The question of what you read during a pandemic has confronted many readers of these pages in recent weeks. I am no different. I purchased a copy of The Plague by Albert Camus. It still lies unread. Long working days were consumed with responding to the economic impacts of the disease. Concluding such a day with a parable on pestilence was just too much.
Maybe I will feel different when the sun returns. I suspect, however, that Camus will be waiting a while yet.
My reading habits have changed. Stephen King has been my companion for much of Covid-19. As social distance took hold and as the economy closed, tales of fantasy became more appealing. The attraction of relaxing with a book on economics has, understandably, weakened.
The Economics of Belonging by Martin Sandbu is the exception. This is a crisply written analysis of economic discontents and their political consequences. Though written in the pre-pandemic era, the conclusions and prescriptions of this book are very relevant to our current debates.
The author is an economics commentator for the Financial Times. A decade of seeking to understand the reverberations of the Great Financial Crisis has equipped Sandbu with a lucid style and a thorough understanding of the great economic issues of our era.
At the time of writing this review, I was immersed in negotiations to form a new government. A large proof copy of this book nestled against sheaves of policy papers in my satchel.
It was a good companion during those intricate discussions, noting the achievements of politics of the centre but fiercely critical of policy mistakes that risk the unravelling of support for markets within democracies.
The opening pages make the challenge clear. The western social order is at risk. This order has faced challenges before. Uniquely, on this occasion, the challenges are from within.
Diminished prospects
The causes of this challenge, in this analysis, are primarily economic. The promise of economic advancement, through a secure job, rising income or an affordable home, has diminished for too many. But the perceived catalysts of these diminished prospects are politically significant.
The author notes this when he writes that “Those turning against the western order are those who feel left behind in it, but not just that: they feel left behind by their own – betrayed by the elites who constructed the system and were entrusted with making it deliver.”
This is referred to as “the end of belonging”, with the book analysing why this has occurred and, commendably, the solutions to these ills.
This is far from the first book on such themes. Countless volumes exist, debating the recent changes in our political, economic and social order. Crucially, Sandbu differs in two regards.
First, his analysis contends that economic change is the primary cause of political disruption: “Economic grievance expresses itself as cultural or values-driven behaviour. It intensifies or politicises particular values and attitudes, which may have been more or less close to the surface in different individuals but would not have motivated political choice in the absence of economic pressure.”
This approach differs from other analysts who discern other roots to recent political changes. This includes Roger Eatwell and Matthew Goodwin in their work National Populism, where they ascribe equal importance to how bonds between voters and traditional political parties have become frayed.
However, this more singular focus facilitates the second important quality in this book: the willingness of the author to suggest solutions, to argue for the kind of changes he believes are necessary.
This is after Sandbu lacerates leaders for “half a century of policy mistakes”. These include not adequately supporting workers in the shift from industrial to service-based economies and responding with scale and speed to the Great Financial Crisis.
Global integration
Leaders have not confronted these failures. The convenient alternative, this book argues, is to blame globalisation for the loss of jobs or decline in living standards. Different strands of global integration are analysed, including immigration, trade and the growth of financial services.
The conclusion is clear, that political choices are at fault, and that policymakers have acquired a “learned helplessness” in the face of forces that they played a role in strengthening. The answer is not the reversal of globalisation, but the creation of more inclusive forms of economic and political integration.
The author concludes that “the West’s economies of belonging withered as the consequence not of globalisation but of technological change and more or less wilful domestic policy mismanagement”. A policy agenda is argued for that looks to reclaim economic openness as “a positive contribution to the domestic economy of belonging”.
This agenda included the development of a universal basic income at the centre of reformed social support systems. Other elements include stronger representation rights for workers and a more radical approach to competition policy. It is possible to deliver protective policies that can also be pro-competitive. “Otherwise, disempowered workers and small businesses cannot challenge and compete with the most powerful actors.”
This is accompanied by a very well-argued chapter on budgetary policy. The case is made for using tax and public spending policy to inject higher levels of demand into the economy to combat underemployment and the marginalisation of vulnerable workers. Such a claim resonates with debate now under way about the trade-offs between budgetary policy and employment levels.
This should be allowed to fund an investment strategy that will “turn places of decline into poles of attraction”.
There is silence on other policies that are normally included in such an agenda. Little is said on the key topics of redistribution, the future of political and economic integration or the future of education. These are curiously significant omissions given their role in domestic policies.
This book could appear wistfully Blairite, harking back to arguments of an age that is now all too distant and moderate. For this reviewer, that, of course, is praise.
Paschal Donohoe is Minister for Finance
