Below is a transcript of the presentation Mark E Thomas gave on Wednesday, 20 May 2020. There is also a video recording of the event in three parts.
You can view the First part of the presentation here.
You can view the Second part of the presentation here.
You can view the Third part of the presentation here.
Good evening, everybody.
Part One: The Virus and What It Could Mean
This presentation is divided into three parts, and the first part is looking at what kind of a world we might expect after the coronavirus.
So let’s begin by looking at the course of the virus itself.
This slide shows four scenarios for the death toll from the coronavirus. The highest line is the laissez-faire line: what would have happened if the government had done nothing significant to contain the virus – no lockdown in March. The results of that would have been around 400,000 deaths in the UK.
The orange line is what would have happened with a loose lockdown – and the results would have been around 110,000 deaths.
The grey line is what would happen with a hard lockdown – the death toll would be around 70,000.
And the thick black line shows the actual results up to yesterday. So the good news is that, if we don’t do anything stupid now, we have already seen the vast bulk of all deaths which will come in the UK.
But there are absolutely no grounds for complacency, because if we were to have a reckless unlock at the end of May, we could still see the death toll rise towards the 400,000 mark.
So let’s assume that we manage the virus well and avoid a second spike. What would that mean for the economy?
The solid red line represents the estimates from the Office for Budget Responsibility. As you can see there’s an enormous plunge in economic activity in quarter two, and they’re anticipating a very sharp uptick in quarters three and four. The dotted red line indicates what would happen if we had growth at 4% per annum thereafter. And the grey line shows, for comparison, what happened after the Global Financial Crisis. So this is a rather dismal picture – on the OBR projections, we are facing a worse recession than the one following the Global Financial Crisis – but they are expecting a very rapid bounce-back.
Is that what is actually going to happen? The answer is that nobody knows, not even roughly, because it depends so much on policy decisions.
If we had a committed market fundamentalist like Jacob Rees-Mogg setting policy, we would see a no-deal Brexit at the end of the year – which the government’s own estimates say would be extremely damaging to the economy – followed by savage cuts to public spending. That might produce a profile rather like the bottom of the grey area.
On the other hand, if we had a leader like Franklin D Roosevelt or Clement Attlee in charge of policy, we would expect some form of New Deal with much greater support both for business and for the population, and that might produce a profile rather like the top of the grey area.
The US New Deal introduced by Franklin D Roosevelt saw enormous public investment programs and job creation schemes, which is what ended 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?
Most of the data on this slide come from the Bank of England, which has compiled 300 years of financial history for the UK. And the very end comes from the Office for Budget Responsibility estimates. As you can see the OBR is projecting that debt will reach 100% of GDP.
Is that a problem? There are already many voices telling us that that would be ruinous and that we need to prepare for another round of austerity. But that’s not what the rest of the data show.
In fact, 100% is not ‘staggeringly high’, it’s 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 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 demonstrably not an obstacle to growth. And the growth itself reduces the rate of debt to GDP.
So you will hear a lot of noise about ‘ruinous levels of debt’ and the supposed ‘need to get government finances under control.’ Almost all of that will come from politicians and journalists; and almost none will come from serious economists – and now you can see the reason. The debt hysteria is actually more dangerous than the debt.
So we have a choice between a world of austerity or a New Deal style world. What does that really mean for people?
Today’s median earner takes home just under £25,000 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 with a no deal Brexit and 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. The UK would have become a bit like South Africa: a small number of immensely wealthy people living, surrounded by intense security from the impoverished masses.
We’ve seen that it is a choice that we face, not an inevitability.
Why don’t we simply choose:
- no mass impoverishment,
- no environmental degradation,
- lower inequality, and
- a constructive role for everyone in society
– in other words a positive future for our children?
After the break we will come back to the question of how we can create such a future.
Part Two: What It Would Take to Build a Better World
Before the break, we saw the range of possible futures open to us. And we saw that at one end of that range is a rather attractive future. In this part of the presentation we will look at what we have to do to build that attractive future.
The economy is the system we have put in place to provide goods and services for people. It’s a complex system, but we can think of it as being a bit like a pie in which the size of the pie represents the goods and services which are available to be distributed, and the slice represents what each person actually gets.
In this analogy there are three problems we need to fix:
- for the last decade, the pie has hardly grown at all in the UK;
- when it does grow, some of that growth is bad for the environment;
- and most people’s slices are smaller now than they were in 2007.
How are we going to fix this?
