Phil Mullan, Creative Destruction: How to start an economic renaissance, Policy Press, 2017, ix + 348 pp, 1 4473 3611 2, pbk, £12.99
The agenda which this book tackles is the fact that ten years after the 2008 financial crisis we are only now and only very slowly beginning to climb out of recession. Mullan explores a number of related causes of this problem: companies’ unwillingness to invest (because of lower profitability, and uncertainty about the future of the economy); technological innovation is slowing down; and the state’s abdication of responsibility for economic growth, and its withdrawal from facilitating innovation. Mullan discusses in some detail today’s deterioration of productivity, declining living standards, low job creation, the increasing number of poor quality jobs, and a decreasing ability to fund consumption and therefore production by creating debt. We are experiencing a ‘zombie economy’ (p. 167).
What is required, according to Mullins, is ‘creative destruction’, whereas, for political reasons, our governments tend to prefer to subsidise failing industries and our banks are reluctant to foreclose on failing businesses. There is nothing new about change and uncertainty. What is distinctive today is that businesses are risk averse and that they are encouraged to be so. We now have an attitude very different from that which characterised the Enlightenment and almost every period of change since then. ‘Rather than uncertainty propelling change, human-directed change … is increasingly seen as contributing to unnecessary uncertainty.’ (p. 195). We know that economic growth requires innovation and investment, but those are the things that we aren’t doing: and where innovation is occurring we are keener to see it as a threat than as an opportunity. Artificial Intelligence is one obvious example of this tendency; and another is that we are quicker to identify climate change as a requirement to restrict economic growth rather than seeing economic growth as a means of abandoning more primitive and more damaging methods of production. We ‘muddle through’ (p. 227). Companies improve their profits by reducing costs rather than by innovating, and governments promote stability rather than innovation and in particular fail to invest in the new infrastructure that other innovation requires.
Mullan’s prescription is, quite simply, innovation, with businesses and governments working together to promote research and to facilitate new kinds of production. The problem is that change can be painful – and that’s where the book ends. We are left knowing that creative destruction is required, that change can be painful, and that governments are understandably hesitant about launching their countries into painful economic transitions that are bound to have unpredictable social consequences.
That is not where the book should have ended. It should instead have included an additional chapter on how governments could protect their populations through the necessary economic change: because that is the only way to make radical economic change socially and therefore politically acceptable. Mullan might have pointed out that the NHS is the obvious exemplar. In the UK, whatever someone’s economic or employment situation, the NHS will provide for their healthcare needs. The same principle would apply to incomes. Economic transitions destroy old jobs and create new ones, and they destroy employment market structures and create new ones. Such painful transitions would be bearable if a Citizen’s Basic Income were to underpin everyone’s net income, because then a proportion of everyone’s net income would be entirely secure, whereas today someone’s entire net income is at risk. A significant additional effect of a Citizen’s Basic Income would be to provide every individual with greater freedom in the employment market, whereas today’s tax and benefits systems lock people into a narrow range of options. Such new kinds of freedom are precisely what is required to facilitate the changing economic structures that we need.
This is a persuasive book. A second edition would be even more persuasive if the author were to explain how governments might provide the kinds of security that people will need if radical economic change is to be socially and therefore politically acceptable. That is the only way in which governments will find it possible to promote the innovation that the economy requires, and to provide the security that people will need if they are to participate in the economic change that we need.