October 23, 2025 • 42 mins
From trade wars to skyrocketing tech valuations, governments and investors seem to be making economically irrational moves. As the world heads into another global climate summit, there is a need for fresh thinking to bring countries back to work on the urgent challenge of climate change. This week on Zero, political economist Abby Innes tells Akshat Rathi what governments are getting wrong about addressing the problems we face and how to reimagine economics for the climate era.
Explore further:
- Abby’s book, Late Soviet Britain
Zero is a production of Bloomberg Green. Our producer is Oscar Boyd. Special thanks to Eleanor Harrison Dengate, Sommer Saadi, Mohsis Andam, Laura Millan and Sharn Chen. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to zero. I am Akshatrati this week rethinking economics.
As I've watched world events unfold this past year, I've
been surprised by the many seemingly economically irrational moves at
(00:24):
governments and investors around the world are making. The prime
examples are coming from the US with President Donald Trump's
trade war or attacks on clean energy, but there are
many others. The incredible valuation of AI companies, Argentina's extreme austerity,
inclusion of defense companies in ESG funds, the European Unions
(00:46):
promised to buy seven hundred and fifty billion dollars of
liquefied natural gas. The list is long. Each of these
can be explained in different ways. Perhaps it was for
a political win, or it was an ideological choice, or
short term thinking, or investments made because of a fear
of missing out, or some combination.
Speaker 2 (01:08):
Of those excuses.
Speaker 1 (01:10):
But what if the main reason for these irrationalities is
much deeper. That's what Abbi Inns thinks. She's an associate
professor of political economy at the London School of Economics,
and she came to that conclusion while writing her book
Late Soviet Britain as unlikely as it might seem. Her
central thesis is that the UK and other capitalist economies
(01:33):
are behaving like the ineffective, centrally planned Soviet economy. She
argues that the market driven economic system that was supposed
to be the antidote to socialism can never deliver on
its utopian promises. Ever since I finished reading the book
earlier this summer, I've not been able to stop thinking
about it. Though the title refers to the problems in
(01:54):
the UK, the conclusions that Abbi draws are much more
widely applicable, and she arrives at them after studying more
than a century of academic work done in economics. The
book isn't a light read, but I think it is
a necessary read for anyone trying to make sense of
the world we find ourselves in. So I wanted to
(02:14):
ask Abby to lay out the case she makes in
her book and explain why governments and corporations aren't taking
the climate threat as seriously as economists think they should.
Welcome to the show.
Speaker 3 (02:28):
Abby, thank you very much, thanks for asking me.
Speaker 1 (02:31):
So this is a climate podcast, but folks who work
on the climate challenge will fully recognize that we live
in a complex highly connected and interdependent world, and in
that sense, any climate solution will involve not just change
in technology, but also changes to how government works, finance society.
(02:53):
And your book is focused mainly on government, but on
the economy as a whole, has an intriguing title Late
Soviet Britain. Before we explore the nuances of the work
that you've done and the research that led you to
write the book, could you just tell us how you
started to work on the book at all and what
(03:15):
did you conclude after working on it for many years.
Speaker 3 (03:18):
Six and a half years, which was quite a lot
longer than I thought it was going to take when
I started it. So the reason it's ended up with
this very counterintuitive title is that when I started working
on it, which was after Brexit, what I wanted to
write about was state failure, and so I thought, well,
(03:40):
I'll begin by looking at the really obvious sort of
aspects of that. So I thought I'd start with public
sector outsourcing. So the more I looked into that, looking
into these contracting failures and enterprise failures, rising costs, declining
service quality and so on, I started to get this
very uncap any feeling that it was very familiar, familiar
(04:03):
to me as someone with a research background in the
old Soviet space. I thought, well, this is very strange.
Meant to be the opposites, right, The neo classical economics
behind neliberalism was meant to be the as it were,
the scientific economics that was the antidote really to the
(04:23):
kind of central planning, bureaucracy and rigidity that we knew
about from the Soviet experience. And then I realized that
what they held in common was that they were exact
mirror images.
Speaker 1 (04:36):
So there are beliney of examples, and we'll come to them.
One that shocked me as somebody coming to this country
as an immigrant and then learning that the country that
built the modern sewage system now spilled sewage in UK
rivers and seas was an interesting experience. But we can
(04:56):
come to that failure a little later. There is an
hour respect of our discussion which is focused on politics separately,
economics separately. They are usually not put together. But your
area of study is political economy. And you got to
the conclusions in the book, which you should briefly mention
(05:18):
through a circuituous route going all the way back to
the philosophy of science.
Speaker 2 (05:22):
Why was that necessary.
Speaker 3 (05:23):
So what I became really interested in was how two ideologies,
so neoliberalism in the West and Soviet economics in the East,
how they could be rooted in such different metaphysics as
it were, so Soviet economics being rooted in sort of
(05:45):
Marxists sociology, which was meant to be dynamic and about
moving classes and dynamic social systems, and the mathematical economics
known as neoclassical economics, which sits behind most neoliberal policy,
which is very much more abstract. It exists in a
world of logical argument from assumption using either mathematics or
(06:05):
formal logical argument, and modeling and forecasting. It's an attempt
to build a kind of predictive analytical science. The idea
being that you could cut out all this sort of
empirical noise and get to, as it were, the universal
truths of the economic world. That's the aspiration, and I
thought to understand this, to understand how they nevertheless end
(06:29):
up converging on the same state craft of quantification, output planning,
target setting, measurement, forecasting. All of this, I'm going to
have to go back to the philosophy of science to
figure out how they converge, and the point of convergence
is that when Stalin moves away from long term determinism
(06:52):
to the idea that you can have a top down,
almost completely encompassing, central planning system, you suddenly arrive even
a world of attempting to create a perfect coordinating system,
a perfect alecative mechanism using planning, and that is the
exact mirror image of the aspiration behind neoclassical economics.
Speaker 1 (07:15):
How exactly though, because you are still in the Soviet
system trying to centrally plan for a state that is authoritarian.
Speaker 3 (07:24):
That's right.
Speaker 1 (07:25):
For socialist outcomes, that's right. And on the other hand,
the system we live in here in the West now,
which has been in place for a while but has
been going towards a particular direction, is market oriented democracies
where people are choosing these leaders, and the leaders are saying,
we are going to create offers and options for all
(07:46):
of you in this competitive space that would allow you
to make the best rational choices you are. They seem opposite,
and they are opposite.
Speaker 3 (07:53):
That's absolutely right. So the book is a kind of
dark historical joke in a way, because the argument is
absolutely not It would be absurd to argue that neoliberalism
emerged in anything remotely like sort of totalitarian, oppressive, coercive systems,
whereas the particularly from the Stolenist era onwards, of course,
(08:14):
that system is a totalizing regime, very explicitly, so it's
extremely violent, it's extremely coercive throughout that period. But the
point I want to make in the book is that
despite being absolute opposite regimes in political form, the way
(08:35):
they think about the economy, the fact that they think
about the economy in deterministic machine forms of reasoning means
ironically that they converge on the same forms of statecraft
and reasoning about the economy, which is quantification, target setting, calculation,
(08:58):
risk calculation, the idea that we don't live in a
uncertain world, but we live in a computable world. And
also that if you create systems according to this, as
it were, the science, then enterprises businesses will only behave
in a rational, socially productive manner. And the irony of
(09:18):
all of this is that what hyperneoliberal states like the
UK and the US produce is Soviet state failures in
capitalist form.
Speaker 1 (09:28):
Late Soviet Britain tells me Soviet Union had problems, especially
in its late years, because then it went into collapse.
And if you are after six and a half years,
concluding this is where Britain is now, you are saying
we are heading towards collapse. But sure the country has problems,
but it's also democracy and as far as I know,
(09:51):
collapse isn't coming.
Speaker 3 (09:53):
I certainly hope collapse isn't coming. Faith in democracy is
extremely weak at this point. I think it's fair to
say it's weaker than it has been than at any
point since the creation of universal suffrage in the UK.
