Paul Smyth.

Paul Smyth examines the recent UK report, outlining a ‘Plan for the New Economy’.

Paul Smyth

One of the UK’s leading non-party think tanks, the Institute for Public Policy Research (IPPR), established a Commission on Economic Justice in 2016, after Britain’s vote to leave the European Union, to examine the challenges facing the UK economy and make practical recommendations for reform.

Inspired initially by the Archbishop of Canterbury, Justin Welby, the Commission on Economic Justice consulted in the UK with academics, business, and labour groups, as well as with civil, church, and community networks and individuals. Its final report, Prosperity & Justice: A Plan for the New Economy, with its 70 Recommendations, was published by Polity Press, Cambridge in September 2018, and heralds a new phase in our conversations about social policy and the economy.  

When the Australian Catholic Bishops launched their 2017 statement on the economy, Everyone’s Business, advocates of values like ‘inclusion’ and ‘sustainability’ often had trouble engaging with a mainstream economic policy language in which ethics had been reduced to an unquantifiable sludge at the margins of the market economy. Wealth was about market efficiency; justice an optional extra. 

Filling the moral vacuum

Undoubtedly, the new social ethics of the Bishop’s Statement requires a new economic policy bottle. IPPR’s ‘new economic paradigm of sustainable and inclusive growth’ may well signal a restoration of ethics to the centre of economic debate. If so, it will only be repeating the achievement of the IPPR’s Commission on Social Justice (1994), which anticipated so much of the ‘Third Way’ social investment and social inclusion agenda of the early 21st century.

Joseph Stiglitz. BBC World Debate. International Monetary Fund. flickr cc.

The moral vacuum created by the latter-20th-century construction of economics as a ‘science’ has long been the butt of academic critique, but only lately has it become an issue for the mainstream. Addressing the role of the welfare state in reducing inequality, Joseph Stiglitz, in his 2018 chapter on ‘The Welfare State in the Twenty-First Century’ (in J Ocampo and J Stiglitz (eds), The Welfare State Revisited, Columbia University Press), rehearses supporting economic arguments. He even invokes Rawls’s theory of social justice, before concluding, tellingly, ‘It even goes beyond standard arguments for social justice. We must ask ourselves: what kind of society do we want to live in, and what kind of individuals do we wish to be?’.

In this vein, M Mazzucato’s brilliant advocacy for the ‘entrepreneurial state’, in his 2018 book, The Value of Everything, lacerates a neoclassical economics which knows ‘the price of everything and the value of nothing’.  It is this assertion of the social or ethical embeddedness of markets which is the fons et origo of IPPR’s new economic paradigm. In its ‘New Vision’, ‘the economy should give expression to our values, not be the place that we leave them behind’. 

The case for change in our focus

Social embeddedness is of course a concept long familiar to social policy researchers expounding classical Polanyian justifications for the welfare state. The notable thing about the IPPR report is that it refers not to the welfare state, but to the economy. 

Moreover, it argues that if our concern is social policy, then it is the economy which should be of central concern: ‘if the core processes of income and wealth distribution within the economy are generating widening inequalities, taxes and benefits can only ever play catch up’. The role of the welfare state receives only one page in the Report.

Of course, this switch of focus only happens when there is deep dissatisfaction with the ‘core processes’. Here, the Report offers a compelling snapshot of the case for change in Britain, a scenario increasingly familiar in comparable countries, including Australia. It highlights broad stagnation of incomes, ‘nineteenth-century-style exploitation’ in the labour market, rising poverty, and inequality with geographical divides, all creating ‘islands of prosperity in a sea of injustice’.

The policy analysis highlights a systemic over-reliance on the financial sector, unsustainable reliance on debt-fuelled consumption and industrial decline, and poor performance in terms of investment, research and development, productivity, and trade. 

What is most interesting about the detailed policy responses is the new mix of Keynesian with Schumpeterian strategies. The former reflects the familiar macro-critique of Austerity, whilst the latter introduces new emphases on an ‘active and more purposeful state’ working through devolved administrative structures to accomplish ‘Missions’ concerned with the directions and outcomes of the economy. These concepts of ‘active states’ and ‘Missions’ form the core of IPPR’s proposals for ‘wiring social justice into the economy’. 

‘Missions’ reflect a society’s values, and IPPR grounds its analysis on a welcome discussion of values. Our relationship to the economy, it proposes, is not just about income, but about our ‘Common Good’. This can include not just ‘social welfare’, but a strong democracy, trust in one another and our institutions, fair and cohesive institutions, scientific and cultural achievements, natural environments, parks, public spaces, and so on. 

Contra neoliberalism, this invites us to see that “there is such a thing as society, that it can be in a better or worse condition and this affects how we feel about ourselves’. 

Rebalancing power across the economy & society

Within the Common Good, a key value is ‘Social Justice’ which, applied to contemporary UK society, should have six elements: no absolute poverty, fair workplaces, no groups systematically excluded, inequalities reduced over time, no places left behind, and a sustainable environment preserved for future generations.

IPPR emphasises that the Common Good is as much about process as about principle, and this will require a rebalancing of power across the economy and society. Here, it canvasses ideas such as revaluing the positive roles of state and civil society alongside markets, stakeholder rather than shareholder models of governance, promotion of cooperatives, an increased role for trade unions, cooperation between employers and employees, a national investment bank oriented to long-term planning, and a National Economic Council.

Overall, the success of this report rests on its ability to identify the new waves of economic and social research, which are engaging effectively with the pressing social questions unanswerable in the receding paradigm. 

Of central importance is the reopening of the dialogue on the Common Good; and here, it is noteworthy that IPPR points readers to the importance of Catholic Social teaching, in particular Pope Paul VI’s concept of ‘authentic development’. Building on IPPR, the Church might well launch its own process of discerning what that might mean for Australia today.

Paul Smyth is Honorary Professorial Fellow, School of Social Political Sciences, University of Melbourne.

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