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Transcript
Rob Johnson:
Welcome to Economics and Beyond. I’m Rob Johnson, president of the Institute for New Economic Thinking. I’m here today with Ann Pettifor, a famous British economist originally from South Africa, who has led things like Debt Jubilee in 2000, a prescient diagnosis of a forthcoming great financial crisis. And an author back in, I believe, 2007 and ‘08, of a proposal for what we now call the Green New Deal.
We’re here to look at the challenge that we all sense. It’s not on the horizon, it’s right in front of us at this juncture. In her book from 2019, Verso Books, The Case For A Green New Deal, is an extraordinary exploration of the scope and the scale of what we must do to address this challenge for humankind. Ann, thank you for joining me today.
Ann Pettifor:
Pleasure.
Rob Johnson:
I really look forward to this. I have, how do I say, been invigorated in reading the book in preparation for this. I’m sure our audience will be as well when they read the book. But also when they hear your vision of where we go. But let’s start with a simple question, what inspired you to write this book in this time window?
Ann Pettifor:
I think it was that I’d seen what had happened. We wrote the original report back in 2007, ‘08, and it was a battle to get that written. It was a battle between the environmentalists in our group and the economists, and the macroeconomists in the group to kind of get ourselves to work together to produce the report. And then, as you say, the report didn’t go very far, until AOC and the justice Democrats picked it up. Then, suddenly it was out there.
But what I was seeing increasingly was that people were talking about the technocratic side of what kind of technologies do we need to solve this problem. Whereas, what I wanted to argue was that actually we have to think about the economics, and we have to think about the economic system, and its link to the ecosystem.
Because so much of economics is expressed in terms that are beyond the comprehension of ordinary folk, if you like, the thing that inspires me is to be able to talk to fellow activists about macroeconomics. It’s not rocket science, is what I’m clear about. But the way it’s often discussed and talked about is as if it were a kind of physics post quantum theory kind of thing.
This is the inspiration, is to share my understanding of macroeconomics with environmentalists and ecologists, with the people on the ground that are arguing for this change, so that they can be empowered, if you like. And I have to say, that I’ve seen that in action before. When we began the campaign Jubilee 2000, which was for the cancellation of the sovereign debts of 30 countries or so, people said to me, “Well…” People didn’t understand what it was about. Didn’t understand the relationship between international creditors and debtors, sovereign debtors.
But, we found it wasn’t really hard to explain. And once people got it, and they got sometimes the most complex ideas, they acted. And so for me, that’s my inspiration. People, once they understand something, are capable of the most extraordinary action and transformation.
Rob Johnson:
Well, I found it fascinating, obviously in what we now call the ESG world, that you bridge from the technology of climate transformation to finance and the incentive structures. I did sense in your writing and in some of your references related to Karl Polanyi and others that you think it’s important that the, what you might call, unbridled free-market financial system be channeled in a constructive direction, or structurally changed quite significantly. Can you tell us a little bit about why you feel that, and what you would do in that realm?
Ann Pettifor:
Gosh, Rob. So, it takes us back to the nature of money, which I think is still rarely understood. And credit as a kind of spigot which we can turn on. And if we turn it on in a way, we could regulate it, which is unmanaged, we could spew out enormous quantities of credit, which become debt. And if that credit is aimed at consumption, if it’s aimed at, I don’t know, extraction of fossil fuels, or it’s aimed at increasing our ability to go shopping, then of course there are going to be greenhouse gas emissions that come from that.
And so, what I wanted to do is to draw the line between the spigot of credit creation and the price of that credit, which is the rate of interest essentially, and the relationship between that and finance. And then the buildup of debt, of sovereign, and private, and corporate debts. But ultimately, the buildup of emissions.
I always tell the story of my children leaving school and going to university, and suddenly having thrust in their hands credit cards before they had any source of income. But simply because they were going to university, the banks were in there, and giving them credit cards, and inviting them to borrow and to spend without any income.
And of course, what they wanted to spend it on wasn’t on more books for university, but ongoing on foreign holidays in the University breaks. So, it’s this disconnect between the creation of credit and our ability to repay. And there are limits to our ability to repay, and there are ecological, as well as economic limits to our ability to repay. I think that’s really the important point to make.
Now, under today’s so-called free market, it’s extraordinarily higher how dependent the free market now is on the state, and in particular on central banks. But the ideology of free markets is that there should be no management of credit creation process. That actually, we should trust the invisible hand to allocate resources efficiently.
