1
00:00:00,180 --> 00:00:09,839
A year ago tomorrow, we met in this very room to celebrate the 80th birthday of Lord Randolph with

2
00:00:09,840 --> 00:00:18,120
a wonderful colloquium with Johann Habermas and Fritz Stern and many people,

3
00:00:18,120 --> 00:00:23,040
including members of the DA and our family, who we're delighted to see here today,

4
00:00:25,650 --> 00:00:40,170
to celebrate that birthday and to have a very fascinating discussion which you can find recorded in the publication on Liberté, on the table outside.

5
00:00:41,370 --> 00:00:45,749
At the end of that colloquium, Fritz Stern said, This was so interesting.

6
00:00:45,750 --> 00:00:49,650
Why don't you do it again? Why don't you do it every year?

7
00:00:50,550 --> 00:01:00,360
On his birthday, tragically. Ralph Randolph died only a few weeks later, on the 17th of June.

8
00:01:02,550 --> 00:01:06,180
But we thought that we should do it again anyway.

9
00:01:06,210 --> 00:01:20,300
We thought he'd like us to. So we have established at this college a Don Dorf program for the Study of Freedom, which has really three parts.

10
00:01:20,310 --> 00:01:26,340
There is a major research agenda which focus this year, particularly on free speech.

11
00:01:27,300 --> 00:01:35,160
We have a small group of Don Dorf scholars who are selected from among the students

12
00:01:35,160 --> 00:01:42,600
of the college in a competitive process and who do research projects of their own,

13
00:01:43,320 --> 00:01:48,600
as well as working with the program. And we have this annual lecture.

14
00:01:50,140 --> 00:02:01,480
The program is generously supported by the Aurora Foundation from Canada, the Ford Foundation from Norway, and the Site Foundation from Hamburg,

15
00:02:02,200 --> 00:02:12,339
a foundation with which Ralston Dorf was very closely associated for many, many years, as has been this college.

16
00:02:12,340 --> 00:02:16,540
And we're delighted to have with us Professor Michael Gehring,

17
00:02:17,230 --> 00:02:27,160
the chairman of the executive board of the Tiger Foundation, who will say just a few words before we move to the lecture.

18
00:02:27,790 --> 00:02:31,090
Professor Garrett, Professor Garton Ash, ladies and gentlemen,

19
00:02:31,420 --> 00:02:40,150
it's a great privilege for me and for the side of doom to welcome you this afternoon for the first half down of Memorial Lecture at St Anthony's.

20
00:02:40,690 --> 00:02:46,389
As Timothy just said, drive down. Rob has been very close with this site and the site foundation.

21
00:02:46,390 --> 00:02:53,770
Personal friendships with Mario and Dino, with the former chief editor to Zuma and also with the publisher Get Materials

22
00:02:53,790 --> 00:02:59,829
himself made him a critical observer of and an important adviser to the paper and,

23
00:02:59,830 --> 00:03:11,979
of course, an eminent author for this site, whose articles in this side always found a very big audience in 1997, 1998, and beginning of 1999,

24
00:03:11,980 --> 00:03:20,770
once Donald wrote the biography of our founder Get Good, Serious, this made him spend many, many weeks with us in our archive.

25
00:03:21,010 --> 00:03:27,670
Those two years were also the formative years of the Site Foundation shortly after our founders death,

26
00:03:28,110 --> 00:03:35,550
and I personally owe a lot to our founder as we had many talks while he was with us in the archive.

27
00:03:35,680 --> 00:03:42,610
Many projects I discussed with him well before they became projects and he shaped many of them.

28
00:03:43,120 --> 00:03:46,359
He was a member of the founding board of the Good Serious Law School.

29
00:03:46,360 --> 00:03:53,620
One of the biggest things that the good Serious Foundation has started so far, and I must say I do miss him.

30
00:03:54,220 --> 00:04:03,490
I miss these talks over some cups of coffee and I miss his invitations to the House of Lords where we sometimes met and had lunch together.

31
00:04:03,730 --> 00:04:06,370
Not that I miss the luncheons too much,

32
00:04:07,240 --> 00:04:15,700
but I knew that Lord down North always enjoyed showing the splendour and tradition of the Upper House to friends from Germany,

33
00:04:15,940 --> 00:04:26,620
and I miss the exchange of ideas. If he were still around and we could meet at night to discuss the growing problem of social inequality with him,

34
00:04:27,070 --> 00:04:32,920
the Federal Republic has always been so proud of its rather tight social cohesion.

35
00:04:33,490 --> 00:04:40,390
Today, however, the growing concern about the split of society the greater number of poor people,

36
00:04:41,650 --> 00:04:48,700
the diminishing middle class, the integration of our immigrant population is a major topic for many,

37
00:04:48,700 --> 00:04:50,440
many foundations in my country,

38
00:04:50,860 --> 00:05:01,270
and therefore I look forward very much to today's lecture on wellbeing and inequality in post-industrial societies and on tomorrow's discussion.

39
00:05:02,080 --> 00:05:07,240
I wish us all the most fruitful start into a sunny May a month.

40
00:05:07,870 --> 00:05:10,870
That will always start with Ralph Da Randolph's birthday.

41
00:05:11,140 --> 00:05:21,220
Thank you very much. That has had a remarkable career between business, public life and intellectual life.

42
00:05:22,270 --> 00:05:32,139
He's worked with all four BP, Chase Manhattan, McKinsey's merrill Lynch and Standard Chartered, amongst others, so he knows where off he speaks.

43
00:05:32,140 --> 00:05:41,980
He's been director general of the CBI, chair of the Pensions Commission, chair of the Government Committee on Climate Change, chair of the SCC,

44
00:05:41,980 --> 00:05:49,240
very relevant to this university and became Chair of the Financial Services Authority in

45
00:05:49,240 --> 00:05:57,670
autumn 2008 with perfect timing just to greet the largest financial crisis for 70 years.

46
00:05:58,390 --> 00:06:03,790
He is also a very notable author and lecturer.

47
00:06:05,380 --> 00:06:18,400
He's given a remarkable series of lectures, and he's the author of a very interesting book called Just Capital, published in 2001,

48
00:06:18,400 --> 00:06:26,950
to which Ralph Don Dorf wrote a preface in which Roth called it a highly original

49
00:06:27,220 --> 00:06:33,460
political economy of liberty at a time of global pushes and local pools.

50
00:06:34,270 --> 00:06:41,740
I think we're just about due for a sequel, so maybe we'll have the prequel to the sequel this evening.

51
00:06:42,430 --> 00:06:49,330
We're equally fortunate in our commentators, both of whom have flown the Atlantic to be with us today.

52
00:06:49,960 --> 00:06:55,400
On my right. Robert Skidelsky. Lord Skidelsky is a master of political economy.

53
00:06:55,420 --> 00:06:58,840
He's taught that subject at Warsaw, at Warwick University.

54
00:06:59,910 --> 00:07:07,120
Warsaw, too. He's taught it, I would say, in the House of Lords and as chair of the Social Market Foundation.

55
00:07:07,600 --> 00:07:14,020
I've been reading him since I was a boy, since I read politicians in the slum in sixth form at school.

56
00:07:15,160 --> 00:07:25,630
His great masterpiece is, of course, his three volume biography of John Maynard Keynes, an absolute masterpiece of its kind.

57
00:07:26,020 --> 00:07:34,240
And I think he probably feels that Keynes has something still to say to us about the state of capitalism today.

58
00:07:36,010 --> 00:07:44,890
And finally, our own Paul Collier of this college and the world, one of this country's and the world's leading development economist.

59
00:07:45,190 --> 00:07:48,130
We all knew he was absolutely remarkable.

60
00:07:49,060 --> 00:07:59,320
I think the world found out at the latest with the publication of his book, The Bottom Billion Billion, which became a phenomenon.

61
00:07:59,740 --> 00:08:04,630
He subsequently published a book called Wars, Guns and Votes.

62
00:08:05,230 --> 00:08:19,780
And if you hurry to Blackwell's, you may get his latest book, The Plundered Planet, which is out just after the election and before.

63
00:08:20,410 --> 00:08:26,860
No competition, of course. Before I turn over to Ed, I do have to say one important thing,

64
00:08:26,860 --> 00:08:32,769
which is one or two of you will have noticed that we have an election on what the

65
00:08:32,770 --> 00:08:40,180
chair of the FSA says can possibly occasionally play a role in British politics.

66
00:08:40,660 --> 00:08:48,400
And therefore, I have to say, particularly to all the journalists present, that this meeting is under the Chatham House rule,

67
00:08:48,700 --> 00:09:00,879
which states that you may quote some of the things that have been said, but not attribute them to any identifiable individual.

