This is a transcript of my speech to the Gladstone Club on Monday, 9 December, 2019

Good evening.

In three days, we go to the polls in probably the most important election of our lifetimes. And here we all are, talking about economic policymaking.

Do you ever feel your life is not going according to plan?

I certainly do.

I never planned to be here. I thought I would carry on working as a management consultant for a few more years. Probably, by now I would be handing over my responsibilities to the next generation and perhaps looking forward to a couple of non-executive director roles.

But about six years ago, one of my colleagues approached me with an unusual request. At the time, I was running the Strategy practice at PA Consulting Group, working largely with chief executives and their teams in the private sector, and my colleague ran the Defence and Security practice, working principally in the public sector. His practice was very successful and had some large and important projects – but it didn’t have access to the most senior people in the Defence and Security services. His question was: could I help him change that?

I explained that what worked well in the private sector was to carry out research on a topic that CEOs ought to find interesting and then invite them to a dinner to discuss the findings. We decided to see whether the same thing would work in the public sector.

The first topic we picked was the Arab Spring, which had caught most western institutions – the Foreign Office, the Security Services, the Armed Forces, etc – on the back foot. We decided to explore the question of whether they should have been able to predict it.

At first glance, the answer is clearly ‘no.’ The immediate trigger for the Arab Spring was when a Tunisian street vendor named Mohamed Bouazizi set himself on fire in the central square of the town of Sidi Bouzid. He had been harassed and publicly humiliated by the police, who had also confiscated his wares leaving him no way to earn a living. In desperation, he set himself on fire. His self-immolation was captured on mobile phones and the images flashed around the Arab world. Within hours, riots had started, and within 12 months, there had been riots, uprisings and revolutions in at least 20 countries. And at least four resulted in regime change.

No-one could have predicted that Bouazizi would respond to the harassment by setting himself on fire. But police brutality happens around the world, sometimes with tragic consequences, and those consequences don’t usually trigger a revolution.

So we looked at a slightly different question: should the Foreign Office and the Security Services have been able to predict that the Middle East was in such a volatile state that a tragic but small incident could be enough to spark a wave of revolutions?

And the answer to that one was ‘yes.’ We found four factors which, between them, made a country more likely to erupt in revolution, and they were present in most of the Arab world.

One of those four factors was widespread poverty. And that was what started to derail my plans.

Because this first analysis was well received in the Defence and Security community, we decided to repeat the exercise with other topics. One of these was rising inequality in the US and the UK. I knew that there was an issue – that was why we picked the topic – but I had no idea how profound it was and how far-reaching its effects. And the more I looked, the more concerned I became.

Eventually, it got to the point where I decided that I should leave consultancy and write a book about what I had discovered. That book eventually became 99%.

I expect you’re asking yourselves why I would do such a thing? Let me tell you.

What I found, as I looked at the statistics was that a process of mass impoverishment had taken hold in both the UK and the US and that a continuation of current trends would lead, before the year 2050, to the US becoming much like South Africa is today – an extremely rich, but very small, elite surrounded by a population in, or not very far from, poverty. And, although the process is less advanced here, in the UK the median earner will – on current trends – have seen his or her earnings fall almost halfway towards today’s poverty line. The middle class is under threat. Many of our children are under threat. I realised my children’s future was under threat. That was why.

So what I want to say to you tonight is simply this. We must act now to safeguard our current civilisation – and we can, because the obstacles to change are economic myths, not economic realities. So now is the time to make sure that we build a world fit for our children to live in, and the good news is that it will just take five simple steps.

There are three parts to the argument:

  1. If we carry on as we are, our current civilisation will not survive until 2050
  2. The obstacles to change are mental barriers, not economic laws
  3. If we take five simple steps, we can build a better world for our children.

Let’s take these three in turn.

#1: If we carry on as we are, our current civilisation will not survive until 2050

The period from the end of the Second World War to 2050 splits neatly into three 35-year chunks: the Golden Age of Capitalism from 1945 -1980; the Age of Market Capitalism from 1980-2015; and the age we are just starting and therefore cannot name yet.

