In the first of this three part series, Simon Radford warns Liberals of their impending irrelevance, if they don't seize the opportunity now offered to them. Simon is a Provost Fellow at the University of Southern California

Liberalism has never been more relevant, but also in bigger danger of extinction. It is this essay’s argument that a defined liberal vision on economics is both well overdue and also never been more necessary: the opening up of economic debate post-2008 has given liberals an opportunity to unearth the liberal tradition in economics and assert its relevance, both for economics as a field, and for a voting public starving for a new progressive vision. It’s only by wholeheartedly embracing this vision that British liberalism can hope to survive in the long run. The good news? It was the people who carried on this buried liberal tradition who correctly identified the looming crash and have the most compelling analysis of its aftermath. The Liberal Democrats’ economic message lost its way in a Goldilocks approach of being a little less hot than the Tories and a little cooler than Labour; there has never been a more propitious time politically to solve the Liberal Democrats’ “economics problem”. And the answers are there if only the party is brave enough to look.


Paradigm shift

Do you remember when ‘serious people’ said that 9/11 changed everything? Instead of 2001, 2008 might well be the year that historians consider a more likely date for a watershed moment. The Financial Crash and the Great Recession laid waste to a way of seeing the world that had outrun its usefulness. Economics as an intellectual field had a small group of extremely powerful gatekeepers, many of whom took the same graduate seminar in macroeconomics at MIT. The definition of good scholarship had been set very narrowly and produced norms of intellectual inquiry that one would have to be mad or bad to ignore if one wanted an academic career (it is noticeable how private sector economists are a lot more plural in approach). The housing bubble, Financial Crash and the biggest global downturn since the 1930s, has thrown the field of economics into sharp disrepute: even the Queen asked economists at the Bank of England why no one saw this coming. Economists, politicians, and the public have started to ask- what is living and dead in the economics we learned at school and university? Is there a more fruitful way to look at the world?

Thomas Kuhn, the philosopher of science, calls this a “paradigm shift”, as one scientific research programme gives way to another, and an old framework is quickly and decisively cast aside. Imre Lakatos said that the old research programme has to be “degenerative” (i.e. uses more and more auxiliary hypotheses to explain inconvenient facts) and the new one “progressive” (i.e. a new bed of theory explains the same amount with fewer assumptions, or simply explains more). But science doesn’t take place in a vacuum: Foucault’s insight that science rests on political authority and is often used to control rather than liberate, can be seen, for example, in those peddling the creed of climate change denial or anti-vaccers. Those who benefit from the status quo, even if not fit for purpose, do not tend to give up positions of prominence so easily. Science is politically contested and better theory needs to be fought for. Institutions, from academic journals to university departments, are populated by those who have made a living from the old way of doing things. People fond of clinging to received wisdom and the organs of sensible moderation, from newspaper leader columns to former politicians, find the cognitive work of revising assumptions less preferable than shutting down new debate and clinging onto the wreckage of the old way of doing things. But bad theory can’t be propped up indefinitely. There is something in the air; a wind blows that is starting to shake political foundations. 2008 was a dagger at the heart of economics as it was previously studied. Whoever grasps the next political economic paradigm will surely reap the political rewards. The mushy political consensus of austerity and managed decline is not satisfying, intellectually or politically. This need to find an alternative is the greatest threat to liberalism, and the opportunity of a generation, if we would only grasp it.

Economics as a means, not an end

One of the most pernicious myths in British liberalism is that there are such things as “social liberals” and “economic liberals”. Anyone who identifies as an “economic liberal” and not a “social liberal” is, in fact, not a liberal at all. Liberalism has always been a political project whose aim was to provide the greatest possible array of capabilities and opportunities to everyone. That is the framework that liberals use to evaluate policy, including economics. Economics is not some policy area detached from the liberal way of seeing the world, it is integral to it. Economics is a servant to political ends, not its master. And an economic vision is what voters tend to judge parties on. If the Liberal Democrats can’t agree on what a liberal take on economics is, then it deserves to die. 

Liberalism has always existed on the Left of the political spectrum: from combatting corporate welfare in the Corn Laws to Beveridge’s blueprint for a welfare state. In some places the state should do less- like removing subsidies for the well-off- and in many more cases the state should do considerably more- properly funding engines of capabilities like schools, universities, hospitals and regulating in order to disperse power to the widest array of people. “Liberty without equality is of noble sound but squalid meaning”, as Hobhouse once wrote. In a country with scandalously high adult illiteracy, with wealth concentrated in few hands, and where social mobility is amongst the very lowest in the OECD, it is clear that Britain needs to be radically overhauled in order to be anywhere close to being liberal. But mainstream economics- and a an ideological diversion that claims to be “liberal” but is actually an impoverished version of libertarianism which wrongly sees private power concentration as “natural” and markets as emerging ex nihilo without state power enforcing its rules- seems to set limits to what can be achieved. We must either fit inside a dying paradigm or found a new one. 2008 serves as a great political opportunity to be both better liberals, and to be at the forefront of seeing the world more clearly. In order to do so, we need a quick history lesson in how economics has come to crisis.

Click here for part two

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