68
00:09:00,880 --> 00:09:09,370
And I would ask you all to respect that until the 7th of May, when everything may be quoted.

69
00:09:09,730 --> 00:09:18,520
And indeed, this discussion will go up on the Oxford University i-Tunes website.

70
00:09:19,750 --> 00:09:27,280
This does not mean that you have to sing, but we look forward very much to what you have to say.

71
00:09:27,550 --> 00:09:34,260
Please join me in welcoming a dash of. Thank you very much.

72
00:09:34,260 --> 00:09:42,630
And good afternoon, everybody. It really is a huge honour to have been asked to give this first memorial lecture in Ralph's Honour.

73
00:09:43,320 --> 00:09:51,660
I first met Ralph some 15 years ago, and I very soon realised that I had gained not only a good friend, but also a great advisor.

74
00:09:52,080 --> 00:09:57,900
As Tim said, he provided a sparkling preface introduction to my book, Just Capital,

75
00:09:58,320 --> 00:10:07,680
and he also provided detailed responses to many of the lectures or essays which I would send him pre or post publication.

76
00:10:07,680 --> 00:10:13,500
And he always came back with comments. And since we agreed on many issues, his comments were on the whole supportive.

77
00:10:13,830 --> 00:10:21,720
But they were perceptive in their specific criticisms or suggestions of different lines of argument that one ought to look at.

78
00:10:22,230 --> 00:10:30,660
But on one occasion he wrote back and he said, Look, honestly, while appreciating my arguments, he was instinctively unsympathetic to my conclusions.

79
00:10:31,200 --> 00:10:39,390
My article had been entitled Capitalism and the End of History, and in it I argued that Francis Fukuyama's end of history,

80
00:10:39,720 --> 00:10:44,100
which foresees a sort of convergence of all countries to a sort of mixed economy.

81
00:10:44,100 --> 00:10:54,300
Switzerland of perpetual peace was, while certainly not inevitable, that perhaps no other societal end point other than that was likely to be stable.

82
00:10:55,110 --> 00:11:01,890
Growth, however, would have absolutely nothing to do with this attempted compromise with the Fukuyama point of view.

83
00:11:02,130 --> 00:11:07,950
He was he wrote back, and I quote, instinctively suspicious of all end isms.

84
00:11:08,640 --> 00:11:15,090
And indeed he was the suspicion of end isms of any idea that society can ever achieve some

85
00:11:15,360 --> 00:11:21,870
status beyond which there is no social conflict was indeed one of Ralph's enduring themes,

86
00:11:21,870 --> 00:11:25,620
and it is stated clearly in one of his first and most famous books.

87
00:11:25,980 --> 00:11:28,710
Class and Class Conflict in Industrial Society.

88
00:11:29,100 --> 00:11:38,520
In the final paragraph of that book, Ralph argued that, I quote Totalitarian monism is founded on the idea that conflict can and should be eliminated.

89
00:11:38,940 --> 00:11:45,690
In contrast, the pluralism of free societies is based on recognition and acceptance of social conflict.

90
00:11:46,200 --> 00:11:54,390
For freedom in society means above all that we recognise the justice and creativity of diversity, difference and conflict.

91
00:11:55,140 --> 00:12:00,930
Now, half a century has passed, actually 53 years since Ralph wrote those words.

92
00:12:01,260 --> 00:12:10,250
And since then, of course, much has changed Britain certainly, but even to a degree, Germany have become, in some senses, post-industrial societies.

93
00:12:10,260 --> 00:12:16,440
Even in Germany, by the way, only 20% of people actually now get their employment from manufacturing.

94
00:12:16,860 --> 00:12:22,560
And in both countries, there have been transformational increases in the average standard of living.

95
00:12:23,280 --> 00:12:27,060
But the issues of social conflict and social competition still remain.

96
00:12:27,570 --> 00:12:33,330
One of the major parties in Britain's general election next week has said that British society is broken.

97
00:12:33,840 --> 00:12:42,149
And while some them some measures of class differentiation, particularly, I think, in Britain, have become less obvious over the last 50 years,

98
00:12:42,150 --> 00:12:48,540
the sort of class differentiation by by accent, by culture, by what you wear,

99
00:12:48,840 --> 00:12:53,730
actually inequalities of income and growth, quantitative inequalities have grown.

100
00:12:54,480 --> 00:13:04,650
So my aim in this lecture is to explore how growing economic prosperity and inequality relate to one another and to perceived well-being,

101
00:13:05,070 --> 00:13:10,530
and how those relationships change as the structure of economic activity changes.

102
00:13:10,980 --> 00:13:14,700
So while Ralph wrote of Class and class conflict in Industrial Society,

103
00:13:15,030 --> 00:13:20,310
my title for this evening is Wellbeing and Inequality in post-Industrial Society.

104
00:13:21,750 --> 00:13:32,820
Attaining a superior growth rate and thus increasing prosperity was central to political debates in most developed countries in the late 20th century.

105
00:13:33,360 --> 00:13:39,660
Now, of course, other issues such as culture, morals, religion, national identity were not entirely present,

106
00:13:39,990 --> 00:13:46,500
but the issue of which political party would best deliver material prosperity was often a key

107
00:13:46,830 --> 00:13:54,180
electoral battleground in a way which was not true in 19th or early 20th century politics.

108
00:13:54,900 --> 00:14:02,070
The shared assumption across the political spectrum was that economic growth, which you could measure through growth in GDP or per capita GDP,

109
00:14:02,430 --> 00:14:10,140
would feed directly through to rising well-being, welfare, happiness, contentment, whatever word we want to use for that.

110
00:14:10,500 --> 00:14:17,070
And therefore, that delivering that success would deliver political success for whichever party managed to achieve it.

111
00:14:17,580 --> 00:14:21,690
And the debate was essentially about what policies would achieve that end.

112
00:14:22,410 --> 00:14:27,030
The conservative narrative, which was asserted with increasing confidence towards the end of the century,

113
00:14:27,330 --> 00:14:32,850
was that free markets were the best way to deliver prosperity and that significant inequality.

114
00:14:32,910 --> 00:14:35,400
Was acceptable and indeed required.

115
00:14:35,790 --> 00:14:42,719
But it was required because it provided the incentives to entrepreneurs, to executives and to ordinary workers through low taxation,

116
00:14:42,720 --> 00:14:50,130
which would ensure innovation, competitive success in global markets, high productivity growth, and thus rising prosperity.

117
00:14:50,700 --> 00:14:58,800
So unlike in the 19th century, when conservatives defended inequality and property rights as elements of some sort of natural order,

118
00:14:59,730 --> 00:15:05,940
conservative parties have tended to advance an instrumental justification of both markets and inequality.

119
00:15:06,330 --> 00:15:15,720
Flexible markets and low taxes on the rich are good for you because they will help in some indirect sense, make you the average voter richer.

120
00:15:16,050 --> 00:15:21,060
So parties of the right have tended to be defined less by the classic parameters of conservatism.

121
00:15:21,390 --> 00:15:28,890
Nations, social order, religion, received morals and culture, and have become instead parties of a liberal economic ideology.

122
00:15:29,460 --> 00:15:36,960
What is left in turn, have to decide how much of this narrative they accepted and how much was compatible with egalitarian instincts.

123
00:15:37,350 --> 00:15:43,530
Reactions differed by country and between those parties with strong Marxist traditions and those more willing

124
00:15:43,530 --> 00:15:50,370
to accept that the simple amelioration of working class conditions was an acceptable aim of a left wing party.

125
00:15:50,880 --> 00:15:55,140
But the direction of change everywhere was towards at least a partial acceptance.

126
00:15:55,140 --> 00:16:01,200
And in some countries, I would say in particular in Britain, in a full scale embrace of a liberal economic ideology,

127
00:16:01,710 --> 00:16:08,910
the assumption that markets helped create growth in GDP, that growth in GDP meant social well-being and individual welfare,

128
00:16:09,390 --> 00:16:18,780
and that significant inequality was acceptable because but also to the extent that it helped deliver enterprise competitive success,

129
00:16:18,780 --> 00:16:25,920
productivity growth and rising GDP per capita. Those assumptions became increasingly shared across the political spectrum.

130
00:16:26,820 --> 00:16:31,290
But I think what is interesting is that even as that increasing consensus has grown,

131
00:16:31,950 --> 00:16:37,620
economic and social developments have occurred which tend to undermine the assumptions on which it is based,

132
00:16:38,010 --> 00:16:41,790
and it's on those developments that I would like to focus this evening.

