinking economics.
Speaker 1: As I've watched world events unfold this past year, I've
Speaker 1: been surprised by the many seemingly economically irrational moves at
Speaker 1: governments and investors around the world are making. The prime
Speaker 1: examples are coming from the US with President Donald Trump's
Speaker 1: trade war or attacks on clean energy, but there are
Speaker 1: many others. The incredible valuation of AI companies, Argentina's extreme austerity,
Speaker 1: inclusion of defense companies in ESG funds, the European Unions
Speaker 1: promised to buy seven hundred and fifty billion dollars of
Speaker 1: liquefied natural gas. The list is long. Each of these
Speaker 1: can be explained in different ways. Perhaps it was for
Speaker 1: a political win, or it was an ideological choice, or
Speaker 1: short term thinking, or investments made because of a fear
Speaker 1: of missing out, or some combination.
Speaker 2: Of those excuses.
Speaker 1: But what if the main reason for these irrationalities is
Speaker 1: much deeper. That's what Abbi Inns thinks. She's an associate
Speaker 1: professor of political economy at the London School of Economics,
Speaker 1: and she came to that conclusion while writing her book
Speaker 1: Late Soviet Britain as unlikely as it might seem. Her
Speaker 1: central thesis is that the UK and other capitalist economies
Speaker 1: are behaving like the ineffective, centrally planned Soviet economy. She
Speaker 1: argues that the market driven economic system that was supposed
Speaker 1: to be the antidote to socialism can never deliver on
Speaker 1: its utopian promises. Ever since I finished reading the book
Speaker 1: earlier this summer, I've not been able to stop thinking
Speaker 1: about it. Though the title refers to the problems in
Speaker 1: the UK, the conclusions that Abbi draws are much more
Speaker 1: widely applicable, and she arrives at them after studying more
Speaker 1: than a century of academic work done in economics. The
Speaker 1: book isn't a light read, but I think it is
Speaker 1: a necessary read for anyone trying to make sense of
Speaker 1: the world we find ourselves in. So I wanted to
Speaker 1: ask Abby to lay out the case she makes in
Speaker 1: her book and explain why governments and corporations aren't taking
Speaker 1: the climate threat as seriously as economists think they should.
Speaker 1: Welcome to the show.
Speaker 3: Abby, thank you very much, thanks for asking me.
Speaker 1: So this is a climate podcast, but folks who work
Speaker 1: on the climate challenge will fully recognize that we live
Speaker 1: in a complex highly connected and interdependent world, and in
Speaker 1: that sense, any climate solution will involve not just change
Speaker 1: in technology, but also changes to how government works, finance society.
Speaker 1: And your book is focused mainly on government, but on
Speaker 1: the economy as a whole, has an intriguing title Late
Speaker 1: Soviet Britain. Before we explore the nuances of the work
Speaker 1: that you've done and the research that led you to
Speaker 1: write the book, could you just tell us how you
Speaker 1: started to work on the book at all and what
Speaker 1: did you conclude after working on it for many years.
Speaker 3: Six and a half years, which was quite a lot
Speaker 3: longer than I thought it was going to take when
Speaker 3: I started it. So the reason it's ended up with
Speaker 3: this very counterintuitive title is that when I started working
Speaker 3: on it, which was after Brexit, what I wanted to
Speaker 3: write about was state failure, and so I thought, well,
Speaker 3: I'll begin by looking at the really obvious sort of
Speaker 3: aspects of that. So I thought I'd start with public
Speaker 3: sector outsourcing. So the more I looked into that, looking
Speaker 3: into these contracting failures and enterprise failures, rising costs, declining
Speaker 3: service quality and so on, I started to get this
Speaker 3: very uncap any feeling that it was very familiar, familiar
Speaker 3: to me as someone with a research background in the
Speaker 3: old Soviet space. I thought, well, this is very strange.
Speaker 3: Meant to be the opposites, right, The neo classical economics
Speaker 3: behind neliberalism was meant to be the as it were,
Speaker 3: the scientific economics that was the antidote really to the
Speaker 3: kind of central planning, bureaucracy and rigidity that we knew
Speaker 3: about from the Soviet experience. And then I realized that
Speaker 3: what they held in common was that they were exact
Speaker 3: mirror images.
Speaker 1: So there are beliney of examples, and we'll come to them.
Speaker 1: One that shocked me as somebody coming to this country
Speaker 1: as an immigrant and then learning that the country that
Speaker 1: built the modern sewage system now spilled sewage in UK
Speaker 1: rivers and seas was an interesting experience. But we can
Speaker 1: come to that failure a little later. There is an
Speaker 1: hour respect of our discussion which is focused on politics separately,
Speaker 1: economics separately. They are usually not put together. But your
Speaker 1: area of study is political economy. And you got to
Speaker 1: the conclusions in the book, which you should briefly mention
Speaker 1: through a circuituous route going all the way back to
Speaker 1: the philosophy of science.