Well, of course, it turns out that the invisible hand can’t allocate resources efficiently. So, there’s much about the theory of money and finance, which is really flawed. And which results… And so for me, the challenge is to help ecologists and environmentalists to understand those connections, and not to think that economics belongs in a separate silo. And for economists to understand that actually their theories are leading to the kind of unsustainable emissions that we have today.
Rob Johnson:
Well, like you mentioned, what we’ll call an acceleration of credit, can increase the rate of pollution and carbon burning. The other dimension which economists often call externalities or public goods is that, when you’re financing something and some of the benefit comes from protecting the common good through protecting the environment, that may not bear the financial return that a private transaction does.
So, you can do reckless things and be more creditworthy than if you’re actually doing wholesome things. It’s really dependent upon, as you described, how you frame what the credit allocation process is, looks like. You mentioned things like, I often call, the bailouts of 2008, ‘09, the mother of all moral hazards. Because at full months believing that you can be too big to fail, you can gain market share because nobody thinks you will default, but smaller institutions will. And, you can lend even more aggressively, because somebody will clean it up for you.
That’s just in that container. But when we meld this with climate, the nature of the social return versus the private return becomes another, I call, front row consideration.
Ann Pettifor:
Absolutely. It wasn’t just the bailout of 2007 and ‘08, it was the bailout of March 2020. The Fed bailed out the federal banking system. And so, Capitalism has evolved, Rob. It’s evolved beyond what we think of it as. We used to think of it as the production of commodities and the trade in commodities in goods and services. Well now, capitalism has become something quite different.
Because by allowing the credit creation process, the financial system to be detached, if you like, from regulatory oversight, in particular Democratic regulatory oversight, we’ve allowed capitalism to evolve into this thing which it is now, where actually it is mainly concerned with… And Susan Cassell is really good on this, it’s not concerned with competition within countries, it’s concerned with competitiveness, global competitiveness.
And global competitiveness not in goods and services, but in intangibles. In things like intellectual property and financial services. These are all rent staking activities. What’s striking to me is that economists allow this to happen, or agree with this, and indeed are responsible for this particular framework that we have today.
What it’s resulting in is the failure of capitalism to create and produce new assets, essentially. But actually, to feed off existing assets. So, we see capital wanting to invest, for example in London property, or New York property, and old Victorian buildings in London. Which have become extraordinarily valuable, and extracting rent from those old assets.
Rather than doing what we all thought entrepreneurial capitalism was about, which is to create new assets. We need capitalism now to create the kind of assets we need to tackle the climate breakdown and biodiversity loss, and capitalism is not fit for that anymore. So, the whole financialization, and the whole domination of the economy by, if you like, by private authority, with private players deciding on our futures instead of public authority, we’re in this situation where all that capitalism wants to do is to effortlessly extract rent from existing assets, and not create new assets. So, it’s contradictory in itself, if you like.
Rob Johnson:
Yeah. I remember in my reading, a British economist, a general may name Fred Hirsch, and he talked about positional goods. More recently Adair Turner, when he was a senior fellow at INET, wrote a book called Between Debt and the Devil, where he underscored exactly the kind of things you’re talking about. Which is, you have collateral based lending for real estate exploding, and we have central banks and bailouts and everything to support that.
And the myth was, as I think you alluded to, what we were really doing was creating capital formation for new assets, which we might call enhance productivity, but what we were doing was taking old assets and revaluing them and creating wealth effects in what Fred Hirsch called positional goods. So, is this system, if you will, producing the kind of outcomes that warrant the kind of guarantees that have been granted in… Adair was saying, I think an agreement with you, that there’s quite a contradiction there.
Ann Pettifor:
Absolutely. The other contradiction, I don’t know, for me it may not be a contradiction, but the other challenge is that it’s antidemocratic, essentially. So the state now become, as others have argued, a collateral factory. The state is creating assets, I.e. debt, sovereign debt, and the private sector can’t get enough of that. That’s why we see the prices of bonds rising and the [inaudible 00:14:15] falling as dramatically as they have been.
And yet, while the state is a collateral factory, it’s simultaneously attacked for creating the debt which becomes such vital collateral for the private finance sector. While the private finance sector might value an asset like London property, there is nothing as safe as sovereign British debt, or of course US debt, for collateral for the purposes you rightly argue of obtaining additional wealth.
