081210 Post-Industrial Keynes 2

7/29/2019 081210 Post-Industrial Keynes 2

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Post-industrial Keynes

Alan Freeman

11/12/2008


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The argument in outline Big public spending is coming back

No need to spend time discussing this argument

If Im right, we will soon find out; if Im wrong, it wont matter

Since it is happening anyhow, what should it be spent on?

Services 78% of all US employment, 82% in UK, 38% in China

Human Capital is main target of private investment

Should public investment not at least seek the same targets?

What can it achieve that private investment cannot?

The previous such event was 1929

The resolution was the New Deal, the war, and the welfare state

Socially transformative reconstruction

What should we do to update 1929 to 2009?

Can we conceive of (and measure) civilisational change

as investment?


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John Maynard Keynes is alleged to have said:

When the facts change, I change my mind.What do you do, sir? I have changed my mind.

Martin Wolff, FT 07.10.08

Richard Nixon once said, We are allKeynesians now, Now he appears to be

making a comeback.

Edward Luce, FT 14.10.08(actually, it was Milton Friedman)


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If we are all going to be Keynesians,it might pay to see what Keynes had

to say

after all, he did found the Arts Council


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Keynes Mayoral Manifesto?

If I had the power today I should surely set outto endow our capital cities with all the

appurtenances of art and civilization on thehighest standards of which the citizens of each

were individually capable, convinced that whatI could create, I could affordand believingthat the money thus spent would not only be

better than any dole, but would make

unnecessary any dole


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Convinced that what I could create, I could

afford

We destroy the beauty of the countrysidebecause the unappropriated splendours of

nature have no economic value. We arecapable of shutting off the sun and the stars

because they do not pay a dividend. Londonis one of the richest cities in the history of

civilization, but it cannot afford the higheststandards of achievement of which its ownliving citizens are capable, because they do

not pay.John Maynard Keynes National self-sufficiency,

New Statesman and Nation 6, 8 July


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What are governments actually doing?


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A glide-path for the long-termBarack Obama yesterday spelt out his plans for the biggestinfrastructure investment in the US for half a century... Mr

Obamas proposals for government works on roads, bridges,internet broadband and school buildings, together with energy

efficiency measures and health spending, are far more detailed thanthe normal announcements during a time of transition

The key is making sure we jump-start the economy in a way thatdoesnt just deal with the short term, doesnt just create jobsimmediately, but also puts us on a glide path for long-term

sustainable economic growth, Mr Obama said yesterday onNBCsMeet the Press.

Financial Times 8 December 2008


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The next industrial revolutionMandelson will sketch out a new doctrine of market-drivenindustrial activism ... Low-carbon technology, civil nuclear

plans and high-tech manufacturing are all likely to be boosted.

The speech will build on a defence of Britain's manufacturingbase the business secretary mounted last week at the

Confederation of British Industry (CBI), in which he said he

hated Britain being described as a "post-industrial economy"since the UK was the sixth-largest manufacturer by output.

Though the future for the country may not lie with mills andsmokestacks, he told the CBI, it lay with the next industrial

revolution and the low-carbon and post-carbon technologies that

will define the 21st centuryGuardian, December 3 2008


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As stated, these proposals already go

beyond demand creation

They are clearly framed to add to capacity.

So, what, actually, constitutes capacity at

the start of the 21st Century?


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0%

2%

4%

6%

8%

10%

12%

1996 2006

Shareo

fcreative

productsin

totalexports

China

UK

Japan

Germany

US

An instrumental response: the markets good for UK creative industries so

they are a good bet to invest in. A good answer, but is it really the point?

Read on


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Can we be more visionary?

Create what we would like to afford At great moments of civilizational change, the

nature of society is transformed, and thistransforms the very idea of demand

Transforms need We dont know what will be produced, but we

should bet that whatever is produced, will alsobe consumed

Because the producers are also the consumers


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The folly of machinocratic thought Machines are not the only way to raise productivity

Augmenting human capacity provides the cultural basis for step-rises in theproductivity of civilisations

Hindu-Arabic numbers transformed commerce (step-change in speed of calculation try

multiplying XVII and MMCMIX in your head)

Logarithms transformed navigation (and gunnery) similarly

1984, McMillans table of logarithms UKs 6th best selling book

Literacy as such raises capability of whole civilisations The three Rs at the time, a visionary advance

Universal Education a civilisational goal with economic consequences

Universal Health ditto (think of the time lost through sickness, + ultility of being hale)

But are neither tangible nor directly commercialisable

We should not write them off as not an investment because we cannot see or sell them

Actually, this is probably the state at its best enhancing general human capacity


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What sort of investment can augment human capital,really?


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What new civilisational rights are within our capabilities, if augmented byforward-looking investment?

Creativity

Art

Education

Environment

Culture


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Evaluating legacyOne part of the approach:Evaluation of legacy benefits should take due account of

improvements to capacitychanges capable of deliveringbenefits over timein particular improvements to infrastructure

and offer.

