Action Against Impoverishment

This is an approximate transcript of the presentation Mark E Thomas gave to the London Quakers on 16 January 2021. We aim to have a video soon.

Introduction

Good morning, everybody.

First of all, thank you very much for inviting me to come back and talk to you again. Particular thanks to those who have already heard me speak and were prepared to risk a second exposure.

We last met on 24 October, and the topic was related to Building Back Better after COVID-19. I was particularly focusing on how the UK can avoid mass impoverishment after COVID. At that meeting, I began by saying, “let’s assume that we manage the epidemic well and avoid a second spike…”

Unfortunately, in the UK, we have not managed it well: the government ignored calls from its own scientists and from Independent SAGE for a ‘circuit breaker’ lockdown, and in addition, we are now facing a new and more infectious strain.

By the end of the year, the UK had both one of the worst death tolls in the world and one of the most damaged economies.

To me, this chart is stunning. First of all it shows how badly we have performed both in terms of safeguarding the lives of our citizens and protecting our economy – which is a story that most of our media have ignored. You can see on the x-axis how high our death toll is relative to other countries, and on the y-axis how bad the economic damage.

Secondly, and even more importantly, it shows that there is really no trade-off between these two things. There are simply no countries in the top right of the diagram. And yet, being such a country appears to have been the strategy of our government: they have been trying to trade-off a stronger economy against a higher death toll.

So the challenge of building back better after COVID-19 is even greater than it was when we last spoke. Against this difficult backdrop, you might even be tempted to ask: “is it possible to build a better future from this base?”

I am going to give the answer in two parts, but both have the same message which is that an attractive future is still within reach – we can do much more than we think we can:

• as a country we should still be aiming to create a world where today’s younger generations – people under 30 – have a realistic expectation of living in a much better world than today, rather than expecting to be the first generation in living memory to be poorer than their parents. If we do not do that, it is a political choice not an economic necessity;
• as citizens, working together, we can influence that choice – it is our choice.

Let me start by looking from the perspective of the country as a whole.

Choosing to Build a Better World

There is no question that the UK is facing a crisis. The question is what we do after the crisis?

There are some interesting parallels from history: what did the US do to tackle the Great Depression? What did the UK do at the end of the Second World War?

The US New Deal introduced by Franklin D Roosevelt saw enormous public investment programs and job creation schemes, which is what started to end the Great Depression.

In the UK, after the Second World War, Clement Attlee’s government followed the blueprint of the Beveridge report and invested to build the NHS and to construct the Welfare State.

In both cases, the results were better for the economy overall, and far better for the typical member of society.

On the face of it, this looks like a no-brainer – why not go for the New Deal approach? Well the obvious question is what would happen to the debt?

Of course, the economic damage caused by the virus has resulted in a significant increase in government debt. The ratio of UK debt to GDP is now around 100%.

And we are starting to hear voices claiming that this is a disaster for the UK.

One claimed that, “The debts we will have built up by the time the pandemic is over are too big to think about.” If we do not tackle it immediately, their argument runs, the cost of servicing the debt will rise and the government will be, for the first time in history, at risk of default. Even if that does not happen, debt at this level would leave an unjustifiable burden for future generations, “After all, it’s not us that will have to pay this money back, it’s our unborn grandchildren, who bear no responsibility for this mess whatsoever.”

While we may not like it, these voices say, there is no serious, responsible alternative to renewed austerity. Let us take a look at the facts.

Most of the data on this slide come from the Bank of England, which has compiled 300 years of economic history for the UK. And at the very end come estimates from the Office for Budget Responsibility.

As you can see, 100% is not staggeringly high, it is not even rather high, it is almost exactly the average level of debt that the UK has held over the last 300 years. There is absolutely no factual basis for the debt hysteria.

In fact, even if the debt went a long way above a hundred percent, there would still be no reason for hysteria. Just before the Industrial Revolution really took off, around 1820, debt to GDP was over 200%. Immediately before the Golden Age Of Capitalism (the post-war period 1945 – 1980) debt to GDP was over 250%.

