#keynesian

[Video Transcript]

Do you feel trapped in a broken economic model? A model that's trashing the living world and threatens the lives of our descendants? A model that excludes billions of people while making a handful unimaginably rich? That sorts us into winners and losers, and then blames the losers for their misfortune?

Welcome to neoliberalism! The zombie doctrine that never seems to die, however comprehensively it is discredited.

Now, you might have imagined that the financial crisis of 2008 would have led to the collapse of neoliberalism. After all, it exposed its central features – which were deregulating business and finance, tearing down public protections, throwing us into extreme competition with each other – as, well, just a little bit flawed.

And intellectually, it did collapse. But still, it dominates our lives.

Why? Well, I believe the answer is that we have not yet produced a new story with which to replace it.

Stories are the means by which we navigate the world. They allow us to interpret its complex and contradictory signals. When we want to make sense of something, the sense we seek is not scientific sense but narrative fidelity.

Does what we are hearing reflect the way that we expect humans and the world to behave? Does it hang together? Does it progress as a story should progress?

Now, we are creatures of narrative, and a string of facts and figures, however important facts and figures are – and, you know, I'm an empiricist, I believe in facts and figures, but – those facts and figures have no power to displace a persuasive story.

The only thing that can replace a story… is a story.

You cannot take away someone's story without giving them a new one.

And it's not just stories in general that we are attuned to, but particular narrative structures. There are a number of basic plots that we use again and again. And in politics there is one basic plot which turns out to be tremendously powerful, and I call this "the restoration story." It goes as follows:

Disorder afflicts the land, caused by powerful and nefarious forces working against the interests of humanity.

But the hero will revolt against this disorder, fight those powerful forces against the odds, overthrow them, and restore harmony to the land.

You've heard this story before. It's the Bible story. It's the "Harry Potter" story. It's the "Lord of the Rings" story. It's the "Narnia" story.

But it's also the story that has accompanied almost every political and religious transformation going back millennia.

In fact, we could go as far as to say that without a powerful new restoration story, a political and religious transformation might not be able to happen. It's that important.

After laissez-faire economics triggered the Great Depression, John Maynard Keynes sat down to write a new economics, and what he did was to tell a restoration story, and it went something like this:

Disorder afflicts the land! (Laughter) Caused by the powerful and nefarious forces of the economic elite, which have captured the world's wealth.

But the hero of the story, the enabling state, supported by working class and middle class people, will contest that disorder, will fight those powerful forces by redistributing wealth, and through spending public money on public goods will generate income and jobs, restoring harmony to the land.

Now like all good restoration stories, this one resonated across the political spectrum. Democrats and Republicans, labor and conservatives, left and right all became, broadly, Keynesian.

Then, when Keynesianism ran into trouble in the 1970s, the neoliberals, people like Friedrich Hayek and Milton Friedman, came forward with their new restoration story, and it went something like this – you'll never guess what's coming. (Laughter)

Disorder afflicts the land! Caused by the powerful and nefarious forces of the overmighty state, whose collectivizing tendencies crush freedom and individualism and opportunity.

But the hero of the story, the entrepreneur, will fight those powerful forces, roll back the state, and through creating wealth and opportunity, restore harmony to the land.

And that story also resonated across the political spectrum. Republicans and Democrats, conservatives and labor, they all became, broadly, neoliberal.

Opposite stories with an identical narrative structure.

Then, in 2008, the neoliberal story fell apart, and its opponents came forward with...

Nothing.

No new restoration story! The best they had to offer was a watered-down neoliberalism or a microwaved Keynesianism.

And that is why we're stuck. Without that new story, we are stuck with the old failed story that keeps on failing.

Despair is the state we fall into when our imagination fails. When we have no story that explains the present and describes the future, hope evaporates. Political failure is, at heart, a failure of imagination.

Without a restoration story that can tell us where we need to go, nothing is going to change, but with such a restoration story, almost everything can change.

The story we need to tell is a story which will appeal to as wide a range of people as possible, crossing political fault lines. It should resonate with deep needs and desires. It should be simple and intelligible, and it should be grounded in reality.

Now, I admit that all of this sounds like a bit of a tall order. But I believe that in Western nations, there is actually a story like this waiting to be told.

Over the past few years, there's been a fascinating convergence of findings in several different sciences, in psychology and anthropology and neuroscience and evolutionary biology, and they all tell us something pretty amazing: that human beings have got this massive capacity for altruism. Sure, we all have a bit of selfishness and greed inside us, but in most people, those are not our dominant values.

And we also turn out to be the supreme cooperators. We survived the African savannas, despite being weaker and slower than our predators and most of our prey, by an amazing ability to engage in mutual aid, and that urge to cooperate has been hardwired into our minds through natural selection.

These are the central, crucial facts about humankind: our amazing altruism and cooperation.

But something has gone horribly wrong. Disorder afflicts the land. (Laughter)

Our good nature has been thwarted by several forces, but I think the most powerful of them is the dominant political narrative of our times, which tells us that we should live in extreme individualism and competition with each other.

It pushes us to fight each other, to fear and mistrust each other. It atomizes society, it weakens the social bonds that make our lives worth living. And into that vacuum grow these violent, intolerant forces.

We are a society of altruists, but we are governed by psychopaths. (Applause)

But it doesn't have to be like this. It really doesn't, because we have this incredible capacity for togetherness and belonging, and by invoking that capacity, we can recover those amazing components of our humanity: our altruism and cooperation.

