If only Britain had joined the euro

If Gordon Brown had chosen to join the single currency 10 years ago, both the European Union and Britain would be stronger now

• 
• • Will Hutton
  • The Guardian, Thursday 13 June 2013 19.30 BST

Gordon Brown with Paul Boateng and Dawn Primarolo in June 2003, just after his ‘not yet' decision on joining the euro. Photograph: Sean Smith for the Guardian

Ten years ago this week Gordon Brown said no to joining the euro. It is an anniversary on which Bank of England governor Mervyn King, Ukip's Nigel Farage, Unite's Len McCluskey and the Guardian's Larry Elliott, along with most of the British economic establishment, can all agree. On this, Brown was right.

Elliott set out the establishment consensus in a classic piece this month on his alternative history of what would have happened had Britain joined. Essentially, he says, there would have been a bigger boom in the runup to 2007 and a more disastrous bust. Britain would now be struggling to maintain its membership as anti-EU sentiment mushroomed, prompting its eventual exit, dramatising the inherent unsoundness of yoking disparate economies into one inflexible currency.

But there is a more optimistic, alternative history. The first obvious point is that Britain could have joined the euro only if a referendum had been won. A victory would have depended on it being an obvious good deal, with the pound entering at a competitive rate and the euro's structure, rules and governance reformed to accommodate British concerns and interests. The European Central Bank would have needed to look more like the US Federal Reserve, with more scope for fiscal and monetary activism. The Germans would doubtless have insisted, in return, that the EU banking system be more conservatively managed.

The last decade would have been very different. What none of the mockers of the euro ever acknowledge is the economic doomsday machine that Brown created through not joining. By not locking in a competitive pound, Britain suffered a decade of chronic sterling overvaluation, made more acute by the City of London sucking in capital from abroad to finance the extraordinary credit and property boom of those years.

Imports surged and exports sagged; the economy outside banking, which made goods and services to be sold abroad, either stagnated or shrank. Much of the best of UK manufacturing was auctioned off to foreigners. Today we find that, despite a huge currency devaluation, there are just not enough companies to take advantage of it: too much of the rest of British capacity, thanks to foreign takeover, has become a part of global supply chains that are indifferent to exchange-rate variation. Our export response has been feeble; evidence of the economic orthodoxy's inability to devise policies and structures that favour production.

Inside the euro, at a highly competitive exchange rate, Britain's exports would instead have soared, and its traded goods sector would have expanded, not shrunk. Regional cities would have boomed around sustainable activity rather than property and credit. The euro's rules would have meant a less reckless fiscal policy, and banks would have been more constrained in lending for property. They would have had to lend proportionately more to fast-growing real enterprise, reinforced because the new rules would have required them to lend in a more balanced way.

Britain would have entered the 2008 crisis with a far less unbalanced economy, a stronger banking system and international accounts, and a government deficit much less acute. And the reformed eurozone could have responded much more flexibly and cleverly than it did.

In any case, both Britain and Europe are now wrestling with depressed economic activity caused by overstretched bank and company balance sheets – and the exchange-rate regime is hardly the cause of this distress. Germany and the stronger EU countries are plainly wrong in their overemphasis on austerity as a solution, but surely right to argue that the only long-term solution is for the whole of Europe to move to their productivist, stakeholder capitalism.

British mainstream commentators see the obvious fissure between the stronger European north and the weaker south as proof positive that the euro is fatally flawed. But suppose countries like Greece or Ireland rise to the German challenge? Already there are encouraging auguries in both. If so, notwithstanding excessive austerity, they could weather the crisis, and become stronger.

There is plainly a chance one or more countries could leave, but there is a greater chance the system in some form will hold – it is in too many countries' interests to avoid failure. Then expect a pan-European recovery to begin in the second half of the decade that will gather strength in the 2020s.

Inside the euro for the last decade, the economic and political debate would have necessarily moved on. Having won a historic referendum decisively affirming Britain's future in Europe, the Blair government would have had to think in European terms about how to produce, invest, innovate and export. Sure, there would have been problems. But Britain outside the euro in 2013, with endless spending cuts, the biggest fall in real wages for a century, 500,000 people relying on food banks, and a weak unbalanced economy, is hardly a land of milk and honey.

Emboldened by his referendum victory, Blair could have sacked Brown before the disastrous second phase of his chancellorship and lacklustre prime ministership. Blairism would have morphed into a new form of European social democracy, fashioning British-style stakeholder capitalism. UK politics would not have moved so decisively to the right, with conservatives preaching free-market Thatcherism while the left clings to a bastard Keynesianism – united only in their belief, against all the evidence including Britain's export performance, that floating exchange rates are a universal panacea.

