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David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.
In the library of the Treasury, there is an ancient copy of one of Keynes’ pamphlets, and it has been scrawled over by Treasury officials with the words ‘bankruptcy’ and ‘insanity’.
Keynes was challenging the Treasury idea, which seems to have been in their DNA since time immemorial, that the way out of recession is to get people to save not spend. The money has to be in the banks, ready to lend.
Keynes’ view was that, in the end, this kind of puritanical retrenchment led to death – “a peregrination in the catacombs with a guttering candle”. But we don’t have to worry because that was in the 1930s. Or do we?
A little bird told me recently that the attitude in the Treasury has reverted to type faced with the recession and deficit. Once again, the official view is that people should be encouraged to save not spend, so that the money is available for lending.
Since Keynes’ day, there are two extra problems with this, and they are not small. There are hardly any banks left, and those that survive have long since dismantled the infrastructure they need for local lending. Their attention is elsewhere. They can’t do it.
So when the Treasury persuade George Osborne to raise VAT to 20 per cent, this is the agenda: don’t spend, save. Unless he and Cable and Danny Alexander can stand up to the Treasury, and tackle this hideous and ancient mistake, I fear it may be the peregrination in the catacombs for us.
Anna Coote is Head of Social Policy at nef.
Imagine a new ‘standard’ working week of 21 hours. Not 35 hours, or a four-day week, but 21 hours or its equivalent spread across the calendar year.
How would it feel to wake up on a chilly February morning? More time in bed, more time with the kids, more time to read, see your mum, hang out with friends, repair the guttering, make music, fix lunch, walk in the park. Whatever you need or want to do.
Economist John Maynard Keynes hoped that by 2000, we'd be working 15 hour weeks.
Outlandish? Well, it’s less radical than the vision of John Maynard Keynes. He imagined a 15-hour week by the beginning of the 21st century, because he thought we’d no longer have to work long hours to satisfy our material needs.
His forecast was wrong, not least because our definition of material needs has grossly expanded. In fact, the ‘normal’ working week lengthened in the last decades of the 20th century, with two-adult households adding six hours a week to their combined paid workload. Many of us work longer and harder to earn enough to buy what we need (or think we need), to keep or improve our place in the world, or simply to make ends meet. Meanwhile, others have too little employment, or none at all.
But Keynes was right to envisage a need to think differently about how we use and value time. In the 21st century, moving towards much shorter hours of paid employment could be a critical factor in heading off environmental, social and economic catastrophe. In the developed world, most of us are consuming well beyond our economic means, well beyond the limits of the natural world and in ways that ultimately fail to satisfy us.
Economic growth has depended on a volatile mix of depressed wages and escalating material consumption. So workers have borrowed to consume what they cannot afford and now the credit bubble has burst. Politicians are urging us all to shop harder to help the economy recover and grow. Yet natural resources are critically depleted by high-rolling consumerism and the climate clock is ticking. While some of us accumulate more and more material goods, others have less and less of life’s essentials.
We have even managed in our increasingly unequal society to divvy up time as an unequal commodity. Under-employment as well as unemployment is prevalent in low-income groups. Nearly 2.5 million are currently unemployed. Nearly one million worked part-time in the third quarter of 2009, because they could not find a full-time job, a rise of 30,000 over the previous quarter and up 30 per cent since the 2008.
A more equal distribution of working time would have clear environmental benefits. Leading economists are turning their attention to how we can manage with little or no economic growth, on the ground that continuing growth in the developed world cannot be ‘decoupled’ from carbon emissions sufficiently or in time to avoid disastrous climate change. Tim Jackson, Peter Victor and others have identified shorter working hours as one way to reduce labour and output overall without intensifying hardship or widening inequalities: share out the total of paid work more evenly across the population.
A 21-hour working week is a long way from today’s standard of 40 hours or more, but not so far-fetched when you consider the infinitely varied ways in which we actually spend our time. On average, people of working age spend 19.6 hours a week in paid employment and 20.4 hours in unpaid housework and childcare. Of course these averages mask huge inequalities, both between women and men and between income groups – not only in how they use their time, but also in how far they can control it. Bringing the standard nearer to the average could help to iron out these differences.
Moving towards a standard of 21 hours could help to redistribute unpaid as well as paid time – for example by making more jobs available for the unemployed and giving men more time to look after their children.
