The Great Transition and modelling

The Great Transition is a document produced by the New Economics Foundation.

It deliberately ‘quotes’ the title of Karl Polanyi’s book about the development of market capitalism, The Great Transformation.  This book written in 1945 looks at social and economic development with an anthropological perspective.  It portrays economic processes as being ‘embedded’ in social, political and geographical processes.  Economic relationships are culturally circumscribed and instantiated.  These relations are not seen as something that is abstracted from the society of which they are a part and they do not have objective laws of development free of the shaping circumstances of the people and societies in which they develop.  The economy is not, in this version of social reality, a separate sphere. This work has given rise to a significant trend in Economic Anthropology.

This movement represents a deep critique of Classical Economics in the sense that, for example, markets cannot be considered, from this perspective, to be ‘natural’ and are therefore not capable of being analysed as if they are subject to laws akin to those of the natural sciences. It is clear to any anthropologist that markets are constructed by states (see David Graeber’s Debt, the first 5000 Years).

The Great Transition has a remarkable quality of freedom as a document because, though it is written by economists, it doesn’t start out from economics.  It starts from the idea of well-being and constructs, on this basis, an aspirational and utopian vision of a future society and then proceeds to put economics at the disposal of this vision.  It starts out by asking what is the purpose of economics if it cannot deliver a prescription for a more equitable and sustainable society.  There is a key section which asks ‘What is the purpose of it all?’ that starts by an outright defiance of quantification:

‘It is a virtual axiom of orthodox economics that more is always better’ p. 14

This is a rejection not just of the value system implicit in classical economics but of its methodology.  The quantification processes are connected to the construction of the economic system as an abstract entity and as a natural, ‘a priori’ structure.

Later this section goes on to describe how practical elements like:

‘financial regulation, taxation and welfare policy, or reducing our carbon intensity’ p.15

cannot be changed separately from the people who inhabit, are governed or are regulated by them:

“But we need to remember that, as important as these are, in a democracy, none of these changes will come about without the will and desire of the people. And people are not like the passive automatons of economics textbooks. They have goals, beliefs and aspirations and they actively construct the world around them through the ways in which they talk, behave and make meaning.” P.15

So what is envisaged is a process of change where economic processes are ‘embedded’ in other processes.

The document then goes on to imagine some provocative policy suggestions for example, a 67% inheritance tax to pay for a basic investment in the from of a kind of personal grant to every citizen of £25,000.  This is in the section on the The Great Redistribution.  In another section entitled: The Great Revaluation, a shift in the habitual means of measurement of economic health is envisaged making self assessments of happiness and well-being a social process in place of the quantification of production in the Gross Domestic Product figure that is currently used as a measure of growth.  I am not going to review the entire book.

It is deliberately provocative, stimulating, eccentric, imaginative and, by some yardsticks, unrealistic.  The reader may be reminded of the famous slogan from 1968:  ‘Be realistic, demand the impossible’.

It sets aside the question of implementation.  It is clear that many of the measures recommended if they were considered from a policy point of view could only be implemented by a state regulatory and legislative operation that would involve the government having massively extended powers.  It really goes without saying that this could only happen if a consensus in favour of the kind of changes proposed had been created.  Basically it implies that the first step towards this is to re-imagine what is possible but it doesn’t do so by simply dreaming.  It mixes a practicality with its propositions by costing them.

There is no other document quite like it from a major think tank or centre of thinking and doing.  What interests me about its lack of orthodoxy is that it offers the basis to imagine a national economy such as that of the United Kingdom departing from the global consensus in an act of unilateralism that may not be culturally uncharacteristic of a society that managed the Reformation and the First Industrial Revolution.  In fact the question of unilateralism and the idea of an inventive development programme for what might be considered to be an already developed country has a kind of poetic and historical justice.  As far as the industrial development of the country goes it might be a question of ‘First in, first out’. The early development of the industrial revolution is a key ingredient in the development of Britain’s empire and the empire is the key ingredient of the domination of the banking and finance institutions.  The development of self sufficiency and sustainability must entail the removal of the stranglehold of these institutions on our lives and on our imaginations.  This may be why The Great Transitions proposals for a Great Re-skilling  is so visionary.