And so, these contradictions within capitalism are extraordinary. And it brings me back to the old tax payer. Frankly, if I was to build a movement now, or try to, I’m too old, but I would want to build a movement of taxpayers, and call it the Taxpayers Alliance. And say, “We are demanding to know why you are using our assets, the collateral created by the state, and backed up by taxpayers, and the value of the collateral is entirely dependent on the fact that we pay our taxes every year into the treasury, which gives the treasury and the Federal Reserve the power that it has to create liquidity.”
Well then, what are the terms and conditions of that? And there are no terms and conditions at the moment. Wall Street can get bailed out by the Federal Reserve every time it messes up, or every time there’s a shock. And then the reason why Wall Street has consolidated itself, if you like, and expanded its borrowing since both 2007, ‘09 and 2020, and the amount of wealth generated through the pandemic is quite extraordinary, is because it was able to draw on these bailouts from the Federal Reserve, from the taxpayer without terms and conditions.
I think that’s what I want to wake up people too. Because really, it’s our taxes, and our money, and our hard work, and the fact that we’re employed and able to pay taxes that is actually upholding Wall Street, to put it very crudely. And yet, Wall Street treats the state effectively with content, in my view.
Rob Johnson:
Yeah. Well, in the United States there’s a great deal of concern about the role of money in politics. Where in essence, what I call the commodification of social design and enforcement becomes essentially, you might say, a sector becomes the architect of how it’s regulated and how it’s subsidized. And the politicians need to, what you might call, heed their demands in order to get the war chest to get reelected. So, these are very complicated things, unless you naively separate the domain of politics from the economy, as though they’re mutually exclusive. But a political economy doesn’t look like that.
You started writing A Green New Deal Report. I remember Jeff Tilly, who’s a monetary economist that I’ve admired and I saw referred to as what was part of your group. But, what inspired you at that time? Was it concern about climate, or was it seeing this misallocation that the financial sector fostered? What was that first report about?
Ann Pettifor:
Well, that first report was about the arguments we had with the environmentalists. And the arguments over management theory and policy, which wasn’t understood at all. I think Jeff Tilly is a really important inspiration and mentor for me. What he taught me was about Keynes essentially, and Keynes’s understanding of the nature of the monetary system, and the [inaudible 00:18:31] to the monetary system what had to be done in the 1930s. Which is to subordinate it to the interests of democracy, if you like, and to remove it from its role as master of the economy, and instead to turn it back into being servant to the economy.
But I think really what transformed my thinking was an understanding of Keynes, and an understanding that Keynes is so fearfully misrepresented as being about tax and spend, about being about fiscal policy when really he was deeply uninterested in fiscal policy. But he was convinced that by managing monetary policy, it was possible to manage the prosperity of the economy as a whole.
And Keynes is no lefty. He was just a traditional capitalist, if you like. And he understood that in order for capitalism to be sustainable… And he did have more than a vision than just that, of course, but he understood that for that to happen the monetary system had to be managed. That took me back to the whole question of the nature of money, and the fact that today there’s still massive misunderstanding.
The very fact that the public authorities, Rob, tolerate crypto currencies, and the fraud and the corruption around crypto currencies seems to me to be an expression of the fact that there is still confusion around the commodity theory of money as to the credit theory of money. And of course, Keynes was on the side of the credit theory of money. He himself had to struggle with those ideas at the beginning.
But once he got it, he then understood really given that it’s a social construct, and not a commodity, money is something that has to be managed, or else we could just magic it out of thin air. And we do magic it out of thin air. But that’s a reason for us not behaving as if we were the sorcerer’s apprentice, messing around with the sorcerer’s pale and brush, Goethe’s famous story. And it is something that we have to manage.
But, Wall Street would rather… We weren’t managing it. And above all, would prefer for the system not to be democratically managed. It’s that understanding of Keynes that I’ve found has inspired me all the way through. And I struggled on a daily basis. I see how Keynes is misrepresented and abused. And particularly also in terms of the history. I hope you will have read the bit about 1919, and his ideas for the international system that came out-
Rob Johnson:
Oh, yeah.
Ann Pettifor:
expressed at Versailles.
