January 29, 2021

In the early years of this century, I spent a lot of Tuesday afternoons with Vince Cable. Then occupying some sort of role on the Liberal Democrat front bench, and representing Twickenham in parliament, Dr Cable MP would invite political correspondents to a room on the Committee Corridor of the House of Commons. There he would deliver what could only be described as lectures on contemporary economic issues. I remember a very good one on oil prices. It was often impressive and generally interesting, and almost entirely pointless.

The problem was that Cable, who later became an interesting Cabinet minister then a poor Lib Dem leader, struggled to connect his economic insights to practical politics. The ever-smaller band of hacks attending used to leave that room each week wondering what his seminars had to do with the Blair government, the Lib Dems’ prospects, or anything else that was then on the agenda at Westminster.

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Those Commons sessions — erudite, informative, almost devoid of politics — came to mind while I read Cable’s latest book. Money and Power is good and interesting, but fails utterly to deliver on one of its key promises. The book is 16 portraits of world leaders who made a real economic impact, and if you’re looking for a brisk, slightly old-fashioned “great man” primer on modern economic history, pre-order it today. But if you’re taken by the publisher’s promise of a book “examining the fascinating interplay of economics and politics”, prepare for disappointment.

Because this is economics largely estranged from — and sometimes wholly divorced from — politics. Time and again, the matter of whether and why economic policies and their authors are approved or rejected by their populations is an afterthought, treated like a weather event: something that just happens. And in his intelligent but bloodless way, Cable unwittingly says quite a lot about what can go wrong with economic policymaking. By omission, he points towards some things that the next generation of economically-interested politicians should be thinking hard about now.

Maybe the first and biggest question is: how important should economic policy be to politicians? Cable quite rightly notes that for most of the post-war period, countries around the world have given national priority to rising living standards and economic wellbeing. He goes on to describe how a variety of leaders have sought to do that, with varying degrees of success. Cable’s measure of success for the politicians he profiles is largely based on economic outcomes: did they deliver more wealth and wellbeing for their populations?

The importance of that barely needs to be explained: sustained economic growth in recent decades has transformed human experience in ways that were barely conceivable even a generation ago. Infant mortality has plummeted, lifespans are soaring, and the years of life we have are happier and healthier than ever before.

But is that enough? And is the pursuit of growth above all always the right thing for politics to do? Cable’s economic policymakers often come across almost as Platonic guardians, distant and superior beings making decisions about the best interests of the masses who will eventually benefit, whether they know it or not and whether they welcome it or not. One of Cable’s most revealing observations is about Margaret Thatcher: “One of her traits — and an admirable one — was to introduce and persist with measures that she knew to be unpopular but judged to be necessary.”

In this book, elections, opinion and consent are peripheral; where Cable says “politics”, he often means a leader’s ascent through the hierarchy of a party, not anything directly involving the people who feel the results of economic policies. His depiction of Ludwig Erhard, father of social market economics, is crisp, informative and challenging (I speak as Director of the Social Market Foundation) but says almost nothing about post-war politics in West Germany. He writes about Franklin D Roosevelt’s success in establishing a generation-long post-war consensus around a “strong, active federal US government, labour rights and social protection”, but he does so in a single paragraph and offers no explanation of how FDR turned economic success into political wins.

And as Cable acknowledges — but cannot explain — there is no certainty that good economics is also good politics. He profiles Leszek Balcerowicz, Poland’s finance minister at the fall of communism: his “Big Bang” liberalisation of the Polish economy put the country on track for years of strong growth and, eventually, EU membership. But Balcerowicz lasted barely two years, as Poles rejected him and his allies. By contrast, Cable notes that Peronism in Argentina “has combined one of the most abject, sustained failures in economic policy with continued political popularity, evidenced by the 2019 election of a sixth Peronist president”.

What makes the difference? Cable doesn’t know and doesn’t really try to answer. His puzzlement over voters’ curious choices is evident in his last and probably unwise profile, of Donald Trump, which appears to have been hastily finished in the strange days following the November election.

Trump’s eclectic but not haphazard approach to economics perplexes Cable (and others), who cannot understand how Reaganomic tax-cuts could sit with a fixation on protectionist bilateral trade policy and nostalgia for inefficient manufacturing — and command the support of a large section of the American electorate.

All of which leads to one of the questions Cable doesn’t ask, but which emerges clearly on reading his book: what happens to economic policy when people decide there are more important things in life than economics?

To be fair to Cable, he’s hardly alone in this. All sorts of people — politicians, journalists, academics — have been keen to try to explain the politics of recent years in solely economic terms. Trump won in 2016 because white non-college incomes fell and jobs disappeared; Britain voted Brexit because of austerity.