And it's an important question as to why that is.
And the argument I make in the book is that
(10:16):
what has really changed significantly is that the mainstream parties
in Britain over the last forty five years have all
more or less adhered to a single economic blueprint. There
are important differences between labor and the conservatives on that,
but probably the most important distinction within it is between
(10:40):
so called Camp one and Camp two, or a first
burst world or second best world neoclassical economists. And let
me explain what I mean by that. So, if you're
in the first best world, those positions tend to assume
that the more the state withdrawals, the more the market
is a perfect active mechanism, that individuals within market systems
(11:04):
are basically rational, that we can navigate our way round
highly competitive markets, and that this is the supremely efficient
system of allocation in the world. And historically now that's
as it were, the radical free market position. Over time,
(11:24):
it's become an increasingly dogmatic position.
Speaker 1 (11:28):
And that's also from the political perspective. Margaret Thatcher here
in the UK and Ronald Reagan in the US in
the nineteen eighties absolutely trying to bring what is labeled
as neoliberal economics to the political sphere.
Speaker 3 (11:42):
That's right, they're the radicals in neoclassical economics, but the
mainstream position is not really. The most mainstream economists who
work in companies and government, treasury and so on, tend
to be so called second best world economists, and they
are are more skeptical of the idealized image or even
(12:03):
the possibility of perfectly efficient markets, perfectly rational individuals. However,
they maintain the basic methodology, which is the idea that
using mathematic or modeling and argument from assumption that might
be formal prose argument or it may actually use mathematics.
Their assumption is that that methodology is incredibly useful for
(12:25):
figuring out how markets fail. So what they're interested in
is using the ideal types, as it were, the perfect markets,
the perfectly informed individual as a heuristic device as a benchmark,
so that you can then develop theory of why markets
will fail.
Speaker 1 (12:42):
In practice, the Tacher era, you get a ton of
privatization because that's the goal of that station out of
the way, right, and the water companies are privatized, and
you know, we know what happened to the sewage problem.
As a result, railways are privatized. Utilities parts of them
start to get privatized, the power utilities. Then come the
(13:02):
labor years and they realize not all of that privatization
was good, or there are things that the economy hasn't
been considering, like greenhouse gases. You know, labor in the
later years puts a price on carbon on coals specifically
to try and include what later on economists Nicholas turn
(13:23):
labels the greatest market failure, which is taking greenhouse gas
emissions outside the economic system, clearly when it has an
impact on the economic system. So they try and fix
these market failures. But what you're saying is they're still
trying to get back to this perfect world of perfect
rational people operating in a perfect market, and that would
(13:48):
be better for everybody. So there's really not that much
difference between the political economy of labor and conservatives over
the last forty five to fifty years.
Speaker 3 (13:58):
That's very nicely set out. That's exactly right. And the
point I want to make is that labor and social
democratic parties more generally. This is true of the New
Democrats in the US, it's true social democratic parties really
across Europe and beyond found it very appealing the idea
that you could have this kind of technical science of
(14:18):
how you would improve markets, that you would get the
best of markets and states, that you would use the
state only in these efficient ways of mending market failures.
But the point I make in the book is that
that's a confusion of something that is logically valid with
something that you can actually reproduce in the social world,
because the fallacy is that by mending a market failure,
(14:43):
you're taking society closer towards the efficiency horizon of a
perfectly complete market or a perfect system of allocation. And
the point I make in the book is that's the
Soviet fallacy too. It's the high modernist fallacy that we
live in a computable world and perfect efficiency is humanly possible.
Speaker 1 (15:04):
If we get all the information, we'll make the right
decisions as a result. So talk me through a failure
that may explain it. The water utilities here have been privatized.
They have been pretty profitable for the shareholders who then
took on the ownership of these utilities. Add the cost
clearly of service to people because we have sewage in
(15:25):
freshwaters and we have a ton of leaks of fresh
water into the pipe system which has been been fixed.
How exactly to camp one Camp two thinking lead to
a corporation a public good that has to be a
regulated monopoly if it has to be privately owned or
just a state owned company, because you can never have
(15:46):
competition there happen.
Speaker 3 (15:49):
So the sort of idealized version is that markets are
always functionally and morally superior to the state because instead
of having the fear being that you would have this
kind of monopoly state that would set prices for a
nationalized water system that it would probably overinvest, that it
(16:09):
would be this kind of misallocation of resources that a
market system of supply and demand would somehow resolve in
a more efficient way, so the assumption being that market
provision will somehow be more alecatively efficient. The trouble with
things like water and natural resources like that is that
(16:30):
they are natural monopolies in terms of provision and supply
and the networks that go with it, and so on
and so forth. But the issue was also that the
assumption is that firms of all sizes are as it
were productive stewards of the real economy, so that even
(16:52):
if you had a monopoly firm, the discipline of its
wider participation in markets would lead it to invest in
a rational way for the long term. This isn't something
that's very easy to describe within neoclassical modeling. So the
short termism of shareholders and the idea that they don't,
(17:13):
as it were, think in universal welfare improving terms when
they think about returns is something that seems to have
been missed. But it's been a fairly fatal mistake for us.
Speaker 1 (17:23):
So it's a government failure here. What could the government
have done differently to actually make it work?
Speaker 3 (17:31):
So this brings us to the second best world right
where these kind of contractual failures or regulatory failures. The
assumption is that there must be something in the incentive
framework that is inadequate, so you correct the incentive framework.
And that's logical, that makes perfect intuitive sense. So you
try and do that. You create targets, or you create
(17:54):
certain incentives or even disincentives, so you have the threat
of five means for example, or you demand more information.
There are all kinds of things you can do to
try and sort of correct the framework. What neoclassical models
of that cannot begin to describe, though, is the power
relationship between a monopoly provider and a government who will
(18:17):
be held ultimately legally, fiscally and politically liable for the
non delivery of that service. So what we see in
real historical time is that the British government tries to
exert a fine and the regulator makes kind of rude
noises to the company, and the company says, well, we
(18:40):
realize we've miscalculated in some way and we would pay
the fine, but that would rebound on higher bills or
it will restrict our capacity to invest. And it's the
investment famine that's been so damaging over time to the
nature of the fundamental assets like the non building of
reservoirs in the UK case. So government tends to retreat
(19:02):
because it is caught between a rock and a hard place.
Speaker 1 (19:07):
But is there something that you see or something that
you can see in history in the late Soviet Union
that you are seeing in today's Britain.
Speaker 3 (19:15):
Yeah. I think there are concentrated corporate interests as they
were in the old enterprise planning system of the Soviet Union,
that kind of military industrial complex if you like, of
the Soviet system. But I guess the British system would
be a mix of, as it were, the least socially
(19:35):
constructive corporate, financial and fossil fuel interests who are absolutely reactionary,
who would rather dig in politically, even if it means
the overthrow British democracy. That like corporate interests and fossil
fuel interests supporting Trump in the US, they would rather
(19:57):
back an authoritarian to sustain their economic and financial privileges.
Then admit that those privileges have occurred at the exclusion
of social cohesion and a sustainable form of economic development,
and it's time that they were readjusted and changed and
(20:20):
effectively broken up.
Speaker 1 (20:21):
It leads to frustration among the public and a desire
for a solution, and the rise of populism. There is
Farage in the UK, Trump in the US, Maloney in Italy,
More in India, Aduan in Turkey. Why is it that
their message lands so well? Why is it right wing
(20:41):
populace and not so much lefting populist who get their
message out? Why isn't there like a climate populist.
Speaker 3 (20:49):
Well, there's again a slightly horrifying analogy with the Soviet system.
