It’s worth noting, in passing that Keynes vision (International Bank of Settlements, etc.) never was a “one country” vision. His framework only makes long-term sense if it includes international co-operation.

Cruddas has a tendency to mix and match his metaphors and models in speeches, so I never know which bits he’s nailed down the details for.

BTW, is Compass holding some kind of central archive of the debate?

How come other EU countries manage to both keep to EU rules and also make less of a mess of things than we do? I hear of our civil servants coming back from EU meetings realising how much more skilled their civil servants are, so what went wrong here? Also there has been that saying that we are a mid-Atlantic island, yet USA federal level civil servants who I encounter are also much better skilled than the London ones who I encounter here.

Conor,

As I understand you, the real point of this post is the international dimension. And I presume your question bears more upon the non-depression economics than the short-term ‘depression economics’. And (another assumption) the aspect you are interested in is the ‘imbalance’ of large global trade deficits/surpluses and the associated build up of large debtor/creditor relationships between countries. Correct me if I’m wrong.

This is an old, big question (Bernanke being one of those who has thought about it a lot, as, it appears, has Obama’s new appointee, Geithner) and while the left-wing may have a different take on it than the right, it some respects it is a problem that is best approached without a left/right agenda.

I think the problem is tied up with that of exchange rates. I don’t really know what to say about that: the chances of a global managed exchange rate system are low when one of its goals would be to make China do something it doesn’t want to do. So perhaps rather than speculate about possible exchange rate regimes the thing to do is assume continuation of the current system. But, perhaps one answer is for the rich countries to gang up on China a threaten to start blocking imports unless it lets its currency appreciate. I don’t know.

Your understandable concern is to avoid retarding the progress of currently poor countries who are busy reducing poverty via trade. This is a problem that isn’t going to go away even if China lets it currency appreciate – hopefully some time soon the various factors that stop Africa being a viable manufacturer and exporter (and I’m not talking about market access) will be overcome, and Africa will become a low-wage competitor against us, and the BRICs.

In terms of what countries export and import, certain imbalances are inevitable. Only some countries have mineral reserves, for example. And while some countries are poorer than others, poorer countries will have a similarly in-built advantage in labour intensive industries and trying to erase that advantage might be futile and also morally dubious – low wages are the biggest lever these countries have to lift themselves out of poverty.

I think the left has to abandon this idea (which is actually just as common on the right) that we’d be better off if we “made more stuff”. If we want to erase imbalances, we need to find things to export, and a large part of that will inevitably be services, unless we really do want to try to out-China China. Not to mention the fact that as the world grows richer, the composition of the economy will keep shifting toward services (especilally if we want to be ‘sustainable’).

Banking is a dirty word right now, but although the banks managed to tie themselves in knots and hang themselves with mortgage backed securities and CDSs etc. all that stuff is only a small part of what banks do. Financial services are a natural export sector for us, so I think if the left tries to cripple this sector because it thinks banks are bad, it will be making the ‘imbalances’ problem worse.

Energy is be part of everyone’s answer – clearly cutting energy imports would help with imbalances, but it would also be nice if we could design and manufacture sustainable energy kit which we could then export to China, India. The problem here is the world could use as cheap solar panels, for example, as it can get, so building them in China and India makes sense. We could subsidise some of the high-tech aspects where we can compete, and try to build up a lasting comparative advantage that might stay with us after China’s currency has appreciated. But this strikes me as a pretty thin answer. We could try to identify other sectors where we have a export potential (education, music, video games?) and see what the state can do to help there. It’s also a perhaps a problem that these sectors don’t obviously help the unskilled and unemployed (but perhaps it would indirectly – worker reallocation is too large a topic to get into here).

Conor, you might like Dani Rodrik’s One Economy Many Recipies, which discusses a sort of ‘experimental’ industrial policy, where rather than try to pick winners the state tries a half-way house of being partially led by industry, while also being ready to pull the plug if it’s not working. This is one sort of left-wingish answer, but he’s mainly writing about poor countries not rich ones.

Like you Conor, I don’t think the left should start campaigning for tarifs and the whole shebang to try to cut imports. This is classic game theory stuff, whereby everybody looking out for themselves in isolation makes everybody worse off. I can’t see a good ending down that road. And it certainly doesn’t sound much like international solidarity. But maybe we face a nasty trade off – if we want to do something about these ‘imbalances’ etc. and China keeps holding its currency down, we are going to have to start doing some unfriendly things – either that or put up with imbalances. I don’t know, after all this, it turns out I don’t have much useful to say.

dreamingspire:

Not sure if the issue of civil servants is a bit of a thread hijack, but the US is drawing civil servants from a pool across a big country. Even though there’s evidence that there are greater incentives to go into various other careers in the US, the place is big enough to have talent left over for government. Also, above a certain level, there are political appointees which allows more room to bring in talent from outside if needed. (There are downsides to this too, but that’s for a longer debate.)