And economics may have been one factor for some voters. But that economics-first view overlooks other things, the cultural and the social, which some people consider more valuable than GDP growth. Philip Hammond used to say that none of the 17.4 million who backed Brexit voted to be poorer, but some of them did. Some were quite happy to forego some portion of future economic growth in exchange for what they saw as sovereignty, national pride, a sense of control.

That’s not a choice I’d have made, but I think people who make policy need to accept it as a valid choice. They also need to think more about why some people feel able and compelled to make such choices: free trade made America richer in aggregate, but didn’t benefit everyone, or make everyone feel happier about themselves or their country. Economic policy should acknowledge such perceptions and experiences and reflect them more, rather than — as Cable’s analysis sometimes seems to imply — regarding voters’ irrationality as an inconvenient obstacle to be overcome or just avoided.

Here, I should note that I have a lot of sympathy for Cable’s Platonic view of policymaking: both as a columnist and a think-tanker, I’ve often argued for politicians to do unpopular-but-sensible things. (And I still do: the sooner we start taxing housing assets to fund social care the better.) But my guess is that it’s going to become even less viable to make economic policy by doing complicated and contentious things for the greater good of the electorate in the hope of securing their weary consent later. I suspect electorates empowered and (sometimes) informed by social media and possessing a very(historically speaking) high level of wealth and comfort are only going to expect more from their leaders than sound economic management.

My bet is that sooner or later, that’s going to mean people in politics start talking a lot more about central banks. A conversation about their role in modern economics — and politics — is surely overdue. Our elected leaders have handed vast power to technocrats whose legal mission is to do what’s best for the masses, not what they want. There’s nothing wrong with this — it’s better than the alternatives — but where’s the political process to deliver consent? The economic guardians of monetary policy routinely make decisions with profound political consequences: ultra-low interest rates and quantitative easing are effectively transferring great wealth to older property-owners, at the expense of younger people struggling to buy a home and amass decent pension. Yet in the UK at least, politicians barely talk about any of this. In QE, economics trumps politics to such an extent that politics is barely present.

That cannot last. Cable several times cites Bill Clinton’s campaign slogan — It’s the economy stupid — as a truism that explains all politics. Not anymore.

There’s another even deeper canyon on the politics-economics faultline that Cable highlights without apparently noticing. Can economics be used to suppress politics? Can you provide enough wealth to buy your way out of the political need to win arguments and elections? These questions arise in Cable’s analysis of east Asian leaders, in which he has disappointingly little to say about political freedom.

His portrait of Lee Kwan Yew, for instance, has more to say about the academic background of Lee’s economic advisers than about the people of Singapore and their view of a leader who delivered economic growth and an increasingly authoritarian state.

And then there’s China, which is posing one of the biggest questions of all about politics and economics. Is it possible to make a country and a people rich without making them free? Our entire idea of the West is premised on the assumption that economic growth and political freedoms proceed together: as people own more stuff, they demand and acquire legal rights over that stuff, and in due course a say in how those laws are made. Educated, property-owning masses cannot be denied political freedom forever, we trust.

China is doing a depressingly good job of proving us wrong on that. The CCP’s embrace of the market has made many of its people — by global and historical standards — rich. Hundreds of millions of Chinese people have smartphones and flatscreen TVs, but not one of them has a vote. Effective economic policy is trumping politics.

This is the stuff I’d like to read about in a book that offers to guide our understanding of the future relationship between politics and economics. Sadly Cable barely touches on this and his book sometimes goes beyond being simply apolitical and borders on the amoral. His chapter on Deng Xiaoping treats Deng’s role in Mao’s mass murder of their countrymen — and direct responsibility for the Tiananmen Square massacre — as mere factual context for the man’s views on markets, industrialisation and agricultural reform.

The results are jarring, especially when Cable writes blandly about the catastrophic Great Leap Forward, when private farming was banned and crops seized by the state. This horror took place when Deng was one of the three men running China, yet Cable presents it as little more than a bump in the road to economic success:

 “…countless millions died in the famine: 45 million according to some Western sources; 16-17 million on Chinese official estimates. It was an epic disaster which appears to have persuaded Deng (working with like-minded senior leaders) to press for ‘adjustments’: radical economic changes designed to raise living standards.”

After all, what other response could a good economic policymaker have to helping cause the worst famine in human history than to seek to raise living standards for those still living? Deng may have been, in Cable’s phrase, an effective economic architect, but he was a gravedigger too. Shrugging off a state’s murder of its own people because it made the ones it didn’t kill richer is the logical, dismal conclusion of a worldview that accords economics priority over politics.