A single currency demands disciplines and painful trade-offs: but floating exchange rates after a financial crisis are a transmission mechanism for bank-runs and beggar-my-neighbour devaluations. Magic bullets do not exist. Had Britain joined, both we and Europe would have been better placed, and Larry Elliott would now be writing about how better to get Britain to innovate and invest under a fourth-term Labour government. A better world all round.

What matters: leadership, data analysis, culture

Three factors that can play an important role in a team's success

Ed Smith

May 15, 2013

 

	Rajasthan Royals are an example of a cricket team that underspends and overachieves © BCCI  Enlarge
Related Links Ed Smith : It's not about selection or tactics, silly

A writer yearns to have intelligent readers who engage with his ideas. Then you realise that they are examining your logic with an uncomfortably forensic eye.

Two weeks ago I argued that all students of sport need to understand randomness. That the familiar talking points of selection and tactics are lazily thrown around to explain events they often do not influence. That understanding the "causes" of why things happen in sport is very difficult.

Enter Kieran McMaster, a statistician and ESPNcricinfo reader. He asks how I can explain the evolution of the Spain football team and the All Blacks rugby squad, teams that not only win but also drive forward the evolution of their sport. Surely that is evidence of tactical supremacy? Moreover, his question gained added weight thanks to a random external event: the retirement of Sir Alex Ferguson. How can I square my scepticism about the short-term influence of tactics and selection with the consistent and relentless success of Sir Alex, who manipulated the levers of management so shrewdly?

Here goes.

I certainly do believe in leadership. It is obviously true that some captains and coaches make a sustained difference. Warren Gatland has transformed the Welsh rugby team from romantic underachievers to pragmatic winners. Jose Mourinho wins something wherever he goes. The pattern of success is too consistent to be explained by randomness. One out of one might be dumb luck. But it is much more likely to be skill than luck if a coach has a long sequence of different winning teams.

It is equally true that there aren't many coaches and captains in this elite category, certainly fewer than there are teams that need managers. Great coaches are incredibly rare. So clubs that continually chop and change managers, searching for the right "chemistry" (usually a euphemism) are usually taking an ill-judged risk. It is a statistical fact that changing the manager, on average, makes no difference at all to the performance of the team. It is, however, always expensive and usually distracting. Most teams would be better advised to invest in youth coaching and infrastructure rather than another round of sackings at the top.

Consider the following logic. If every club sacked its coach on the basis that they were searching for Sir Alex Ferguson, at the end of the process there would still only be one club with Sir Alex Ferguson, and dozens of disappointed teams, because there can only ever be one manager who is the best in the world. Sometimes it's better to work with what you've got rather than chase fantasies.

Secondly, I acknowledge that teams can gain a competitive advantage through smarter, clearer use of data and statistics. We all know about Moneyball and the Oakland A's. Cricket has a more current example: the Rajasthan Royals. They underspend and overachieve. And, like the A's, they use data to study how games are really won, instead of just recycling clichés. According to Raghu Iyer, the Royals' CEO, their strategy is not to buy famous players but to "out-think the opposition" at the player auction.

Thirdly, I believe in the power of culture. The recurrent success of some national sides cannot be explained by random cycles of dominance. Some sporting cultures achieve success because they get more things right, from grass roots to World Cup final. The All Blacks play a wonderful brand of total rugby. They rely on skills developed throughout New Zealand's rugby culture. In Dunedin this March, during rain delays in the cricket Test match between England and New Zealand, I watched Otago practise on the adjacent rugby ground. Everyone can pass, everyone has awareness, there are no donkeys and no under-skilled thugs.

	The serious analyst of sport runs into difficulties when he argues that "an Australian would never have dropped that catch because they're tougher over there", or "India lost the match because they should have picked X"

Something similar can be said about Spanish football. Only once have I succumbed to a satirical rant on Twitter. It was during the European Cup final of 2012. In the lead- up to the match, we had to endure ill-informed punditry about how Spain's refusal to pick "an outright striker" was a negative move, how they played a cautious game based on control of the ball rather than dynamic sweeping moves, how rival teams ought to do this and ought to do that, as though opponents hadn't already tried everything and simply lost. Basically there was a widespread reluctance to admit that Spain had developed a systemic solution to playing a better, more modern brand of football. This struck me as both insane and ungracious.