In principle, the answer is simple:
- firstly, we need to make sure that when we do grow the pie, the growth is not harmful; and
- secondly, we need to grow it faster and share it more fairly.
That will produce the desirable future that we talked about in Part One.
Let’s start by looking at the issue of good growth and bad growth.
We can split all economic activities into these three buckets:
- the good bucket which contains all activities that do not harm the environment: planting trees and insulating houses, for example would fit into bucket A;
- the could-be-good bucket which contains activities which, though desirable in themselves, have at least some environmentally harmful consequences – agriculture, public transport and energy generation would be in bucket B;
- the bad bucket which contains activities which we would be better off without.
Once we know what sits where, we can aim to grow bucket A quickly; to transform bucket B – for example by switching to renewable energy for electricity generation – and to shrink bucket C as fast as we can.
And that would clearly be good for the environment. But what about people?
Although it’s true that policy formulation is very 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.
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. Very 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 balance these policies, the pie may grow, but many people will find their slice shrinking dramatically. Over the last 40 years, in the United States, the pie has grown dramatically but many people have seen their slices shrink – and this is because of captured growth policies such as automation and free trade with low-cost countries which led to the hollowing out a lot of manufacturing jobs in the States. We need to see these policies balanced.
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 safety. 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 no-deal Brexit would be an example. The government’s own analysis shows that no deal 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.
What would happen if we had policy formulated in this way, with 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 in Part One, in which everyone is about 50% better-off than today and our children’s generation have an appealing future to look forward to.
So in principle, building that attractive future seems quite possible – but it does require a change of policy direction, and we will discuss that in Part Three.
Part Three: How We Can Do It In Practice
In Part One, we saw that there’s a huge range of possible futures that we could head towards, and that some of those futures are very attractive. In Part Two, we explored briefly the kind of policies that would be needed to create such an attractive future. In Part Three, we are going to discuss what will have to happen in practice to direct us towards that attractive future.
And, perhaps surprisingly, 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 only a very small fraction of the population. All countries need to learn from the US experience.
The second action is 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 Part One, as a matter of fact, this is no justification. Austerity was based on the myth, not the facts.
The third action, we have already talked about. Formulating policy for abundance and solidarity – using that matrix of policies to ensure that we grow the pie faster and share it more fairly.
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. Competition is supposed to ensure that good businesses drive out bad ones. But too often today, it works the other way round. One of the easiest ways for 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 this. And so an ethical business finds itself at a disadvantage when competing with an unethical one. We need to fix that.
So how are we going to ensure that these five steps become reality?
This slide shows what the 99% organisation is trying to build.
In June last year, this slide would have been blank. Nothing existed: no book; no website; no organisation – nothing but an aspiration.
That aspiration, of course, is to change policy along the lines that we have been discussing. There are 650 people in the country who need to change the way they vote – our MPs – and they need the votes of their constituents (that’s us). So the 99% organisation is setting up local groups in each constituency whose ultimate objective is to reach a point where they can apply sufficient pressure to change policy.
But, of course, they can’t do that on their own, and we are putting in place a series of pressure points which the local groups can use to make their points to MPs.
First, there is the book, 99%: Mass Impoverishment And How We Can End It – which sets out in far more detail than I have time to do today both the problem and the solution. It also contains a lot of facts, many of which will be new to most MPs, and which will strengthen their hand in making their own arguments.
We are gradually working to improve our publicity – the book was named by the Financial Times as one of the best economics books of 2019, and we have been gaining an increasing profile on social media. The next stage will be to get a higher profile on mainstream media.
We talked about the need to create clean, competitive markets – and we have recently kicked off a joint project with Imperial College London, the Impact Project and the Institute for Public Policy Research to produce a prototype league table of businesses which externalise their costs. That is a first step in what will be a long journey to make externalisation impossible.
And we are starting other projects with other organisations which will create further pressure points over time.
So we have a long-term plan to change the direction of public policy. And we have started work on it. But what are we doing in the short term?
While in the short term, we shall certainly take any opportunities open to us to influence policy, our main focus right now is on spreading the word: we need as many people as possible to understand that mass impoverishment has been happening, that it is a real risk in the future but that it is not inevitable. That in itself is an enormous task.
Fortunately, the organisation is growing fast. At the end of last year, we had managed to sign-up around 100 members. And membership is growing at more than 15% per month, so today we have over 300 members and by the end of the year we are aiming to have about 600. And those members have a very diverse range of skills, talents and experience, so we are an increasingly powerful voice.
Thank you very much indeed for your questions so far. Please do sign up and join us: we need your help.