In the Soviet system, you had decades of trying to
mobilize people according to Marxist Leninist economic promises right that
in the Soviet space, economies would become more and more wealthy,
more and more and more fraternal, and ultimately the state
(21:09):
would wither away and lead to communism, which was like
an Edenic condition of a spontaneously for eternal and equal
and fair and just and happy society. Right, The thatch
right promise is never that extreme, but it is a
promise of the Reagan and the Thatcher revolutions that by
(21:30):
removing the states, not completely, but by rolling back the
post war state, by rolling back social democratic values, that
all boats would rise on a rising tide continuously and
so we had decades of great economic optimism, but then
you get the global financial crisis, which is pretty cataclysmic
(21:51):
in terms of the legitimacy and credibility of this system.
And that creates a pretty fundamental problem for neoliberal political
parties after the global financial crisis, which is, how do
you continue to legitimize a materialist utopia in non economic terms?
So you do what the Soviets did, and what the
(22:11):
Soviets did in the nineteen eighties was increasingly moved to
nationalist forms of mobilization and racism, so ethnic mobilizations, ethno
nationalist mobilizations, and that's what you're also seeing on the
neoliberal right. It's what happened to the Republican Party in
the US, it's what happened to the Conservative Party. And
(22:33):
I think part of the appeal of ethno nationalist and
racist politics for political parties that don't want to change
the economic paradigm fundamentally is you can make huge expansive promises.
You can, as it were, create combat tasks that replace
the old economic combat tasks. You can create enemies foreign
(22:57):
and domestic. You can mobilize people, you can divide your societies.
It's a wedge issue. And you can do all of
this without making a lot of economic promises except that
things will get better because instead of dealing in an
honest way about the failures of the economic paradigm of
the last forty five years, it's how much easier to
(23:19):
blame it on immigrants or excessive immigration, to resurrect great
task historic injustices like the.
Speaker 1 (23:29):
Or net zero by twenty fifty.
Speaker 3 (23:31):
This is fascinating to me that net zero instead of
taking the science seriously as natural science, but because it
had become infected by socialism, right, that socialism had killed
the entrepreneurial spirit of the West. That's the argument, and
the net zero a socialism argument is a kind of
recalibrated version of that. So it's not that there's an objective,
(23:54):
empirically verifiable reason to be pretty critical about our current
economic status. So no, it's a socialist conspiracy. So zero
is particulated by right wing interests who wish to preserve
the privileges that they've gained, particularly obviously sort of carbon
fossil fuel interests wish to maintain subsidy and privilege and
(24:16):
so on. To reconstitute that argument that this isn't you
know this science is this is just socialism under a cloak.
Speaker 1 (24:30):
Join us after the break for more of my conversation
with Professor Abby Innes, author of Late Soviet Britain. Thank
you to everyone who has written a review of Zero recently.
We appreciate all of them and please keep them coming. Recently,
Sheila wrote Zero's crystal clear reporting presented with reflection and serenity,
must be the best climate crisis information available.
Speaker 2 (24:52):
Thank you, Sheila.
Speaker 1 (25:06):
In the Climate Circles, one diagnosis of the problem that
has gained traction recently is that governments, whether left or right,
have made it harder to build things. Infrastructure everywhere is creaking. Yeah,
it's private companies sometimes that are actually responsible for that infrastructure,
like the sewage system here, but it's really governments and
(25:26):
their overburdened regulation that has made it obstructionist rather than
rules that came from the right place. At one point,
this is broadly called the abundance agenda, taken off in
the US a lot, and the solution is, if only
there were fewer regulations in place, we will all have
(25:49):
clean energy, healthy world that we all want to live in.
And the left could actually deliver on the promises that
the left has made for decades. Now make it concrete.
From a climate perspective, it's the idea that even though
Joe Biden signed what was the US's biggest climate bill,
(26:09):
the Inflation Reduction Act, in twenty twenty two, by the
time the twenty twenty four election rolls around, very little
has been built, not much of the money has been spent.
People haven't seen the benefits. So no wonder Trump gets elected.
Do you think that diagnosis of the malays is right?
Speaker 3 (26:26):
It's a great question. I think I'd adjust it slightly,
which is, we have to ask where the regulatory brittleness
and complexity came from. And again it's one of the
points of Soviet analogy. So what Soviets and neoliberals both
do is try and set up their idealized system of coordination,
(26:47):
whether it's the state and command planning in the Soviet
system where it's via increasing market power. But what happens
next in both systems is that the promises of theory
don't play in practice. So what do you do? What
mechanisms do you have to try and improve the situation
where you have the state and second best world Neoclassical
(27:09):
economics says, what you need to do is regulate them
in the forms that would allow them to, as it were,
conform more to market theory. So that's what we do.
And it's also what the Soviets did in their original
central planning system, which is when things don't work the
way you're supposed to, what you try and do is
(27:30):
build this exo skeleton of more targets, more metrics, more
output planning. And the irony in the UK case is
we have, after forty five years of marketization, we have
a state that is more centralized, more bureaucratic, more rigid,
and more expensive than it has ever been historically.
Speaker 1 (27:50):
It has more people working for it, the government spends more.
That's when toucher to power.
Speaker 3 (27:57):
That's right.
Speaker 1 (27:57):
This is true not just in the UK, but so
in the US, where Reagan promise there will be small government,
government is bigger today and spends way more now, and
apart from the one term of Clinton when deficit actually fell,
it has been rising all throughout. So but the answer
of the abandonce agenda that you just need few regulations,
(28:20):
you don't think that's right.
Speaker 3 (28:21):
So a simple a kind of unit, you know, one
dimensional solution like deregulate.
Speaker 1 (28:27):
It's just.
Speaker 3 (28:29):
Given where we are. I think you just get yet
another wave of unanticipated and mostly negative consequences.
Speaker 1 (28:36):
There was a simplistic idea in a way that was
running camp on Camp two saying we can create a
perfect market economy showing the size of the government, and
then everybody will be happy. That's not worked out. So
now some people are coming in and saying, well, what
we need is we've just got too many regulations. Cut
those regulations, we will have a solution. But you're saying,
simplistic thinking is what got us here, It cannot get
(28:59):
us out of the substituation. That's right, What should we
be doing?
Speaker 3 (29:04):
I think what's incredibly important, and I suppose what I
was aspiring to do in the book is come up
with a diagnosis of how we got here. That isn't
about sort of as it were, good people and bad people.
It's a lot more complicated than that. You have to
make a philosophical reckoning. And the philosophical reckoning is do
(29:25):
we think we live in a computable world or do
we think we live in a world of inescapable uncertainty.
Do we think the human economy is more like a watch,
or do we think it's more like a garden. What
sets the natural science is apart, however, is that outside
the social world it's easier to It has proved easier
(29:50):
to isolate generative mechanisms in certain systems. So having discovered
things like thermodynamics or gravity, or the ways certain chemical
compounds combined, we have actually discovered natural laws that are
remarkably robust and that give us a basis further theorizing.
What makes that much more difficult in the social world
(30:14):
is that there's far greater contingency. Those natural laws don't
exist because the agents in the social world are themselves imaginative.
We're always in the social sciences trying to interpret a
world of people who are themselves constantly reinterpreting the world
and how they should behave in it. And that level
(30:35):
of contingency, that level of complexity, and the fact that
the world is always becoming something else socially means that
we need to make, as it were, a far more
radical shift than simply a shift in one form of
regulation or deregulation. We need to comprehend the fact that
(30:57):
we don't live in a computable world. And once you
dec side that once you recognize that, it radically, I think,
changes the way you think about the economy and the
repertoire of potential systems and methodologies that you might use
within it.
Speaker 1 (31:16):
Are there economies in the world that aren't falling for
this problem as the UK and the US have done.
Speaker 3 (31:23):
I think you're beginning to see a lot of really
interesting experimentation. So when it comes to circular economy ideas,
for example, in those countries you know, Sweden, Holland come
to mind, and you look at Copenhagen or even Barcelona
or Amsterdam where you still have significant sort of planning
capacity within those local city authorities that they're trying to
(31:46):
move quite far in that circular economic infrastructural design, but
of course for already built cities that can be quite difficult.