In the 14th minute, Cesc Fabregas, an attacking midfielder who was playing instead of the lamentably absent "outright striker", scored a typically classy goal. The goal revealed the interaction of control, technique, movement, intelligence and team work - a microcosm of Spanish footballing philosophy. Spain went on to win 4-0, and this columnist could not resist a series of sarcastic tweets about "boring Spain", "stupid selection", "wrong-headed tactics" and so on.

But I'm not certain, returning to our original question, that the influence of national sporting culture should be filed under the heading "tactics". It is more a case of philosophy culminating in elite expression. Put differently: if Spain had been instructed by their manager to play a violent, low-skill form of football in that final, I doubt they could have done so. So deeply ingrained is their approach that it has become second nature, not really a "tactic" at all.

I thrill to all three of these methods of gaining an edge in sport: through leadership, via analysis, and through culture.

However, and here is the crucial point, not everything that happens on the sports pitch can be explained in terms of leadership and strategy, or even culture (though the influence of culture is so subtle that it's impossible to measure).

This is especially true over the short term. The serious analyst of sport runs into difficulties when he argues that "an Australian would never have dropped that catch because they're tougher over there", or "India lost the match because they should have picked X", or "imagine how good we'd be if we changed the captain". Above all, my scepticism about causes kicks in when a match is lost and a media inquest begins into everything that immediately preceded the defeat, as though the former inevitably led to the latter.

In sport, as in life, I believe in the capacity of innovation, strategy and intelligence to make a difference over the long term. But that faith can coexist with the right to challenge the retrofitting of today's causes to suit yesterday's events.

You can be a short-term sceptic and still a long-term optimist.

India's invisible innovation

Brics miracle over as world faces decade-long slump

US Conference Board fears Brics miracle over as world faces decade-long slump

The catch-up boom in China, India, Brazil is largely over and will be followed by a drastic slowdown over the next decade, according to a grim report by America’s top forecasting body.

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China’s double-digit expansion rates will soon face, fallng to 3.7pc from 2019-2025 as the aging crisis hits. 

By Ambrose Evans-Pritchard

7:37PM GMT 13 Nov 2012

377 Comments

Europe's prognosis is even worse, with France trapped in depression with near zero growth as far as 2025 and Britain struggling to raise its speed limit to 1pc over the next three Parliaments.

The US Conference Board’s global economic outlook calls into question the "BRICs" miracle (Brazil, Russia, India, China), arguing that the low-hanging fruit from cheap labour and imported technology has already been picked.

China’s double-digit expansion rates will soon be a romantic memory. Growth will fall to 6.9pc next year, then to 5.5pc from 2014-2018, and 3.7pc from 2019-2025 as the aging crisis hits and investment returns go into "rapid decline".

Growth in India - where the reform agenda has been "largely derailed" - will fall to 4.7pc to 2018, and then to 3.9pc. Brazil will slip to 3pc and then 2.7pc. Such growth rates will leave these countries stuck in the "middle income trap", dashing hopes for a quick jump into the affluent league.

"As China, India, Brazil, and others mature from rapid, investment-intensive ‘catch-up’ growth, the structural ‘speed limits’ of their economies are likely to decline," said the Board. 

The fizzling emerging market story is a key reason why the West has relapsed this year. The world is now facing a synchronized downturn all fronts, with little scope for fiscal and monetary stimulus.

^{France slumps to bottom of the class, with Britain close behind}

"Mature economies are still healing the scars of the 2008-2009 crisis. But unlike in 2010 and 2011, emerging markets did not pick up the slack in 2012, and won’t do so in 2013," it said.

The Conference Board says Europe’s demographic crunch and poor productivity has reduced trend growth to near 1pc, though it could be worse if the region makes a hash of monetary policy and follows Japan into a "structural deflation trap". Large numbers of people may be shut out of the jobs market forever.

Germany will outperform Italy and France massively over the next five years, implying a bitter conflict within EMU over control of the policy levers. While the report does not analyze debt-dynamics, it is hard to see how the Club Med bloc could keep its head above water in such a grim scenario or stop political revolt coming to the boil.

Bert Colijn, the Board’s Europe economist, said France’s woes stem from low investment, as well as delayed austerity and reform. The reckoning will now come.

He thinks Spain will fare better since it has already taken its bitter medicine. It is expected to grow at 1.8pc for the next decade as "Schumpeterian" creative destruction clears away dead wood and unleashes fresh energy - a contentious point since labour economists argue that unemployment of 25.6pc is doing permanent damage to parts of the workforce, and therefore to economic potential.

America has a younger age profile and should eke out 2.5pc to 3pc growth until 2018, and 2pc thereafter. It has a big "output gap" of 6pc of GDP to close before it hits any speed limit, so part of this is just the effect of elastic snapping back.