Rob Johnson:
Treaty of Versailles, yeah, exactly. Well, the other part of Keynes that is a building block to awareness is his PhD dissertation, the treatise on probability, was really about what we call ontological uncertainty, or some would call radical uncertainty. The unknown unknowns. And these systems, like the monetary system, and the value of liquidity was quite integrated with coping with unknown unknowns, and how to, what you might call, stabilize an anxious system that doesn’t have a terminal point that everybody believes in.
And so, I thought he was very, very sophisticated in the way in which the whole body of his work worked from a different vision of what society was than what we call mechanical Keynesian macroeconomics, that my alma mater, MIT and other places, emphasized in the years following.
Ann Pettifor:
Yeah. Rob, I’m very struck by this economist at the Fed. Is it Jeremy B. Rudd?
Rob Johnson:
Yes.
Ann Pettifor:
And his recent paper that’s caused such a stir. And I have to say, I said when he was absolutely right, when he talked about the primary role of mainstream economics and our society is to provide an apologetics for a criminally oppressive unsustainable an unjust social order. Coming out of the Fed, that was pretty wonderful.
But in dealing with that, Adam Pozen then argued that macroeconomics is at the level, he said, of Galileo and Copernicus, and we’re just still at the stage of figuring out the basics of how the financial universe works. And I love Adam Pozen, he is an old friend. But I think he’s wrong on this. Because we’re not at the stage of Galileo and Copernicus. Keynes took us to a far more advanced stage in his work. But, we’ve regressed from that.
And I don’t think that’s accidental, Rob. I have to say I’m something of a conspiracy theorist when it comes to this. Because in my view, Keynes was deliberately… And I think he was naïve, I think there was quite a long… He didn’t manage this terribly well. But I think he was naïve in thinking that his friends in the City of London, and indeed in the economics profession would eventually be persuaded of these arguments, and wouldn’t try to subvert and undermine them. But, they actively did so even before he died. And they were actively undermining Bretton Woods even as he left New Hampshire.
But what I want to argue is that actually if we could restore an understanding of Keynes’s monetary theory and policy, we go a long way to creating the kind of economic framework that we need to tackle the big crises of our day, which is of course climate breakdown.
Rob Johnson:
Yeah. Well, there are a lot of elements. I studied a lot of the students of Keynes. And one in particular, Lorie Tarshis came to the United States and wrote a book, a textbook of Keynesian theory, and was punished by elites. Particularly, I think it was William Buckley at Yale University. Kind of put out a call to trustees and boards all over that this man was a heretic, and this book had to be stopped.
After that, in what I would call in and around the McCarthyite era, people were much more cautious, and much more mechanical and abstract in what they would represent in the United States, and perhaps in the entire Anglo-Saxon world. But this group now that they called the post Keynesians, many of whom I believe were educated at Cambridge England, and many are in Italy, and parts of the United States, some of whom have emphasized what we might explore, modern monetary theory, which I think relates to your proposals.
There’s a great deal of skepticism that Rudd really put out hard. And with that footnote about why at the beginning he issued a very, very bold challenge, that I think we should all listen to.
Ann Pettifor:
Absolutely. I agree with that. Yeah.
Rob Johnson:
Yeah, Neil Irwin just wrote this up in the New York Times this last week.
Ann Pettifor:
I noticed that. I noticed they left out his footnote.
Rob Johnson:
Yes.
Ann Pettifor:
They inflation expectations, but they left out the powerful footnote. But I think, so Rob, it was really difficult. I studied Samuelson at University, and I found it, even in the South African context, really incomprehensible in relation to the real world that I lived in. And I think for many economists, they’re having to go back to square one, and finding that very, very difficult, really. Because they’ve been trained to think so differently. But, I’m hopeful people learn, people can change, and the Jeremy B. Rudds can turn up.
And there are an awful lot of people that know there’s something seriously wrong. It just takes some courage to come out and say it. But, I’m really convinced that we need to revive the real Keynes, and the real… I just have to say also, Rob, I’m very skeptical about MMT. I’m not really a great fan of modern monetary theory. Precisely because it’s emphasis is so entirely on fiscal policy, really. Whereas actually… And there is this assumption that actually, and I think often they’re misrepresented, and then that’s unfair.
But the impression given is that governments can print money ad infinitum, and I don’t think that is possible. I think it’s true that governments and central banks have enormous powers to create liquidity and to spend. But there are limits. And as I say, they’re both economic and ecological to that ability. And I think MMT just give the impression that we can print money, and I’m deeply against that. For me, every time the government issues a bond, that is an obligation, and that obligation has to be met.