133
00:16:42,870 --> 00:16:51,690
The central fact is illustrated by the next chart, which is taken from Richard Layard book on Happiness,

134
00:16:52,260 --> 00:16:58,079
and it sets out the very simple fact that at the levels of income already attained by rich,

135
00:16:58,080 --> 00:17:02,310
developed countries which are up there in the top right hand side,

136
00:17:02,970 --> 00:17:08,280
there does not appear to be any strongly link or indeed any link at all between

137
00:17:08,280 --> 00:17:14,370
average GDP per capita and people's perception of their average happiness.

138
00:17:15,180 --> 00:17:20,159
Now, of course, one immediately has to understand that there are considerable theoretical and empirical

139
00:17:20,160 --> 00:17:25,590
problems in defining and measuring this thing called well-being or contentment or happiness.

140
00:17:25,920 --> 00:17:32,820
And indeed, there are theoretical problems in deciding whether average happiness should be the overriding aim of society.

141
00:17:33,210 --> 00:17:43,350
Suppose, for instance, that the average citizens of a dictatorial country make themselves very happy by a oppressing a small minority.

142
00:17:44,220 --> 00:17:49,050
In that we face all the complex issues of how you add up different people's happiness,

143
00:17:49,590 --> 00:17:55,290
which the 19th century utilitarians raised but never really worked out how to solve.

144
00:17:55,860 --> 00:18:00,719
But while these pro-black problems certainly make me very wary of the idea that

145
00:18:00,720 --> 00:18:06,210
we can define and then pursue some sort of index of gross national happiness,

146
00:18:06,630 --> 00:18:10,890
I think it's still important to note that a wealth of data suggests that people in rich,

147
00:18:10,890 --> 00:18:15,570
developed countries do not feel on average any more content now than 30 years ago.

148
00:18:15,900 --> 00:18:22,889
And that, as this chart shows, self-reported measures of happiness in different countries tend to suggest that people's sense

149
00:18:22,890 --> 00:18:30,390
of well-being increases as average income per capita rises from very low levels to around,

150
00:18:30,390 --> 00:18:34,110
say, 15 or £20,000 per capita per annum.

151
00:18:34,410 --> 00:18:38,730
But it then caps out. And then that empirical evidence, of course,

152
00:18:39,210 --> 00:18:45,960
might tend to accord with what common sense would tell us that freeing people from hunger, ill health or continuous,

153
00:18:45,960 --> 00:18:53,100
backbreaking work in either the workplace or the domestic environment is likely to make a big difference to people's self-reported happiness,

154
00:18:53,550 --> 00:19:02,430
but that once you have an adequate car, the new car with new styling and better acceleration is not going to transform your long term happiness,

155
00:19:02,760 --> 00:19:07,650
even if it gives you for the few days that you first got it, a sort of temporary buzz,

156
00:19:08,130 --> 00:19:12,780
and that once you've got perfectly pleasant clothes designed at least with some sense of style,

157
00:19:13,080 --> 00:19:18,660
changing them continually to keep up with the latest fashion is going to make less of a difference.

158
00:19:19,230 --> 00:19:25,740
Taking the bottom billion about whom Paul has written from extreme poverty down in

159
00:19:25,740 --> 00:19:31,170
the left hand corner there to the standard of living achieved in Western Europe by,

160
00:19:31,170 --> 00:19:36,040
say, 1970 or. 1980 would clearly be transformative,

161
00:19:36,580 --> 00:19:45,399
taking China's 1.4 billion from $3,000 per day per annum today to say $20,000 per annum will probably

162
00:19:45,400 --> 00:19:52,150
deliver significant increases in something that we can with reasonable certainty label as human well-being.

163
00:19:52,630 --> 00:19:59,290
But it is simply not clear that further increases in the average measured GDP of already rich societies

164
00:19:59,590 --> 00:20:06,400
will make much of a difference to how well-off or content or happy the average citizen will feel.

165
00:20:07,210 --> 00:20:17,950
So why is that? Well, in part, it follows simply from some concept of a hierarchy of human needs and thus of partial satiation of needs.

166
00:20:18,490 --> 00:20:28,480
One winter coat keeps you warm. Two winter coats don't keep you warmer, though they may give you a benefit of variety and style,

167
00:20:28,810 --> 00:20:33,940
but that is a less important in the hierarchy of human needs than just being warm.

168
00:20:34,600 --> 00:20:39,190
And that sensible behavioural assumption, if I can have the next chart,

169
00:20:39,580 --> 00:20:47,590
is of course expressed in the formal economics concept of the diminishing marginal utility function.

170
00:20:48,100 --> 00:20:56,829
Economists have always drawn charts like this which show that as you go up on income on the horizontal axis, something utility,

171
00:20:56,830 --> 00:21:03,040
well-being, happiness, whatever it is, tends to go up, but it tends to go up on a diminishing marginal basis.

172
00:21:03,040 --> 00:21:06,669
And concepts like that are fundamental to the way that economists are able

173
00:21:06,670 --> 00:21:11,980
to manipulate the algebra of these assumptions and end up with some results.

174
00:21:12,670 --> 00:21:18,640
But one that classic concept could help explain a curve of steadily declining increase.

175
00:21:19,120 --> 00:21:22,510
It cannot explain why the curve might actually turn quite flat.

176
00:21:22,960 --> 00:21:27,670
Or indeed, as some evidence suggests, for some societies, we might actually go negative,

177
00:21:28,330 --> 00:21:35,500
but such a flattening might become more understandable once we think about three ways in which the nature of

178
00:21:35,500 --> 00:21:44,080
consumption and its relationship to human well-being is changed by the very fact that we are getting richer.

179
00:21:45,190 --> 00:21:52,599
The first of those factors is that the richer people on average are the more that they

180
00:21:52,600 --> 00:21:59,500
are devoting their income to buying goods because other people have bought their goods,

181
00:21:59,830 --> 00:22:04,570
those goods, in order to prove that they have relative status,

182
00:22:04,990 --> 00:22:11,570
they are buying things in order to feel that they are in with the new fashion and that they have relative status.

183
00:22:11,590 --> 00:22:15,940
Now, that is most obvious, for instance, in relation to fashion clothing.

184
00:22:16,270 --> 00:22:22,060
One of the reasons why people are willing to spend large amounts of money to buy the latest fashions of clothes

185
00:22:22,480 --> 00:22:28,960
is to prove by being wearing them that they are able to afford them that they are as good as the next person.

186
00:22:29,380 --> 00:22:33,100
And that, you may say, is a relatively small part of expenditure.

187
00:22:33,550 --> 00:22:41,500
But actually it turns out that there may be quite some significant chunks of expenditure which are of the form of competing for relative status.

188
00:22:41,890 --> 00:22:43,310
Let me give you one particular fact.

189
00:22:43,330 --> 00:22:54,130
It has been noted that the amount of money that parents spend each Christmas on children has soared over the last 20 years.

190
00:22:54,640 --> 00:23:00,520
And that is partly because children are very, very aware of relative status and they are very,

191
00:23:00,520 --> 00:23:04,480
very concerned to make sure that they have the latest gizmo,

192
00:23:04,690 --> 00:23:12,010
the latest fashion, the shirt, which has David Beckham's name on it, the latest iPod, the latest, whatever it is.

193
00:23:12,460 --> 00:23:16,090
But there's no sign whatsoever that it has made children on average happier.

194
00:23:16,360 --> 00:23:25,150
But a very significant amount of parental income of families is now devoted essentially to keeping up the relative status of each family's children.

195
00:23:25,930 --> 00:23:30,880
The second factor which goes on, however, and I think this is a bigger factor as people get richer,

196
00:23:31,450 --> 00:23:37,120
is that a higher percentage of their income is devoted to competing for the enjoyment of goods and services

197
00:23:37,120 --> 00:23:44,710
which are location specific and that which at least in a densely populated country are an inherited,

198
00:23:44,920 --> 00:23:55,150
inherently limited supply. And therefore, what matters even to enjoying that is not your absolute income, it is your relative income.

199
00:23:55,900 --> 00:24:03,520
In order to be able to stay at the hotel on the beach rather than a hotel half a mile away from the beach.

200
00:24:03,970 --> 00:24:10,720
Your absolute income is irrelevant. All that matters is your relative income relative to everybody else in society.

201
00:24:11,200 --> 00:24:16,830
The same for the hotel on the skiing piece, rather than half a mile away from the skiing piece.

202
00:24:17,260 --> 00:24:22,329
Now, again, you may say, well, that's relatively small, but actually it turns out to be crucially important.

203
00:24:22,330 --> 00:24:25,180
And one of the things that we spend a very large amount of money on,

204
00:24:25,510 --> 00:24:32,350
which is where we live and people spend a very significant amount of their income in competing.