^{Emerging markets deflate}

The Board said lack of demand lies behind the current global malaise, but the fading technology cycle may prove a greater threat over the long-term.

The thesis is based on work by professor Robert Gordon from Northwestern University, who argues that the great innovation burst of the last 250 years is a "unique episode in human history" and may be fading. His claims challenge the work of Nobel laureate Robert Solow - orthodoxy since the 1950s - that economic growth is a perpetual process once the right legal and market framework is in place.

The Conference Board’s forecast is starkly at odds with a report by the OECD last week predicting that China would keep growing at 6.6pc until 2030, and India at 6.7pc -- propelling the two rising powers to global dominance.

Apostles of the BRICS revolution are certain to dispute the claims. Yet there could be no clearer sign that the emerging market euphoria of the last decade has fully deflated.

Profit and PR are the real enemies of innovation

From drugs to computers, the big rewards are now in tweaking existing products and presenting them as ground-breaking

• 
• • Peter Wilby
  • guardian.co.uk, Friday 10 August 2012 22.00 BST

Bryony Finn of the Science Museum inspects the Pilot ACE, the fastest computer in the world in the 1950s and fundamentally designed by Alan Turing. Photograph: Geoff Caddick/PA

For more than a decade, we have been told that the pharmaceutical industry faces a crisis: it finds it more and more difficult to develop new drugs. The returns on research and development, company executives plead, are dismal. In the US particularly they have therefore lobbied for longer periods of patent protection, more government subsidies and less regulation of new drugs. The growing costs of research, they argue, justify the high prices. But this week a widely reported paper for the British Medical Journal, by two North American professors, Donald Light and Joel Lexchin, points out that the annual licensing of new drugs is much the same as it has been for 50 years. Unfortunately, 85-90% are minor variations on existing drugs (often introduced when patents are near expiry) and provide "few or no clinical advantages for patients".

The US drugs industry, say Light and Lexchin, spends only 1.3% of revenues (excluding taxpayer subsidies) on basic research to discover molecules that could lead to genuinely new medicines. It spends far more on maintaining profits – among the highest of any industry, after tax – and on PR, marketing and lobbying. There is an innovation crisis, but largely of the companies' own making.

For years nearly all original drugs brought to market have been based on research either at taxpayer-funded institutions, mainly universities, or in small biotechnology companies. Big companies, such as Pfizer and GlaxoSmithKline (recently fined $3bn by US regulators for aggressive and misleading marketing), are essentially rent-seekers. They do not create wealth and add social benefit, but enrich themselves through control of resources, as landowners have done for generations. And what has happened in "big pharma" – long marked down by the left, and some on the right, as an unacceptable face of capitalism – mirrors what has happened across the British and US economies. The innovation crisis is not confined to the drugs industry.

Max Levchin and Peter Thiel, co-founders of PayPal, said last year that innovation in the US was "somewhere between dire straits and dead". In his book Rise of the Creative Class (2002), Richard Florida of Toronto University argued that, while a time traveller from 1900 arriving in 1950 would be astonished by phones, planes, cars, electricity, fridges, radio, TV, penicillin and so on, a traveller from 1950 to the present would find little to amaze beyond the internet, PCs, mobile phones and, perhaps, how old technologies had become infinitely more reliable. The US economist Tyler Cowen made a similar point last year in The Great Stagnation: innovation slowed after the 1970s, he argued, and failed to create jobs. No development of the past 50 years, he could have added, bestowed benefits comparable to what washing machines and vacuum cleaners did to liberate women from drudgery.

Green energy technologies have not developed for large-scale use as was widely expected. Nor have electric cars, still less flying cars. The promise of gene therapy is unfulfilled. The development of MEMs (miniaturised pumps, levers or sensors on silicon chips) and nanotechnology – predicted as long ago as 1959 – has been agonisingly slow. In some respects, we have gone backwards: since the retirement of Concorde, the speed of air travel has slowed.

The desirability of some of these technologies is contested, but their spread has not been inhibited on social or ethical grounds. So what stops their development? Excessive government regulation and high taxes, stifling animal spirits among innovators and entrepreneurs, are commonly blamed. I see it differently. Invention and development of genuinely new, beneficial products are being stifled, as in the pharmaceutical industry, by big, established companies, not government. Just as drug companies tweak existing products, and deploy large marketing budgets to present them as new, so do other companies tweak and sometimes incrementally improve technologies that were familiar to our grandparents.

