We need a post-pandemic recalibration of the economic thinking of progressives

On Thursday last week, our supposedly Thatcherite Chancellor the Exchequer, Rishi Sunak, slaughtered yet another sacred cow of the economic consensus. From Milton Friedman arguing in the 1960s that “inflation is always and everywhere a monetary phenomenon” to the spread of central bank independence in the 1990s and 2000s, the idea that governments could not and should not compensate their citizens for rising prices became and remained a core tenet of economic thinking for decades. Sunak’s offer of (big, but inadequate) payments to households for skyrocketing energy prices directly challenged that.

Let’s leave aside the Chancellor’s precise reasons, this week, for the sudden U-turn – just weeks after his Spring Statement supposedly dealt with the problem of the cost of living. This is a Tory government that consistently pleads its low-tax, low-spending, pro-market virtues, but which has since even before Covid been driving up taxes, pushing up spending and has consistently acted to expand the role of the state in the economy: nationalising railways, nationalising gas suppliers, planning to nationalise key parts of the electricity grid, stepping in to block the sale of a silicon chip designer and the cartel plans of football clubs. The windfall tax, originally Labour’s proposal, opens a particularly dangerous new front for the Tories, cracking open the idea that high prices for essentials might have more to do with fat profits than either wages or government spending.

This could be a moment of intellectual triumph for all those who, for decades, have opposed the rampant free marketeering of the ruling ideology that became known as neoliberalism. Many Conservatives certainly think so. James Forsyth, political editor at The Spectator, claims Sunak’s intervention last week had senior Tories fearing that it “risks suggesting a sea-change in favour of Labour and left-wing ideas”. Shadow Chancellor Rachel Reeves has been quick to claim that Labour and progressives are “winning the battle of ideas”. All across the world, the tiptoe out of free-market economics that began after the 2008 financial crisis has accelerated into a rush, as governments of whatever supposed ideological hue find themselves spending and intervening in their economies on a huge scale.

Yet once we look beyond the case-by-case adjustments governments are making to an increasingly unstable world, the intellectual foundations for a new kind of economics look a bit shakier. There aren’t ready-made solutions to a pandemic (as the scrabbling of governments across the world showed) whilst the rise in inflation since last year has left many economists offering non sequiturs. Adam Posen, once a doveish member of the Bank of England’s monetary policy committee, has bluntly insisted a recession may now be needed to rinse inflation out of the system. How putting more workers in Britain out of a job will reduce the price of gas from Qatar or wheat from Ukraine is never made very clear. The old textbook models don’t apply particularly well under current circumstances.

And the pandemic itself has thrown open to question many of our assumptions about the nature and purpose of work. It should be obvious to all of us now that some of the most essential work is either poorly paid and insecure, or not paid at all. The work of care – both for each other, and for the wider environment – falls most often into this category. How we value and remunerate work, how and where work is performed, how long we should be working for have all re-emerged as central economic questions.

The need to recalibrate the economic thinking of progressives and all those who want to see a fairer world is why the Progressive Economy Forum is hosting its first annual conference with the University of Greenwich on June 11th. It will be one of the first occasions since the lockdowns that the movement has had to come together and discuss the ideas we need to take on these immense economic challenges we now face.

Labour figures speaking include Shadow Secretary for Zero Carbon Ed Milliband and backbenchers Clive Lewis and Nadia Whittome, joined by leading thinkers on macroeconomics, sustainability, inequality and the digital economy for panels including ‘the cost of living on dying planet’, ‘how to work less (and why you should)’ and ‘what does a progressive macroeconomics look like?’ The full timetable is up online. We are in a critical moment – a point of multiple crises and change, where the intellectual terrain for the next decade will be formed. This is a conference to help shape it.