There’s nothing natural or inevitable about our nine-to-five, five-day week. It’s just a relic of the industrial revolution. It can be changed. When the state of Utah in the US introduced a four-day week for state employees (without reduced hours, but giving everyone a three-day weekend), more than half said they were more productive and three-quarters said they preferred the new arrangements. The State saved $4.1 million through reduced absenteeism and overtime and $1.4 million through reduced travel in state-owned vehicles; it reduced carbon emissions by 4,546 metric tons, other greenhouse gases by 8,000 tons and petrol consumption by 744,000 gallons. 82 per cent of employees said they wanted the one-year experiment to continue.
We could get off the consumer treadmill and leave a smaller footprint on the earth. We could spend less on energy-intensive ‘convenience’ items designed to save us time – from processed foods and household gadgets to cars and airline tickets. We’d have more time to care for friends and family, and to look after our own health. We could leave employment and claim our pensions later, with a much gentler transition to retirement. We’d have more time to keep learning and take part in local activities. We might begin to reassess how we value different kinds of work, regardless of whether or how it is paid. We might give a higher rating to relationships, pastimes and places that absorb less of our money and more of our time.
There could be benefits for business too, with more women in paid employment, more men leading rounded, balanced lives, less workplace stress and greater productivity hour for hour. The driving force towards a prosperous economy would no longer be credit-fuelled consumerism, which has proved so destructive, but financial stability and good work distributed fairly across the population.
None of this will be easy to achieve. A lot of people will have to adjust to earning a lot less, but this has to be seen as part of a bigger transition, over a decade or more, that will involve a radical shift in values and expectations. . Everything depends on having the right measures in place to ensure that work is fairly distributed, that everyone has enough to live on, that employers are encouraged to take on more staff, and that public attitudes change to support less materialist lifestyles and a revaluation of paid and unpaid time. These are explored in more detail in our report, 21 Hours.
Social norms that seem to be firmly fixed can sometimes change quite suddenly. Take, for example, attitudes towards slavery and votes for women, wearing seatbelts and crash helmets, not smoking in bars and restaurants. The weight of public opinion can swing from antipathy to routine acceptance, usually when there’s a combination of new evidence, changing conditions, a sense of crisis and a strong campaign. This proposal for a 21-hour working week is intended as a provocation, to stimulate debate and ideas. It also reflects an urgent need to build a sustainable future. We already have strong supporting evidence, changing conditions that demand a fresh approach and a profound sense of crisis. The campaign starts here.
21 hours: Why a shorter working week can help us all to flourish in the 21st century by Anna Coote, Andrew Simms and Jane Franklin was published on Saturday 13 February 2010.
Josh Ryan-Collins is a researcher in the Business, Finance and Economics team at nef.
After the storm: what will replace the neoliberal consensus?
The financial crisis which erupted almost two years ago has led to the biggest shake up in economic policy since the Oil Crisis of the 1970s. Neoliberal economics lies in tatters, with the UK Conservative party dismissing the notion of the ‘utility-maximising rational actor’ as a fantasy and Martin Wolf of the FT pronouncing the end of the dream of global free market capitalism. The question is what will come next.
Sadly, there are few signs of a new approach which takes seriously the ‘triple crunch’ of the financial, environmental and energy crises. Rather, governments are turning back to tried and tested state-led growth strategies to reflate national economies, pumping liquidity into credit markets and creating new or bringing forward existing public spending plans. In other words, there has been a return to post-war Keynesianism – the doctrine that the state could and should regulate the market and step in to boost demand whenever required. This thinking lies at the heart of Obama’s $787 billion fiscal stimulus package, as well of those of Europe and China. China is embarking on what is possibly the biggest Keynesian experiment in history, with the government attempting to create a welfare state virtually overnight so as to maintain demand as well as pumping billions of yuan into mainly state owned industries, as Newsnight’s Paul Mason recently revealed.
Aside from the fact that the proportion of this new funding that will be spent upon green investment is rather small (very small in the case of the UK), there are bigger questions about whether this whole approach will prevent another, bigger financial crisis and help us move towards to the low carbon, low throughput ‘steady-state’ economy required to prevent catastrophic climate change.
As Walden Bellow, the Phillipino intellectual and activist, points out in a recent article, today’s crisis requires us to move beyond Keynesian demand management at the national level to address global problems of inequality, overproduction and over-consumption. For Bellow:
“The challenge to economics at this point is raising the consumption levels of the global poor with minimal disruption of the environment, while radically cutting back on environmentally damaging consumption or overconsumption in the North. All the talk of replcaing the bankrupt American consumer with a Chinese peasant engaged in American-style consumption as the engine of global demand is both foolish and irresponsible.”
