Life Beyond Growth: Join the Evolution

I have been puzzling over why the Office for Budget Responsibility, which was only established to give prudent and honest advice about what is happening in our economy, has failed so resolutely to either predict or interpret the current economic position. It hasn't helped that the man chosen to head up the organisation was qualified in communications more than in economic analysis, but perhaps there are deeper answers to the questions about why it keeps predicting more growth than we are likely to achieve.

If you were on the edge of a paradigm shift, would you honestly be able to look across the gulf and believe what you were seeing on the other side? Or, rephrasing that question with relevance to the purpose of this blog, would you be able to believe that growth will never return and that your job as an economist should be not predicting its returning, or even trying to bring about its return, but rather encouraging the evolution of the economy towards a structure that does not rely on growth?

Let's spend a while looking at the figures. Osborne's disastrous revisions to his growth figures, which lead him to conclude that we must face at least another six years of grinding austerity, are based on more OBR predictions. The OBR now suggests that the 0.8% growth they predicted just eight months ago has been transformed into 0.1% of contraction. Next year's growth, they suggest, while less than their March prediction of 2%, will still be a determinedly positive 1.2%. The fantastical nature of these predictions arises from the fact that the past always looks worse than in OBR-land, but the future continues to look rosier. This suggests a failure of judgement and the need for a reality check. The OBR economists appear to be psychologically incapable of responding to a world beyond growth: being incapable of imaging such a world they gaily predict it away.

What is the view from Euroland? Even the German economy, the final functional growth engine, is beginning to sputter. In spite of our view of Germans as sober and rational, the disease of fantastical prediction appears to be spreading their way. The Bundesbank is making even more rapid adjustments to its predictions, suggesting the German economy will grow by just 0.4% next year compared with its June forecast of 1.6%. When a key economic variable can be reduced so drastically in just five months you realise that you are dealing with psychological rather than statistical error.

So what does the economy beyond growth look like? At present, without any evolution in our expectations and basic parameters, it looks very grim indeed: desperate pressure on the planet, growing inequality as the fight over the shrinking pie continues, and increasing social tensions as the elites refuse to accept that a future without growth means they cannot continue to extract disproportionate amounts of wealth as they have in the past.

Yet as a green economist I can see the end of growth as part of a story with a decidedly happy ending. Economic growth, and the inequality and ecological pressure it brings with it, could be replaced by an economy where the objective was balance and harmony between people, other species, and the planet we share. How can we move towards such an economy? What might its social and political institutions look like? How can we begin to create a culture that makes this not just a possible but a desirable future. It is to answer these questions that Green House is hosting a seminar in London on 19 December in partnership with the Green European Foundation. Please join us - and join the evolution.

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Chote Chokes

Robert Chote, who heads up the Office for Budget Responsibility, is the sort of economist on whom our futures rely. His career profile is unusual, in that he appears to have no practical working experience either in government, academia or industry, the closest being two years he spent as an 'adviser' at the IMF. He is a former journalist who then moved on to head up the Institute for Fiscal Studies, a leading thinktank analysing economic policy. For a man in such a powerful position the biographical detail available on him via the internet is rather thin,* but it seems safe to assume that he has spent his whole professional life on the theoretical rather than the practical side.

The Office for Budget Responsibility he heads was invented by the Tories following the election as a way of artificially distancing themselves from economic policy-making. Don't blame us if we make a wrong move, they enabled themselves to say, we are following the path scientifically determined by our independent economic advisors. The Office's reputation, and hence its power, relies on its ability to predict the course of the UK economy. This morning Chote admits, on behalf of his Office, that his predictions have been wrong. Growth forecasts will be revised downwards: the OBR was wrong about the impact of the government's policies on the UK economy.

In an interview in this morning's Independent Chote belittles the importance of the OBR's forecasts, commenting that 'You shouldn't bet the farm on any macro-economic forecasts being correct. We set out to make key judgments and to see how sensitive our judgements are, for example to how strong the recovery is or the pattern of growth.'

But this is just too glib: in reality, the OBR's forecasts have been used to back up Osborne's policies. Because the Office for Budget Responsibility predicted that the austerity programme would result in higher growth rates the Chancellor accepted this course of action on our behalf. Now it is apparent that in fact these policies are devastating our economy and stalling growth, are we to see a change of direction? Is Robert Chote about to lose his job? Will the OBR be abolished so that politicians have to demonstrate convictions and the courage to act on them, rather than indicating a phoney adherence to a bogus science?

This morning's interview makes clear how dangerous it is to leave our economic future in the hands of men like Chote who talk a good talk and cover the government's back. What we rather need in these times of crisis is politicians with the courage to take responsibility and to take action.

*The short biography at the end of the Independent article appears to be taken from his Wikipedia entry, which is shorter than mine.
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