Where there is atomization, we can build a thriving civic life with a rich participatory culture. Where we find ourselves crushed between market and state, we can build an economics that respects both people and planet. And we can create this economics around that great neglected sphere, the commons.

The commons is neither market nor state, capitalism nor communism, but it consists of three main elements: a particular resource; a particular community that manages that resource; and the rules and negotiations the community develops to manage it.

Think of community broadband or community energy cooperatives or the shared land for growing fruit and vegetables that in Britain we call allotments.

A commons can't be sold, it can't be given away, and its benefits are shared equally among the members of the community.

Where we have been ignored and exploited, we can revive our politics. We can recover democracy from the people who have captured it. We can use new rules and methods of elections to ensure that financial power never trumps democratic power again. (Applause)

Representative democracy should be tempered by participatory democracy so that we can refine our political choices, and that choice should be exercised as much as possible at the local level. If something can be decided locally, it shouldn't be determined nationally.

And I call all this the politics of belonging.

Now, I think this has got the potential to appeal across quite a wide range of people, and the reason for this is that among the very few values that both left and right share are belonging and community. And we might mean slightly different things by them, but at least we start with some language in common.

In fact, you can see a lot of politics as being a search for belonging. Even fascists seek community, albeit a frighteningly homogenous community where everyone looks the same and wears the same uniform and chants the same slogans.

What we need to create is a community based on bridging networks, not bonding networks. Now, a bonding network brings together people from a homogenous group, whereas a bridging network brings together people from different groups. And my belief is that if we create sufficiently rich and vibrant bridging communities, we can thwart the urge for people to burrow into the security of a homogenous bonding community defending themselves against the Other.

So in summary, our new story could go something like this:

Disorder afflicts the land! (Laughter)

Caused by the powerful and nefarious forces of people who say there's no such thing as society, who tell us that our highest purpose in life is to fight like stray dogs over a dustbin.

But the heroes of the story, us, we'll revolt against this disorder. We will fight those nefarious forces by building rich, engaging, inclusive and generous communities, and, in doing so, we will restore harmony to the land. (Applause)

Now whether or not you feel this is the right story, I hope you'll agree that we need one. We need a new restoration story, which is going to guide us out of the mess we're in, which tells us why we're in the mess and tells us how to get out of that mess.

And that story, if we tell it right, will infect the minds of people across the political spectrum.

Our task is to tell the story that lights the path to a better world. Thank you. (Applause)

Barack Obama speaking in Kenya may have had a slip of the tongue, or maybe he just finally let the truth slip out.

Firstly, we have to acknowledge that a depression being “over” is a soft statement, most of the time.  By literal text of the basic definition of a depression (”a period of declining economic activity spread across the economy”), the Great Depression was over in 1934, when the economy stopped being in a freefall and we’d recovered enough to be about where we were before the 1930′s, in terms of GDP growth.  Depressions are active and substantial loss, recessions are failure to meet potential.

Normally these would be an arcane point to make, but we are dealing with economic analysis and arguments, so it’s within the realm.  People, economists and layman alike, hand-wave a Depression to mean “both the depression and the resulting recession, if there is one”.

The Great Depression wasn’t fully fixed or recovered from until WW2, the most massive federal spending binge in our nation’s history, because we’re including the economic recession afterwards.  WW2 was boosting the U.S. economy long before we even got into it directly through our “arsenal of democracy” policy, but look at the GDP of the 1930′s.

You can see that in 1934, the year after the New Deal was passed and was being implemented, GDP growth skyrocketed 12 points compared to 1933, and would keep growing through 1936.  We, at that point, were officially back to a level comparable to the 1929 level, which was higher than the 1928 level (before the depression).

We had plenty more room to go in regards to unemployment, and that wouldn’t be entirely fixed until WW2, which is why the debate is murky and reasonable people can disagree, but by 1936 the unemployment rate had dropped from 23.6% in 1932 (the peak)  to 16.9% in 1936, dropping over 7%.

There was a recession in 1937 that slumped economic recovery, but it’s important to note that the causes are widely-accepted to have been too much deficit reduction and too quickly a restriction of federal reserve requirements, amounting to an overall tightening of fiscal policy, not the expansion of the New Deal. There’s research to suggest that worrying about and acting on inflation too soon can actively hurt a weakened and recovering economy.

The recession of 1937-38 occurred long ago, but it does have policy lessons for today. It suggests that, in a weak recovery, a pre-emptive monetary strike against inflation (which was very low at the time, as it is today) is capable of producing a devastating recession.    

What is known of Keynes's early relationships indicates that they were exclusively homosexual. His lovers included artist Duncan Grant and the scholar Dilly Knox. Keynes was open about his sexuality and kept a diary detailing his encounters. He was a member of the freethinking Bloomsbury Group, a loose association of artists and thinkers, most of whom were bi.

Keynes's friends were surprised when he fell in love with a Russian ballerina Lydia Lopokva in 1921. He eventually dropped all of his other lovers and married her, with Duncan Grant serving as best man. To the surprise of many of his friends, the marriage seems to have been a happy one and the two remained together until his death in 1946.

Ahey, ahey hey.

People, Power and Profits. Progressive Capitalism for an Age of Discontent;

‘A progressive agenda for how to save capitalism from itself’