I mean, I think the fact is you're seeing lots
of experimentation, but it's eclectic as it were. So if
you took the idea of public banks, someone like Thomas
Mahoir has written a wonderful book on public banks and
(32:09):
is part of a big project with the Canadian government
looking at this. Public banks are much bigger players globally
than normal financial journalism tends to credit, and I think
there's a lot of potential in public banks to mix
concessionary and non concessionary lending to encourage innovation at the
not just the firm level, but the techological level and
(32:31):
the local authority level. Germany has created i think, something
like ten new public banks in the last decade. So
I think you are seeing countries understanding that short term
financial horizons are just far too short, and what kind
of financial organizations would extend those horizons, and public banks,
(32:51):
public regional development banks is obviously a way to go,
and lots of countries globally have experimented that very productively,
I think.
Speaker 1 (32:59):
So. I wrote a book called Climate Capitalism, which, if
you only diagnosed on its title, yes, from a lefty perspective,
that is a paradox capitalism and climate change. While their
opposites capitalism caused climate change. So how can it ever
solve it? Yes, if it took it from your analysis,
it may fall in Camp two category for most people,
which is to say you're tweaking capitalism to be climate oriented.
(33:22):
But in fact, when I wrote the book as a journalist,
my goal was to try and find examples around the
world where climate solutions were scaling. Yes, they happened to
be in capitalist economies, but the roots they were taking
to get to those solutions were radically different. The Chinese
system is the state led capitalist economy where they allow
(33:44):
for planning for five year plans, but they also allow
for hyper competition to reach those goals that the state
has set. And that's what I found refreshing about your book,
which is that you're not as many people who critique
capitalis just dump the idea markets can never work. There useless.
(34:04):
They've caused this problem. So think about something else and
we can talk about what there's something else that they
suggest which currently doesn't operate at any scale anywhere. But
you acknowledge that there are parts of capitalism that are useful,
that market economies or marketization of certain things can be useful. Sure,
the machine model of the entire economy isn't right.
Speaker 3 (34:25):
And it dilutes us. It gives us a sort of
baseline assumption that firms will always tend to be productive
students of the real economy, and that assumption that comes
out of the machine modeling of neoclassical economics is demonstrably false. Right,
sometimes they are, but if you basically, do not restrain
(34:48):
firms and drive them through regulation but also culture towards
valuable social purposes. They can become incredibly negative actors within
the social world. So by being utopian about them, what
we've actually done is, as it were, forgotten decades of
what we had learned in the pre and post war
(35:10):
period about how socially beneficial firms could be if they
were driven primarily by social purpose, but profit was a
secondary priority.
Speaker 1 (35:20):
But if the market economy does have utility, these economic
models do have utility, what are they? Where are they
still useful?
Speaker 3 (35:28):
Again, If we think that we live in a garden
rather than a watch, I'm going to keep coming back
to that analogy. If we think we live in an
uncertain world, then we should stop thinking in terms of
efficiency and optimality in a presumptively completable machine, because those
things are delusions. They are kind of god delusion, and
(35:50):
we should think much more about, well, what are the
coordinating mechanisms that we have that would allow us to
be continuously adaptive, continuously resilient, continuously able to scan the
horizon with the greatest number of alternative perspectives that we
(36:12):
can muster. What's a kind of anti fragile economy under
conditions of ecological collapse. And my answer to that would
be the most pluralistic range of systems that you have.
So that's everything. That's markets, that's firms, but firms much
more driven by social purpose than profit. That's the state,
(36:34):
but it's also well lots of different social forms, forms
of cooperation, forms of coordination that are trust based rather
than contract and price based.
Speaker 1 (36:47):
So there is a warning in your book where when
you diagnose all these problems, there is clearly temptation to
try and break it about create a revolution of some sort,
which is what happens when you know, in the Soviet Union,
when the social contract was so deeply broken that you
had a revolution and then so we broke apart. But
(37:11):
you want against revolutions because they don't end up creating
the kind of solution that the revolutionaries are hoping for.
Speaker 3 (37:20):
I'm against revolution if we're talking whole social system revolutions.
None of us can know what the correct system is
because we're not God. And it is the ultimate virtue
of liberal democracies that they are adaptive systems. They allow
for learning from your previous mistakes, but they're only adaptive
(37:41):
if political parties themselves don't get attached to utopian economic orthodoxies,
which then stop them from learning. The other reason that
I'm against revolutions is revolutions tend to have revolutionary leaders.
I mean, they tend to be deeply undemocratic, and I'm
a democrat. I think the guy who runs a firm
(38:01):
or a grocery, or the woman running those things, we
all have a great deal of knowledge about our own condition.
In fact, we have more knowledge about our own condition
than anyone else. And the most adaptive, resilient, and knowledgeable
system is going to be one that operates in a
(38:22):
kind of analytical pluralism in lots of different organizational forms,
so that all of our knowledge is relevant. That's the
most deeply democratic system. And it seems to me inconceivable
that we are going to reach a form of society
and economics that is compatible with the biosphere. If we're
(38:42):
trying to impose machine systems or machine thinking or monocultural
ideas on to something as beautiful and elaborate and constantly
evolving and nonlinear and dynamic as the natural world, so
(39:03):
we need to think in terms of how do we
emulate that world in the way we organize ourselves. Democracy
is a pretty good start. Part of what you're talking
about is kind of fatalism, and I think a lot
of the fatalism in among economic actors, corporate actors, you know, regulators,
financial actors. Even is the idea that there's sort of
(39:25):
cogs in a machine and they can't change the nature
of that machine, and we can change it every day.
Every day is different. But we need as soon as
we understand that we can change it, that we break
non natural economic laws, when we change our minds, when
we do things differently, it opens the game in a
completely different way.
Speaker 1 (39:43):
And the whole reading of your book is to me
empowering because it says we don't have the answer, which
is a temptation that so many people have to fall for.
Speaker 3 (39:55):
Yeah, isn't it great?
Speaker 1 (39:56):
There is intellectually humility in realizing their deep problems, that
we have small solutions, and that all those solutions can
be started to work on simultaneously, and it's not starting
from zero. Some form of these exist in different parts
of the economy around the world, and that they all
can start to add up if we reframe the problem
(40:20):
at the top, which needs to be addressed, but we
don't need the top to go away before we can
start to work on those solutions.
Speaker 3 (40:29):
That's exactly wonderful. I'm so happy that that's the conclusion
that you drove from the book, because it is the
one I reached. And also I want to point out
that even in the most dramatic social revolutions of the
modern era, right even in the Soviet Revolution and in
the collapse of communism and in the thatch Right revolutions,
we think about them as revolutions, but from one day
(40:51):
to the next they were incremental. Right, Real people in
the real world, from one day to the next are
solving the problem they have on their desk with incomplete information,
even if they think they're Soviet revolutionaries. And that's one
of the main reasons those revolutions tend to go hey
(41:11):
wire from day two more or less. That is the
human condition. The human condition is we are all attempting
to solve the problems right in front of us with
incomplete information.
Speaker 1 (41:23):
It is true, and even on just objective metrics which
we can take. You know, we live longer lives than
we ever have done. We have better medicine than we
have ever done, we have technologies now that can start
to address the climate problem at prices that you know,
we would be jealous of if we knew in advance
that that could be reached. And so clearly there are
(41:46):
tools as well available to try and solve the problem.
So thank you for laying out the problems so clearly
and for creating space for everybody to work on solutions.
Speaker 3 (41:57):
Thank you so much, it was a privilege to be asked.
Speaker 1 (42:04):
And thank you for listening to zero. And now for
the sound of the week, that's the sound of sumo.
This week, London's been a buzz with the news of
the sumo wrestling at the Royal Albert Hall, only the
(42:26):
second time a sumo tournament has ever taken place outside
of Japan. Share this episode with a friend or with
someone who has witnessed the fall of the Berlin Wall.
