Philippe Legrain at the Edinburgh Book Festival
A vision of a world fairer, safer, richer and greener.
Thomas Friedman says the world is flat – Philippe Legrain doesn’t think so. What matters most to how you do in life is where you are born and who your parents are. Philippe’s envisioned world is one where the benefits and opportunities of the middle classes in the West are extended to everyone.
In Edinburgh to promote his new book, Aftershock, Philippe told us that to reshape the world economy banking, tax, migration and the climate all need to be reorganised and fixed to prevent another collapse and protect the very existence of liberal democracy.
On banking he says banks should be broken up and re-regulated and governments should use their stakes in bailed out banks to force them to lend to small business if they won’t do it themselves. Bonuses should only be paid in shares which cannot be quickly sold, to ensure bankers have a personal stake in the long term future of their institutions. All pretty sensible if not terribly radical.
Tax should be shifted from labour, which we think is a good thing, perhaps, onto carbon and land. Land tax would be harder to avoid, would pay for infrastructure improvements, like high speed rail into Scotland, which it is ‘criminally irresponsible’ to be taking so long to achieve. I’ve talked about LVT before, and, indeed, I quoted Philippe then, so it’s no surprise to hear it as part of his suggestions now. Shifting to land tax would make the vast bulk of the population better off, and perhaps do something to tackle the distribution of property in this country where 0.3% of population owe 69% of the land, more unequal than Brazil. Carbon should be priced so that business can take that cost into account in planning for the future and to encourage clean technology but emissions trading creates the same problems as financial markets, with prices too volatile to provide a good incentive.
He’s right in identifying the problems with the current European and planned (now scrapped) US trading systems, but I’m not sure he should be so keen to dismiss the idea out of hand. Quotas don’t have to be a give-away to big business, a scheme that gave permits directly to citizens on a per capita basis and then forced companies to buy them back could provide a direct incentive to consumers whilst forming the basis for a basic income. But I’ll come back to this in another post.
Philippe doesn’t like to see himself as left or right. And it’s true, ideas like land value tax, for example, or open borders, really aren’t left or right wing intrinsically. What’s more important, he believes, is whether you are for progress and change or trying to prevent it. Whether you are for an open or a closed society. He says government should have a role equipping people for change, ensuring equality of opportunity and protecting those that are disadvantaged by change, when factories move abroad or replace manual labour with machines, for example. Speaking of which, he predicts that, as with agriculture, manufacturing will progressively employ fewer people, manufacturing jobs in China are now decreasing even as it’s share of the market increases due to productivity improvements. But this is also a man who says t-shirts selling for £2 are a good thing, because even workers earning, what appear to us as, very low wages in China are earning more than they would in subsistence farming and the process of industrialisation and urbanisation inevitably raises living standards in the long run.
Asked about the immediate plans for our economy, he says we need to bring the deficit down eventually, but it is still too early and the recovery too fragile to cut now. You get out of recession by growing the economy, it is unlikely the private sector can make up the difference if the public sector is cut now. Where that has worked in the past it has been where a small country can devalue its currency to boost exports and where the banking system has been functioning properly, neither is true for us. Cuts in education and capital spending are even worse as these have direct benefits in increased productivity and taxes in the future. The cuts are less about good economics and more about a political decision to shrink the size of the state, get cuts out of the way well before the next election and reduce the deficit quickly enough to give away tax cuts before the next election.
Which all sounds remarkably close to conventional Green thought. Where I suspect he diverges from many of us, however, is when asked about eh limits of growth. Growth fundamentally comes down to two things in the mind of Philippe Legrain, ingenuity and energy. Human ingenuity is virtually unlimited, and till now we have only exploited a tiny portion of it, the rich, male, western part. As the developing world grows and women gain more power our capacity for invention will grow too. If we continue to burn carbon the world will fry, but the solution is not to drastically cut our living standards but to switch to a different fuel. There are huge quantities of energy from the sun, wind and atom (he didn’t go into great detail on his preferred mix, or whether atom referred to fission, fusion or both). With energy we can desalinate water, and there is plenty of salt water, with food we should be able to increase yields by 50% by 2050, which would be enough to feed 9 billion people (again relatively few details in the talk on how this can be achieved). With other resources the prices will go up as supply decreases or demand increases which will stimulate new technologies with fewer requirements.
While there’s certainly some truth in the idea that there’s plenty of clean energy out there if we make the effort, and that with enough energy we can overcome quite a lot of other problems, there is, perhaps, a little too much reliance on our ability to always find technological solutions in time in this part of his argument. Certainly I’d like to see a little more evidence at the least an hopefully that’ll be something he addresses in the book. I’ll let you know.
Philippe Legrain’s book Aftershock: Reshaping the world economy after the crisis is out now