Infrastructure would include, but is not confined to, facilities,

venues and dedicated spaces (foe example sports facilities orvenues providing cultural or sporting activities).

Offer would include, but is not confined to, the range ofactivities available (for example the range of activities and thevolume or variety of forms of cultural participation available to

residents)

a realisable way of evaluating investments, such as theOlympics, intended to provide cultural legacy


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An extra mile valuing cultureInfrastructure can, and should, extend to intangible

improvements in human and cultural capital.

This might include for example enhanced brand or

reputation for locations, enhanced public awareness

of the benefits of culture and sporting activities,enhanced choice or diversity of cultural offer,

perceived existence, inheritance or option benefits,

and recognised excellence in cultural production or

sporting achievement, etc.


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Accords with emerging statistical practice- extracts from the ONS work programme

ICT and software to be measured as capital

Knowledge and other related intangibles as capitalassets

Information Society measures to build evidence on

access, adoption and impact of ICT, and electronicnetworks for business and households

Measurement of human capital

Measurement of health and education services

Time use data, as part of household microdataapproach, to show effects of networks on individual

behaviourOfficial Statistics and the New Economy:

Office for National Statistics programme of work 2002


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A giant step furtherWhat we might treat as capital in the future


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Civilisational step-change as investmentorWhat wasthe Welfare State, actually?

New Deal Large-scale investment

Defining a new type of society

Augmentation of human capacity

Augmentation of conception of civilisation

After the war

Health, education, elderly care, employment, housing becomecivilisationally definitional

Debate over how to deliver; but as human rights it is now accepted thatsociety should aim to deliver them

Eg Millenium Development Goals, UN charter, etc

The war itself was a huge social transformer

It created huge social cohesion

Imposed consensus for hitherto inconceivable degree of equity There was an idea of the values we are fighting for


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Whats wrong with educated plumbers?An example of a visionary response

Universal Higher Education Becomes normal citizenship not an acquisition

Every great step in civilisation involves more time tobecome a citizen

Transforms taste (eg art, music, literature appreciation)

Transforms difference (issue becomes what kindofeducation? not what level?)

Automatically redistributive (next 50% contains the poor)

Redefines urbanity: (University is Civic Anchor: no longergraduate factory but a citizen farm; every town above50,000 has some kind of HE institution)

Obvious measure for temporarily unemployed geteducated

Investment for the future


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Postscript - the Great Depression

1929 is the only comparison we have so lets look at it

Growth in real US Gross Domestic Product 1930 2008


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Growth in real US Gross Domestic Product 1930-2008

-10

-5

0

5

10

15

20

193

0

193

4

193

8

194

2

194

6

195

0

195

4

195

8

196

2

196

6

197

0

197

4

197

8

198

2

198

6

199

0

199

4

199

8

200

2

200

6Movingaverage(3-year)percentchangeoverthe

periodinUSGDP,c

onstantUSD

New Deal


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Post-postscript: does the welfare state lead to

debt, actually?

Government Debt

-150

-100

-50

0

50

100

150

200

Italy

Japan

USApost-rescue

Belgium

Greece

USApre-rescue

Portu

gal

Germany

France

Aus

tria

UnitedKingd

om

Netherlands

Spain

Switzerland

Ireland

Iceland

Denmark

Sweden

Finland

Norw

ayN

etGovernmentSurp

lusasPercentofGDP,2

008

Surplus

Debt

Source: Government Debt: OECD Economic Outlook No. 83, Annex Table 33; Welfare classification: Daniel Ankarloo, 'Market myths: a critical

look at neo-liberal assertions (in swedish) (2008). For more information contact Daniel Ankarloo at [email protected]

USA pre/post-rescue = before/after bailout of Fannie Mae/Freddie Mac


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Some references Who said We are all Keynesians now? See John Maynard Keynes by Milton

Friedman (1997)http://richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/fr

iedman.pdf

Keynes and the Arts, SeeKeynes and his Battlesby Gilles Dostaler (2007)

Measuring Intangibles: see for example

http://www.statistics.gov.uk/articles/economic_trends/IAOS_Jan2003.pdf)

Why I forecast a big downturn in 2003 (and havent changed my mind): http://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdf

The Assemblys discussion on the downturn and London

http://www.london.gov.uk/assembly/scrutiny/econ_cst_seminar20081210.jsp
http://richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/friedman.pdfhttp://richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/friedman.pdfhttp://www.statistics.gov.uk/articles/economic_trends/IAOS_Jan2003.pdfhttp://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdfhttp://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdfhttp://www.london.gov.uk/assembly/scrutiny/econ_cst_seminar20081210.jsphttp://www.london.gov.uk/assembly/scrutiny/econ_cst_seminar20081210.jsphttp://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdfhttp://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdfhttp://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdfhttp://www.statistics.gov.uk/articles/economic_trends/IAOS_Jan2003.pdfhttp://richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/friedman.pdfhttp://richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/friedman.pdf

081210 Post-Industrial Keynes 2

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