Speaker 2 (42:36):
This episode was produced by Oscar boyd Our.
Speaker 1 (42:38):
Theme music is composed by Wonderly Special Thanks to Eleanor Harrison, Tngate,
Samersadi Moses Andam Laura Milan and Sharon chen I, am Akshadharati.
Speaker 2 (42:47):
Back soon
Welcome to zero. I am Akshatrati this week rethinking economics.
As I've watched world events unfold this past year, I've
been surprised by the many seemingly economically irrational moves at
(00:24):
governments and investors around the world are making. The prime
examples are coming from the US with President Donald Trump's
trade war or attacks on clean energy, but there are
many others. The incredible valuation of AI companies, Argentina's extreme austerity,
inclusion of defense companies in ESG funds, the European Unions
(00:46):
promised to buy seven hundred and fifty billion dollars of
liquefied natural gas. The list is long. Each of these
can be explained in different ways. Perhaps it was for
a political win, or it was an ideological choice, or
short term thinking, or investments made because of a fear
of missing out, or some combination.
Speaker 2 (01:08):
Of those excuses.
Speaker 1 (01:10):
But what if the main reason for these irrationalities is
much deeper. That's what Abbi Inns thinks. She's an associate
professor of political economy at the London School of Economics,
and she came to that conclusion while writing her book
Late Soviet Britain as unlikely as it might seem. Her
central thesis is that the UK and other capitalist economies
(01:33):
are behaving like the ineffective, centrally planned Soviet economy. She
argues that the market driven economic system that was supposed
to be the antidote to socialism can never deliver on
its utopian promises. Ever since I finished reading the book
earlier this summer, I've not been able to stop thinking
about it. Though the title refers to the problems in
(01:54):
the UK, the conclusions that Abbi draws are much more
widely applicable, and she arrives at them after studying more
than a century of academic work done in economics. The
book isn't a light read, but I think it is
a necessary read for anyone trying to make sense of
the world we find ourselves in. So I wanted to
(02:14):
ask Abby to lay out the case she makes in
her book and explain why governments and corporations aren't taking
the climate threat as seriously as economists think they should.
Welcome to the show.
Speaker 3 (02:28):
Abby, thank you very much, thanks for asking me.
Speaker 1 (02:31):
So this is a climate podcast, but folks who work
on the climate challenge will fully recognize that we live
in a complex highly connected and interdependent world, and in
that sense, any climate solution will involve not just change
in technology, but also changes to how government works, finance society.
(02:53):
And your book is focused mainly on government, but on
the economy as a whole, has an intriguing title Late
Soviet Britain. Before we explore the nuances of the work
that you've done and the research that led you to
write the book, could you just tell us how you
started to work on the book at all and what
(03:15):
did you conclude after working on it for many years.
Speaker 3 (03:18):
Six and a half years, which was quite a lot
longer than I thought it was going to take when
I started it. So the reason it's ended up with
this very counterintuitive title is that when I started working
on it, which was after Brexit, what I wanted to
write about was state failure, and so I thought, well,
(03:40):
I'll begin by looking at the really obvious sort of
aspects of that. So I thought I'd start with public
sector outsourcing. So the more I looked into that, looking
into these contracting failures and enterprise failures, rising costs, declining
service quality and so on, I started to get this
very uncap any feeling that it was very familiar, familiar
(04:03):
to me as someone with a research background in the
old Soviet space. I thought, well, this is very strange.
Meant to be the opposites, right, The neo classical economics
behind neliberalism was meant to be the as it were,
the scientific economics that was the antidote really to the
(04:23):
kind of central planning, bureaucracy and rigidity that we knew
about from the Soviet experience. And then I realized that
what they held in common was that they were exact
mirror images.
Speaker 1 (04:36):
So there are beliney of examples, and we'll come to them.
One that shocked me as somebody coming to this country
as an immigrant and then learning that the country that
built the modern sewage system now spilled sewage in UK
rivers and seas was an interesting experience. But we can
(04:56):
come to that failure a little later. There is an
hour respect of our discussion which is focused on politics separately,
economics separately. They are usually not put together. But your
area of study is political economy. And you got to
the conclusions in the book, which you should briefly mention
(05:18):
through a circuituous route going all the way back to
the philosophy of science.
Speaker 2 (05:22):
Why was that necessary.
Speaker 3 (05:23):
So what I became really interested in was how two ideologies,
so neoliberalism in the West and Soviet economics in the East,
how they could be rooted in such different metaphysics as
it were, so Soviet economics being rooted in sort of
(05:45):
Marxists sociology, which was meant to be dynamic and about
moving classes and dynamic social systems, and the mathematical economics
known as neoclassical economics, which sits behind most neoliberal policy,
which is very much more abstract. It exists in a
world of logical argument from assumption using either mathematics or
(06:05):
formal logical argument, and modeling and forecasting. It's an attempt
to build a kind of predictive analytical science. The idea
being that you could cut out all this sort of
empirical noise and get to, as it were, the universal
truths of the economic world. That's the aspiration, and I
thought to understand this, to understand how they nevertheless end
(06:29):
up converging on the same state craft of quantification, output planning,
target setting, measurement, forecasting. All of this, I'm going to
have to go back to the philosophy of science to
figure out how they converge, and the point of convergence
is that when Stalin moves away from long term determinism
(06:52):
to the idea that you can have a top down,
almost completely encompassing, central planning system, you suddenly arrive even
a world of attempting to create a perfect coordinating system,
a perfect alecative mechanism using planning, and that is the
exact mirror image of the aspiration behind neoclassical economics.
Speaker 1 (07:15):
How exactly though, because you are still in the Soviet
system trying to centrally plan for a state that is authoritarian.
Speaker 3 (07:24):
That's right.
Speaker 1 (07:25):
For socialist outcomes, that's right. And on the other hand,
the system we live in here in the West now,
which has been in place for a while but has
been going towards a particular direction, is market oriented democracies
where people are choosing these leaders, and the leaders are saying,
we are going to create offers and options for all
(07:46):
of you in this competitive space that would allow you
to make the best rational choices you are. They seem opposite,
and they are opposite.
Speaker 3 (07:53):
That's absolutely right. So the book is a kind of
dark historical joke in a way, because the argument is
absolutely not It would be absurd to argue that neoliberalism
emerged in anything remotely like sort of totalitarian, oppressive, coercive systems,
whereas the particularly from the Stolenist era onwards, of course,
(08:14):
that system is a totalizing regime, very explicitly, so it's
extremely violent, it's extremely coercive throughout that period. But the
point I want to make in the book is that
despite being absolute opposite regimes in political form, the way
(08:35):
they think about the economy, the fact that they think
about the economy in deterministic machine forms of reasoning means
ironically that they converge on the same forms of statecraft
and reasoning about the economy, which is quantification, target setting, calculation,
(08:58):
risk calculation, the idea that we don't live in a
uncertain world, but we live in a computable world. And
also that if you create systems according to this, as
it were, the science, then enterprises businesses will only behave
in a rational, socially productive manner. And the irony of
(09:18):
all of this is that what hyperneoliberal states like the
UK and the US produce is Soviet state failures in
capitalist form.
Speaker 1 (09:28):
Late Soviet Britain tells me Soviet Union had problems, especially
in its late years, because then it went into collapse.
And if you are after six and a half years,
concluding this is where Britain is now, you are saying
we are heading towards collapse. But sure the country has problems,
but it's also democracy and as far as I know,
(09:51):
collapse isn't coming.
Speaker 3 (09:53):
I certainly hope collapse isn't coming. Faith in democracy is
extremely weak at this point. I think it's fair to
say it's weaker than it has been than at any
point since the creation of universal suffrage in the UK.
And it's an important question as to why that is.
