Politics & economics: A strange role reversal

It’s not very clear why it has happened but, in an increasingly noticeable way, economics and politics have exchanged roles. Thus, there was a time when post-1945 economics concerned itself with economic growth and politics with the distribution of the fruits of that growth.

But now it’s the other way round. Economists are talking more and more about distribution and politicians are talking about growth. The consequences are as counterproductive and confusing as when bowlers bat and batsmen bowl. Or as Eli Heckscher and Bertil Ohlin might have asked, whither comparative advantage?

When I mentioned this to my friend Brijeshwar Singh — who knows a thing or two about economics despite having wasted his considerable intellect in the IAS — he said “don’t call it role reversal, call it ‘realignment’”. But regardless of what we call it, surely this change is worthy of serious intellectual inquiry.

One big problem, for example, is knowing, or deciding, how far to go back. Or as that line in the Peter Sellers song went, when did the trouble start?

Did it start with the “end of history” in 1990, when communism died, or in 2009, when unelected central banks started calling the political shots? Or, should we go back to the 1950s, when western economics was trying to figure out a gigantic and unanswerable puzzle: Why does output go on growing in some countries but refuses to do so in others?

No conclusive conclusion was ever reached. I think the last boy to stand on the burning deck was Daron Acemoglu. He said it’s the institutions, stupid. Others before him had said, successively, that it was capital accumulation, international trade, accumulated knowledge, and, above all, efficient markets.

Roles reversed

That was also the period when politics was polarised into the conservative and left-liberal camps, where left was code for “only the poor matter, the rich don’t” and liberal meant “you should follow the rules we the elites make”.

The role reversal can be put another way. Politics had assumed growth to be the autonomous variable which happened on its own but distribution to be in need of state intervention. “You make, I take”, was the guiding intellectual political framework.

Then something happened. Although this “something” could have been much earlier, I will take the 2008 “global” financial crash as the starting point because it is more contemporary.

The response of politics was Keynesianism, with knobs on. The politicians had decided that distribution was autonomous but growth, or the prevention of its collapse, needed massive state intervention.

And so we have had what has been called a “tsunami of money”. Print on, Macduff has become the new intellectual framework for politics.

Meanwhile, there has been a revival of Marxism even if its useless offspring, communism, is dead. Economists have suddenly turned their attention to distribution, via that inequality thing. A French guy called Thomas Piketty — the French always cause paradigm shifts — ran a lot of numbers and said yo! it’s distribution, la!

So, since then we have seen a flood of distribution-oriented economics. An extreme version of this is to eliminate the rich.

Quo vadis?

And that’s where we are at now. The batsmen are bowling and the bowlers are batting and the game has gone for a six. For every “and so…” which one side points out, the other side says “but then…”

The question that people brainier than me now have to answer is what kind of political theory and economic theory will emerge from this. I had asked in an earlier article how economics would accommodate, say, higher budget deficits and protectionism into its framework if distribution became the main focus of economics. After all, both would be an automatic consequence of the new focus on distribution because, while growth is all about efficiency, distribution gives it a much lower priority.

Likewise, if political theory has to move away from its traditional preoccupations with sovereignty and its discontents — these defy counting — and induct economic growth into its analytical framework, how will it do it? Does it have the tools for it? Perhaps it should start by defining itself more narrowly instead of being what the Oxford Handbook of Political Theory calls an “undisciplined” field.

It could, of course, be argued that academic disciplines don’t have to worry about such mundane things. But when everything else is changing so rapidly, that would be a total copout.

So go for it, lads, because if you don’t, you have nothing to lose but your reputation.