205
00:24:32,640 --> 00:24:42,120
To live in nice places. It's fundamental to your quality of life, whether you live in the part of town which is free of crime or free of graffiti,

206
00:24:42,330 --> 00:24:45,810
which looks nice, which is a pleasant place to to live or not.

207
00:24:46,320 --> 00:24:50,970
And also, you may compete in order to be able to live near your work with a smaller commute.

208
00:24:51,000 --> 00:24:57,840
These things are incredibly important to your standard of living, but your ability to get the nicer product,

209
00:24:58,140 --> 00:25:06,990
the house in the nicer part of town or the house in the unspoilt countryside or the house which is in the more pleasantly aesthetic part of town,

210
00:25:07,290 --> 00:25:12,450
is not driven by absolute income, it is driven by relative income and as absolute income goes up.

211
00:25:12,750 --> 00:25:18,000
It's very interesting. What tends to happen is that the average price of all houses relative to our income goes up.

212
00:25:18,240 --> 00:25:22,380
We devote more than growing, come to this competition for relative status.

213
00:25:22,830 --> 00:25:29,819
The third thing that is going on, however, is that in some ways, as we get richer, growth produces externalities,

214
00:25:29,820 --> 00:25:38,640
environmental effects, where the very process of getting richer produces externalities detrimental to present or future human welfare.

215
00:25:39,090 --> 00:25:44,340
Now, actually, interestingly, some of these externalities have improved in the last 50 years.

216
00:25:44,640 --> 00:25:47,459
London no longer has the smog which it used to suffer,

217
00:25:47,460 --> 00:25:53,490
and indeed local pollution externalities have declined in pretty much all rich developed countries.

218
00:25:54,240 --> 00:25:59,340
But even when we solve those pure congestion, effects remain.

219
00:26:00,480 --> 00:26:07,799
Driving a car along a country road in 1950s Britain, for those who could then afford it, was simply a more pleasant,

220
00:26:07,800 --> 00:26:15,390
relaxing experience than doing the same today because you were much less likely to be driving bumper to bumper behind the car in front.

221
00:26:15,960 --> 00:26:21,360
And the simple fact is that a very large percentage of all car advertisements on television today,

222
00:26:21,690 --> 00:26:27,479
which appear to have been shot in rural Scotland or Scandinavia at 4 a.m. on

223
00:26:27,480 --> 00:26:32,130
a summer morning are bound to produce a sense of frustration and road rage,

224
00:26:32,370 --> 00:26:37,140
since they entice you to buy a product which you will almost never enjoy.

225
00:26:37,860 --> 00:26:43,140
So in all sorts of ways, as we get richer, if we do not carefully manage the process,

226
00:26:43,470 --> 00:26:48,840
increasing wealth degrades the very benefits it seems to make more generally available.

227
00:26:49,350 --> 00:26:54,960
The more people who can afford to enjoy the unspoilt beach or countryside, the more spoilt it is.

228
00:26:56,040 --> 00:27:04,440
So in each of these three ways, what we have is a fashion in which this standard utility function,

229
00:27:04,800 --> 00:27:08,790
which assumes that your utility is a function of your income,

230
00:27:09,210 --> 00:27:18,270
isn't right, because your utility is a function not only of your income, but of the income of everyone else in society.

231
00:27:18,270 --> 00:27:32,190
And that is quite a problem. So some standard bits of economic theory alongside, however, this process of a change in the nature of consumption.

232
00:27:32,820 --> 00:27:40,020
There also, however, appear to be ways in which the pattern of production is also changing.

233
00:27:41,070 --> 00:27:45,780
Roger Bootle In his recent book The Trouble with Markets makes what I think is a

234
00:27:45,780 --> 00:27:52,860
very useful distinction between what he calls distributive and creative activities,

235
00:27:53,310 --> 00:27:59,790
where creative activities are those things which do directly increase at least measured GDP.

236
00:28:00,060 --> 00:28:02,310
Whether or not that translates into well-being,

237
00:28:02,610 --> 00:28:15,720
whereas distributive activities are those things which simply tend to move money from one person to another, they are part of a zero sum competition.

238
00:28:16,440 --> 00:28:21,989
Now that distinction between distributive and creative activities has in fact always

239
00:28:21,990 --> 00:28:25,740
been present in market economies and indeed probably in all human societies.

240
00:28:26,160 --> 00:28:33,059
So the salesman who wins an order for his firm at the expense of another firm does not directly increase GDP per capita.

241
00:28:33,060 --> 00:28:37,080
He makes his firm richer and another poor even more clearly.

242
00:28:37,080 --> 00:28:45,719
A clever lawyer whose client wins essentially just redistributes money from the opposing client and the financial trader who bets,

243
00:28:45,720 --> 00:28:49,260
well, makes money at the expense of the one who bets badly.

244
00:28:49,770 --> 00:28:57,210
And so the market economy has never created growth because every person is involved in a directly value generating activity,

245
00:28:57,480 --> 00:29:06,930
but because it is supposed competition between people and firms will tend over time to give advantage to the better idea and the more efficient firm.

246
00:29:07,320 --> 00:29:14,130
So the existence of some activities which are purely in rojiblancos terms distributive has always been with us.

247
00:29:14,820 --> 00:29:21,780
But I think it's highly likely that the relative importance of such distributive activity tends to increase as societies get richer.

248
00:29:22,080 --> 00:29:26,219
And it is certainly the case that a disproportionate share of high skilled human

249
00:29:26,220 --> 00:29:31,080
resources appears to get devoted to such purely distributional activities.

250
00:29:31,770 --> 00:29:32,290
Financial.

251
00:29:32,530 --> 00:29:40,150
Of us, particularly those involved in wholesale trading activities, include a large share of activities which are in their indirect effects,

252
00:29:40,300 --> 00:29:45,130
in their direct affects, purely distributive and which are very highly remunerated.

253
00:29:45,460 --> 00:29:48,910
And the share of financial services in our economies has grown.

254
00:29:49,570 --> 00:29:53,590
Richer societies tend to different degrees to be more litigious societies.

255
00:29:53,920 --> 00:29:59,170
Litigation is essentially a zero sum distributive activity, and lawyers are very highly paid.

256
00:29:59,590 --> 00:30:05,530
And in rich societies, consumers are able to devote a significant slice of income to buying goods simply because

257
00:30:05,530 --> 00:30:11,250
they bear a celebrity brand buying celebrity A's perfume versus celebrities bees.

258
00:30:11,680 --> 00:30:19,450
But brand competition of this sort is, I think, essentially distributed rather than value added and is distinct in its economic function.

259
00:30:19,450 --> 00:30:23,169
From the early development of brand branding, which performed a vital,

260
00:30:23,170 --> 00:30:32,230
important function in enabling consistent quality products to dominate over the multiplicity of poor quality and often, frankly, dangerous products.

261
00:30:32,770 --> 00:30:38,799
Now, how far such distributive activities in advertising and PR in much of financial

262
00:30:38,800 --> 00:30:42,820
services and legal services have increased as a percentage of the total economy.

263
00:30:42,820 --> 00:30:48,100
I don't know, but I would suggest it is a very interesting subject for economic research.

264
00:30:48,610 --> 00:30:52,780
But some increase I'm fairly certain has occurred and it is certainly noticeable that

265
00:30:52,780 --> 00:30:57,309
many of the highest paid and therefore presumably high skilled people earn their

266
00:30:57,310 --> 00:31:02,200
living from activities where the devotion of higher skills must simply increase the

267
00:31:02,200 --> 00:31:07,000
intensity of distributional competition rather than deliver value added benefits.

268
00:31:07,810 --> 00:31:11,890
If high income attracts cleverer people to become divorce lawyers,

269
00:31:12,310 --> 00:31:18,400
society does not gain from the increased competition in the courtroom between those different lawyers.

270
00:31:19,330 --> 00:31:27,879
So in different ways. Therefore, I think an increasingly rich society is both one in which increasing income is likely

271
00:31:27,880 --> 00:31:32,650
for behavioural reasons to deliver diminishing marginal improvements in wellbeing,

272
00:31:32,980 --> 00:31:39,700
and one in which more of our productive activities and our consumption is devoted to forms

273
00:31:39,700 --> 00:31:46,569
of zero sum competition in which relative skill is crucial to success and relative status,

274
00:31:46,570 --> 00:31:55,330
crucial to the individual's sense of well-being. And I think those changes help us to understand why the relationship between

275
00:31:55,330 --> 00:32:00,040
average income and contentment might not merely be one of a diminishing curve,

276
00:32:00,430 --> 00:32:01,450
but actually flat.