But, it’s part of this process of putting all the emphasis on fiscal policy, all the emphasis on tax and spend, and no emphasis at all on monetary theory and policy, and that’s bizarre. For me, the mission is to try and rebalance that.
Rob Johnson:
Yes. Well, you talked about being, what you might call, skeptical about vested interests. I remember there is a poet who goes by the name IN-Q, In Question. He has a poem, I believe the title of which is Evidence. One of the verses in the poem is, “People will always find evidence to affirm what they choose to believe.” In other words, they reverse the causality. The evidence doesn’t inspire what you believe, you are choosing selectively the evidence to reaffirm your priors. I worry about that, particularly in this realm of monetary theory, that we haven’t been as open-minded or as curious about the adverse side effects of the system that we unleashed really, I guess, in the beginning of the Reagan Thatcher period, it accelerated quite markedly.
Ann Pettifor:
I actually always wanted to go back to Nixon, Rob, and 1971. I have just read Jeffrey Garten, I think his name is, book on Three Days At Camp David. And it’s absolutely fascinating. I was asked to write a piece for Boston review not long ago, and in it I mentioned 1971 and the Nixon shock. They came back to me in conversation and said, “Gosh, we hadn’t thought of it in terms of the international framework and architecture. We thought about it in terms of controls over wages and prices.”
And I thought, to come back to your point, about how we look for the evidence for priors, and I’m just as guilty as anybody else. I hadn’t really taken much notice of the issue of wage and price controls in the United States in 1971, and the fact that this was a major concession by Nixon to the Democrats. I was overwhelmingly concerned with the Nixon shock, and the fact that it was Nixon single-handedly, single-handedly, and without consultation with his colleagues internationally, dismantling Bretton Woods. And without anything to replace it with, you know.
As Michael Hudson always explains, the replacement of the gold standard became the US debt standard, basically. The treasury built standard. But, it is a fascinating tale. And it’s fascinating to me that the Nixon shock, it was first drawn to my attention by the chief economist at UNCTAD, [inaudible 00:31:40], a wonderful economist.
Rob Johnson:
Oh, yeah.
Ann Pettifor:
Back in the 80s and the 90s he talked about the Nixon shock, and I’d never heard of the Nixon shock. And we started talking about it. But I’d noticed nobody else talked about it. And yet it was transformational of the whole international system. And while I often look at 1933 Anna Roosevelt, and what Roosevelt did overnight, and history of this is really superb, to transform the gold standard and begin dismantling the gold standard.
But one has to look at what Nixon did in 1971 to understand actually, the ability to transform the international financial system is, he demonstrated you could do it. You can do it overnight. And he did it overnight. So, with the political will of a Nixon, we could bring about another transformation.
So, while one hand it’s a story of despairing, a despairing story. On the other hand, it’s an inspirational story. It shows that with courage and guts… And what’s striking about Garten’s account of Three Days At Camp David was that Nixon, for all his weaknesses, wanted big bold ideas, like recognizing China on the one hand, and this. Where are the politicians with that kind of courage and with that kind of vision for something big and bold today?
Rob Johnson:
Yes. I’ve really enjoyed this explanation of the financial system and the, how do I say, the ways it will potentially be an ally in the transformation that we need related to climate. Let’s talk about your vision of where do we go so that my grandchildren and children feel safe, and feel like they’re in a coherent world? And yours too.
Ann Pettifor:
Yeah. In the book, I basically echo the work of Herman Daly, in calling for a steady state economy. For a recognition of the second law of thermodynamics, that every time we burn fossil fuels, it doesn’t evaporate and go away, it just becomes something else. So, the vision is for a steady state economy. And I think that’s going to mean an economy where we’re going to have lower levels of consumption, we’re going to be probably less mobile in the sense of we’re going to have to have much simpler lifestyles. But while those lifestyles might be simpler, and might be more labor-intensive, we’re going to have too substitute, if you like, labor for carbon. We’re going to have to get out of our cars and perhaps cycle around, or find other ways of moving around which are not so damaging.
While that might feel risky, in fact, it could actually lead to a very rich and… A life of abundance in my view. And I think we learned some of this through the pandemic. I don’t know about you, Rob, but where I live, which is a deeply conservative rural part of Britain, I was just so overwhelmed by the sense of community, the way in which people came together. The idea of working collectively to manage the situation.
