Managing the Economy

There has been much discussion, in the run-up to our election, about which party is best able to “manage the economy” – but little attention has been paid to what is meant by the phrase “managing the economy”, and in whose interests is it assumed that it should be managed.

The economy is, after all, a hydra-headed, multi-faceted beast and it could be managed for a wide variety of different purposes. If we are to judge who is best at managing it, we need to know by what criteria we are asked to make that judgment and, unless we know the goals that are set, we cannot know whether they have been met.

Is the economy to be managed so as to maximise production? That can so often be just another way of saying “so as to maximise business profits and top salaries”. Or is it to be managed so as to lift employment and wages? Or to make the government’s books look good? That is usually just another way of expressing the intention to cut spending on essential services.

Might we define the goal of “managing the economy” as minimising its impact on the environment – a goal that many might dismiss as having little to do with what the economy is really about. But others might say that that is exactly what the economy is about – that the economy is what we do to meet our supposed needs as consumers, by making demands on our environment and its resources.

Or we might want to see the economy managed so that its benefits are shared as widely as possible, though some might say that has little to do with the real purpose of the economy – but try telling that to those who feel left behind.

Should the goal be an economy that boosts our well-being, rather than boosts Gross Domestic Product? We might register, in that context, Sir David Attenborough’s commendation of our current government, and of Jacinda Ardern, in particular, for their introduction of a budgetary process focused on well-being.

Is a well-managed economy one that enables us, as a country, to pay our way in the world? If so, we might worry about our perennial trade deficit and how much we owe to overseas lenders.

Or should we focus instead on the amount of indebtedness that we all, as individuals, take on? In which case, we might be anxious about the volume of money that the banks create out of nothing and then lend on mortgage.

Or do we take the view that “managing the economy” means that the really important questions, such as deciding how much money there should be in circulation, should be handed over to the banks to decide in their own interests?

How the economy should be managed, in other words, depends on what we think the economy is for – on which subject, opinions will vary widely, and will usually reflect the political views of those making the judgment.

We should certainly stop imagining that “managing the economy” is a simple concept, and easily measured, rather as though we were totting up a golf score. We can all be reasonably satisfied that Tiger Woods is good at golf because we can count the number of strokes he takes.

But the economy is more complicated – and to ask how and by whom it is best managed is to invite a whole range of political, social and ethical concepts to be brought to bear. It might be better to ask, “what is an economy for” and to judge those claiming to be good managers of it according to the answers they give to that question.

And we should probably be suspicious of those who claim to have all the answers to a question that is undoubtedly more complicated than they seem to realise.

Nor should we forget that the important people in an economy are not the government, but us. It is, after all, our economy; we should ensure that we have a proper say in how it is run and for whose benefit, rather than leave those questions to politicians with their own axes to grind.

Bryan Gould
7 October 2020