These were the two most successful periods in the UK’s economic history.

Very high debt is clearly not an obstacle to growth. And the growth itself reduces the rate of debt to GDP. I know that some people are a bit nervous about the word ‘growth’ – but bear with me for a few minutes: I will come back to that point fully in a while. But for now, I just want to focus on the state of government finances.

On that subject, I think you will hear a lot of noise about ‘ruinous levels of debt’ and the supposed ‘need to balance the books.’ Almost all of that will come from politicians and journalists; and almost none will come from economists in reputable universities – and now you can see one of the reasons.

What this chart shows – most importantly – is that we have a choice between a world of austerity or a New Deal style world. The idea that there is no alternative to austerity is economic nonsense.

What does that really mean for people?

Today’s median earner (2019) took home just under £25,000 a year. What will that figure be in 2050? Well of course it all depends what trends we follow.

If we were to follow the pre-2010 trends, by 2050 the median earner would be taking home almost £35,000 a year. At the other end of the spectrum, if we follow the coronavirus and Brexit with permanent austerity, we might be looking much more like £16,000.

In the first case, the average person would have a far easier life than today – though still not luxurious. In the second case most people would be living in or near today’s poverty line.

We would have turned the UK into the country a bit like South Africa is today: a small number of immensely wealthy people living surrounded by private security to protect them from the impoverished masses.

That process is what the 99% Organisation calls mass impoverishment, and that is what we were set up to prevent.

And, in case you were wondering, it would probably be even worse in London. Although London, on average, is far richer than the rest of the UK, it already has a greater problem of poverty.

So there is a clear problem. If we now turn to solutions, perhaps surprisingly, given the scale of the problem, the actions we need to take are individually neither particularly radical, nor very complex.

In fact there are really only five actions we need to take.

The first action is a democratic reset. At the moment there is nothing in our unwritten constitution which prevents the government enacting a policy that it knows will be harmful for 99% of the population. It is simply taken for granted that they would never do that. The last 10 years show us that we cannot rely simply on taking it for granted; we need constitutional protection.

We also need far more in the way of checks and balances than are currently present. Looking at the state of the US today shows that democracy is fragile, and risks being captured by powerful interests representing a tiny fraction of the population. All countries need to learn from the US experience.

The second action is also self-evident: we need to base policy on facts not myths. The dominant policy of the last decade has been austerity – and this was justified on the basis of the ‘state of public finances’: the level of debt to GDP. But as we saw in before, as a matter of fact, this is no justification. Austerity was based on a myth, not the facts.

The third action builds on the foundation of the first two actions to develop policies which both grow the pie and share it fairly – so that everybody in society benefits.

Before I get into the detail of that one, I should perhaps say a few words about the subject of growth. It is undeniably true that if we continue growing our economy as we have done, we will produce an environmental catastrophe. And that has led some people to conclude that we should end growth altogether.

But that does not follow.

Everyone agrees that there are some human activities which are good for the environment, good for employment and good for the economy. Planting trees is an obvious example, as are insulating houses to make them more energy-efficient, switching to non-fossil energy, et cetera. If we do more of these things, that produces economic growth and simultaneously helps to tackle the climate emergency: that is what we call good growth.

Everyone also agrees – or almost everyone – that there are activities which may be good for the economy but are damaging for the environment. Building a new coal-fired power station would be an example. If we do more of those things, we do produce economic growth, but we worsen the climate emergency: that is what we call bad growth.

All our activities can be divided into one of three buckets:

• the good bucket: activities like planting trees which are already beneficial and so doing more of them would be good for the environment;
• the could-be-good bucket: activities which have major benefits, but a significant environmental downside, which need major transformation before growing them would be beneficial. Agriculture fits this bucket we cannot live without it, but it is currently responsible for a great deal of environmental damage;
• the bad bucket: activities which cannot be transformed, and which we should find ways to live without. Burning fossil fuels sits in this bucket.