Also, by the way, this unilateral departure from the so-called international community may be just the element needed in the face-off with the ‘developing world’ that is the signature of every climate change negotiation.  I will resist the economisation of this strategy so I will not talk about ‘first mover advantage‘. Also I will not decorate this idea with the already discredited fantasies of ecological modernisation and ‘decoupling‘.

Also, it is possible that this idea of unilateralism is dynamically linked to localism.  In fact, localism is unilateralism in the making.  One only has to look, for example, at the implications of the ‘local energy descent plans’ proposed by the Transition Network movement to see this.

So the decision by the New Economics Foundation to make The Great Transition the central dynamic element in their overall work is a very exciting move.

How do you relate the work of the economist, which is based on making mathematically-based models of economic social processes, to building a consensual movement and campaigning on particular issues?  This is not easy.

In a blog for the New Economics Foundation the outline of the model they are constructing is described as a part of an intervention nef has made in the argument between Paul Krugman and Steve Keen about the definition of aggregate demand.  Also on page 10 of the slide presentation there is a link to the presentation that nef made to the Conference of Ecological Economists in Rio de Janeiro in June 2012.

This modelling work is a ‘work in progress’ and they are focusing initially on how to find a way of modelling the impact of bank lending – or credit creation – on the volume of economic activity.  They do this by defining the rate of increase of lending/debt. This is a differential.  They express this as a measure of planned lending/debt and thus they are attempting to quantify expectation.

You can see why their focus is on banking and trying to shed light on the operational impact of financial institutions.  The consequences of this modelling work and its interaction with building consensus and campaigning work have yet to be seen.  They have only been working on the model for two years. Its not easy to find this alchemy.

At the moment the glory of it seems to be that it can participate in the ‘big fights’ (e.g. Keen versus Krugman) in the ideological slugging matches of the machismo culture of objective truths, that it can talk to the Bank of England, that it might even one day put an authoritative visiting card on the table at the Treasury.  Of course these ‘big hitters’, the mainstream ocean liners of the consensual apparatus, will always look with openness at any action on the ground that they can incorporate or extinguish with scorn.

In this regard the methodologies are not value free and the culture of the ‘big fight’ can become strategically restricting when applied to building a movement.

In the field of Climate Change Impacts and Adaptation there is a considerable amount of work about the mentalities (‘top down’) that emerge from knowledge that is ‘black-box’ computer derived.  Maybe the expert scientist ‘speaking truth to power’ in the person of the ‘policy-maker’ is a paradigm as defunct as a quasi-Leninist model of movement building. The way nef describe their training work is through ‘masterclasses’.  There’s always a danger when you get your hands on the levers of an economic model that you may get delusions of being ‘masters of the universe’!

In the movement for economic literacy the pedagogy of the oppressed and the strategies of cultural action for freedom (Freire’s work, by the way, is unafraid to define itself as Utopian) that I have talked about elsewhere in this blog and which is at the heart of the work on mappa mundi may be something that should be considered more deeply by the New Economics Foundation.

To construct an authoritative position when presenting the modelling work I think that nef should make clear that systems dynamics was first used comprehensively in 1972 in ‘Limits to Growth‘.  Also, it should survey, in an introductory spirit, more carefully other modelling work, like the E3 work by Cambridge Econometrics or the REAP input-output modelling which is the basis of work at the Universities of York  and now in Multi-Regional Input Output modelling at University of Leeds. I think a broader pluralistic approach to ‘models of change’ would be a good idea. See mode(l)s of change. Be hegemonic and inclusive. It should be emphasised how accessible the STELLA and VENSIM tools are for analysis of systems dynamics.  We covered it in a couple of weeks on the Masters in Ecological Economics course at Leeds.

Opening up modelling and creating access to it must be a vital part of a popular economics.  Why is this so difficult to do?

I think that what is happening at the New Economics Foundation is really exciting.

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