Speaker 2: Why was that necessary.
Speaker 3: So what I became really interested in was how two ideologies,
Speaker 3: so neoliberalism in the West and Soviet economics in the East,
Speaker 3: how they could be rooted in such different metaphysics as
Speaker 3: it were, so Soviet economics being rooted in sort of
Speaker 3: Marxists sociology, which was meant to be dynamic and about
Speaker 3: moving classes and dynamic social systems, and the mathematical economics
Speaker 3: known as neoclassical economics, which sits behind most neoliberal policy,
Speaker 3: which is very much more abstract. It exists in a
Speaker 3: world of logical argument from assumption using either mathematics or
Speaker 3: formal logical argument, and modeling and forecasting. It's an attempt
Speaker 3: to build a kind of predictive analytical science. The idea
Speaker 3: being that you could cut out all this sort of
Speaker 3: empirical noise and get to, as it were, the universal
Speaker 3: truths of the economic world. That's the aspiration, and I
Speaker 3: thought to understand this, to understand how they nevertheless end
Speaker 3: up converging on the same state craft of quantification, output planning,
Speaker 3: target setting, measurement, forecasting. All of this, I'm going to
Speaker 3: have to go back to the philosophy of science to
Speaker 3: figure out how they converge, and the point of convergence
Speaker 3: is that when Stalin moves away from long term determinism
Speaker 3: to the idea that you can have a top down,
Speaker 3: almost completely encompassing, central planning system, you suddenly arrive even
Speaker 3: a world of attempting to create a perfect coordinating system,
Speaker 3: a perfect alecative mechanism using planning, and that is the
Speaker 3: exact mirror image of the aspiration behind neoclassical economics.
Speaker 1: How exactly though, because you are still in the Soviet
Speaker 1: system trying to centrally plan for a state that is authoritarian.
Speaker 3: That's right.
Speaker 1: For socialist outcomes, that's right. And on the other hand,
Speaker 1: the system we live in here in the West now,
Speaker 1: which has been in place for a while but has
Speaker 1: been going towards a particular direction, is market oriented democracies
Speaker 1: where people are choosing these leaders, and the leaders are saying,
Speaker 1: we are going to create offers and options for all
Speaker 1: of you in this competitive space that would allow you
Speaker 1: to make the best rational choices you are. They seem opposite,
Speaker 1: and they are opposite.
Speaker 3: That's absolutely right. So the book is a kind of
Speaker 3: dark historical joke in a way, because the argument is
Speaker 3: absolutely not It would be absurd to argue that neoliberalism
Speaker 3: emerged in anything remotely like sort of totalitarian, oppressive, coercive systems,
Speaker 3: whereas the particularly from the Stolenist era onwards, of course,
Speaker 3: that system is a totalizing regime, very explicitly, so it's
Speaker 3: extremely violent, it's extremely coercive throughout that period. But the
Speaker 3: point I want to make in the book is that
Speaker 3: despite being absolute opposite regimes in political form, the way
Speaker 3: they think about the economy, the fact that they think
Speaker 3: about the economy in deterministic machine forms of reasoning means
Speaker 3: ironically that they converge on the same forms of statecraft
Speaker 3: and reasoning about the economy, which is quantification, target setting, calculation,
Speaker 3: risk calculation, the idea that we don't live in a
Speaker 3: uncertain world, but we live in a computable world. And
Speaker 3: also that if you create systems according to this, as
Speaker 3: it were, the science, then enterprises businesses will only behave
Speaker 3: in a rational, socially productive manner. And the irony of
Speaker 3: all of this is that what hyperneoliberal states like the
Speaker 3: UK and the US produce is Soviet state failures in
Speaker 3: capitalist form.
Speaker 1: Late Soviet Britain tells me Soviet Union had problems, especially
Speaker 1: in its late years, because then it went into collapse.
Speaker 1: And if you are after six and a half years,
Speaker 1: concluding this is where Britain is now, you are saying
Speaker 1: we are heading towards collapse. But sure the country has problems,
Speaker 1: but it's also democracy and as far as I know,
Speaker 1: collapse isn't coming.
Speaker 3: I certainly hope collapse isn't coming. Faith in democracy is
Speaker 3: extremely weak at this point. I think it's fair to
Speaker 3: say it's weaker than it has been than at any
Speaker 3: point since the creation of universal suffrage in the UK.
Speaker 3: And it's an important question as to why that is.
Speaker 3: And the argument I make in the book is that
Speaker 3: what has really changed significantly is that the mainstream parties
Speaker 3: in Britain over the last forty five years have all
Speaker 3: more or less adhered to a single economic blueprint. There
Speaker 3: are important differences between labor and the conservatives on that,
Speaker 3: but probably the most important distinction within it is between
Speaker 3: so called Camp one and Camp two, or a first
Speaker 3: burst world or second best world neoclassical economists. And let
Speaker 3: me explain what I mean by that. So, if you're
Speaker 3: in the first best world, those positions tend to assume
Speaker 3: that the more the state withdrawals, the more the market
Speaker 3: is a perfect active mechanism, that individuals within market systems
Speaker 3: are basically rational, that we can navigate our way round
Speaker 3: highly competitive markets, and that this is the supremely efficient
Speaker 3: system of allocation in the world. And historically now that's
Speaker 3: as it were, the radical free market position. Over time,
Speaker 3: it's become an increasingly dogmatic position.