277
00:32:02,770 --> 00:32:12,880
Now, in addition, however, in this environment where relative status matters quite a lot and GDP growth has less power to make people happier,

278
00:32:13,330 --> 00:32:20,530
inequality has been increasing in rich, developed societies, and it's been increasing along two dimensions.

279
00:32:21,100 --> 00:32:27,819
First, there is a tendency most prominent in Anglo-Saxon countries, and in particular in the US, but also present,

280
00:32:27,820 --> 00:32:35,350
as you were mentioning earlier, in Germany, for the bottom of the income distribution to fall away from the median.

281
00:32:35,950 --> 00:32:44,770
Second, a very strong and indeed quite startling tendency, most extreme in the US, but also pronounced in the UK and throughout the developed world.

282
00:32:45,250 --> 00:32:52,660
For the top to pull away from the middle and the very rich to pull away from the merely moderately rich.

283
00:32:53,020 --> 00:33:01,540
We have a phenomenon where increases in the income of the top decile over the last 30 years have significantly exceeded those of the median.

284
00:33:01,900 --> 00:33:07,450
The top percentile has been doing much, much better than the poor.

285
00:33:07,570 --> 00:33:09,400
Not so very rich top decile.

286
00:33:09,670 --> 00:33:19,900
And as for the top 0.1%, well, they've really been worrying the rest of the top percent because they've been really pulling away at a ferocious pace.

287
00:33:20,560 --> 00:33:26,290
Now, the first of these two phenomena, the poorer relative position of the poorest, is, I think,

288
00:33:26,290 --> 00:33:33,729
probably best explained by a combination of technology and globalisation with free movement of traded goods and to a lesser but still

289
00:33:33,730 --> 00:33:43,960
important degree migration labour bound in economic theory to reduce the relative income of lower skilled people in richer countries,

290
00:33:44,290 --> 00:33:50,080
even when it increases the average income level. That is what classic trade theory would tell us.

291
00:33:50,830 --> 00:33:55,719
The second phenomenon the richer relative position of the richest is, I think,

292
00:33:55,720 --> 00:33:59,799
rooted in an interplay of factors too complex and multifaceted to address this evening.

293
00:33:59,800 --> 00:34:08,110
But I think it includes some which are related to the changing nature of consumption and production, which I referred to earlier.

294
00:34:09,040 --> 00:34:18,160
One striking development at the very top of the distribution is increasing returns to stardom and celebrity to high sporting and artistic skill.

295
00:34:18,850 --> 00:34:25,630
Stanley MATTHEWS, the great Stoke City and Blackpool Football, great of 1950s Britain,

296
00:34:26,140 --> 00:34:31,960
never earned from his football genius any more than an adequate middle class.

297
00:34:32,170 --> 00:34:36,100
Standard of living. He was not in the rich of Britain.

298
00:34:36,670 --> 00:34:46,150
David Beckham is in the super rich. C.S. Lewis, for all his novels, ended up with a very nice, adequate upper middle class income.

299
00:34:46,570 --> 00:34:51,490
J.K. Rowling, creator of Harry Potter, is a billionaire now.

300
00:34:51,520 --> 00:34:54,640
Technology and globalisation are among the factors at work here,

301
00:34:54,880 --> 00:35:01,060
which is the ability of the TV and the Internet to make David Beckham and Harry Potter global brands.

302
00:35:01,690 --> 00:35:07,329
But actually, rising average income level is also important because as people's income rise,

303
00:35:07,330 --> 00:35:14,889
they can devote more of that rising income simply to providing their children with the latest branded merchandise,

304
00:35:14,890 --> 00:35:20,770
which happens to have Harry Potter written all over it, without which their relative status is lost.

305
00:35:21,160 --> 00:35:26,500
And buying that merchandise puts huge amounts of money in the hands of celebrities.

306
00:35:26,950 --> 00:35:34,599
One of the reasons why Stanley MATTHEWS was not a billionaire was that the ordinary kids of working class Britain in 1950s,

307
00:35:34,600 --> 00:35:38,170
Britain didn't have enough money to make him a billionaire.

308
00:35:38,680 --> 00:35:42,909
And while the superstars a few once the minor stars and passing celebrities,

309
00:35:42,910 --> 00:35:47,080
the agents and the lawyers and the PR firms and the executives of the media channels are included.

310
00:35:47,410 --> 00:35:55,360
We have one of the phenomena helping to understand this accelerating growth at the top of the income decile in parallel.

311
00:35:55,390 --> 00:36:01,120
Meanwhile, the changing nature of consumption and the increasing devotion to goods and services which

312
00:36:01,120 --> 00:36:06,489
in the hierarchy of human needs are not essential but nice to have and driven by fashion.

313
00:36:06,490 --> 00:36:10,630
Emotional appeal style means that in some areas of economic activity,

314
00:36:10,900 --> 00:36:19,900
highly talented individuals can make their companies very much more successful very rapidly and in a highly measurable way.

315
00:36:20,560 --> 00:36:25,540
A talented retailer with a flair for store design and ambience for range,

316
00:36:25,540 --> 00:36:33,610
select range selection and for marketing can make a huge and very immediate difference to a retail chains success.

317
00:36:34,030 --> 00:36:41,200
Whereas a talented manufacturing manager can only do so over many years as research and development,

318
00:36:41,200 --> 00:36:46,810
investment or manufacturing efficiency improvements very slowly reach fruition.

319
00:36:47,380 --> 00:36:50,770
And the shorter the time period over which results are achieved,

320
00:36:51,100 --> 00:36:55,330
and the more easily that they seem identifiable with the individual rather than the team,

321
00:36:55,780 --> 00:37:00,880
the more likely it is that they get reflected in individual remuneration.

322
00:37:01,570 --> 00:37:08,080
So I believe that the higher the percentage of our consumption devoted to goods and services where soft factors like style,

323
00:37:08,090 --> 00:37:15,430
ambience and brand matter, the higher will be the naturally arising inequality at the top end of the income distribution.

324
00:37:16,540 --> 00:37:20,590
This phenomenon of highly measurable and immediately measurable economic impact, moreover,

325
00:37:20,890 --> 00:37:28,600
is particularly present in some of those activities which are most clearly in Roger Bhutto's distinction distributive rather than creative.

326
00:37:29,200 --> 00:37:35,470
The successful lawyer redistributes income in favour of his or her client, and away from the other lawyer's client.

327
00:37:35,800 --> 00:37:42,640
And his or her success in doing so is immediately apparent in a way which is not true of the research

328
00:37:42,640 --> 00:37:50,830
scientist working alongside many others on a drug which will produce patient benefits ten years down the line.

329
00:37:51,400 --> 00:37:59,140
And a similar logic explains why we pay or have paid financial traders so much money.

330
00:37:59,470 --> 00:38:03,720
It appears to be measurable how much money they have created.

331
00:38:03,730 --> 00:38:11,080
Now, we've actually worked out that sometimes attached to the money that they created in 2007 was a sort of toxic tail of liabilities.

332
00:38:11,260 --> 00:38:16,210
Two years later, we are trying to fix that problem. But I suspect that even when we have fixed it,

333
00:38:16,540 --> 00:38:23,110
we will still have a natural process for financial traders to be one of the forms of highly paid activity in the economy.

334
00:38:23,500 --> 00:38:30,280
And therefore, the larger the share of financial services within the economy, the wider again will tend to be these income disparities.

335
00:38:30,910 --> 00:38:38,770
Finally, these factors I've already mentioned the nature of celebrity, the nature of jobs, where you can make a difference quickly.

336
00:38:39,160 --> 00:38:45,970
The nature of these distributed activities, they then help change attitudes, and that in itself unleashes further change.

337
00:38:46,690 --> 00:38:50,590
If the world of celebrity and fashion and media generates very high pay,

338
00:38:51,010 --> 00:38:54,910
and if there are more highly paid corporate lawyers and investment bankers than in the past,

339
00:38:55,300 --> 00:39:02,260
and if there are some businesses such as fashion retailing, where the star CEO can make a big difference and get highly rewarded,

340
00:39:02,800 --> 00:39:12,550
then the sense among the generality of the income elite of what is normal and justifiable shifts, and in addition,

341
00:39:12,910 --> 00:39:18,610
the income that that income elite need in order to end up owning the house in the nice part

342
00:39:18,610 --> 00:39:24,100
of town goes up because their ability to buy that house is driven by their relative income,

343
00:39:24,310 --> 00:39:31,480
not their absolute income. If you then add in the impact of a partly global market in executive talent, the role of.

344
00:39:31,520 --> 00:39:36,530
Remuneration consultants with their comparisons between this CEO and that and the central

345
00:39:36,530 --> 00:39:42,380
role which relative status competition plays in the motivation of high talent people.