And the argument I make in the book is that
(10:16):
what has really changed significantly is that the mainstream parties
in Britain over the last forty five years have all
more or less adhered to a single economic blueprint. There
are important differences between labor and the conservatives on that,
but probably the most important distinction within it is between
(10:40):
so called Camp one and Camp two, or a first
burst world or second best world neoclassical economists. And let
me explain what I mean by that. So, if you're
in the first best world, those positions tend to assume
that the more the state withdrawals, the more the market
is a perfect active mechanism, that individuals within market systems
(11:04):
are basically rational, that we can navigate our way round
highly competitive markets, and that this is the supremely efficient
system of allocation in the world. And historically now that's
as it were, the radical free market position. Over time,
(11:24):
it's become an increasingly dogmatic position.
Speaker 1 (11:28):
And that's also from the political perspective. Margaret Thatcher here
in the UK and Ronald Reagan in the US in
the nineteen eighties absolutely trying to bring what is labeled
as neoliberal economics to the political sphere.
Speaker 3 (11:42):
That's right, they're the radicals in neoclassical economics, but the
mainstream position is not really. The most mainstream economists who
work in companies and government, treasury and so on, tend
to be so called second best world economists, and they
are are more skeptical of the idealized image or even
(12:03):
the possibility of perfectly efficient markets, perfectly rational individuals. However,
they maintain the basic methodology, which is the idea that
using mathematic or modeling and argument from assumption that might
be formal prose argument or it may actually use mathematics.
Their assumption is that that methodology is incredibly useful for
(12:25):
figuring out how markets fail. So what they're interested in
is using the ideal types, as it were, the perfect markets,
the perfectly informed individual as a heuristic device as a benchmark,
so that you can then develop theory of why markets
will fail.
Speaker 1 (12:42):
In practice, the Tacher era, you get a ton of
privatization because that's the goal of that station out of
the way, right, and the water companies are privatized, and
you know, we know what happened to the sewage problem.
As a result, railways are privatized. Utilities parts of them
start to get privatized, the power utilities. Then come the
(13:02):
labor years and they realize not all of that privatization
was good, or there are things that the economy hasn't
been considering, like greenhouse gases. You know, labor in the
later years puts a price on carbon on coals specifically
to try and include what later on economists Nicholas turn
(13:23):
labels the greatest market failure, which is taking greenhouse gas
emissions outside the economic system, clearly when it has an
impact on the economic system. So they try and fix
these market failures. But what you're saying is they're still
trying to get back to this perfect world of perfect
rational people operating in a perfect market, and that would
(13:48):
be better for everybody. So there's really not that much
difference between the political economy of labor and conservatives over
the last forty five to fifty years.
Speaker 3 (13:58):
That's very nicely set out. That's exactly right. And the
point I want to make is that labor and social
democratic parties more generally. This is true of the New
Democrats in the US, it's true social democratic parties really
across Europe and beyond found it very appealing the idea
that you could have this kind of technical science of
(14:18):
how you would improve markets, that you would get the
best of markets and states, that you would use the
state only in these efficient ways of mending market failures.
But the point I make in the book is that
that's a confusion of something that is logically valid with
something that you can actually reproduce in the social world,
because the fallacy is that by mending a market failure,
(14:43):
you're taking society closer towards the efficiency horizon of a
perfectly complete market or a perfect system of allocation. And
the point I make in the book is that's the
Soviet fallacy too. It's the high modernist fallacy that we
live in a computable world and perfect efficiency is humanly possible.
Speaker 1 (15:04):
If we get all the information, we'll make the right
decisions as a result. So talk me through a failure
that may explain it. The water utilities here have been privatized.
They have been pretty profitable for the shareholders who then
took on the ownership of these utilities. Add the cost
clearly of service to people because we have sewage in
(15:25):
freshwaters and we have a ton of leaks of fresh
water into the pipe system which has been been fixed.
How exactly to camp one Camp two thinking lead to
a corporation a public good that has to be a
regulated monopoly if it has to be privately owned or
just a state owned company, because you can never have
(15:46):
competition there happen.
Speaker 3 (15:49):
So the sort of idealized version is that markets are
always functionally and morally superior to the state because instead
of having the fear being that you would have this
kind of monopoly state that would set prices for a
nationalized water system that it would probably overinvest, that it
(16:09):
would be this kind of misallocation of resources that a
market system of supply and demand would somehow resolve in
a more efficient way, so the assumption being that market
provision will somehow be more alecatively efficient. The trouble with
things like water and natural resources like that is that
(16:30):
they are natural monopolies in terms of provision and supply
and the networks that go with it, and so on
and so forth. But the issue was also that the
assumption is that firms of all sizes are as it
were productive stewards of the real economy, so that even
(16:52):
if you had a monopoly firm, the discipline of its
wider participation in markets would lead it to invest in
a rational way for the long term. This isn't something
that's very easy to describe within neoclassical modeling. So the
short termism of shareholders and the idea that they don't,
(17:13):
as it were, think in universal welfare improving terms when
they think about returns is something that seems to have
been missed. But it's been a fairly fatal mistake for us.
Speaker 1 (17:23):
So it's a government failure here. What could the government
have done differently to actually make it work?
Speaker 3 (17:31):
So this brings us to the second best world right
where these kind of contractual failures or regulatory failures. The
assumption is that there must be something in the incentive
framework that is inadequate, so you correct the incentive framework.
And that's logical, that makes perfect intuitive sense. So you
try and do that. You create targets, or you create
(17:54):
certain incentives or even disincentives, so you have the threat
of five means for example, or you demand more information.
There are all kinds of things you can do to
try and sort of correct the framework. What neoclassical models
of that cannot begin to describe, though, is the power
relationship between a monopoly provider and a government who will
(18:17):
be held ultimately legally, fiscally and politically liable for the
non delivery of that service. So what we see in
real historical time is that the British government tries to
exert a fine and the regulator makes kind of rude
noises to the company, and the company says, well, we
(18:40):
realize we've miscalculated in some way and we would pay
the fine, but that would rebound on higher bills or
it will restrict our capacity to invest. And it's the
investment famine that's been so damaging over time to the
nature of the fundamental assets like the non building of
reservoirs in the UK case. So government tends to retreat
(19:02):
because it is caught between a rock and a hard place.
Speaker 1 (19:07):
But is there something that you see or something that
you can see in history in the late Soviet Union
that you are seeing in today's Britain.
Speaker 3 (19:15):
Yeah. I think there are concentrated corporate interests as they
were in the old enterprise planning system of the Soviet Union,
that kind of military industrial complex if you like, of
the Soviet system. But I guess the British system would
be a mix of, as it were, the least socially
(19:35):
constructive corporate, financial and fossil fuel interests who are absolutely reactionary,
who would rather dig in politically, even if it means
the overthrow British democracy. That like corporate interests and fossil
fuel interests supporting Trump in the US, they would rather
(19:57):
back an authoritarian to sustain their economic and financial privileges.
Then admit that those privileges have occurred at the exclusion
of social cohesion and a sustainable form of economic development,
and it's time that they were readjusted and changed and
(20:20):
effectively broken up.
Speaker 1 (20:21):
It leads to frustration among the public and a desire
for a solution, and the rise of populism. There is
Farage in the UK, Trump in the US, Maloney in Italy,
More in India, Aduan in Turkey. Why is it that
their message lands so well? Why is it right wing
(20:41):
populace and not so much lefting populist who get their
message out? Why isn't there like a climate populist.
Speaker 3 (20:49):
Well, there's again a slightly horrifying analogy with the Soviet system.
In the Soviet system, you had decades of trying to
mobilize people according to Marxist Leninist economic promises right that
in the Soviet space, economies would become more and more wealthy,
more and more and more fraternal, and ultimately the state
(21:09):
would wither away and lead to communism, which was like
an Edenic condition of a spontaneously for eternal and equal
and fair and just and happy society. Right, The thatch
right promise is never that extreme, but it is a
promise of the Reagan and the Thatcher revolutions that by
(21:30):
removing the states, not completely, but by rolling back the
post war state, by rolling back social democratic values, that
all boats would rise on a rising tide continuously and
so we had decades of great economic optimism, but then
you get the global financial crisis, which is pretty cataclysmic
(21:51):
in terms of the legitimacy and credibility of this system.