Speaker 1: And that's also from the political perspective. Margaret Thatcher here
Speaker 1: in the UK and Ronald Reagan in the US in
Speaker 1: the nineteen eighties absolutely trying to bring what is labeled
Speaker 1: as neoliberal economics to the political sphere.
Speaker 3: That's right, they're the radicals in neoclassical economics, but the
Speaker 3: mainstream position is not really. The most mainstream economists who
Speaker 3: work in companies and government, treasury and so on, tend
Speaker 3: to be so called second best world economists, and they
Speaker 3: are are more skeptical of the idealized image or even
Speaker 3: the possibility of perfectly efficient markets, perfectly rational individuals. However,
Speaker 3: they maintain the basic methodology, which is the idea that
Speaker 3: using mathematic or modeling and argument from assumption that might
Speaker 3: be formal prose argument or it may actually use mathematics.
Speaker 3: Their assumption is that that methodology is incredibly useful for
Speaker 3: figuring out how markets fail. So what they're interested in
Speaker 3: is using the ideal types, as it were, the perfect markets,
Speaker 3: the perfectly informed individual as a heuristic device as a benchmark,
Speaker 3: so that you can then develop theory of why markets
Speaker 3: will fail.
Speaker 1: In practice, the Tacher era, you get a ton of
Speaker 1: privatization because that's the goal of that station out of
Speaker 1: the way, right, and the water companies are privatized, and
Speaker 1: you know, we know what happened to the sewage problem.
Speaker 1: As a result, railways are privatized. Utilities parts of them
Speaker 1: start to get privatized, the power utilities. Then come the
Speaker 1: labor years and they realize not all of that privatization
Speaker 1: was good, or there are things that the economy hasn't
Speaker 1: been considering, like greenhouse gases. You know, labor in the
Speaker 1: later years puts a price on carbon on coals specifically
Speaker 1: to try and include what later on economists Nicholas turn
Speaker 1: labels the greatest market failure, which is taking greenhouse gas
Speaker 1: emissions outside the economic system, clearly when it has an
Speaker 1: impact on the economic system. So they try and fix
Speaker 1: these market failures. But what you're saying is they're still
Speaker 1: trying to get back to this perfect world of perfect
Speaker 1: rational people operating in a perfect market, and that would
Speaker 1: be better for everybody. So there's really not that much
Speaker 1: difference between the political economy of labor and conservatives over
Speaker 1: the last forty five to fifty years.
Speaker 3: That's very nicely set out. That's exactly right. And the
Speaker 3: point I want to make is that labor and social
Speaker 3: democratic parties more generally. This is true of the New
Speaker 3: Democrats in the US, it's true social democratic parties really
Speaker 3: across Europe and beyond found it very appealing the idea
Speaker 3: that you could have this kind of technical science of
Speaker 3: how you would improve markets, that you would get the
Speaker 3: best of markets and states, that you would use the
Speaker 3: state only in these efficient ways of mending market failures.
Speaker 3: But the point I make in the book is that
Speaker 3: that's a confusion of something that is logically valid with
Speaker 3: something that you can actually reproduce in the social world,
Speaker 3: because the fallacy is that by mending a market failure,
Speaker 3: you're taking society closer towards the efficiency horizon of a
Speaker 3: perfectly complete market or a perfect system of allocation. And
Speaker 3: the point I make in the book is that's the
Speaker 3: Soviet fallacy too. It's the high modernist fallacy that we
Speaker 3: live in a computable world and perfect efficiency is humanly possible.
Speaker 1: If we get all the information, we'll make the right
Speaker 1: decisions as a result. So talk me through a failure
Speaker 1: that may explain it. The water utilities here have been privatized.
Speaker 1: They have been pretty profitable for the shareholders who then
Speaker 1: took on the ownership of these utilities. Add the cost
Speaker 1: clearly of service to people because we have sewage in
Speaker 1: freshwaters and we have a ton of leaks of fresh
Speaker 1: water into the pipe system which has been been fixed.
Speaker 1: How exactly to camp one Camp two thinking lead to
Speaker 1: a corporation a public good that has to be a
Speaker 1: regulated monopoly if it has to be privately owned or
Speaker 1: just a state owned company, because you can never have
Speaker 1: competition there happen.
