Excerpt from New Normal, Radical Shift
Chapter 1: Reframing Following the credit crisis, and the consequent surge in sovereign debt as Western governments took on the liabilities of the failed banking system, debate has raged between economists on ways out of the crisis. The dominant arguments come from the traditional camps. Neo-‐liberals favour cutting public spending sharply, releasing the private sector which, they argue, becomes ‘crowded out’ by high government borrowing and spending. Keynesians argue that borrowing is legitimate to sustain demand through difficult economic conditions, that cutting too sharply risks a double-‐dip recession. Continued borrowing and spending is a ‘fiscal stimulus’. From neither side is there so much as a whisper on what public sector funds might actually be spent. Nor is there proper concern for how value for money for any investment, public or private, can be assessed. The entire lexicon of economics is based on a mechanistic metaphor that an economy is just gigantic plumbing, with money like flowing water: aggregate demand, crowding out, fiscal stimulus, etc. For example, the ‘crowding out’ agenda is based on the assumption that public spending is often wasted. Now, it probably is, but so is much private investment, such as wasteful or poorly planned mergers, as discussed. In the conventional economic theories that guide the policies we experience, the people who actually create the wealth do not even feature. As Gordon Pearson notes in his masterful book The Rise and Fall of Management: ‘While variations have occurred at different times, economic theories, from Marx to Keynes and Friedman, share both a common root in Adam Smith and a more or less complete incomprehension of business enterprise and its management.’ In terms of monitoring economic developments, the main indicator remains the embarrassingly crude ‘money in, money out’ double-‐entry book-‐keeping technique, developed by Luca Pacioli in the 1490s. This still forms the basis of the quarterly report, together with the similarly crude GDP growth indicator for a national economy, but with the unfortunate adaptation that booked profit or borrowed growth is allowed to be registered, meaning that the headline figures are often fictional as well as mono-‐ dimensional. We are dealing with a 21st Century inbox of acute environmental pressure; complex, international organisations, depending on high levels of skill and technological awareness. Yet our ways of understanding these dynamics rest on flawed 18th-‐20th Century economic thinking, and our main means of measurement and communication is © Neela Bettridge and Philip Whiteley 2011 New Normal, Radical Shift
an unreformed 15th Century technique. It is like trying to guide a rocket to the moon using the navigational instruments of Christopher Colombus.
© Neela Bettridge and Philip Whiteley 2011 New Normal, Radical Shift