And that creates a pretty fundamental problem for neoliberal political
parties after the global financial crisis, which is, how do
you continue to legitimize a materialist utopia in non economic terms?
So you do what the Soviets did, and what the
(22:11):
Soviets did in the nineteen eighties was increasingly moved to
nationalist forms of mobilization and racism, so ethnic mobilizations, ethno
nationalist mobilizations, and that's what you're also seeing on the
neoliberal right. It's what happened to the Republican Party in
the US, it's what happened to the Conservative Party. And
(22:33):
I think part of the appeal of ethno nationalist and
racist politics for political parties that don't want to change
the economic paradigm fundamentally is you can make huge expansive promises.
You can, as it were, create combat tasks that replace
the old economic combat tasks. You can create enemies foreign
(22:57):
and domestic. You can mobilize people, you can divide your societies.
It's a wedge issue. And you can do all of
this without making a lot of economic promises except that
things will get better because instead of dealing in an
honest way about the failures of the economic paradigm of
the last forty five years, it's how much easier to
(23:19):
blame it on immigrants or excessive immigration, to resurrect great
task historic injustices like the.
Speaker 1 (23:29):
Or net zero by twenty fifty.
Speaker 3 (23:31):
This is fascinating to me that net zero instead of
taking the science seriously as natural science, but because it
had become infected by socialism, right, that socialism had killed
the entrepreneurial spirit of the West. That's the argument, and
the net zero a socialism argument is a kind of
recalibrated version of that. So it's not that there's an objective,
(23:54):
empirically verifiable reason to be pretty critical about our current
economic status. So no, it's a socialist conspiracy. So zero
is particulated by right wing interests who wish to preserve
the privileges that they've gained, particularly obviously sort of carbon
fossil fuel interests wish to maintain subsidy and privilege and
(24:16):
so on. To reconstitute that argument that this isn't you
know this science is this is just socialism under a cloak.
Speaker 1 (24:30):
Join us after the break for more of my conversation
with Professor Abby Innes, author of Late Soviet Britain. Thank
you to everyone who has written a review of Zero recently.
We appreciate all of them and please keep them coming. Recently,
Sheila wrote Zero's crystal clear reporting presented with reflection and serenity,
must be the best climate crisis information available.
Speaker 2 (24:52):
Thank you, Sheila.
Speaker 1 (25:06):
In the Climate Circles, one diagnosis of the problem that
has gained traction recently is that governments, whether left or right,
have made it harder to build things. Infrastructure everywhere is creaking. Yeah,
it's private companies sometimes that are actually responsible for that infrastructure,
like the sewage system here, but it's really governments and
(25:26):
their overburdened regulation that has made it obstructionist rather than
rules that came from the right place. At one point,
this is broadly called the abundance agenda, taken off in
the US a lot, and the solution is, if only
there were fewer regulations in place, we will all have
(25:49):
clean energy, healthy world that we all want to live in.
And the left could actually deliver on the promises that
the left has made for decades. Now make it concrete.
From a climate perspective, it's the idea that even though
Joe Biden signed what was the US's biggest climate bill,
(26:09):
the Inflation Reduction Act, in twenty twenty two, by the
time the twenty twenty four election rolls around, very little
has been built, not much of the money has been spent.
People haven't seen the benefits. So no wonder Trump gets elected.
Do you think that diagnosis of the malays is right?
Speaker 3 (26:26):
It's a great question. I think I'd adjust it slightly,
which is, we have to ask where the regulatory brittleness
and complexity came from. And again it's one of the
points of Soviet analogy. So what Soviets and neoliberals both
do is try and set up their idealized system of coordination,
(26:47):
whether it's the state and command planning in the Soviet
system where it's via increasing market power. But what happens
next in both systems is that the promises of theory
don't play in practice. So what do you do? What
mechanisms do you have to try and improve the situation
where you have the state and second best world Neoclassical
(27:09):
economics says, what you need to do is regulate them
in the forms that would allow them to, as it were,
conform more to market theory. So that's what we do.
And it's also what the Soviets did in their original
central planning system, which is when things don't work the
way you're supposed to, what you try and do is
(27:30):
build this exo skeleton of more targets, more metrics, more
output planning. And the irony in the UK case is
we have, after forty five years of marketization, we have
a state that is more centralized, more bureaucratic, more rigid,
and more expensive than it has ever been historically.
Speaker 1 (27:50):
It has more people working for it, the government spends more.
That's when toucher to power.
Speaker 3 (27:57):
That's right.
Speaker 1 (27:57):
This is true not just in the UK, but so
in the US, where Reagan promise there will be small government,
government is bigger today and spends way more now, and
apart from the one term of Clinton when deficit actually fell,
it has been rising all throughout. So but the answer
of the abandonce agenda that you just need few regulations,
(28:20):
you don't think that's right.
Speaker 3 (28:21):
So a simple a kind of unit, you know, one
dimensional solution like deregulate.
Speaker 1 (28:27):
It's just.
Speaker 3 (28:29):
Given where we are. I think you just get yet
another wave of unanticipated and mostly negative consequences.
Speaker 1 (28:36):
There was a simplistic idea in a way that was
running camp on Camp two saying we can create a
perfect market economy showing the size of the government, and
then everybody will be happy. That's not worked out. So
now some people are coming in and saying, well, what
we need is we've just got too many regulations. Cut
those regulations, we will have a solution. But you're saying,
simplistic thinking is what got us here, It cannot get
(28:59):
us out of the substituation. That's right, What should we
be doing?
Speaker 3 (29:04):
I think what's incredibly important, and I suppose what I
was aspiring to do in the book is come up
with a diagnosis of how we got here. That isn't
about sort of as it were, good people and bad people.
It's a lot more complicated than that. You have to
make a philosophical reckoning. And the philosophical reckoning is do
(29:25):
we think we live in a computable world or do
we think we live in a world of inescapable uncertainty.
Do we think the human economy is more like a watch,
or do we think it's more like a garden. What
sets the natural science is apart, however, is that outside
the social world it's easier to It has proved easier
(29:50):
to isolate generative mechanisms in certain systems. So having discovered
things like thermodynamics or gravity, or the ways certain chemical
compounds combined, we have actually discovered natural laws that are
remarkably robust and that give us a basis further theorizing.
What makes that much more difficult in the social world
(30:14):
is that there's far greater contingency. Those natural laws don't
exist because the agents in the social world are themselves imaginative.
We're always in the social sciences trying to interpret a
world of people who are themselves constantly reinterpreting the world
and how they should behave in it. And that level
(30:35):
of contingency, that level of complexity, and the fact that
the world is always becoming something else socially means that
we need to make, as it were, a far more
radical shift than simply a shift in one form of
regulation or deregulation. We need to comprehend the fact that
(30:57):
we don't live in a computable world. And once you
dec side that once you recognize that, it radically, I think,
changes the way you think about the economy and the
repertoire of potential systems and methodologies that you might use
within it.
Speaker 1 (31:16):
Are there economies in the world that aren't falling for
this problem as the UK and the US have done.
Speaker 3 (31:23):
I think you're beginning to see a lot of really
interesting experimentation. So when it comes to circular economy ideas,
for example, in those countries you know, Sweden, Holland come
to mind, and you look at Copenhagen or even Barcelona
or Amsterdam where you still have significant sort of planning
capacity within those local city authorities that they're trying to
(31:46):
move quite far in that circular economic infrastructural design, but
of course for already built cities that can be quite difficult.