Speaker 3: So the sort of idealized version is that markets are
Speaker 3: always functionally and morally superior to the state because instead
Speaker 3: of having the fear being that you would have this
Speaker 3: kind of monopoly state that would set prices for a
Speaker 3: nationalized water system that it would probably overinvest, that it
Speaker 3: would be this kind of misallocation of resources that a
Speaker 3: market system of supply and demand would somehow resolve in
Speaker 3: a more efficient way, so the assumption being that market
Speaker 3: provision will somehow be more alecatively efficient. The trouble with
Speaker 3: things like water and natural resources like that is that
Speaker 3: they are natural monopolies in terms of provision and supply
Speaker 3: and the networks that go with it, and so on
Speaker 3: and so forth. But the issue was also that the
Speaker 3: assumption is that firms of all sizes are as it
Speaker 3: were productive stewards of the real economy, so that even
Speaker 3: if you had a monopoly firm, the discipline of its
Speaker 3: wider participation in markets would lead it to invest in
Speaker 3: a rational way for the long term. This isn't something
Speaker 3: that's very easy to describe within neoclassical modeling. So the
Speaker 3: short termism of shareholders and the idea that they don't,
Speaker 3: as it were, think in universal welfare improving terms when
Speaker 3: they think about returns is something that seems to have
Speaker 3: been missed. But it's been a fairly fatal mistake for us.
Speaker 1: So it's a government failure here. What could the government
Speaker 1: have done differently to actually make it work?
Speaker 3: So this brings us to the second best world right
Speaker 3: where these kind of contractual failures or regulatory failures. The
Speaker 3: assumption is that there must be something in the incentive
Speaker 3: framework that is inadequate, so you correct the incentive framework.
Speaker 3: And that's logical, that makes perfect intuitive sense. So you
Speaker 3: try and do that. You create targets, or you create
Speaker 3: certain incentives or even disincentives, so you have the threat
Speaker 3: of five means for example, or you demand more information.
Speaker 3: There are all kinds of things you can do to
Speaker 3: try and sort of correct the framework. What neoclassical models
Speaker 3: of that cannot begin to describe, though, is the power
Speaker 3: relationship between a monopoly provider and a government who will
Speaker 3: be held ultimately legally, fiscally and politically liable for the
Speaker 3: non delivery of that service. So what we see in
Speaker 3: real historical time is that the British government tries to
Speaker 3: exert a fine and the regulator makes kind of rude
Speaker 3: noises to the company, and the company says, well, we
Speaker 3: realize we've miscalculated in some way and we would pay
Speaker 3: the fine, but that would rebound on higher bills or
Speaker 3: it will restrict our capacity to invest. And it's the
Speaker 3: investment famine that's been so damaging over time to the
Speaker 3: nature of the fundamental assets like the non building of
Speaker 3: reservoirs in the UK case. So government tends to retreat
Speaker 3: because it is caught between a rock and a hard place.
Speaker 1: But is there something that you see or something that
Speaker 1: you can see in history in the late Soviet Union
Speaker 1: that you are seeing in today's Britain.
Speaker 3: Yeah. I think there are concentrated corporate interests as they
Speaker 3: were in the old enterprise planning system of the Soviet Union,
Speaker 3: that kind of military industrial complex if you like, of
Speaker 3: the Soviet system. But I guess the British system would
Speaker 3: be a mix of, as it were, the least socially
Speaker 3: constructive corporate, financial and fossil fuel interests who are absolutely reactionary,
Speaker 3: who would rather dig in politically, even if it means
Speaker 3: the overthrow British democracy. That like corporate interests and fossil
Speaker 3: fuel interests supporting Trump in the US, they would rather
Speaker 3: back an authoritarian to sustain their economic and financial privileges.
Speaker 3: Then admit that those privileges have occurred at the exclusion
Speaker 3: of social cohesion and a sustainable form of economic development,
Speaker 3: and it's time that they were readjusted and changed and
Speaker 3: effectively broken up.
Speaker 1: It leads to frustration among the public and a desire
Speaker 1: for a solution, and the rise of populism. There is
Speaker 1: Farage in the UK, Trump in the US, Maloney in Italy,
Speaker 1: More in India, Aduan in Turkey. Why is it that
Speaker 1: their message lands so well? Why is it right wing
Speaker 1: populace and not so much lefting populist who get their
Speaker 1: message out? Why isn't there like a climate populist.
Speaker 3: Well, there's again a slightly horrifying analogy with the Soviet system.
Speaker 3: In the Soviet system, you had decades of trying to
Speaker 3: mobilize people according to Marxist Leninist economic promises right that
Speaker 3: in the Soviet space, economies would become more and more wealthy,
Speaker 3: more and more and more fraternal, and ultimately the state
Speaker 3: would wither away and lead to communism, which was like
Speaker 3: an Edenic condition of a spontaneously for eternal and equal
Speaker 3: and fair and just and happy society. Right, The thatch
Speaker 3: right promise is never that extreme, but it is a
Speaker 3: promise of the Reagan and the Thatcher revolutions that by
Speaker 3: removing the states, not completely, but by rolling back the
Speaker 3: post war state, by rolling back social democratic values, that
Speaker 3: all boats would rise on a rising tide continuously and
Speaker 3: so we had decades of great economic optimism, but then
Speaker 3: you get the global financial crisis, which is pretty cataclysmic
Speaker 3: in terms of the legitimacy and credibility of this system.
