Economics: Theory & Action

Natalie Bennett of the Green party

Natalie Bennett of the Green party

A couple of days ago there was a Radio 4 programme that revealed how narrow the discipline of economics has become at universities around the world. This is tragic as these students go on to be the key decision makers. The Neo-Classical model is totally broken, yet stuck in their ivory towers, unable to see an alternative and divorced from reality; they continue to teach this planet destroying and socially destructive nonsense.

It reminds me of my travels in communist Eastern Europe in the 1970’s. Most of the critical thinking population could see Marxist theory didn’t fit with perceived reality, yet the tired old politicians kept spouting the same old mantras. I recall a conversation with a judge in East Berlin in 1977 who told me the whole system would come crashing down. It was twelve years before it did, but it was inevitable.

In the 1970’s I frequently discussed politics and economics with my grandfather, who’d been sympathetic to Marxist ideas in his youth, but had mellowed to be a Keynesian Labour party type socialist by the time I knew him. Keynesian economics hit the buffers of stagflation in 1978-79. As Thatcher promoted a revival of the Neo-Classical economics of the 1920’s my grandfather said it would inevitably end in crashes, crisis and chaos. It has. We lurch from crisis to crisis.

Neo-Classical, Marxist, Keynesian, economic grand theories have failed us. We need new economic models rooted in the real world that recognise our utter dependence on a functioning biosphere. Without clean air, unpolluted water, healthy soils, treasured biodiversity and a stable climate we will never have economic stability. Without life there is no economy. Without social justice, political and economic stability is both unlikely and undesirable. Many Green economists have been writing about this over the last forty or fifty years: it is time to bring them centre-stage into the teaching of economics.

Meanwhile we need to take practical steps right now to set the economy moving in the right direction. Here are two practical suggestions. Yesterday Natalie Bennett of the Green Party made the very sensible suggestion to cut rail and bus fares by 10% and to pay for this by scrapping the £15 billion road building programme. Now, with cheap oil and gas prices is the time to introduce a Carbon Tax. In a UK context this could raise £20 billion per year. This could be put into developing and implementing a serious energy demand reduction strategy: building efficient district heating networks, insulating houses and investing in a sophisticated mix of renewable energy infrastructure and legislating to improve energy efficiency of appliances and technologies from kettles to cars, power stations to houses. A huge number of jobs could be created, fuel poverty eliminated and carbon emissions massively reduced, and it might even help economics re-engage with the real world.

BBC Radio 4 on teaching economics

George Monbiot on economics

Natalie Bennett in the Guardian

Lawrence Summers writing in the Financial Times on why now is a good moment to bring in a Carbon Tax