Supermarkets are full of things that claim to be "new and improved". Technologists tweak vegetables and fruits to make them last longer, look better and travel more easily, without regard to flavour. Bankers develop new trading "products" that, however you cut it, are still about borrowing and lending. We have digital radio and high-definition TV, though not everybody thinks either improves on what existed before. For many companies, skilful marketing of products that aren't significantly different from what preceded them has replaced innovation. It's cheaper and less risky to convince customers that something is ground-breaking, even when it isn't, than develop something truly innovatory.

In short, rent-seeking is now far more lucrative than innovation that delivers social benefits. The big rewards go to directors and executives of large companies – and financial traders, the ultimate rent-seekers who impose an unproductive tax on invention, investment and hard work across the world. Like the inventors of lasers and transistors, Alan Turing – without whom the modern computer wouldn't exist – and Tim Berners-Lee, inventor of the worldwide web, did not become rich. Bill Gates and the late Steve Jobs did.

Gates and Jobs recognised the possibilities of what others invented, risked money to develop them, and through marketing and design made them accessible to millions. Nobody suggests they should go unrewarded. But as Joseph Stiglitz points out in The Price of Inequality, Microsoft "did not develop the first widely used word processor, the first spreadsheet, the first browser, the first media player, or the first dominant search engine". Gates became rich because he established a near-monopoly in PC operating systems. When innovations such as the web browser appeared, he saw off their initial developers and other potential competitors by launching his own versions at below-cost prices or none at all.

Innovation always entails risk. But the bar is set higher because those who innovate or support innovation must overcome the entrenched interests of monopolistic rent-seekers, who usually have the ear of governments and regulators. Knowing this, many scientists and mathematicians put their innovatory talents at the well-rewarded service of financial companies rather than struggle in research labs. Light and Lexchin argue for better regulation of the drugs industry. We need better regulation of rent-seekers across the board if the British and US economies are to be steered towards creating genuinely new, marketable technologies that are both job-creating and socially beneficial.

The rebirth of Japan

What's the story of the next decade?

The country's urge to reset its business culture is a lesson to Britain in finding the way back to prosperity

• 
• • Will Hutton
  • The Observer, Sunday 1 April 2012 
  • 
    

In some fields Japan is years ahead of the rest of the world. Photograph: Gina Calvi/Alamy

It is a small thing, but it says a lot about the country. At Tokyo's Narita airport, when you take off your shoes at the security screening check, the guard hands you a pair of leather slippers. The message is obvious: this airport cares for your wellbeing and recognises your need.

In Japan, taxi doors swing open automatically; toilet seats are electronically warmed and cleaned; and the extraordinary variety of food is presented exquisitely. There is a passion for satiating every imaginable human want and a joy in embracing the science, technology and innovation that might help deliver just that.

For 40 years, between 1950 and 1990, this passion was a key ingredient driving one of the most remarkable periods of growth in economic history. But for the past 20 years, Japan has been stricken by stagnation. In the late 1980s-90s, it suffered a financial crisis nearly as severe as our own. The economic model – the Ministry of International Trade and Industry guiding Japanese companies; the keiretsu networks of loosely conglomerated firms and associated banks; the great global brands – suffered an implosion.

Yet this remains a $5trn economy, the third largest on the planet. The Japanese themselves are desperate to recover the elixir of growth, and understand that economic conservatism – in Japan just as in Britain – leads to disappointment and heartbreak.

In 2009, the Democratic party of Japan was elected by a landslide, pledging a root and branch reform of every bureaucratic, corporatist and anti-democratic element in Japan's broken system. It also pledged to recast economic policy to serve the people. Despite some epic mistakes, notably its handling of the Fukushima nuclear disaster, it still holds an opinion poll lead over its rival, the Liberal Democratic party (LDP).

However, forces within the government are very much open to pondering where it should go next. Ten days ago, I was invited by the DPJ government to go to Tokyo to contribute to this ongoing conversation.

Cabinet members wanted to discuss what a 21st-century social contract might look like, respecting both necessary labour market flexibility and security. They wanted to understand the contribution that open innovation ecosystems and an entrepreneurial state can play in driving forward innovation and investment. Above all, they asked: how could Japan reinvent its stakeholder capitalism of the second half of the 20th century so that it was more democratic? And they thought there might be something in my ideas rehearsed in the books The State We're In and Them and Us. In short, how could Japan do good capitalism?

It is the question – not only in Japan but, I would argue, in Britain. In Japan the devastating earthquake in Tohoku 12 months ago has made it even more acute. Three hundred and forty thousand people are still without homes. At least 19,000 died. And the nuclear power station at Fukushima very nearly suffered a meltdown.