Speaker 3: And that creates a pretty fundamental problem for neoliberal political
Speaker 3: parties after the global financial crisis, which is, how do
Speaker 3: you continue to legitimize a materialist utopia in non economic terms?
Speaker 3: So you do what the Soviets did, and what the
Speaker 3: Soviets did in the nineteen eighties was increasingly moved to
Speaker 3: nationalist forms of mobilization and racism, so ethnic mobilizations, ethno
Speaker 3: nationalist mobilizations, and that's what you're also seeing on the
Speaker 3: neoliberal right. It's what happened to the Republican Party in
Speaker 3: the US, it's what happened to the Conservative Party. And
Speaker 3: I think part of the appeal of ethno nationalist and
Speaker 3: racist politics for political parties that don't want to change
Speaker 3: the economic paradigm fundamentally is you can make huge expansive promises.
Speaker 3: You can, as it were, create combat tasks that replace
Speaker 3: the old economic combat tasks. You can create enemies foreign
Speaker 3: and domestic. You can mobilize people, you can divide your societies.
Speaker 3: It's a wedge issue. And you can do all of
Speaker 3: this without making a lot of economic promises except that
Speaker 3: things will get better because instead of dealing in an
Speaker 3: honest way about the failures of the economic paradigm of
Speaker 3: the last forty five years, it's how much easier to
Speaker 3: blame it on immigrants or excessive immigration, to resurrect great
Speaker 3: task historic injustices like the.
Speaker 1: Or net zero by twenty fifty.
Speaker 3: This is fascinating to me that net zero instead of
Speaker 3: taking the science seriously as natural science, but because it
Speaker 3: had become infected by socialism, right, that socialism had killed
Speaker 3: the entrepreneurial spirit of the West. That's the argument, and
Speaker 3: the net zero a socialism argument is a kind of
Speaker 3: recalibrated version of that. So it's not that there's an objective,
Speaker 3: empirically verifiable reason to be pretty critical about our current
Speaker 3: economic status. So no, it's a socialist conspiracy. So zero
Speaker 3: is particulated by right wing interests who wish to preserve
Speaker 3: the privileges that they've gained, particularly obviously sort of carbon
Speaker 3: fossil fuel interests wish to maintain subsidy and privilege and
Speaker 3: so on. To reconstitute that argument that this isn't you
Speaker 3: know this science is this is just socialism under a cloak.
Speaker 1: Join us after the break for more of my conversation
Speaker 1: with Professor Abby Innes, author of Late Soviet Britain. Thank
Speaker 1: you to everyone who has written a review of Zero recently.
Speaker 1: We appreciate all of them and please keep them coming. Recently,
Speaker 1: Sheila wrote Zero's crystal clear reporting presented with reflection and serenity,
Speaker 1: must be the best climate crisis information available.
Speaker 2: Thank you, Sheila.
Speaker 1: In the Climate Circles, one diagnosis of the problem that
Speaker 1: has gained traction recently is that governments, whether left or right,
Speaker 1: have made it harder to build things. Infrastructure everywhere is creaking. Yeah,
Speaker 1: it's private companies sometimes that are actually responsible for that infrastructure,
Speaker 1: like the sewage system here, but it's really governments and
Speaker 1: their overburdened regulation that has made it obstructionist rather than
Speaker 1: rules that came from the right place. At one point,
Speaker 1: this is broadly called the abundance agenda, taken off in
Speaker 1: the US a lot, and the solution is, if only
Speaker 1: there were fewer regulations in place, we will all have
Speaker 1: clean energy, healthy world that we all want to live in.
Speaker 1: And the left could actually deliver on the promises that
Speaker 1: the left has made for decades. Now make it concrete.
Speaker 1: From a climate perspective, it's the idea that even though
Speaker 1: Joe Biden signed what was the US's biggest climate bill,
Speaker 1: the Inflation Reduction Act, in twenty twenty two, by the
Speaker 1: time the twenty twenty four election rolls around, very little
Speaker 1: has been built, not much of the money has been spent.
Speaker 1: People haven't seen the benefits. So no wonder Trump gets elected.
Speaker 1: Do you think that diagnosis of the malays is right?
Speaker 3: It's a great question. I think I'd adjust it slightly,
Speaker 3: which is, we have to ask where the regulatory brittleness
Speaker 3: and complexity came from. And again it's one of the
Speaker 3: points of Soviet analogy. So what Soviets and neoliberals both
Speaker 3: do is try and set up their idealized system of coordination,
Speaker 3: whether it's the state and command planning in the Soviet
Speaker 3: system where it's via increasing market power. But what happens
Speaker 3: next in both systems is that the promises of theory
Speaker 3: don't play in practice. So what do you do? What
Speaker 3: mechanisms do you have to try and improve the situation
Speaker 3: where you have the state and second best world Neoclassical
Speaker 3: economics says, what you need to do is regulate them
Speaker 3: in the forms that would allow them to, as it were,
Speaker 3: conform more to market theory. So that's what we do.