346
00:39:42,890 --> 00:39:49,220
And you have the ingredients for the relentless rise in the relative income of the best of which we have seen in the last 30 years,

347
00:39:50,110 --> 00:39:57,440
a rise which in the dominant narrative of the last 30 years could be justified because it made them the economy more efficient and competitive.

348
00:39:57,920 --> 00:40:00,800
But actually there's no clear proof that it has such an effect.

349
00:40:01,220 --> 00:40:09,020
The capitalist, but somewhat less unequal economies of the 1950s and 1960s produced just as rapid overall growth rates.

350
00:40:09,830 --> 00:40:15,980
But conversely, there is some evidence that the scale of the increase in inequality may have undermined average wellbeing.

351
00:40:16,700 --> 00:40:20,570
Richard Wilkinson and Kate Pickett in their recent book The Spirit Level,

352
00:40:20,930 --> 00:40:27,200
present evidence that a society where the bottom of the income distribution has drifted away from the medium will be one

353
00:40:27,200 --> 00:40:35,600
in which a wide range of common sense indicators of wellbeing look worse indicators like worse health or higher crime.

354
00:40:36,140 --> 00:40:42,500
And that extreme inequality and awareness of inequality at the bottom end has a direct impact on the well-being of the

355
00:40:42,500 --> 00:40:49,430
less successful because precisely because they feel they have lost out badly in a competition for relative status,

356
00:40:49,640 --> 00:41:00,080
a feeling which actually can be worse the more apparently meritocratic the society is, rather than one defined by immovable class barriers.

357
00:41:00,710 --> 00:41:01,190
Now, of course,

358
00:41:01,190 --> 00:41:08,660
one question in relation to all this is whether all that matters in this respect of inequality is the relationship between the bottom and the median,

359
00:41:08,930 --> 00:41:12,610
or whether the relationship between the median and the top is also important?

360
00:41:13,250 --> 00:41:13,729
And of course,

361
00:41:13,730 --> 00:41:21,139
a classic liberal or conservative argument has been that the latter does not matter both because the numbers at the very top are so small

362
00:41:21,140 --> 00:41:28,850
that any attempt to redistribute their income via progressive taxation would only make a trivial difference to the average or poorer citizen.

363
00:41:29,180 --> 00:41:32,959
Or indeed, if we're talking about a very small scattering of billionaires,

364
00:41:32,960 --> 00:41:38,450
that the lifestyle of the celebrity rich is so detached from ordinary people that people can,

365
00:41:38,450 --> 00:41:41,450
as it were, by reading Hello magazine at the dentist,

366
00:41:41,720 --> 00:41:48,620
gain the thrill of vicarious interest without actually being made less happy through unachievable status competition.

367
00:41:49,040 --> 00:41:55,460
And it is true that people often seem intensely concerned about their position relative to those very close to them

368
00:41:55,670 --> 00:42:01,700
in the income distribution and not so concerned about people who appear to live simply on a different planet.

369
00:42:02,300 --> 00:42:10,160
But arguably, I think that indifference to the much richer may change if, in addition to, as it were, a little thin scattering of billionaires.

370
00:42:10,460 --> 00:42:17,690
It is the whole of the top decile which pulls away, enjoying a highly visible and reasonably widespread standard of living,

371
00:42:17,990 --> 00:42:22,729
to which a broad mass of people aspire, but which only a minority can ever achieve,

372
00:42:22,730 --> 00:42:27,680
given that the standard is defined by relative income, not by absolute.

373
00:42:28,550 --> 00:42:33,260
So let me sum up my argument. So far, I've described a classic political narrative in which the market,

374
00:42:33,260 --> 00:42:41,090
economy and significant inequality were required and justified because they delivered economic growth, which delivers well-being.

375
00:42:41,540 --> 00:42:47,390
But I then observed that empirical evidence suggests that in most rich, developed countries,

376
00:42:47,900 --> 00:42:52,940
further economic growth does not seem to be producing an increase in perceived well-being.

377
00:42:53,330 --> 00:42:58,280
And I suggested that that may be explained by a combination of four things the classic concept of

378
00:42:58,280 --> 00:43:03,470
diminishing marginal utility rooted in the common sense observation of a hierarchy of human needs,

379
00:43:04,430 --> 00:43:12,559
the changing nature of consumption in richer societies, which makes it increasingly the case that one person's utility is affected by other

380
00:43:12,560 --> 00:43:17,150
people's income as well as his or her income with relative status competition.

381
00:43:17,150 --> 00:43:20,660
Quite important the changing nature of production activities,

382
00:43:20,660 --> 00:43:26,390
which means that a greater relative share of purely redistributive activities is probably occurring.

383
00:43:26,630 --> 00:43:32,450
And with those purely redistributive activities actually being among the highest paid and increasing inequality,

384
00:43:32,450 --> 00:43:41,540
which certainly matters as between the bottom and the median, and which may also matter to human well-being as between the median and the top.

385
00:43:42,230 --> 00:43:43,550
All of which, if it is true,

386
00:43:43,580 --> 00:43:52,750
creates a major challenge to the dominant and increasingly cross-party narrative of late 20th century politics in which growth delivers well-being.

387
00:43:53,150 --> 00:43:56,870
Growth requires markets, and markets require inequality.

388
00:43:57,410 --> 00:44:05,450
Therefore, vote for deregulation and low taxes because it's going to make you the average citizen, richer and therefore happier.

389
00:44:06,020 --> 00:44:09,920
The fact is that the narrative doesn't appear to fit the facts any longer.

390
00:44:10,760 --> 00:44:15,580
So what follows? Well, first, I'd like to reiterate that I am more wary than some others.

391
00:44:15,590 --> 00:44:18,710
For instance, more wary than my very good friend Richard Layard,

392
00:44:19,070 --> 00:44:26,389
of the idea that we should make increased happiness the explicit and formal objective of economic and social policy.

393
00:44:26,390 --> 00:44:30,920
And that's for two reasons. First, as I already said, I think the problems of.

394
00:44:31,370 --> 00:44:35,540
Getting different individual happiness is are truly intractable.

395
00:44:35,960 --> 00:44:42,650
I think no additive quantification of utils of happiness will ever prove that it is wrong

396
00:44:42,650 --> 00:44:48,740
for the majority to maximise their happiness at the expense of oppressing a minority.

397
00:44:49,070 --> 00:44:57,620
I think we need to introduce an absolute concept of justice as well as a utilitarian quantification of utils.

398
00:44:58,160 --> 00:45:04,700
But second, because even at the level of each individual are measures of happiness or I think highly imperfect and will remain so.

399
00:45:04,700 --> 00:45:12,260
I think they are good enough to tell us that there is no necessary reason to believe that growth will deliver more happiness,

400
00:45:12,620 --> 00:45:18,530
but not good enough to tell us with any precision whether society is getting happier year after year.

401
00:45:19,070 --> 00:45:24,290
So we do not have, and I suspect never will have the ability to construct a gross national well-being

402
00:45:24,290 --> 00:45:29,030
index whose maximisation should now be pursued instead of GDP per capita.

403
00:45:29,690 --> 00:45:37,130
Rather, I think our knowledge lies in knowing what is not true, but knowledge of untruth is still valuable knowledge.

404
00:45:37,460 --> 00:45:44,930
And I think we know with a high degree of probability that the idea that growth in average GDP per capita will necessarily translate into

405
00:45:44,930 --> 00:45:52,700
perceived human well-being or happiness is almost certainly not true beyond the levels of income already achieved in the rich developed world.

406
00:45:53,270 --> 00:45:57,470
So what follows from that partial knowledge?

407
00:45:58,070 --> 00:46:04,790
Well, of course, some might suggest that what follows is what I might call a radical green socialism, strongly egalitarian,

408
00:46:05,330 --> 00:46:11,120
in order to undermine the corrosive impact of relative status competition by just telling people, pack up on that.

409
00:46:11,450 --> 00:46:18,230
I'm not going to let you do it because I'm going to tax you enough that you can't even try and opposed in principle to economic growth,

410
00:46:18,500 --> 00:46:23,210
since it has no positive benefit and generates harmful externalities.

411
00:46:23,540 --> 00:46:30,170
So is that right? Have the arguments in favour of the market economy as the route to innovation and productivity growth simply collapsed?

412
00:46:30,680 --> 00:46:35,569
Well, I don't believe so. And indeed, I believe that a powerful case still exists for a market economy.

413
00:46:35,570 --> 00:46:44,060
And as a result, necessarily, because let's clear be clear, it immediately follows result for accepting non-trivial inequalities,

414
00:46:44,510 --> 00:46:51,740
but that the arguments are more complex, less instrumental and in some sense more fundamental than those which have recently been advanced.