We all know the story: the US and the UK both performed poorly during the post-war period but were fortunately rescued by the Reagan and Thatcher reforms, which rejuvenated their economies and brought growth and prosperity back to the land. So I thought, anyway, until I consulted the official statistics.

When you do that, the results are startling.

As you can see, economic performance during the golden age of capitalism was far better on every measure except inflation than it has been during the age of market capitalism. Overall economic growth was faster and growth in GDP per capita was faster. Perhaps more importantly, growth in median incomes was faster and unemployment was much lower. The growth and prosperity that resulted from the Thatcher and Reagan reforms is a compelling story, but it is not true. I have to admit I was stunned when I realised this.

And if we look in a bit more detail at slightly more recent history, the period from 1997 up to 2018, the picture is even worse. From 1997 – 2010, real GDP per capita (what you can think of as the size of the pie) and real median earnings for all workers both grew, despite the impact of the Global Financial Crisis and the Great Recession which followed it. Since then, however, the size of the pie has continued to grow but the typical person’s slice, real median earnings, have declined.


The pie is still growing – albeit more slowly – but most people are now getting a smaller slice. That is the process that I have called mass impoverishment. That is the process that led Professor Philip Allston, UN special rapporteur on extreme poverty to write of the UK:

“Following drastic changes in government economic policy beginning in 2010, the two preceding decades of progress in tackling child and pensioner poverty have begun to unravel and poverty is again on the rise. 5 Relative child poverty rates are expected to increase by 7 per cent between 2015 and 2021 and overall child poverty rates to reach close to 40 per cent. 6 For almost one in every two children to be poor in twenty-first century Britain would not just be a disgrace, but a social calamity and an economic disaster rolled into one..”

Strong stuff.

What happens if this process continues? Well, on current trends, the answer looks like this.


By 2050, median earnings will have fallen from around £24,000 to just under £20,000. That’s a little under halfway towards today’s poverty line. Most of today’s middle class will be struggling.

Already young people struggle to buy houses. By 2050, they will be struggling to get by month by month.

And that would be quite a remarkable achievement because even if we merely fixed inequality at today’s levels and maintained the growth that we have seen since 2010 (neither of which should be a very high bar) median earnings should have risen to almost £30,000. And if we could return to the pre-2010 trends, median earnings would be over £34,000.

So it requires sustained poor economic management to produce that level of mass impoverishment. It needs a pattern of bad policymaking to achieve it.

We should be aiming to make everyone 50% better off by 2050, but instead we are heading for mass impoverishment. Why don’t we just change direction?

Well, that brings me onto my second point.

#2 The obstacles to change are mental barriers, not economic laws

We have been given the impression that there is no alternative, that our current economic policies are inevitable, and therefore that the trends I have just talked about are unfortunate but unavoidable. In the words of David Cameron, “if there was another way, I would take it. But there isn’t.”

Austerity has justified a large number of individual cost-cutting measures, whose combined effect has been to subdue economic growth and produce this decline in median income and many other painful symptoms.

When I make this point, people often say to me, “true, but you’re forgetting the state of government finances. Austerity was painful but, with debt at that level, it was the only responsible thing to do.”

Now you may be feeling that this is old history. No party is promising further austerity. That seemed to be true until the Tory manifesto came out, and the IFS showed that it was ‘baking in’ future austerity. So we do need to think about why we have had 9 years of austerity and are now set for many more.

As Cameron put it at the time, “To every mother, father, grandparent, uncle, aunt – I would ask this question. When you look at the children you love, do you want to land them with a legacy of huge debts?” Put like that, it does seem unarguable. If we really can’t afford to keep spending, then, however unpleasant it is, we had better stop.

And again, I used to believe this myself until I consulted the Bank of England. Here are the last 300 years of history in relation to government debt as a percentage of GDP.

What the data show is that UK government debt is not ‘huge;’ it is not ‘high;’ it is not even ‘average’ – it is below the average of the last 300 years.