Speaker 3: And it's also what the Soviets did in their original
Speaker 3: central planning system, which is when things don't work the
Speaker 3: way you're supposed to, what you try and do is
Speaker 3: build this exo skeleton of more targets, more metrics, more
Speaker 3: output planning. And the irony in the UK case is
Speaker 3: we have, after forty five years of marketization, we have
Speaker 3: a state that is more centralized, more bureaucratic, more rigid,
Speaker 3: and more expensive than it has ever been historically.
Speaker 1: It has more people working for it, the government spends more.
Speaker 1: That's when toucher to power.
Speaker 3: That's right.
Speaker 1: This is true not just in the UK, but so
Speaker 1: in the US, where Reagan promise there will be small government,
Speaker 1: government is bigger today and spends way more now, and
Speaker 1: apart from the one term of Clinton when deficit actually fell,
Speaker 1: it has been rising all throughout. So but the answer
Speaker 1: of the abandonce agenda that you just need few regulations,
Speaker 1: you don't think that's right.
Speaker 3: So a simple a kind of unit, you know, one
Speaker 3: dimensional solution like deregulate.
Speaker 1: It's just.
Speaker 3: Given where we are. I think you just get yet
Speaker 3: another wave of unanticipated and mostly negative consequences.
Speaker 1: There was a simplistic idea in a way that was
Speaker 1: running camp on Camp two saying we can create a
Speaker 1: perfect market economy showing the size of the government, and
Speaker 1: then everybody will be happy. That's not worked out. So
Speaker 1: now some people are coming in and saying, well, what
Speaker 1: we need is we've just got too many regulations. Cut
Speaker 1: those regulations, we will have a solution. But you're saying,
Speaker 1: simplistic thinking is what got us here, It cannot get
Speaker 1: us out of the substituation. That's right, What should we
Speaker 1: be doing?
Speaker 3: I think what's incredibly important, and I suppose what I
Speaker 3: was aspiring to do in the book is come up
Speaker 3: with a diagnosis of how we got here. That isn't
Speaker 3: about sort of as it were, good people and bad people.
Speaker 3: It's a lot more complicated than that. You have to
Speaker 3: make a philosophical reckoning. And the philosophical reckoning is do
Speaker 3: we think we live in a computable world or do
Speaker 3: we think we live in a world of inescapable uncertainty.
Speaker 3: Do we think the human economy is more like a watch,
Speaker 3: or do we think it's more like a garden. What
Speaker 3: sets the natural science is apart, however, is that outside
Speaker 3: the social world it's easier to It has proved easier
Speaker 3: to isolate generative mechanisms in certain systems. So having discovered
Speaker 3: things like thermodynamics or gravity, or the ways certain chemical
Speaker 3: compounds combined, we have actually discovered natural laws that are
Speaker 3: remarkably robust and that give us a basis further theorizing.
Speaker 3: What makes that much more difficult in the social world
Speaker 3: is that there's far greater contingency. Those natural laws don't
Speaker 3: exist because the agents in the social world are themselves imaginative.
Speaker 3: We're always in the social sciences trying to interpret a
Speaker 3: world of people who are themselves constantly reinterpreting the world
Speaker 3: and how they should behave in it. And that level
Speaker 3: of contingency, that level of complexity, and the fact that
Speaker 3: the world is always becoming something else socially means that
Speaker 3: we need to make, as it were, a far more
Speaker 3: radical shift than simply a shift in one form of
Speaker 3: regulation or deregulation. We need to comprehend the fact that
Speaker 3: we don't live in a computable world. And once you
Speaker 3: dec side that once you recognize that, it radically, I think,
Speaker 3: changes the way you think about the economy and the
Speaker 3: repertoire of potential systems and methodologies that you might use
Speaker 3: within it.
Speaker 1: Are there economies in the world that aren't falling for
Speaker 1: this problem as the UK and the US have done.
Speaker 3: I think you're beginning to see a lot of really
Speaker 3: interesting experimentation. So when it comes to circular economy ideas,
Speaker 3: for example, in those countries you know, Sweden, Holland come
Speaker 3: to mind, and you look at Copenhagen or even Barcelona
Speaker 3: or Amsterdam where you still have significant sort of planning
Speaker 3: capacity within those local city authorities that they're trying to
Speaker 3: move quite far in that circular economic infrastructural design, but
Speaker 3: of course for already built cities that can be quite difficult.