415
00:46:52,160 --> 00:47:00,290
I think five considerations are important. First, some level of economic growth does still matter, even in already rich countries,

416
00:47:00,290 --> 00:47:04,759
because even in rich countries there are some at the bottom of the income distribution for whom

417
00:47:04,760 --> 00:47:10,280
additional income in absolute or relative sense still has the potential to deliver increased well-being.

418
00:47:10,280 --> 00:47:19,100
And it is very difficult to improve their position without growth because redistribution without growth will be very strongly resisted.

419
00:47:19,670 --> 00:47:25,070
People may not gain permanently greater well-being from additional income,

420
00:47:25,580 --> 00:47:33,890
but they may deeply resent having to sacrifice existing already attained levels of income or wealth.

421
00:47:34,400 --> 00:47:41,330
In technical economist terms, the shape of their utility functions is not an absolute given,

422
00:47:41,690 --> 00:47:47,090
but is a function of the income which they have already attained.

423
00:47:47,300 --> 00:47:51,470
Another problem with the way we draw these things in behavioural terms,

424
00:47:51,470 --> 00:47:58,220
people are pitching aid to existing standards of living or wealth and they then end up with deeply ingrained senses of accrued rights.

425
00:47:58,670 --> 00:48:05,480
Growth in classic measured GDP form is almost certainly required to lubricate any desirable redistribution.

426
00:48:05,990 --> 00:48:07,910
Second, and more fundamentally, however,

427
00:48:08,660 --> 00:48:15,260
I think GROSS arguably should be seen not as the desirable objective which justifies the existence of economic freedom,

428
00:48:15,830 --> 00:48:24,740
but rather as the acceptable but not particularly important by-product of economic freedom, which is valuable in and of itself.

429
00:48:25,490 --> 00:48:29,209
The reason why people should be free to start a business, to innovate new products,

430
00:48:29,210 --> 00:48:34,970
to propose new retail formats or closed designs, or to make existing production processes more efficient,

431
00:48:35,300 --> 00:48:42,800
is not that this economic change is good because it will make people permanently happier, but that the human desire to innovate,

432
00:48:42,800 --> 00:48:50,690
to change, to experiment is naturally arising, and that the freedom to express this desire is in itself conducive to well-being.

433
00:48:51,380 --> 00:49:00,650
The Soviet Union, in its final stagnation period, scored low on human happiness as measurable by some pretty absolute measures of human happiness,

434
00:49:00,650 --> 00:49:04,670
such as the propensity to alcoholism or suicide.

435
00:49:05,180 --> 00:49:07,999
And I suspect it did that not only and perhaps not primarily,

436
00:49:08,000 --> 00:49:12,170
but because its production system failed to deliver the consumption goods available in the West,

437
00:49:12,170 --> 00:49:17,060
but because the organisation of production trapped people in stultifying routines,

438
00:49:17,360 --> 00:49:21,800
refusing them the right to develop new ideas, new ways of doing things,

439
00:49:22,250 --> 00:49:28,250
freedom to innovate and change is an end in itself, not an instrumental means to higher GDP.

440
00:49:28,940 --> 00:49:33,280
But if we have that freedom to change and innovate. That will tend to generate productivity growth.

441
00:49:33,640 --> 00:49:37,450
And productivity growth means economic growth unless unemployment rises.

442
00:49:37,900 --> 00:49:43,540
And one thing we know for sure is that involuntary unemployment makes people very unhappy.

443
00:49:44,050 --> 00:49:51,160
Rising GDP per capita is, therefore, I suggest, the unavoidable and acceptable, but not the objective,

444
00:49:51,160 --> 00:49:59,710
the avoidable and acceptable concomitant of two desirable ends economic freedom and full employment, rather than the end in itself.

445
00:50:00,580 --> 00:50:03,550
The third point, however, is that this freedom to innovate, to challenge,

446
00:50:03,820 --> 00:50:10,270
to do new things is likely to be important not only for the opportunities it gives on the production side of the economy,

447
00:50:10,600 --> 00:50:13,270
but for the consumption possibilities that it delivers.

448
00:50:13,960 --> 00:50:19,930
Because even if more and better products and services have decreasing capacity to make people permanently happier,

449
00:50:20,590 --> 00:50:26,740
the potential for change for innovation may in itself be important to human contentment.

450
00:50:27,520 --> 00:50:34,600
If average income doubles in the next 30 years, we have no reason to believe that we will then on average be happier.

451
00:50:35,260 --> 00:50:40,899
But the anticipation that the next 30 years will bring some new products, new services,

452
00:50:40,900 --> 00:50:47,470
new ideas, new fashions and styles may in itself be important to our current contentment.

453
00:50:48,130 --> 00:50:55,690
The journey may be important, not the destination. Clothes, fashions do not, in any objective sense, get better.

454
00:50:56,260 --> 00:51:03,910
They simply change year by year. And every now and then they simply revert to patterns seen decades before.

455
00:51:04,750 --> 00:51:10,090
And there is no reason to believe that in 30 years time people will feel happier because

456
00:51:10,090 --> 00:51:14,620
of the clothes that they are then wearing relative to the clothes that they wear today.

457
00:51:15,250 --> 00:51:18,879
But the very fact that each year brings new fashions with different designers

458
00:51:18,880 --> 00:51:24,130
competing to attract customer approval may be important to some people's contentment,

459
00:51:24,430 --> 00:51:26,920
even while it creates anxieties for others.

460
00:51:27,460 --> 00:51:35,410
The next generation of electronic gadgetry, whatever lies beyond iPods, iPhones and high definition TVs will not make people permanently more content.

461
00:51:35,410 --> 00:51:42,940
But the expectation that the market will create new ideas and products may be important to many people's sense of progress and direction.

462
00:51:43,330 --> 00:51:48,190
And the absence of new ideas and products and styles might generate a sense of dullness and stagnation.

463
00:51:48,760 --> 00:51:58,690
The experience and the expectation of change can be important to current contentment, even if change will not make us permanently more content.

464
00:51:59,620 --> 00:52:05,679
Fourth, it is highly likely that the absence of markets and economic freedom will tend to lead not merely to low growth,

465
00:52:05,680 --> 00:52:08,020
but to complete stagnation and indeed regression.

466
00:52:08,560 --> 00:52:16,270
That was the case in the Soviet Union in the final stagnation years, with measures of GDP growth actually negative and measures of well-being,

467
00:52:16,270 --> 00:52:20,260
as I've said, such as alcoholism or suicide, suggesting an absolute decline.

468
00:52:20,830 --> 00:52:28,120
And one of the reasons for that was relentlessly rising corruption as individuals channelled their natural

469
00:52:28,210 --> 00:52:36,670
human propensity to compete for relative status into corrupt competition for the existing economic cake,

470
00:52:37,030 --> 00:52:41,799
rather than the creation of new businesses or products. And they crucial, though you may find it,

471
00:52:41,800 --> 00:52:49,270
slightly odd justification of market competition and of significant resulting inequality is therefore simply that we are

472
00:52:49,270 --> 00:52:55,510
not going to change human nature and that if people are not able to compete for relative status through the marketplace,

473
00:52:55,930 --> 00:52:58,480
they will end up competing in more harmful ways.

474
00:52:58,990 --> 00:53:07,479
And that thought is actually found like so much other wisdom in Keynes's, the general theory where he noted not not only and I quote,

475
00:53:07,480 --> 00:53:11,980
all that valuable human activities which require the motive of moneymaking and the

476
00:53:11,980 --> 00:53:16,360
environment of private wealth ownership to to reach their full sufficient fruition.

477
00:53:16,600 --> 00:53:24,069
But that quote moreover, dangerous human proclivities can be catalysed into comparatively harmless

478
00:53:24,070 --> 00:53:28,600
channels by the existence of opportunities for moneymaking and private wealth,

479
00:53:28,990 --> 00:53:34,000
which, if they cannot be satisfied in this way, may find their outlet in cruelty,

480
00:53:34,000 --> 00:53:39,460
reckless pursuit of personal power and authority and other forms of self aggrandisement.

481
00:53:39,970 --> 00:53:44,860
As I say, you may think that's a slightly odd argument, but I actually think it may be a real people.

482
00:53:45,430 --> 00:53:50,380
Fifth, and finally, attitudes to inequality, even among the less well-off, are nuanced,

483
00:53:50,620 --> 00:53:54,760
and the impact of rising average income on concerns about inequality is ambivalent.

484
00:53:55,270 --> 00:54:01,600
On the one hand, rising prosperity increases the importance of positional goods and competition for relative status.