And even had it been much higher there is no argument that this would have been a crippling burden for our children and grandchildren. It was far higher in 1820 just before the Industrial Revolution really took off. And it was astronomically high immediately before the Golden Age of Capitalism. Debt at these levels is no barrier to economic success. There is simply no case that current levels of debt made austerity unavoidable.

It was a political choice, not an economic necessity. The narrative of unaffordability, though so widespread that it has come to seem plausible, is another myth.

Nevertheless, you may feel that Boris Johnson is a new leader, and that he has promised to govern in a spirit of one-nation Conservatism, so perhaps this myth is about to be consigned to the dustbin of history.

At this point, it is worth remembering that John Major, Philip Hammond, Ken Clarke, Lord Heseltine, Dominic Grieve, Anna Soubry and many other former leading members of the Conservative party believe that their party has been taken over by an extreme right-wing faction. And assuming that they are right – and they should know – it is worth taking a moment to consider what the agenda of this extreme right-wing faction might be.

Have you heard the phrase ‘market fundamentalism’? A market fundamentalist is one who believes, with the same absolute conviction as a religious fundamentalist, that markets are the best way to allocate resources.

If you take that statement literally, it follows that any other way of allocating resources is worse, and therefore that for an optimal society, all resources should be allocated by the market. Healthcare should be provided by the market, not by the state. Education should be provided by the market, not by the state. Goods and services for the poorest should be provided by the market, not by the state. And in the unlikely event that the market does not provide, then charity can plug the gap.

Of course in this world, a nurse, a shop-worker or a teacher might not be able to afford healthcare or schooling for their children – but for market fundamentalists, that is the result of their bad decisions: they should have become a doctor or a banker or set up a business; then they could.

If what I have said sounds like an extreme description of what market fundamentalists believe, please read Chapter 4 of the book 99%. I think that you will see that it is an accurate description of an extreme position.

And because, when you spell-out the philosophy like this, it sounds so unpalatable, they rarely do spell it out. The only recent exceptions that I am aware of – where the consequences are clearly explained – are in the book by Jacob Rees-Mogg’s father, William Rees-Mogg, The Sovereign Individual, which is a kind of handbook for dismantling democracy, and in Tyler Cowen’s book, Average Is Over which essentially says that if you are an average sort of person and you are hoping for an average sort of life, you can forget it. There just won’t be room for a middle class, only for winners and losers.

So, rather than spell it out explicitly, whether by accident or design, they created what I call ‘the Hydra.’

You remember that in Greek mythology, the Hydra was a deadly, many-headed serpent. The Hydra’s venom, and even its breath, was lethal. Killing the Hydra was one of the labours of Hercules.

Today’s version of the Hydra looks this.



We are well aware of its heads: low economic growth, rising homelessness, a climate emergency, mass impoverishment, rising rates of mental illness and vital public services on the brink of failure through underfunding.

And, to some extent, we are aware that austerity has had a part to play in growing these heads. But we are largely unaware that it is economic myths that sustain austerity, and we are almost completely unaware of the underlying philosophy.

Now, this is a strategic masterstroke. By getting us to internalise economic myths, most particularly the myth of unaffordability, policies like austerity go unchallenged. Not because people like them, but because we believe there is no alternative.

And if there is no alternative, however much we may dislike the consequences, we just have to grin and bear them. The myths act like a veil, hiding the underlying philosophy from scrutiny.

Furthermore because, like the mythical Hydra, this one has many heads each of which can be deadly, the heads attract a lot of attention and resources. We spend our time fighting the heads and not even seeing the body.

For market fundamentalists, the Hydra has been a remarkably successful strategy, and it is continuing to work today.

Now this sounds like bad news – and of course so far it has been. But the good news is that with a fraction of the effort and resources that it takes to tackle all of the heads on the right of diagram, we could tackle the body of the Hydra and move from myth-based policy to fact-based policy.


And this brings me on to my third and final point.

# 3 If we act now, we can build a better world for our children.

There are just five steps we need to take. And in some ways, they are surprisingly modest.