Speaker 3: I mean, I think the fact is you're seeing lots
Speaker 3: of experimentation, but it's eclectic as it were. So if
Speaker 3: you took the idea of public banks, someone like Thomas
Speaker 3: Mahoir has written a wonderful book on public banks and
Speaker 3: is part of a big project with the Canadian government
Speaker 3: looking at this. Public banks are much bigger players globally
Speaker 3: than normal financial journalism tends to credit, and I think
Speaker 3: there's a lot of potential in public banks to mix
Speaker 3: concessionary and non concessionary lending to encourage innovation at the
Speaker 3: not just the firm level, but the techological level and
Speaker 3: the local authority level. Germany has created i think, something
Speaker 3: like ten new public banks in the last decade. So
Speaker 3: I think you are seeing countries understanding that short term
Speaker 3: financial horizons are just far too short, and what kind
Speaker 3: of financial organizations would extend those horizons, and public banks,
Speaker 3: public regional development banks is obviously a way to go,
Speaker 3: and lots of countries globally have experimented that very productively,
Speaker 3: I think.
Speaker 1: So. I wrote a book called Climate Capitalism, which, if
Speaker 1: you only diagnosed on its title, yes, from a lefty perspective,
Speaker 1: that is a paradox capitalism and climate change. While their
Speaker 1: opposites capitalism caused climate change. So how can it ever
Speaker 1: solve it? Yes, if it took it from your analysis,
Speaker 1: it may fall in Camp two category for most people,
Speaker 1: which is to say you're tweaking capitalism to be climate oriented.
Speaker 1: But in fact, when I wrote the book as a journalist,
Speaker 1: my goal was to try and find examples around the
Speaker 1: world where climate solutions were scaling. Yes, they happened to
Speaker 1: be in capitalist economies, but the roots they were taking
Speaker 1: to get to those solutions were radically different. The Chinese
Speaker 1: system is the state led capitalist economy where they allow
Speaker 1: for planning for five year plans, but they also allow
Speaker 1: for hyper competition to reach those goals that the state
Speaker 1: has set. And that's what I found refreshing about your book,
Speaker 1: which is that you're not as many people who critique
Speaker 1: capitalis just dump the idea markets can never work. There useless.
Speaker 1: They've caused this problem. So think about something else and
Speaker 1: we can talk about what there's something else that they
Speaker 1: suggest which currently doesn't operate at any scale anywhere. But
Speaker 1: you acknowledge that there are parts of capitalism that are useful,
Speaker 1: that market economies or marketization of certain things can be useful. Sure,
Speaker 1: the machine model of the entire economy isn't right.
Speaker 3: And it dilutes us. It gives us a sort of
Speaker 3: baseline assumption that firms will always tend to be productive
Speaker 3: students of the real economy, and that assumption that comes
Speaker 3: out of the machine modeling of neoclassical economics is demonstrably false. Right,
Speaker 3: sometimes they are, but if you basically, do not restrain
Speaker 3: firms and drive them through regulation but also culture towards
Speaker 3: valuable social purposes. They can become incredibly negative actors within
Speaker 3: the social world. So by being utopian about them, what
Speaker 3: we've actually done is, as it were, forgotten decades of
Speaker 3: what we had learned in the pre and post war
Speaker 3: period about how socially beneficial firms could be if they
Speaker 3: were driven primarily by social purpose, but profit was a
Speaker 3: secondary priority.
Speaker 1: But if the market economy does have utility, these economic
Speaker 1: models do have utility, what are they? Where are they
Speaker 1: still useful?
Speaker 3: Again, If we think that we live in a garden
Speaker 3: rather than a watch, I'm going to keep coming back
Speaker 3: to that analogy. If we think we live in an
Speaker 3: uncertain world, then we should stop thinking in terms of
Speaker 3: efficiency and optimality in a presumptively completable machine, because those
Speaker 3: things are delusions. They are kind of god delusion, and
Speaker 3: we should think much more about, well, what are the
Speaker 3: coordinating mechanisms that we have that would allow us to
Speaker 3: be continuously adaptive, continuously resilient, continuously able to scan the
Speaker 3: horizon with the greatest number of alternative perspectives that we
Speaker 3: can muster. What's a kind of anti fragile economy under
Speaker 3: conditions of ecological collapse. And my answer to that would
Speaker 3: be the most pluralistic range of systems that you have.
Speaker 3: So that's everything. That's markets, that's firms, but firms much
Speaker 3: more driven by social purpose than profit. That's the state,
Speaker 3: but it's also well lots of different social forms, forms
Speaker 3: of cooperation, forms of coordination that are trust based rather
Speaker 3: than contract and price based.
Speaker 1: So there is a warning in your book where when
Speaker 1: you diagnose all these problems, there is clearly temptation to
Speaker 1: try and break it about create a revolution of some sort,
Speaker 1: which is what happens when you know, in the Soviet Union,
Speaker 1: when the social contract was so deeply broken that you
Speaker 1: had a revolution and then so we broke apart. But
Speaker 1: you want against revolutions because they don't end up creating
Speaker 1: the kind of solution that the revolutionaries are hoping for.
Speaker 3: I'm against revolution if we're talking whole social system revolutions.