At the time of the crisis, Japan hoped that, with the DPJ in power, there would be a decisive change from the way such matters had been handled in the past – obfuscation, delay, inactivity and anxiety to protect corporate interests. Yet the new government bounced off the secrecy of Tokyo Electric Power Company, the bureaucratic ministries, a muzzled media and the enveloping tentacles of the employers' organisation, the Keidanren, as if nothing had changed. Prime Minster Kan became party to delivering inadequate and late information via the impenetrable state and corporate networks; many Japanese became devotees of BBC World News as the only purveyor of truth. Kan was forced to resign last summer.

But the Japanese electorate is not ready to return to the status quo. They know they need nuclear power which just 12 months ago provided more than a third of their electricity needs; but as power stations are being closed down for safety inspections local communities are vetoing their reopening. In May, the last nuclear power station operating will also be mothballed.

The terms for their restarting are tough. Local communities, fired up by a new citizen activism, want effective oversight, transparency of information and commitments to meet international safety standards. It is Japanese good capitalism, driven by citizen demands from below.

Faced with this new phenomenon, the LDP is at a loss, while the DPJ itself seems to be re-gathering its conviction that its reform agenda is the only way forward. At an open meeting in the Japanese parliament, I was struck by the interest DPJ MPs showed in discussing innovative ways of kickstarting credit flows – as anathema to the Bank of Japan and Ministry of Finance as they are to the Bank of England and Treasury.

The Bank of Japan has just expanded a version of the Bank of England's quantitative easing programme; but abstains from the activism it used to show in the great days of Japan's growth. The conclusions are obvious. Japan's financial system is broken; an activist state has to restart bank lending by assuming some of the risk – just as it must in Britain.

If Japan could reset its macroeconomic policy, there is an enormous pool of dynamic hi-tech medium-sized firms that could immediately grow very fast. Consultant Gerhard Fasol argues that in areas like LED lighting or mobile phone payment systems, Japan is 10 years ahead of the rest of the world. The Fujitsus and Toshibas of tomorrow are in the wings. What Japan needs is for the increasingly sclerotic giants to be challenged by these many insurgents, who need new institutions to support their ambitions to go global. A new entrepreneurial, accountable state could drive a second phase of powerful Japanese growth.

These debates are foreign to our primitive business culture, which undervalues service and innovation and scarcely thinks about a more productive capitalism. There is a long list of British companies that have tried to break into Japan's market and failed. Observers say the common theme is wholesale insensitivity to the need for service and innovation, the precondition for any success in Japan.

Britain and Japan are two island economies, both mired in private debt with stricken financial systems. Although Japan has a long way to go, it is becoming obvious, confirmed by last week's British budget, which of the two countries is most likely to create the 21st-century framework for growth and prosperity. The Asian story of the next decade will be Japan's renaissance and China's relapse.

Criticism of Schumacher - if you curtail growth, living standards drop

Schumacher was no radical – if you curtail growth, living standards drop

By suggesting it's better to be economically poorer and spiritually richer, Schumacher ignores links between growth and wellbeing

• 
• • Daniel Ben-Ami
  • guardian.co.uk, Wednesday 16 November 2011 11.30 GMT
  • larger | smaller

Consumer revolution … a customer inspects washing machines at a supermarket in Wuhan, China. Photograph: Darley Shen/Reuters

EF Schumacher's Small is Beautiful is widely viewed as a humanistic and radical tract. Nothing could be further from the truth. Viewed in its proper context it is both profoundly anti-human and deeply conservative.
The central idea in Schumacher's text is that there is a natural limit to economic growth. As he put it: "Economic growth, which viewed from the point of view of economics, physics, chemistry and technology, has no discernible limit, must necessarily run into decisive bottlenecks when viewed from the point of view of the environmental sciences."

Schumacher objected to organising the economy on a large scale precisely because he believed that more prosperity would damage the environment. He correctly understood that small-scale communities cannot produce nearly as much as those operating on a regional or global scale. A modern car, for example, typically relies on components, raw materials and know-how from around the globe. From the perspective of Schumacher's "Buddhist economics", it is better for people to be poorer in economic terms if they can be spiritually richer.

This argument flies against a huge weight of evidence showing that material advance is closely bound up with progress more generally. The past two centuries of modern economic growth have seen huge advances in human welfare along with technological innovation and social advance. Perhaps the most striking single indicator of this improvement is the increase in human life expectancy from about 30 in 1800 to nearly 70 today. Note that this is a global average, so it includes the billions of people who live in poor countries as well as the minority who live in rich ones.

Almost every other measure of wellbeing has increased hugely over the long term, including infant mortality, food consumption and level of education. Most of humanity, even in the developing world, has access to services our ancestors could only have dreamt of, including electricity, clean water, sanitation and mobile phones.