When we look at the UK economy this way, we see a picture like this:

And this picture is extremely good news. First of all, as you can see, about 80% of the UK’s GDP sits in the good bucket: little to no transformation is required before growth can be beneficial on all dimensions.

Secondly, of the remaining 20%, the vast bulk is in the could be good bucket: significant transformation is required, but we can understand the kinds of steps that would be needed to make that transformation. And the transformation itself creates all sorts of economic and job opportunities.

Only a small percentage is in the bad bucket, which we should seek to shrink dramatically and ultimately eliminate.

So we are not ‘pro-growth’ – because that could be an excuse for climate inaction.

We are also not ‘anti-growth’ — because COVID has been a kind of dress-rehearsal for that and having seen the rehearsal, we would not want to watch the play. What happens is that the poor get poorer, while the rich find ways to profit from the chaos.

We are explicitly in favour of good growth and explicitly against bad growth.

So that brings me back to the third action: how do we grow the pie faster (in the sense of good growth) and share it more fairly?

Although it is true that policy formulation is complex, fundamentally there are only four types of policy. Every policy either grows the pie or it does not grow the pie; and it either shares the pie fairly or it does not.

That gives us this picture.

At the top right are the shared growth policies which both grow the pie and share it fairly. Take fundamental research, for example; we have been gradually funding less and less of this – and yet it is the engine of our future prosperity. Or education; or civil infrastructure; or healthcare – all of these things help everyone in society. We want to see far more of these.

At the top left are policies which do grow the pie, but they don’t share the benefits fairly. Aggressive automation, for example, could enable us to produce lots more valuable goods and services, which might be good for society as a whole, but would also lead to many job losses. If we do nothing to balance these policies, the pie may grow, but many people will find their slice shrinking dramatically.

And this brings us to the need for the policies on the bottom right. These policies can be used to balance type I policies so that everybody shares in the benefit that growing the pie can offer. So if we did have aggressive job automation over the next 10 years, some of the casualties could be mitigated by retraining and direct job creation schemes, and some of the balancing would need to come from a strengthening of the safety net. A good policy portfolio is a balanced policy portfolio.

Finally there are the vulture policies which neither grow the pie nor share it fairly. A hard Brexit is be an example. The government’s own analysis showed that a hard Brexit would be expected to shrink the pie. When that happens many people are bound to suffer, even if some hedge fund managers do extremely well. We simply should not implement vulture policies.

So if we look back over the last 10 years, we can see that the main reason for a lot of our problems is that we’ve had a preponderance of Type I and Type III policies, and far too few Type II and Type IV policies.

What would happen if we shifted policy formulation to produce a balanced portfolio of Type I, Type II and Type IV policies?

It would not create utopia, but it would bring us to that type of attractive world that we talked about before, in which the coming generations are substantially better off than today, and younger people have an appealing future to look forward to.

The fourth action is to invest wisely in the future. Because of austerity we have been unwisely under-investing, and there is a great deal of catching up to be done.

And finally, the fifth action is to ensure clean, competitive markets. This is to make sure that ethical businesses outcompete the unethical ones, rather than the other way round.

There is a conventional story of the role of business in improving the world. In this story, good behaviour is synonymous with good business. If you treat your customers well, they will be more loyal; if you treat your employees fairly they will more than repay it with commitment and creativity; if you contribute to the rest of society, you will be rewarded as a good corporate citizen.

In this story, ethical behaviour and competitive advantage are more or less synonymous.

And there are certainly good examples of companies which have both behaved ethically and been successful. The top ten in the UK include: Pukka teas, Neal’s Yard, Triodos, and Ecover.

But if we look at the really successful companies, what do we see? Five huge companies now make up 20% of the market value of the entire S&P 500:  Facebook, Apple, Microsoft, Google and Amazon. They are all under investigation by House judiciary’s antitrust subcommittee for anti-competitive behaviour. In addition, they all avoid taxes. Amazon is notorious for its treatment of its workers. And Facebook has been complicit in abuses of democracy. Are these the five most ethical companies in America? I hope not.