We’re supposed to be so individuated, such individuals, carrying only for number one. It turned out, well actually, we’re not like that. We have the extraordinarily rare, for the world’s species, human qualities of empathy and compassion, and of collective action. No other species can do those things. No one as a species has that level of empathy of compassion and of ability to work collectively. And the pandemic brought out those tremendous human qualities. I think those will be extraordinarily enriching.
We’ve seen the effect of it, as well as, of course, the fact that we’ve engaged with nature far more. We stopped and looked around at the fact that the bees are in decline, and that we need to grow wildflowers, or whatever, to help with that. And that was better for our well-being, and in particularly that is much better for our mental well-being.
So for me, that’s what I look forward to, is to a world where actually there’s a much greater sense of community, and we’re not shopping endlessly, and we’re not consuming endlessly. I work with a wonderful economist, sociologist actually, who argues that in this world, we will be satisfying our needs, but not our once, not our desires. And our desires can rise exponentially, can grow exponentially, but our needs are limited. We need shelter, or we need human love, if you like. We need security, we need education, we need good health, and so on. These are finite. And addressing those needs would keep us very busy, but would make us all feel much better.
Now, this might sound idealistic, but I think it’s what we as human beings want and need, and when we get it we feel much better. And I think we’re gradually learning. The pandemic has been a real lesson, I think, in that regard.
Rob Johnson:
Yes. The joke I use in my podcast is the pandemic has been and unmasking of what we needed to learn. There’s a gentleman philosopher who works in the realm between spirituality and science, he’s from Hungary, named Ervin Laszlo. I made a podcast with him a few months ago. He discusses it in the framework of a tradition from India called the Akashic Field.
I would say he insinuated that perhaps the higher spirits came to us with this pandemic because we needed a wake-up call to invigorate the kind of collective sensitivities in order to meet the challenge of a sustainable climate, how do I say, transformation and social transformation. I think we’re seeing a lot related to concerns about inequality, and racial animosity, and a history of what you might call inaction that is now being challenged by what they call antiracism. As opposed to pretending to be neutral while a hideous cloud hangs over us.
So, I think I’m quite inspired by what you say, that however daunting it is with the pandemic and climate on the horizon, there may be good news embedded in how we are in the midst of a transformation at this juncture.
Ann Pettifor:
Yes. Absolutely.
Rob Johnson:
I enjoyed a comment that you cited Bobby Kennedy in your book, in relation to the false notion that GDP was outstanding. He said, “It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.” I thought you would, Guess what you might call, tickle the economics profession a little bit with that particular quote.
Ann Pettifor:
No, absolutely. And the thing that I’m finding, Rob, which is also encouraging, I talked to people in the corporate sector a lot, and I find that in the corporate sector people are facing reality much more seriously than the politicians. Because they can see their supply lines in danger. They can see the risks facing their businesses. And the problem is really, only need is a framework within which to make the changes.
We all need that. If we want to recycle, and we all want to recycle and reuse, there’s got to be a framework within which we can recycle, and it’s not for individuals to create that. Society has to create it, government has to create that. So, I’m impressed by the readiness of big corporations to begin thinking about how to change their systems to survive, essentially. But, we need frameworks. And you’re right about pandemics. I don’t know if you’ve read Ian Golden’s book, Professor Ian Golden at-
Rob Johnson:
I know Ian quite rail, but I haven’t read his book.
Ann Pettifor:
He, of course, predicted the pandemic in his book called The Butterfly Defect, and argues that there are more pandemics in the pipeline. Which there have to be as we continue to invade, if you like, nature’s space, and to come into conflict with creatures whose viruses are then transmitted. So, we’ve got to be ready. We’ve got to be prepared for this. So, onward and upward.
And we know how to do it. We just have to work for it.
Rob Johnson:
That’s what I find interesting. I mentioned Adair Turner earlier. He does a lot of work on the Energy Transformation Commission. They seem, as I read the reports, to think that this is an achievable goal. In other words, that it’s not biting your fingernails because you can’t imagine even how to do it. It’s about doing it.
And as you mentioned, the credit allocation system. I want to take us to a place, because I have watched over the course of my lifetime, when I was reading when I was a young student, the people on the left favored government, the people on the right favored free-market, simplistically. After a certain time, the people on the left did not trust in government. They thought that government, if you will, was captured. So, the question I’m asking you is, how do we restore the role of government, faith and trust in government expertise and so forth to administer the credit allocation system, the energy transformation, and you might call it the guiding light towards the life we all want to live?
