Tony Judt’s commentary on economic and social stresses

In cleaning out old papers in my home office, I just rediscovered a great book review from Tony Judt, his critique of Robert Reich’s Supercapitalism. Penned for publication in December 2007, Tony diagnosed developing economic and social stresses. He foresaw that the conditions then present could not endure indefinitely. Sadly, he was right. The financial crisis of 2007 morphed into the Great Recession. There followed a period of slow growth and increasing political tension in the advanced economies. Social cohesion weakened as inequalities deepened. Perhaps not suprisingly, many voters became more receptive to suggestions for radical solutions challenging the established order. And, then 2016 happened: Brexit, Trump, and nationalist political turbulence in the EU, among other developments.

Economic and social stresses, plus elements of a solution

Already in 2007, Judt suggested that we act to head off the emerging stresses. He noted that there were important lessons from an earlier time of economic uncertainty in the 20th century. Referring to those living a few generations ago, Judt says,

“We may discover, as they did, that the universal provision of social services and some restriction upon inequalities of income and wealth are important economic variables in themselves, furnishing the necessary public cohesion and political confidence for a sustained prosperity — and that only the state has the resources and the authority to provide those services and enforce those restrictions in our collective name. […] We may find that a healthy democracy far from being threatened by the regulatory state, actually depends upon it: that in a world increasingly polarized between insecure individuals and unregulated global forces, the legitimate authority of the democratic state may be the best kind of intermediate institution that we can devise.”

Judt contrasted such a model with the alternative presumably being rolled out in the US as of 2007. The alternative included untrammelled economic freedom, accompanied by fear and insecurity, reduced social provision and economic regulation. It also included “ever-extending governmental oversight of communication, movement, and opinion.” While history had shown the advantages of balanced, market-oriented economic policies, the alternative approach failed to recognise the importance of social objectives in the successful operation of those policies. Even free markets need an appropriate rule book to ensure optimal outcomes for society as a whole.

Peering into 2017

As the year 2016 grinds to a close, I look out from the top of Greenwich Park hill with some trepidation. Economic and social stresses remain clearly evident. Unfortunately, Judt passed away in 2010 and is not here to update his assessment. I would love to hear his lessons from 2016.

Reflecting on the prospects for 2017, it seems clear that part of the solution should include Judt’s steps to improve social cohesion. Support for those dislocated by globalisation and technological change is needed. This might improve the chances to pursue successfully a more balanced and coherent approach to economic policy. As demonstrated by some Scandinavian countries in recent years, availability of such support can help to reduce the resistance to a positive, market-oriented reform agenda.

It may be that some positive, piecemeal actions are taken due to the current populist political movements in the US or EU. But, these are unlikely to prove adequate. We need more a more coherent, systemic approach. A first step might be to shift the objective from simply protecting what we already have. Why not set a more ambitious target of broad-based, increasing economic prosperity? A more inclusive and open economic strategy, including adequate social protection and improved educational opportunities, might take us further. By better mobilising the full economic potential of society, we improve our chances for improved future well-being.

Reference: Tony Judt, 6 December 2007, “The Wrecking Ball of Innovation”, in The New York Review of Books, Vol. 54, No. 19, a review of “Supercapitalism: The Transformation of Business, Democracy, and Everyday Life”, by Robert B. Reich; .

The view from Greenwich Park, London

The view from Greenwich Park, London