Economics should have a moral purpose
Ashoka Mody is Visiting Professor of International Economic Policy, Princeton University and author of Euro Tragedy: A Drama in Nine Acts (Oxford University Press). His book was judged the best economics book of the year in 2018 by the American Association of Book Publishers. His new book India is Broken is to be published by Stanford University Press in February 2023. He was recently in Cambridge to deliver the Hinsley Memorial Lecture on: “Viewing Economics Through a Moral Lens”, and In this exclusive podcast he updates our listeners on the state of the UK and world economy, and punctures a number of false claims about the negative impact of Brexit. Throughout the conversation, Professor Mody emphasized that the world had veered off into policy mindset that lacked empathy and made the rich richer. Unless the world’s policymakers redirect their efforts to a greater moral purpose, the future is likely to get bleaker.
A bumpy few years ahead
He explains why pumping liquidity into financial systems as a crisis response to Covid and Ukraine, and the associated escalating energy costs, is going to lead to a “bumpy few years’”. “I think we will have to hold tight but I am not sure how bumpy it will be. A great depression like 1930s I think will not happen.” But “small mistakes will lead to large consequences”
He suggests what can be done in the longer term to create a more moral society where governments take joint actions and show empathy to solve the problems that climate change presents to the World. He praises the Biden administration in America for pursuing a moral purpose and reaching out on climate change. He also gives us a preview of what his new book India is Broken will say on the growth of the Indian economy and the dire social problems it faces.
- On the UK economy and the original Liz Truss mini budget he says it was “madness” and that trickle-down economics has: “tortured the data but it has not confessed”. He says it was done “in a shoddy manner”.
- On liquidity he says: “Policy makers are quick to inject liquidity, but private actors withdrew it.”
- he economic turbulence at the present time: “is a commentary on the misguided policies of the West and nothing to do with Brexit.”
- On Levelling up in the UK, he says: “my main regret is that it never happened”.
- The idea that Brexit has been a source of Britain’s economic ills: “is simply not there in the data.”
- “I looked at the IMF data and if anything, the British economy performed better than Germany since Brexit.”
- The World is going through a period of extraordinary turbulence, with Covid and Ukraine and high inflation and that “will continue for the next couple or four or five years”.
- The energy shock has greatly amplified the pre-existing fragility of the German growth model. Germany is going to have to “go through a painful transition”. Germany’s role as the motor economy of the eurozone “is in doubt”.
- The fault line of the Euro has “always run through Italy”. The ECB has been financing the Italian government. “The Eurozone stands at a juncture”.
- “We need to think where we are, and I think the World has to pay vastly more attention to the climate crisis than it did at Cop 26 last year”. We need to create a better world for ourselves and “prepare for it”.
- “I think we have lived in a fools world where we thought we could have everything we wanted and need to face up to the fact that we can’t.”
- “We have ignored for half a century the notion of public goods and fairness. And that is what is missing.”
- Tax cuts break the social cohesion, and the rich get richer. It is a policy by “slogans” rather than on facts.
- “My new book India is Broken shows India does not focus policy on the lives and livelihoods of people. A moral economy is desperately needed.”
- “The climate crisis is the deepest symptom of our moral crisis”. “It says I don’t care about you or future generations.”
- “There is a centralisation of power that distances itself from people. People need to have a say and be enabled to act with trust not be cheated.”