I mean, I think the fact is you're seeing lots
of experimentation, but it's eclectic as it were. So if
you took the idea of public banks, someone like Thomas
Mahoir has written a wonderful book on public banks and
(32:09):
is part of a big project with the Canadian government
looking at this. Public banks are much bigger players globally
than normal financial journalism tends to credit, and I think
there's a lot of potential in public banks to mix
concessionary and non concessionary lending to encourage innovation at the
not just the firm level, but the techological level and
(32:31):
the local authority level. Germany has created i think, something
like ten new public banks in the last decade. So
I think you are seeing countries understanding that short term
financial horizons are just far too short, and what kind
of financial organizations would extend those horizons, and public banks,
(32:51):
public regional development banks is obviously a way to go,
and lots of countries globally have experimented that very productively,
I think.
Speaker 1 (32:59):
So. I wrote a book called Climate Capitalism, which, if
you only diagnosed on its title, yes, from a lefty perspective,
that is a paradox capitalism and climate change. While their
opposites capitalism caused climate change. So how can it ever
solve it? Yes, if it took it from your analysis,
it may fall in Camp two category for most people,
which is to say you're tweaking capitalism to be climate oriented.
(33:22):
But in fact, when I wrote the book as a journalist,
my goal was to try and find examples around the
world where climate solutions were scaling. Yes, they happened to
be in capitalist economies, but the roots they were taking
to get to those solutions were radically different. The Chinese
system is the state led capitalist economy where they allow
(33:44):
for planning for five year plans, but they also allow
for hyper competition to reach those goals that the state
has set. And that's what I found refreshing about your book,
which is that you're not as many people who critique
capitalis just dump the idea markets can never work. There useless.
(34:04):
They've caused this problem. So think about something else and
we can talk about what there's something else that they
suggest which currently doesn't operate at any scale anywhere. But
you acknowledge that there are parts of capitalism that are useful,
that market economies or marketization of certain things can be useful. Sure,
the machine model of the entire economy isn't right.
Speaker 3 (34:25):
And it dilutes us. It gives us a sort of
baseline assumption that firms will always tend to be productive
students of the real economy, and that assumption that comes
out of the machine modeling of neoclassical economics is demonstrably false. Right,
sometimes they are, but if you basically, do not restrain
(34:48):
firms and drive them through regulation but also culture towards
valuable social purposes. They can become incredibly negative actors within
the social world. So by being utopian about them, what
we've actually done is, as it were, forgotten decades of
what we had learned in the pre and post war
(35:10):
period about how socially beneficial firms could be if they
were driven primarily by social purpose, but profit was a
secondary priority.
Speaker 1 (35:20):
But if the market economy does have utility, these economic
models do have utility, what are they? Where are they
still useful?
Speaker 3 (35:28):
Again, If we think that we live in a garden
rather than a watch, I'm going to keep coming back
to that analogy. If we think we live in an
uncertain world, then we should stop thinking in terms of
efficiency and optimality in a presumptively completable machine, because those
things are delusions. They are kind of god delusion, and
(35:50):
we should think much more about, well, what are the
coordinating mechanisms that we have that would allow us to
be continuously adaptive, continuously resilient, continuously able to scan the
horizon with the greatest number of alternative perspectives that we
(36:12):
can muster. What's a kind of anti fragile economy under
conditions of ecological collapse. And my answer to that would
be the most pluralistic range of systems that you have.
So that's everything. That's markets, that's firms, but firms much
more driven by social purpose than profit. That's the state,
(36:34):
but it's also well lots of different social forms, forms
of cooperation, forms of coordination that are trust based rather
than contract and price based.
Speaker 1 (36:47):
So there is a warning in your book where when
you diagnose all these problems, there is clearly temptation to
try and break it about create a revolution of some sort,
which is what happens when you know, in the Soviet Union,
when the social contract was so deeply broken that you
had a revolution and then so we broke apart. But
(37:11):
you want against revolutions because they don't end up creating
the kind of solution that the revolutionaries are hoping for.
Speaker 3 (37:20):
I'm against revolution if we're talking whole social system revolutions.
None of us can know what the correct system is
because we're not God. And it is the ultimate virtue
of liberal democracies that they are adaptive systems. They allow
for learning from your previous mistakes, but they're only adaptive
(37:41):
if political parties themselves don't get attached to utopian economic orthodoxies,
which then stop them from learning. The other reason that
I'm against revolutions is revolutions tend to have revolutionary leaders.
I mean, they tend to be deeply undemocratic, and I'm
a democrat. I think the guy who runs a firm
(38:01):
or a grocery, or the woman running those things, we
all have a great deal of knowledge about our own condition.
In fact, we have more knowledge about our own condition
than anyone else. And the most adaptive, resilient, and knowledgeable
system is going to be one that operates in a
(38:22):
kind of analytical pluralism in lots of different organizational forms,
so that all of our knowledge is relevant. That's the
most deeply democratic system. And it seems to me inconceivable
that we are going to reach a form of society
and economics that is compatible with the biosphere. If we're
(38:42):
trying to impose machine systems or machine thinking or monocultural
ideas on to something as beautiful and elaborate and constantly
evolving and nonlinear and dynamic as the natural world, so
(39:03):
we need to think in terms of how do we
emulate that world in the way we organize ourselves. Democracy
is a pretty good start. Part of what you're talking
about is kind of fatalism, and I think a lot
of the fatalism in among economic actors, corporate actors, you know, regulators,
financial actors. Even is the idea that there's sort of
(39:25):
cogs in a machine and they can't change the nature
of that machine, and we can change it every day.
Every day is different. But we need as soon as
we understand that we can change it, that we break
non natural economic laws, when we change our minds, when
we do things differently, it opens the game in a
completely different way.
Speaker 1 (39:43):
And the whole reading of your book is to me
empowering because it says we don't have the answer, which
is a temptation that so many people have to fall for.
Speaker 3 (39:55):
Yeah, isn't it great?
Speaker 1 (39:56):
There is intellectually humility in realizing their deep problems, that
we have small solutions, and that all those solutions can
be started to work on simultaneously, and it's not starting
from zero. Some form of these exist in different parts
of the economy around the world, and that they all
can start to add up if we reframe the problem
(40:20):
at the top, which needs to be addressed, but we
don't need the top to go away before we can
start to work on those solutions.
Speaker 3 (40:29):
That's exactly wonderful. I'm so happy that that's the conclusion
that you drove from the book, because it is the
one I reached. And also I want to point out
that even in the most dramatic social revolutions of the
modern era, right even in the Soviet Revolution and in
the collapse of communism and in the thatch Right revolutions,
we think about them as revolutions, but from one day
(40:51):
to the next they were incremental. Right, Real people in
the real world, from one day to the next are
solving the problem they have on their desk with incomplete information,
even if they think they're Soviet revolutionaries. And that's one
of the main reasons those revolutions tend to go hey
(41:11):
wire from day two more or less. That is the
human condition. The human condition is we are all attempting
to solve the problems right in front of us with
incomplete information.
Speaker 1 (41:23):
It is true, and even on just objective metrics which
we can take. You know, we live longer lives than
we ever have done. We have better medicine than we
have ever done, we have technologies now that can start
to address the climate problem at prices that you know,
we would be jealous of if we knew in advance
that that could be reached. And so clearly there are
(41:46):
tools as well available to try and solve the problem.
So thank you for laying out the problems so clearly
and for creating space for everybody to work on solutions.
Speaker 3 (41:57):
Thank you so much, it was a privilege to be asked.
Speaker 1 (42:04):
And thank you for listening to zero. And now for
the sound of the week, that's the sound of sumo.
This week, London's been a buzz with the news of
the sumo wrestling at the Royal Albert Hall, only the
(42:26):
second time a sumo tournament has ever taken place outside
of Japan. Share this episode with a friend or with
someone who has witnessed the fall of the Berlin Wall.
Speaker 2 (42:36):
This episode was produced by Oscar boyd Our.
Speaker 1 (42:38):
Theme music is composed by Wonderly Special Thanks to Eleanor Harrison, Tngate,
Samersadi Moses Andam Laura Milan and Sharon chen I, am Akshadharati.
Speaker 2 (42:47):
Back soon
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!