The Economics of Enough: How to Run the Economy as if the Future Matters, by Diane Coyle, Princeton University Press, £16.95, March 2011.
A reasonable definition of a capitalist crisis is a situation in which all available economic policies seem only to exacerbate the problem they are intended to alleviate. In 2011, textbook examples are all around us. There is nothing that the Bank of England can currently do to interest rates which will be economically beneficial. Banks are being asked to both lend more and build up capital at the same time. Our economic situation requires consumers and governments to both spend more and spend less. Resolving such situations requires significant and arduous re-thinking of core precepts of economic policy and theory.
Diane Coyle’s The Economics of Enough is an eerily calm introduction to the severity of our situation. Chapters on our environmental and debt crises contain enough troubling data for either an outbreak of mass panic, or an overhaul of our entire political economy. Coyle reports that current healthcare and pension trends will require OECD governments to borrow an additional 5% of GDP over the next decade, on top of the current sovereign debt crisis. She calculates that tackling climate change could require individual Americans to cut their annual consumption by the equivalent of more than one month's average spending on food, which she compares to another Great Depression. And yet the Manifesto with which the book concludes centres around some comparatively timid proposals for some additional macro-economic indicators, a tweaking of consumer and business incentives, better use of the internet and vague appeals to ‘institutions’ and ‘values’.
When exploring the various dilemmas (and occasional ‘trilemmas’) in which we find ourselves, Coyle is admirably frank about the absence of easy answers or policy solutions. She is dogmatically fair in outlining both sides of every economic argument and the downsides of every policy solution. The book is partly offered as a demonstration that economists explore a wider range of topics, factoring in a greater plurality of goods and supporting a broader diversity of political positions, than their critics like to suggest. As an introduction to ‘post-autistic’ economics, as it is sometimes known, The Economics of Enough is a decent primer, even if sentences such as “Indeed economists have shown that there is a social contagion in many dimensions of life, such as obesity, crime, or suicide”, occasionally leave one wondering if autism is so bad after all.
Yet Coyle often comes across as so balanced as to appear undecided. This may be partly a stylistic limitation. One section begins with the double caveat “Two decades after the crisis of communism, capitalism seems to be in crisis. Or so it is widely believed.” What would it take for this author to share this belief? When is a ‘seeming’ crisis an actual crisis? The famous President Truman line “give me a one-armed economist” (to prevent advice in the form “on the one hand x, but on the other hand y”) has rarely been more urgent.
Every difference is split, but many of them derive from caricatured arguments. Coyle repeatedly criticises GDP as not a good enough measure of economic welfare and wellbeing, but then dishes out an equivalent rebuke to those who believe growth doesn’t matter (the latter opinion is referred to pejoratively as ‘fashionable’, a misconception which suggests Coyle might have spent too long hanging out with the New Economics Foundation). The outcome of this ambivalence is that growth ‘matters’, but isn’t all that matters. A bit like anything one cares to mention then.
Some of the more simplistic oppositions – for instance between the market and a socialist system “built on mass deaths inflicted by brutal dictators” – are erected, before being dismissed as too simplistic. Only an anarchist or a Feudal baron could disagree with the repeated assertion that both markets and governments are important. The recognition that “not all markets are immoral, but the operation of markets in recent times has become in some respects immoral” is a statement so politically cautious (and logically obvious), that it appears to be running scared of the CBI or the financial services sector. It may be a cheap shot, but more than once I wondered whether the book had been proofread through the eyes of potential clients of Enlightenment Economics, Coyle’s consultancy business.
The most frustrating thing about this book is its timidity with regards to its central theme, namely the future. At no point does she declare exactly what we’ve had enough of, except that it isn’t growth and it isn’t markets. Coyle remarks that “whatever our individual rationale, many of us do care about the future”, a statement which, on this occasion, distinguishes ‘the many’ from helpless infants, smacked-out drug addicts and the chronically depressed. Of course we care about the future! Capitalism is a system built on taking bets about the future! The question, which Coyle only occasionally edges towards, is how the future is represented, rendered calculable and acted upon.
Surely the distinguishing feature of the neo-liberal era of the past thirty years has been the spread of neo-classical economic techniques to render the future predictable, across both the private and the public sectors. The future certainly matters to everyone (or, if you prefer, to ‘many of us’) but we are currently locked into a paradigm which represents it through techniques and calculations of highly rationalist risk management. Yet aside from a brief explanation about discount rates (the economic technique used to account for delays in costs and benefits), the concept of risk scarcely features in the book. This, despite Alan Greenspan informing a Senate Committee in autumn 2008 that the “entire intellectual edifice on which modern risk management rests” had collapsed in the summer of 2007.
The inherent uncertainty of the future, and the crisis of risk management, surely invites some less market-based hypotheses and scenarios. The growing investment power of non-liberal or state capitalists (Chinese, Russian and Emirate sovereign powers) in the next fifty years is surely one of the safest bets out there. Rumours abound of public institutions (such as universities) in the West being bought outright by these new, oligarchic investors, just as has already occurred with British football clubs. Perhaps the environmental crisis (whose scale Coyle is entirely aware of) will even require Western states to borrow some tricks from command economies, and simply plan the future economy. None of these propositions is investigated, other than with a retort that we must not return to the 1970s.
Coyle’s instinct is surely the right one: we cannot continue with the models, economic theories, policies and practices that held sway between 1980 and 2008. Yet the book parades theories, evidence and argument, for instance on the transformative power of ICT and the value of social capital, that have been entirely orthodox for the best part of two decades. At times, this book is deeply and powerfully troubling, especially when reviewing the various promises that are going to be broken, with regards to debt, pensions and future generations. What forms of insurance and mutual reliance will replace (or save) these decaying institutions? What would a financial institution look like, which thought in years and decades, rather than in days and quarters? These, surely, are the sorts of question that need answering, now that we’ve had enough.