European countries should be a better comparator, after all, they are more similarly sized. Here we see the effects of social incentives. In part I think the notion of public service as a valuable career survives better in Europe than it does here. The gaps with the private sector pay are actually fairly similar (excluding the top ranks) but we just don’t respect our civil servants that much, so who is going to do the job when they have other options?

The other issue is of course, education. I have no idea what the situation is now, but it used to be that the civil service in the UK was dominated by networks of Oxbridge graduates in anachronistic subjects. Those subjects were supposed to create “rounded” people but when you compare to the typical government service oriented degrees on the continent they really just were not as good preparation for government.

(Which also reminds me of the discussion about PPE over at septicisle.)

They tell me civil service recruiting has changed a lot, but I think it takes time for such changes to work through the system. The people who’ve risen to the top were still recruited under the old systems. The new ones are still juniors.

Uh, chickyog, not septic.

Not a hijack attempt, just pointing out the problem that ‘government’ here is largely implemented by civil servants, and, in key sectors where investment is being discussed, ours are nothing like as skilled as those in comparable countries. I thought that policy is for the politicians, but find civil servants hijacking it (one recently said to a conference that he is a policy person and to me personally that he is not to be bothered with anything technical – and to him how you turn policy into reality, or even work out whether that is possible, is technical) and then discovering that too many of them do not know what they are meddling in. You need the competent organisation…

dreamingspire – I wasn’t accusing you, more defending myself over potential thread-jacking!

I agree that you need a competent organisation that can cope with technical details.

The biggest failing of British Government + Democracy is that both the politicians and the civil servants are largely drawn from fields that do not emphasise that competence.

Thanks for the tip Luis, I am partly thinking out loud here about a future project and will follow your reading advice.

Incidentally, there is an interesting piece in today’s Guardian by Larry Elliot on a similar theme

http://www.guardian.co.uk/business/2008/dec/22/keynes-left-economics-economy

“The crisis thus presents a golden opportunity and a threat to the left. The financial meltdown has morphed into an economic downturn of brutal severity; on the other hand, the window of opportunity will be brief, much time has been lost and there is not a lot of money around to fund blue-skies thinking. US academia at least has Joseph Stiglitz and Paul Krugman; there is, sadly, no sign of a British Keynes for the 21st century. Scholars, politicians and thinktanks have little more than six months to come up with ideas to influence policy before and after the election.”

Over to you Sunny!

Conor, thanks for writing this response. Jon and I are floating ideas. Luis suggested we were ‘ forging a radical new path’, but this is not so. If only we were able to. It’s about putting out ideas and discussing them. Some ideas might be OK and some might not.

There is no defined programme behind the article we wrote. Nor is it a formal Compass initiative. And we certainly aren’t advocating a return to the AES. However I’m personally interested in looking at it again and also Bryan Gould’s economic policies. These were defeated politically by Blair/Brown. Do they still offer a basis for developing a political economy or are they too dated? I don’t know. As for your suggestion about a new internationalism – yes completely agree.

Just to clear up a few points

1. We are not opposed to the knowledge economy or to the cultural industries. They are transformative of wider economic relations but they are not large employers, they are concentrated in certain parts of the country and they contribute to inequality. Alone they do not provide an answer to Britain’s economic future in the way Blair, Mandelson et al believed in the 1990s. Also, through government policy, they have had a negative impact on the HE education system by integrating it into a market economy.

2. I know it’s our fault for how the piece was written but I’d like to separate the idea of the activist state nationalising the banks and exercising strategic control over their investment from the other idea of a post office turned people’s bank, one function of which is to provide micro-credit. Take each idea separately. I hold to both still.

Luis suggests higher benefit levels would be better than offering lending facilities. We need to tackle poverty by increasing benefit levels and we can allow the post office/people’s bank to administer the social fund in a new form plus offer standard banking facilities. This need not mean a return to mega levels of indebtedness. The middle classes can have their over draft facilities without the alarm being sounded.

3. We are not advocating that the way out of the recession is to simply let consumption boom, although I personally favour shifting wealth downwards, how we do so is open to debate.

4. As for agriculture we had in mind the need to address the economic problems of the countryside and achieve some greater degree of food security. Soundings [www.soundings.org.uk] is planning a seminar on this next year.

Larry Elliott has written a good piece in The Guardian [www.guardian.co.uk/business/2008/dec/22/keynes-left-economics-economy] today on what the mainstream left needs to doif it is to have an impact on shaping the future. Soundings [www.soundings.org.uk] is running a series of articles over the next year, Compass is organising an economic summit in April. We have the New Green Deal and there are a number of left economists writing about the current crisis. But we have a lot of catching up to do if we want to have an impact. More than anything we need to coordinate our activities and debates.

Thanks Jonathan, it looks like we both got to Larry Elliot’s piece simultaneously.

I have been thinking about some of this stuff for the entirely tangental reason that I am planning to write something about the political economy of Brazil (as one of the BRICs) next year.

I have also long thought that the British (or northern) left needs to integrate progressive internationalism into its economic analysis. Although I have been a bit critical of Compass, it does seem to be one of the few centre-left organisations that is promoting discussion on these issues so I will follow your debates.