None of the arguments used by Schumacher's followers to counter this narrative of progress are convincing. Greens often side-step the broader case for growth by deriding the accumulation of consumer goods and services. Environmentalist arguments have more than a tinge of elitism, with comfortably middle-class greens scoffing at the masses for wanting flat-screen televisions and foreign holidays. It should also be remembered that some consumer goods, such as washing machines, have directly led to huge improvements in human welfare.

Anti-consumerism reveals more about the narrowness of the green vision than it does about economic growth. Viewing rising prosperity simply in terms of consumer goods is incredibly blinkered. Growth provides the resources for much else including airports, art galleries, hospitals, museums, power stations, railways, roads, schools and universities. Popular prosperity provides the bedrock for much that we value in contemporary society.

Another common green rebuttal to the benefits of growth is to point to the existence of inequality. Of course it is true that there are huge disparities both within countries as well as between the developed and developing world. The key question, however, is how best to tackle the problem. From Schumacher's perspective it is desirable to reduce the living standards of everyone except the poorest of the poor. His is a narrative of shared sacrifice and lower living standards for almost all. The alternative vision, the traditional position of the left, was to argue for plenty for everyone.

Finally, there is the argument about the environment itself. The most popular variant of the idea of a natural limit nowadays is that growth inevitably means runaway climate change. However, there is plenty of evidence to the contrary. There are many forms of energy, including nuclear, that do not emit greenhouse gases. There are also ways to adapt to global warming such as building higher sea walls. Since such measures are expensive it will take more resources to pay for them; which means more economic growth rather than less. If anything the green drive to curb prosperity is likely to undermine our capacity to tackle climate change.
Schumacher's fundamentally conservative argument chimes well with those who want to reconcile us to austerity. It suits those in power for the mass of the population to accept the need to make do with less. Under such circumstances it is no surprise that David Cameron, like his international peers, is keen for us to focus on individual contentment rather than material prosperity.

It is hard to imagine a more anti-human outlook than one advocating a sharp fall in living standards for the bulk of the world's population.

Creativity and curiosity: Do we make stuff up or find it out?

By Prof. Colin Lawson in The Independent

The world of music has much to contribute to debate around the nexus between discovery and invention. Igor Stravinsky memorably once wrote of his ballet The Rite of Spring; ‘I heard and I wrote what I heard. I am the vessel through which the Rite passed’. He felt that he had in effect ‘discovered’ rather than invented it. These days we’re all too eager to accept such an explanation. The Rite’s achievement seems indeed to be that it just exists, a gargantuan presence, arousing the same feelings of wonder as the most remarkable works of nature. However much one seeks to explain it, the Rite seems inexplicable. Yet it’s important to note that Stravinsky’s rationale for the Rite’s composition appeared in print almost half a century after its riotous première in May 1913. At the time of its gestation Stravinsky had described composing the Rite as ‘a long and difficult task’, a claim supported by the surviving sketchbooks. It’s not altogether unexpected that the Rite has also been remade by successive generations of performers. It wasn’t composed as a cornerstone of twentieth century music comprising a series of tableaux, but as a piece of theatre. Innovation and revolution go hand in hand with techniques in which Stravinsky was brought up and trained.

Our own desire to seek explanation, even of subject matter that is fundamentally ‘beyond text’, has become inflected by a cult of celebrity that was unknown in earlier times. Our vocabulary carries a new set of overtones, with words such as classical, serious, musical, genius and masterpiece that would have meant little at a time when music was more closely woven into the fabric of society. When we encounter exceptional achievement we rapidly reach for that vocabulary.

Important evidence for the relationship of creativity and curiosity is provided by the life and posthumous reception history of Mozart.  These days an over-exploited and over-exposed Mozart has almost come to represent western classical music itself. The great man is invoked to sell confectionery, cheese, spirits and tobacco. You can have a Mozart ski holiday or attend a ‘meet Amadeus’ event. Mozart’s credentials as a timeless genius were established immediately after his death. He was soon transformed from mere composer to inspired artist to meet the needs of the age that followed him. In the first biography just six years after his death Mozart was made to observe from his deathbed: ‘Now I must leave my Art just as I had freed myself from the slavery of fashion, had broken the bonds of speculators, and won the privilege of following my own feelings and composing freely and independently whatever my heart prompted.’ During Mozart’s recent 250^th anniversary, Nicholas Kenyon remarked that this apocryphal statement sums up everything the Romantics wanted a composer to be and Mozart was not. Whether or not Mozart would have understood the concept of ‘composing freely’, he wanted to be needed and appreciated and to make the most of performing opportunities; whilst he was conscious of the musical value of his compositions, there’s no evidence that he ever wrote for some far-distant future. Further recent research into Mozart’s compositional method has conclusively exposed as a myth the notion that Mozart carried all his music in his head, awaiting only space in his schedule to scribble it all down.