The first step is constitutional reform. We don’t have a written constitution in this country – and I have never felt more nervous of that fact than I do now. The courts have so far held the line that Government is subject to parliamentary scrutiny, but the Tory manifesto seems to be planning to change that. It is not illegal for a government in this country to pass legislation that it knows will harm the interests of 99% of the population. And we may be about to elect a government that is happy to take advantage of that freedom.

The second step is fact-based policy. There is a spectrum of truth from absolute truth to unfounded falsehood. And far too much policy is based on the wrong end of the spectrum.

Since 2010, the myth of unaffordability has guided policy; as we discussed before – that was the reason for austerity. And in the US, they don’t even accept climate science.

Without facts, there can be no sanity in policymaking.

The third step is to formulate policy that will tackle and reverse mass impoverishment. On the basis of this constitutional reform and a commitment to look at the facts, we can then expect government policy to be sound. We can look for policy to grow the pie faster and share it more fairly.

Policy formulation is complex, but there are only fundamentally four types of policy. Each policy either grows the pie or it doesn’t; and it either shares the benefits of that growth fairly or it doesn’t. That gives us four types of policy:

  1. captured growth policies,
  2. shared growth policies,
  3. vulture policies and
  4. balancing policies.

This simple framework tells you how we got into the mess we are in, and how we can get out.

We got into this mess because we have had far too many captured growth policies and vulture policies, and far too few shared growth policies and balancing policies.

And we can get out if we focus as much as possible on Shared Growth policies. and recognise that where we adopt captured growth policies, they need to be balanced.

And of course if we stop introducing vulture policies.

The fourth step is to invest wisely in the future. That is the Type II policies. We haven’t been wise, because of the narrative of unaffordability which has prevented all kinds of sensible investments.

Environmental investments would fall into this category. It is no more prudent for the Government to say that it cannot afford these things than it would be for me to ‘save’ money by not fixing a leaking roof in my house.

There are obvious investments we should be making in that area. And why not fund the NHS, the Police and Education System properly?

And the fifth step is to ensure clean, competitive markets. At the moment, the immensely powerful force that is the profit motive is too often fighting against solving the problems we are most concerned about. But it need not be.

Too many businesses are near-monopolies. We have little or no choice about whether to trade with them.

And far too many externalise their costs. We pay (through the benefits system) for the fact that many staff do not receive the living wage – even though their employers expect them to be alive when they turn up to work. We pay for the damage done when businesses pollute the environment. And we pay when businesses avoid their taxes.

Even worse, a business which aggressively externalises its costs establishes a cost advantage over its more ethical rivals; it can outcompete them and ultimately drive them out of business.

The bad can drive out the good, rather than the other way around.

A business which externalises its costs becomes an engine for mass impoverishment. A business which externalises its costs is rewarded for destroying the environment.

But if they could no longer externalise all these costs, they would cease to have an advantage over more ethical businesses.

In a world without externalisation, ethical businesses would outcompete unethical ones and the profit motive would become a force for good.


These five steps will be enough to prevent the stream of bad policies that are necessary to sustain mass impoverishment and environmental destruction.

These five steps will enable us to build a world fit for our children to live in.


*          *          *          *          *          *

So let me finish by reminding you how Hercules managed to kill the Hydra.

Initially, Hercules thought the task was not difficult: he was able to lop off several of the Hydra’s heads. But then to his horror, from each stump another two heads grew. Hercules realised that he was about to be overwhelmed and withdrew.

He called on his nephew to help him. They returned together and as Hercules cut off each head, his nephew cauterised the stumps to prevent new heads from growing back. In this way, Hercules was finally able to kill the Hydra.

Like Hercules, we need to realise three things:

  1. It is possible to kill the Hydra
  2. We cannot do it alone
  3. Just attacking the heads won’t be enough.


So although I began with some rather dismal extrapolations of current trends, and although the Hydra has in the past been a formidable enemy, once we see through the veil, we realise that killing it is far from impossible. We just need to ensure that we take those five steps.

So we do have to act. And we do need as many people to lend their support as possible. Can I end by encouraging you all to sign up on the 99% website and do what you can to help change our economic system for the better.


Thank you.