How Quickly Can We Change Our Economy?
Post 8 in a series on the 2016 Hay Festival
“The joy of tax is simply the ability of tax to create the type of society we want,” says Richard Murphy. “It can be the mechanism to deliver a better life for most people.”
At Hay Festival, Professor Murphy described his program for reorganising the economy to respond to the challenges of climate change and inequality. His prescriptions are set out in his latest book, The Joy of Tax, and many have been adopted by Jeremy Corbyn, Leader of the British Labour Party.
Murphy recommends rebuilding the tax base by reversing past tax cuts for corporations and wealthy people and cracking down on tax avoidance by multinationals. The extra tax can then be used to reorganise the economy to meet social goals.
He advocates a national investment bank to invest in new infrastructure, decarbonise the economy and invest in new technologies such as robotics. These investments would create many new jobs.
Jeremy Corbyn, Leader of the British Labour Party, adopted many of Richard Murphy’s proposals.
A key tool in Murphy’s program is Quantitative Easing or QE. QE is economist jargon for printing money. Murphy recommends “People’s Quantitative Easing” instead of QE to rescue banks, as happened during the global financial crisis. Governments can safely print money to create jobs as long as there are people wanting work. No more money would be printed after full employment is achieved. He sees his program as strongly pro-business, as opposed to the current dominant ideology of neoliberalism, which benefits big business but hurts small business.
During the session at the Hay Festival, Murphy focussed on his program. In a subsequent post on the New Weather Institute, he looks at how rapidly our economy can be changed to meet the challenges of climate change and inequality. He says that three things are needed for rapid change:
- Recovery from a crisis, eg, from the Great Depression
- A new technology that demands change, eg mass produced goods
- A major innovation in economic thinking, eg the post-war Keynesian consensus.
After the economic crises of the 1970s, another change occurred, with increasing computerisation and the Thatcher-Reagan embrace of neoliberalism in the 1980s.
What are the prospects for change now? First, we have experienced a crisis, with the failure of neoliberalism in the GFC. Second, there is new technology. “It is green, it is sustainable, it is radically different and it is at least in part robotic. It is demanding massive innovative change now, and it will happen.”
Third, Murphy believes that now, for the first time, we really understand money and that this validates his program of using QE, tax and a national investment bank. If that program is implemented, he says, the transition needed to meet current challenges could be quite rapid.
The Hay Festival Site
Note: This was the second of three Hay festival sessions on how quickly we can change to meet the challenges of climate change and global inequality:
- How quickly can we change … culture? – see my report in previous post
- How quickly can we change …economics?
- How quickly can we change … the built environment?
I was unable to attend the third session, but there is a summary on the New Weather Institute website. The consensus was that the technology is all there to meet the challenges, but “the political class in Britain is unlikely to take the steps we need to have a built environment that doesn’t fatally consume our natural resources. It’s up to us. The more of it we do, the easier it will get and finally the politicians will get it too.”
Does this conclusion also apply to Australia?
The Echidna and the Fox 
Thanks for this interesting post. I do think that in the UK we need a more pro-active industrial policy to promote the technologies of the future. The new UK government has already claimed it will do this in some way, but it remais not be seen whether future policy will match the rhetoric. In my view it should aim to work with the private sector, identify particular sectors of industry that are likely to prosper and support their growth. From R&D that promotes innovation more generally to policies which target particular sectors, there is great potential in this. But under capitalism, which is driven by profitability, the bottom line cannot be neglected. Even a social democratic society in which the public and private sectors work together to co-create widely shared prosperity (at least in theory), there must be limits to tax rates and public spending. Having said that, these are not just economic but political too, so different societies will be able to sustain different tax ‘burdens’ depending on how far they go in accepting more state involvement in the development of the economy and society, as well as providing necessary public goods and a welfare state.
Yes, definitely – a more proactive policy to promote future technologies is needed. In my country, Australia, an innovation policy was launched with much fomented excitement about an “ideas boom”, but it contained only token funding for co-investing in firms developing technology from our universities and research institutions. At the same time funding in scientific and other research, and in the arts, is being drastically reduced. Thanks for your comment – I’m pleased to have discovered your website.