These are issues nef has addressed in our interdependence reports but currently they are not even on the ‘any other business’ agendas of the finance ministries of the world’s great powers. Rather, we are seeing a return to a ‘Growth as Usual’ policy which flies in the face of global inequalities and serious attempts at a transformation to a low carbon economy. It is about time that economists began to look at some of Keynes’ less well known policies, such as that economies should be primarily concerned to consume only what they are able to produce, outlined in his essay on “National Self-Sufficiency“. Globalisation, in particular the globalisation of capital flows, is a major part of the reason we are in this mess – a bit of de-globalisation will be required to get us out of it.
Josh Ryan-Collins is a researcher in the Connected Economies team at nef.
Olympics Minister Tessa Jowell has been out and about recently trying to explain exactly how the 2012 London Olympics are going to be delivered in the worst economic conditions since the War.
Like many Labour ministers of late, she has turned to J.M. Keynes for inspiration, arguing that the government will “turn the great spending power of the Olympics in to economic gold at a time of economic need”.
In terms of investment, I suspect the government might rather get its hands on real gold – which has shot up in value in the past couple of years as investors lose faith in money – than ‘economic gold’, but that’s another story. The important question is whether the Keynesian multiplier – an increase in government spending leading to increased demand which in turn creates jobs and stimulates consumption – will work its magic in East London and further afield as the £6bn Olympic injection, made up 75,000 odd contracts, takes effect.
Jowell claims it will as, unlike previous games, 2012 has regeneration at the heart of its bid. 75 pence of every pound spent on the Games is regeneration-related apparently. Most of this will be spent on East London, one of the most disadvantaged areas in the UK. But as nef has long argued, it is not so much the amount of money invested in an area as how it is spent that determines the regeneration impact. If the big contracts go to foreign companies – as has happened with the Olympic village which went to an Australian developer for example – there is no reason to expect them to subcontract to locally based businesses or hire local people.
This ‘trickle down’ economics failed in Canary Wharf and it will fail again if money is allowed to leak out of the local economy to consultants, developers and the large companies that are best able to exploit new commercial and sponsorship opportunities.
nef‘s report, Fool’s Gold, suggests there are ways to prevent this from happening. Community benefit and regeneration could still be made core criteria for all new contracts and larger contracts could be broken down in to smaller lots. This will level the playing field for smaller, local businesses and social enterprises many of whom are currently struggling to gain access to credit. Targets for the involvement of local firms and the employment of local people should be also be drawn up. The report also recommends that the Olympics organisers utilise nef’s Local Multiplier 3 tool which measures the local impact of spend over three rounds. LM3 has been used successfully across 23 local authorities in the North East to see how public money can maximise public benefit.
Without these steps, it remains doubtful that the 2012 Games will deliver on their promise to regenerate the heart of East London, recession or no recession.
Andy Wimbush is nef‘s Communications Assistant and blogmaster.
This week, The Independent’s Archie Bland reassesses the legacy of New Deal economist John Maynard Keynes and wonders whether his ideas might be resusitated to tackle the financial crisis with green investment.
Meanwhile, Duncan Green, head of research at Oxfam, has joined the Green New Deal chorus:
“The only historical precedent is the kind of mass industrial shift to arms production that takes place during wartime. The challenge is for us to do it through choice rather than in response to actual climate chaos, because by the time climate disasters really start hitting the US and Europe, it may be too late for many of the poorest parts of the world. We need a global version of the New Deal, but we cannot afford to wait for the shocks of war and catastrophe that delivered that change… “
Finally, Newsweek weighs up the chances of a global Green New Deal, looking at what governments around the world are doing to cut carbon, create jobs and promote renewables. Again, however, these writers keep avoiding the elephant in the room: growth.
Mercifully, John Naish bucks the trend with a comment piece in today’s Times explaining how Keynes wasn’t ‘some dry old number-shuffler’ but rather a man dedicated to pursuing the good life – to art, culture, beauty and friendship. And this Keynes would have scorned our obsession with growth and ever-increasing consumption. Naish explains:
He predicted that only a sizeably ignorant minority would pursue constant, selfish consumption: “When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals,” Keynes wrote.
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