Reconnect the economy with an account of human welfare urges RSA Chief Executive

As the Chancellor George Osborne prepares to deliver his first budget of the new Conservative government the Chief Executive of the RSA, Matthew Taylor, has criticised the limited nature of the economic debate as technocratic, short-termist and detached from a deeper account of human welfare and economic resilience.

In front of an audience at the Great Room of the RSA, Matthew Taylor said that while our national economy is doing quite well in conventional or comparative terms, it has a number of deep seated characteristics which are far from benign; the millions of people struggling to get by, the scale of inequality, the disjunction between economic rewards and public value, the sluggishness of productivity and the unsustainability of patterns of our consumption.

He argued that the gap between top line success and underlying problems highlights a potential misalignment between economic progress and human welfare, on the one hand, and between short-term growth and long-term economic resilience, on the other.

Calling for a richer conversation about the long-term goals of economic policy, Matthew warned that the narrowness of the debate has been reinforced by the way we the public tend to think about economics as a technical discipline with which only those with specialist knowledge can engage.

“Portraying economics as a science, even in the face of the many predictive failures of the neo-classical approach, disguises the importance of history, culture, assumptions and values in economic ideas. Whether it is ‘international competitiveness’, ‘shareholder value’ or ‘GDP’ itself mainstream economic discourse is full of complex, sometimes ideologically-freighted ideas masquerading as purely technical descriptions of reality.”

In his annual lecture to the Society, Matthew said that we now have an opportunity to think and act differently. Free market ideology has fewer adherent and many more critics, the latter including not just radicals and idealists but Nobel Prize winning economists, corporate leaders and central bankers, he pointed out.

As Bank of England governor Mark Carney said last month, ‘though markets can be powerful drivers of prosperity, markets can go wrong. Left unattended they are prone to instability, excess and abuse’.

Matthew Taylor went on to propose five principles for opening up a wider, more progressive but also concrete debate about how to create a resilient economy which enhances human welfare: The five design principles are:

1. Clarity of mission and purpose: What are the human goals we want our economic strategy management to help achieve? 

2. The efficient and sustainable use of economic assets: We have many debates about economic assets – for example, about immigration, fossil fuels, culture and education. But without some sense of our starting point it is hard to assess the overall success of our economic strategy and the degree to which our actions are depleting or enhancing our asset base. 

3. Effective and strategic use of key policy instruments: Are our key economic policy instruments, for example tax, used in line with our overall economic mission?

4. Empowering individuals: How can economic policy enable more people to be creative economic actors? 

5. Democratic and participative economic institutions: At the level of the firm and Government the UK’s is unique among advanced democracies in denying almost any systematic route for the voice of employees and the wider citizenry.

By going back to first principles Matthew argued that a number of policies currently deemed too radical and difficult for serious consideration by the political mainstream might get taken more seriously. These include a universal citizen income, a comprehensive land tax, a new form of individual learning accounts and the effective abolition of a fixed age of retirement.

In the concluding remarks of his annual lecture Matthew Taylor argued that such “radical ideas don’t figure in mainstream debate because they just seem too difficult”. As Jean Claude Junker said of his fellow politicians “we all know what to do, we just don’t know how to get re-elected after we do it”.

He also proposed that the RSA establish a Citizens’ Economic Council, an independent but representative group that would over two years openly discuss the aims and design principles for a resilient human welfare economy, and some of the ideas that such an approach might favour. The purpose being to try to get going before the next General Election a wider and richer debate about our hopes and plans for the economy in 2030.

Matthew concluded: “Tomorrow George Osborne will boast of the progress of the British economy and unveil a set of measures designed to maximise political support from his own Party and the wider public. Some of these measures are to be welcomed – particularly the next steps towards greater city devolution. George Osborne’s job is to keep his Party, the voters and the City happy, and by that measure he is doing a pretty good job. The task of the RSA today, is it always has been, is to ask bigger questions, to engage our Fellows and the wider world in exploring new possibilities and experimenting with new approaches.”

Notes to editors

1. For more information contact RSA Head of Media Luke Robinson on 020 7451 6893 or 07799 737 970 or luke.robinson@rsa.org.uk