The usage of words such as ‘creative’ in connection with the production of musical works of art illustrates our tendency to mythologize. The idea of composers as creators or musical artists in a categorical sense is really a feature of the modern era; as Kenyon observes, Mozart doesn’t indicate anywhere that he regards himself as a genius or creator, whilst recognizing that he has genius, a superior talent for making music. In reality, Mozart’s pragmatism is evident in many facets of his professional life, since he worked within the conventions of his time, stretching them to their limits. It’s clear that Mozart’s principal focus was to address specific situations, such as commissions, concerts and dedications. At the same time he contrived to produce a stream of sublime music. But the situations and people directly influenced both his completed compositions and the many fragments that somehow never came to fruition. Perhaps in the case of both Stravinsky and Mozart, it’s the distinction between making stuff up and finding it out that is problematic.

Be strong, be different

Pritish Nandy
30 October 2011, 02:59 PM IST

 

I like Dhoni. He is a no nonsense guy and, like Kapil Dev and Saurav Ganguly before him, a fine leader of men. He is as dignified in defeat as in victory. He was unfazed when England ignominiously crushed us recently, and the Indian team (fresh from winning the World Cup) became the butt of all jokes. He came back and led India to a spectacular 5-0 win in the one-day series against the same England, just to prove cricket isn’t only about winning. It’s a game where defeat teaches you your best lessons so that you can go back and beat the hell out of your tormenters.

But what I like most about Dhoni are two other things. One: He speaks little and always to the point. His game talks for him. His decisions, inexplicable and flawed at times, are never defended, rarely argued over. He simply sets things right the next time. More important, he never plays to the gallery and has no desire to be anointed God, neither by his fans nor fawning sponsors. He remains that ticket checker in Kharagpur station who got lucky and made good. And that precisely is his charm. Neither fame nor money has been able to spoil him. In fact, if you watch his ads, you will figure how ill at ease he is before the camera. He’s a man best left alone. To play the game he’s best at.

Dhoni sums it all up in his new ad when he says, “Zindagi mein kuch karna hai to large chhodo, kuch alag karo yaar.” Great lines those, in response to a campaign by a rival brand which exhorted us to Make it Large. Yes, you are right. It’s the same campaign that drew a spoof from UB showing a fake Harbhajan getting whacked by his father for making ball bearings the size of gym balls at his father’s factory and asking if he had made it large. Another spoof has just appeared featuring a fake Saif as the Chhote Nawab who despite all the pomp and regalia never quite makes it large, as the real nawab.

Dhoni’s right. Any idiot can make it large. All you need is pots of money. The more money you have, the more you can go for scale. The less you need to depend on thinking new, thinking smart. Clever guys, on the other hand, put their indelible stamp on history and show us that innovation is at the heart of all success, not size. Henry Ford could have easily built the world’s biggest bicycle plant. Instead, he launched the car. Steve Jobs spent the best years of his life, not in making Apple the biggest in computers, but in enlarging the domain space and bringing out with the world’s smartest music, phone and communication devices. That’s the constant challenge before clever men and women. To think smart. Not big.

But big is what seduces us. It starts, as usual, with the stupidest claim of all. Every schoolboy boasts to others in the locker room: Mine is bigger than yours. Even though every scholar of sex, from Vatsyayan to Havelock Ellis has repeatedly reiterated that size has nothing to do with being a great lover. In fact, big is a joke among the smarter sex. It is never as important as it is made out to be. It is those who can’t afford the best who go for size. The only real yardstick is excellence, how good you are in what you do. And the less you talk about it, the more likely are others to acknowledge it.

Picasso was not a great painter because he painted large canvases. Chaplin wasn’t great because he made big films. Mozart was not a great musician because he composed large symphonies. Tagore was not a great poet because he wrote epics. You can't compare the achievements of Boeing and Airbus with the ingenuity of the Wright brothers. Or the achievements of Nokia and Blackberry with the genius of Guglielmo Marconi. All real achievers think new. Not big. That’s why Dhoni’s advice, even though it’s in an ad where one brand is spoofing the other, finds so much resonance. “Zindagi mein kuch karna hai to large chhodo, kuch alag karo yaar.”  

That’s why Dhoni is so special.