Ann Pettifor:
I think that’s a really big challenge, and I agree with you about the left’s skepticism about government. But I think that’s because we’ve also hollowed out the state. When I was a young person, the state in Britain was responsible for health, and it was responsible for telecommunications, and it was responsible for public broadcasting and so on, and that’s being chipped away, and chipped away, and chipped away. And so, the state is now this hollowed out thing, if you like. Well, politics is.
Politicians used to be able to decide on the allocation of resources for health, on the allocation of resources for transport. Those have now largely… Health is different here, because we’re very dedicated to the National Health Service. But our transport system has been privatized. And we find that when it goes wrong, nobody’s responsible. That’s part of the reason why there is a lack of trust in the state now.
And so, in a sense it has to be a question of re-empowering the state. In other words, we need more public authority over some of the essential services in the economy, and less private authority. I think the balance is… I too believe that the private sector has to thrive. But the balance is entirely wrong now. And because it’s wrong, a lot on the left no longer trust government, and that’s a great weakness. That has to be changed.
Rob Johnson:
I’ve been involved in some conversations with some people, like Maude Barlow and others, about the notion of water. The scarcity of water, and how we govern water. I know there’s a lot of activism in South Africa right now over the way in which water is administered, and if you will, rationed to the point where in a pandemic people don’t even have enough water to wash their hands.
So, how we build that trust in what you might call the common good being administered by government I think is an essential part of this revitalization. You can put things on a whiteboard, but can you implement them in the rough and tumble of political economy I think is an open question.
Ann Pettifor:
Still, we have to begin with ideas, and with understanding.
Rob Johnson:
Oh, yeah.
Ann Pettifor:
And once we have those… And I go back, if I may, Rob, to end this conversation I think, to the story of Julie 2000. I’ll never forget, Gordon Brown was Counselor, and the treasury official came to me and said, “Look, Gordon has had to hire people to manage the correspondence that’s come in around this question of sovereign debt. We never had a department that worried about this very much, and suddenly we have.”
He said, “But I don’t understand what’s going on.” And he says, “I get letters from women writing on pink paper, with little rosebuds in the corner saying, ‘Dear Sir, I understand that you have negotiated debt relief for Uganda. But that in determining the amount of the relief demanded, you’ve chosen a cutoff date, which is entirely irrational.’” He turned to me and he said, “Who on earth explained to this woman, writing to me from her kitchen table, about the cutoff date for determining the level of debt relief for Uganda?”
I said, “Well, we explain, it’s not rocket science.” But that woman, once she understood that there was something terribly wrong here, took action and challenged the authorities, and a massive change took place. $100 billion of debt was written off. So, that has taught me that it is possible, it is really possible to change.
Rob Johnson:
Yes. Well, you mentioned, despite his shortcomings, a certain courage that is embodied in Richard Nixon. He looked for big change. And there is, I will say, an analogy. My guest on this podcast is someone who sits astride an economics profession, a political system, and she has the courage, meaning you have the courage to paint the pictures of what a Northstar looks like, and what the rocket ship is that gets us there. You advocate for it, and you’re unyielding, and you’re an excellent example.
My Young Scholars initiative should envision, given the challenges on the horizon, what kind of role model for what they want to be, and I think you’re an excellent one.
Ann Pettifor:
Gosh, Rob, that’s ever so generous. Thank you very much. Wow.
Rob Johnson:
Well, I think you’ve inspired that. You’ve inspired that through the years when I’ve seen your work, and as you know I had a lot of training in finance and so forth, and watching how you unraveled all kinds of things and bring them to the practical. It’s not just playing with puzzles, it’s playing with important issues. It’s what questions you choose, and then how you approach the challenge that I have grown to admire.
So, I want to thank you for being with me today. I think we’ll have to probably wait a couple of months or so, but let’s keep an eye out and do another episode. Call me when another vision is, how do I say, ready for my audience and for our young scholars. Because I’m sure you’ll come up with more and more and more. I applaud your work. Please stay at it.
Ann Pettifor:
Thank you so much, Rob. That’s really generous and kind. And thank you for today.
Rob Johnson:
Thank you. We’ll talk again soon. And check out more from the Institute For New Economic Thinking at INETEconomics.org.
