Yesterday I attended an 'in conversation' event in which Robert Skidelksy (Lord Skidelsky of Tilton) presented his latest book, Money and Government: a Challenge to Mainstream Economics. Of course, challenges to mainstream economics have been circulating ever since the financial crisis and there have been new developments in economics such as behavioural economics which draws on the insights of psychology.
In the book, Lord Skidelsky says that he has been chiefly influenced by the insights of Keynes. His biography of him is well known and it was interesting to see Bill Clinton congratulate him when he came to Warwick University to give his last speech as US President. However, Skidelsky also says that he has been influenced by the insights of Polanyi who is certainly 'dans le vent.'
Someone asked me afterwards if I agreed with what he said and I replied, 'Up to a point.' There is no doubt that serious errors were made in the run up to the financial crash in 2008 by both policy-makers and academics. It is also evident that more needs to be done to improve global regulatory supervision of the financial sector, but the willingness for international cooperation is declining, particularly from the United States. What remained of the post-war economic world order is being dismantled.
I think that he was correct in saying that cheap credit became a replacement for the old social contract. Whilst he is critical of the 'fine tuning' Keynesianism of the 1950s and 1960s, he thinks that the collapse of Keynesianism was more the product of a particular conjuncture than systemic. Its collapse may have been hastened by particular events, but from my perspective, neo-corporatism as a political project was flawed (at least in the UK) and could not sustain the weight placed upon it.
He also got in a good dig at The Economist which always proclaims its current line with confidence while insisting that it has been consistent in its faith in liberalism for 175 years. In fact, as he illustrated, the line it takes is inconsistent.
The Conservatives had managed to give austerity a compelling political narrative in 2009. However, the problem was one of private not public debt. He favoured higher levels of public investment, possibly involving a National Investment Bank as advocated by Keynes. In response to a question, he said that there was no magic number for the public debt/GDP ratio, particularly in terms of its effect on growth, although he did mention a figure of 90 per cent.
What would concern me is the proportion of public expenditure devoted to debt servicing, although I can see the case for public expenditure in infrastructure when interest rates are low. However, in my view too many 'grand projets' (Crossrail, HST2) inevitably run over their time and money budgets and fail to deliver a sufficient rate of return.
When I asked him whether there would be another crisis, and, if so, what was the important thing we could do to prevent it, he reasonably enough said that we could not predict the timing or nature of a future crisis, although there could be a series of smaller ones. Earlier he had said that breaking up global banks was unfinished business.
He was more critical of the role of an independent central bank than I would be, although I accept that there has been too much emphasis on the inflation objective. He thinks that interest rates should be decided by politicians and if people don't like what they do, they can throw them out at the next election. This is a rather crude form of control as many factors affect voting decisions.
He argued that politicians were not as bad as many people said, it was essentially an American-based narrative that they were corrupt. I don't think they are corrupt, but they can be influenced by short-term electoral considerations or simply gaining advantage over colleagues. As Alan Watkins, sadly no longer with us, said: 'Politics is a rough old trade.' The evidence on the political budget cycle is mixed to say the least, but that does not mean that the temptation to manipulate economic variables is absent.
He argued that central bankers are accountable to no one, but I think that the Treasury Committee of the House of Commons has subjected the Bank of England to close scrutiny.
It was a polished performance by someone who is widely read, as I know from teaching with him. The political weather is shifting in his direction. I suppose that my fundamental disagreement would be that I think government failure is a more systemic problem than he allows.
Nevertheless, if anything, global political arrangements to curb the excesses of globalisation are slipping away. In particular, what has recently been called 'Moneyland', an unregulated offshore economy continues to go largely unchallenged, allowing global companies to arrange their tax affairs to their advantage. I always saw one of the main benefits of the EU as being its ability to offer some resistance to the worst effects of globalisation, but its political effectiveness and legitimacy is being challenged by populist movements that offer simple solutions to the challenges that people face in their lives.