Speaker 3: None of us can know what the correct system is
Speaker 3: because we're not God. And it is the ultimate virtue
Speaker 3: of liberal democracies that they are adaptive systems. They allow
Speaker 3: for learning from your previous mistakes, but they're only adaptive
Speaker 3: if political parties themselves don't get attached to utopian economic orthodoxies,
Speaker 3: which then stop them from learning. The other reason that
Speaker 3: I'm against revolutions is revolutions tend to have revolutionary leaders.
Speaker 3: I mean, they tend to be deeply undemocratic, and I'm
Speaker 3: a democrat. I think the guy who runs a firm
Speaker 3: or a grocery, or the woman running those things, we
Speaker 3: all have a great deal of knowledge about our own condition.
Speaker 3: In fact, we have more knowledge about our own condition
Speaker 3: than anyone else. And the most adaptive, resilient, and knowledgeable
Speaker 3: system is going to be one that operates in a
Speaker 3: kind of analytical pluralism in lots of different organizational forms,
Speaker 3: so that all of our knowledge is relevant. That's the
Speaker 3: most deeply democratic system. And it seems to me inconceivable
Speaker 3: that we are going to reach a form of society
Speaker 3: and economics that is compatible with the biosphere. If we're
Speaker 3: trying to impose machine systems or machine thinking or monocultural
Speaker 3: ideas on to something as beautiful and elaborate and constantly
Speaker 3: evolving and nonlinear and dynamic as the natural world, so
Speaker 3: we need to think in terms of how do we
Speaker 3: emulate that world in the way we organize ourselves. Democracy
Speaker 3: is a pretty good start. Part of what you're talking
Speaker 3: about is kind of fatalism, and I think a lot
Speaker 3: of the fatalism in among economic actors, corporate actors, you know, regulators,
Speaker 3: financial actors. Even is the idea that there's sort of
Speaker 3: cogs in a machine and they can't change the nature
Speaker 3: of that machine, and we can change it every day.
Speaker 3: Every day is different. But we need as soon as
Speaker 3: we understand that we can change it, that we break
Speaker 3: non natural economic laws, when we change our minds, when
Speaker 3: we do things differently, it opens the game in a
Speaker 3: completely different way.
Speaker 1: And the whole reading of your book is to me
Speaker 1: empowering because it says we don't have the answer, which
Speaker 1: is a temptation that so many people have to fall for.
Speaker 3: Yeah, isn't it great?
Speaker 1: There is intellectually humility in realizing their deep problems, that
Speaker 1: we have small solutions, and that all those solutions can
Speaker 1: be started to work on simultaneously, and it's not starting
Speaker 1: from zero. Some form of these exist in different parts
Speaker 1: of the economy around the world, and that they all
Speaker 1: can start to add up if we reframe the problem
Speaker 1: at the top, which needs to be addressed, but we
Speaker 1: don't need the top to go away before we can
Speaker 1: start to work on those solutions.
Speaker 3: That's exactly wonderful. I'm so happy that that's the conclusion
Speaker 3: that you drove from the book, because it is the
Speaker 3: one I reached. And also I want to point out
Speaker 3: that even in the most dramatic social revolutions of the
Speaker 3: modern era, right even in the Soviet Revolution and in
Speaker 3: the collapse of communism and in the thatch Right revolutions,
Speaker 3: we think about them as revolutions, but from one day
Speaker 3: to the next they were incremental. Right, Real people in
Speaker 3: the real world, from one day to the next are
Speaker 3: solving the problem they have on their desk with incomplete information,
Speaker 3: even if they think they're Soviet revolutionaries. And that's one
Speaker 3: of the main reasons those revolutions tend to go hey
Speaker 3: wire from day two more or less. That is the
Speaker 3: human condition. The human condition is we are all attempting
Speaker 3: to solve the problems right in front of us with
Speaker 3: incomplete information.
Speaker 1: It is true, and even on just objective metrics which
Speaker 1: we can take. You know, we live longer lives than
Speaker 1: we ever have done. We have better medicine than we
Speaker 1: have ever done, we have technologies now that can start
Speaker 1: to address the climate problem at prices that you know,
Speaker 1: we would be jealous of if we knew in advance
Speaker 1: that that could be reached. And so clearly there are
Speaker 1: tools as well available to try and solve the problem.
Speaker 1: So thank you for laying out the problems so clearly
Speaker 1: and for creating space for everybody to work on solutions.
Speaker 3: Thank you so much, it was a privilege to be asked.
Speaker 1: And thank you for listening to zero. And now for
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Speaker 1: This week, London's been a buzz with the news of
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Speaker 2: This episode was produced by Oscar boyd Our.
Speaker 1: Theme music is composed by Wonderly Special Thanks to Eleanor Harrison, Tngate,
Speaker 1: Samersadi Moses Andam Laura Milan and Sharon chen I, am Akshadharati.
Speaker 2: Back soon