So, what is really happening here? In practice, one of the easiest ways for a business to be competitive is to externalise its costs: to pollute without paying the costs of clean-up, to avoid taxes, to underpay staff – and leave the rest of society to pick up the bill for all this. And so an ethical business finds itself at a cost disadvantage when competing with an unethical one. Amazon exemplifies the power of externalisation as a competitive weapon.

At the moment, the playing field is tilted against ethical businesses.

We have started a project jointly with Imperial College, the Institute for Public Policy Research, and the Impact Project (which coordinates the international accounting standard setters). This project is aimed at quantifying the externalities and adjusting company accounts accordingly. It is the first step towards re-engineering the profit motive into a force for good.

Those are the five key actions.

So, to summarise what I have said so far:

• we saw that the UK faces a stark choice – but also that it is a choice: we can choose the future that we move towards and that we leave to coming generations;
• we also saw in outline the kinds of policy shift – and shift in mindset – that will be needed to move us towards an attractive future for our children.

I have covered quite a lot of ground already, so perhaps it is a good time to take a break for questions and answers.

Making Sure We Make the Right Choices

Before the questions and answers, I argued that the kind of future we will end up with is a political choice and that the kinds of actions and policies that we need to take are significantly different from those we have been taking, but not revolutionary.

The obvious next question is how to make sure that we in the UK make the right choices.

As we discussed before the break, a key reason that we have been lured down the wrong path has been that we have almost all – I include myself, before I started doing this research – believed a large number of disempowering myths, which led us to believe that there was no real alternative.

To counter this problem, I decided to write a book, 99%.

In a very summarised form, I have already told you what the book contains: an argument that we have the choice to build a much better world. The book has three parts:

• part one says that if we do not change direction, we will end up in a world we do not want to be living in;
• part two says that the only reason we have not changed direction is that we have been mentally hobbled by believing a large number of myths about our freedom of action; and
• part three gives examples of countries which have done much better and sets out a roadmap for the UK.

But books on their own hardly ever produce change. And we really wanted to produce change. So, at the same time as the book was published, we set up the 99% Organisation.

This is a picture of what we are building. To achieve the kinds of changes that we have been talking about requires policy change, and there are 650 people in the UK who determined that policy: our MPs. If we can help them to formulate better policy and make better informed voting decisions, we will see fact-based policy for the benefit of the population as a whole.

But each MP is responsible, and responsive, principally to his or her own constituents, so we aim to set up local groups in as many constituencies as possible, and to do that we will need a large number of members – possibly as many as 100,000.

That is important because 99% is an entirely volunteer organisation with no employees, so our ability to do anything depends on having members. Our growth has enabled us to kick off five important projects:

1. Local Action – the local groups are active in spreading the message in their own areas, in writing to local politicians and in gaining coverage in local media;
2. APPGs – in addition to the local group contact, we are in contact with several of the all-party Parliamentary groups whose objectives align with hours: most notably with the Future Generations APPG;
3. Externalisation – we have a joint project with Imperial College, the impact Project and the IPPR looking at re-engineering the profit motive into a force for good (a critical part of the fifth action we talked about before the break);
4. Generation 99 – when we talk about the world of 2050, it is important to people like me, but it’s a lot more important to people who are under 30 who will still be at the peak of their powers in 2050. This project aims to energise and empower those generations to build the kind of world they want to live in;
5. Herefordshire 2030 – unlike the other projects, all of which are ultimately aimed at producing top-down policy change, this project aims to see what can be done bottom-up in a particular area (in this case Herefordshire) in order to make the county greener, fairer, and more prosperous by 2030. We are also documenting the project methodology so that it can be replicated more easily in other regions.

I hope I have given you a flavour for what we are aiming to achieve with the book and the movement: ending mass impoverishment, creating a world fit for future generations to live in: greener, fairer, and more prosperous than today.

Please do sign up and join us: we need your help.

Thank you.