485
00:54:02,020 --> 00:54:02,829
On the other hand,

486
00:54:02,830 --> 00:54:11,080
some average earners are likely to be much more relaxed about inequality simply because they have a perfectly adequate standard of living.

487
00:54:11,620 --> 00:54:15,880
Once you have a car, does it matter if someone has a bigger car?

488
00:54:16,210 --> 00:54:21,550
Well, the answer is for some people it matters a lot, and for some other people, it doesn't matter at all.

489
00:54:22,090 --> 00:54:26,770
And as a result, concerns about inequality often relate to its degree, not its existence,

490
00:54:27,100 --> 00:54:30,910
and are often related to concepts of fairness where inequalities are.

491
00:54:30,960 --> 00:54:35,970
Based on factors which people can intuitively understand artistic or sporting talent,

492
00:54:36,330 --> 00:54:40,710
high professional competence, or a wide and obviously owner a span of responsibilities,

493
00:54:41,160 --> 00:54:47,880
all where people feel that business success and high remuneration derives from free choices that they directly have made.

494
00:54:48,240 --> 00:54:53,760
I chose to go to that restaurant. Therefore, the restaurant owner is successful in getting richer.

495
00:54:54,210 --> 00:54:58,710
Even very significant inequalities produce little concern where they are perceived as

496
00:54:58,710 --> 00:55:02,580
deriving from activities whose value people do not comprehend or which they doubt,

497
00:55:03,000 --> 00:55:07,410
as has become the case with some financial services activity. It is deeply resented.

498
00:55:08,100 --> 00:55:12,480
There is, therefore, I believe, a compelling case for economic freedom, for the market economy,

499
00:55:12,900 --> 00:55:19,170
and for treating the economic growth and non-trading the economy which will result as acceptable and inevitable by products.

500
00:55:19,620 --> 00:55:23,700
But I think it is a quite different case from that advanced in the last 50 years

501
00:55:24,270 --> 00:55:28,650
and as a result it may have quite different implications for optimal policy.

502
00:55:29,280 --> 00:55:33,510
Though I have to say, I'm not absolutely sure what the implications of all this are.

503
00:55:33,850 --> 00:55:41,490
And when I sent Robert a copy of my speech in a advance two days ago so that he could respond to it,

504
00:55:41,790 --> 00:55:46,260
I wrote here this section to change, still thinking what the implications are.

505
00:55:46,470 --> 00:55:50,400
And indeed, I was still thinking about them on the way up from London.

506
00:55:50,610 --> 00:55:55,620
But let me suggest a few. First, if GDP growth is not the objective,

507
00:55:55,620 --> 00:56:02,190
we should not treat potentially adverse consequences on growth as arguments against other desirable objectives.

508
00:56:02,670 --> 00:56:10,710
Nick Stern argues that mitigating climate change might only cost one year out of the next 40 years of GDP growth of 2% per annum.

509
00:56:11,220 --> 00:56:14,730
But even if the potential loss was much bigger than that,

510
00:56:15,120 --> 00:56:23,400
the downside in human well-being of sacrificing quite a big slice of GDP growth might be very close to nil.

511
00:56:23,610 --> 00:56:29,970
And therefore, we should take it. The second is that economic stability is probably more important than economic growth.

512
00:56:30,630 --> 00:56:34,500
Radical financial deregulation was justified on the grounds that it would improve the

513
00:56:34,500 --> 00:56:39,810
growth rate and that greater instability risks were acceptable to achieve that end.

514
00:56:40,440 --> 00:56:45,930
But if increases in average prosperity had at best limited ability to foster perceived well-being,

515
00:56:46,320 --> 00:56:52,320
while setbacks to already achieved income clearly harm it and unemployment harms it,

516
00:56:52,320 --> 00:57:00,000
even more so then the bias of policy should be towards moderating fluctuations in growth rather than maximising it.

517
00:57:00,660 --> 00:57:06,780
Third, that while there is a case for accepting significant inequality, we cannot avoid a debate about the degree.

518
00:57:07,710 --> 00:57:13,950
And we don't have a nice, easy metric of saying that the optimal degree is that which maximises growth.

519
00:57:15,330 --> 00:57:20,970
Rather, we are in the difficult space where attitudes to acceptable or desirable inequality

520
00:57:21,270 --> 00:57:25,560
and thus to the degree of progressivity in income or inheritance tax systems,

521
00:57:25,860 --> 00:57:31,169
are inherently judgemental and political. Keynes believed, as I said earlier,

522
00:57:31,170 --> 00:57:35,879
that there was a case for inequality because there were valuable human activities which required

523
00:57:35,880 --> 00:57:40,680
it and because dangerous human proclivities would otherwise be catalysed into harmful activities.

524
00:57:41,160 --> 00:57:47,459
But he also believed that, and I quote, it is not necessary for the stimulation of these activities and the satisfaction

525
00:57:47,460 --> 00:57:52,080
of these proclivities that the game be played for such high stakes as at present.

526
00:57:52,620 --> 00:57:56,190
I have some sympathy with that conclusion as it relates, for instance,

527
00:57:56,520 --> 00:58:00,330
to the stakes for which the game has recently been played in the financial sector.

528
00:58:00,660 --> 00:58:08,010
But it does not leave us with that thought leaves us without a guiding criteria on which to judge how high the stakes should be.

529
00:58:08,640 --> 00:58:13,830
Fourth, and finally, if measured, GDP growth is not the objective but an acceptable by-product.

530
00:58:14,220 --> 00:58:20,840
But if there are particular forms of economic growth which might tend to feed more directly through to human well-being,

531
00:58:20,850 --> 00:58:23,940
ie where we are more confident that there is a relation to well-being,

532
00:58:24,420 --> 00:58:31,110
then we cannot avoid the fact that the pattern and mix of economic growth might be as important or more important than the absolute growth rate.

533
00:58:31,500 --> 00:58:36,330
If, for instance, we do assume, and I quote, that medical advances conducive to well-being,

534
00:58:36,690 --> 00:58:40,830
improving health during life, preventing premature deaths and increasing longevity,

535
00:58:41,250 --> 00:58:48,209
then we might prefer investments that would speed medical advance even if measured, GDP relative to what it would otherwise be,

536
00:58:48,210 --> 00:58:52,680
was slightly less with, for instance, the consumption of other goods reducing as a result.

537
00:58:53,190 --> 00:58:53,909
And in general,

538
00:58:53,910 --> 00:59:02,220
we might logically favour those forms of consumption which were least likely to result in an intensification of relative status competition.

539
00:59:02,760 --> 00:59:03,959
Thus, if, for instance,

540
00:59:03,960 --> 00:59:12,600
we believed that the creation of attractive and shared urban environments was more likely to deliver permanent increases in well-being,

541
00:59:12,840 --> 00:59:16,830
then increasingly ferocious competition to afford branded fashion goods,

542
00:59:17,280 --> 00:59:23,130
then more public expenditure on the former and less private on the latter might be a perfectly sensible choice.

543
00:59:23,790 --> 00:59:30,790
All of which, however, carries great dangers. For once, you no longer have a defined maxim and our social in a.

544
00:59:30,840 --> 00:59:38,610
Atomic decisions lack useful constraints, and each interest group is able to argue that their specific proposal is best for human welfare,

545
00:59:39,030 --> 00:59:43,679
even if, in reality its primary purpose is to serve their narrow interest.

546
00:59:43,680 --> 00:59:48,569
Because even architects of beautiful human space spaces are no freer of the

547
00:59:48,570 --> 00:59:53,370
human proclivity to pursue their own self-interest than any other human being.

548
00:59:53,880 --> 01:00:00,270
Faced with that danger, I know that some may wish to stick to the economic growth target as at least something

549
01:00:00,270 --> 01:00:04,920
objective to hold on to the hand of nurse for fear of finding something worse.

550
01:00:05,610 --> 01:00:13,769
But I think we do have to let go of nurses hand because the narrative that growth delivers human well-being and that inequality is instrumentally

551
01:00:13,770 --> 01:00:22,140
justified because the market economy delivers more growth has lost its power and it has lost its power because of a wonderful achievement,

552
01:00:22,620 --> 01:00:31,500
the attainment over the last 200 years and through the power of the market economy of an average standard of living in most developed countries.

553
01:00:31,830 --> 01:00:37,860
Sufficiently high that further improvement in the average standard of living isn't terribly important.

554
01:00:38,370 --> 01:00:45,810
And again, the thought can be found in Keynes, this time in his 1930 essay on economic possibilities for our grandchildren.

555
01:00:46,410 --> 01:00:50,670
Calculating the long term impact of even quite modest growth at 2% per annum,

556
01:00:51,030 --> 01:00:58,980
he foresaw an early 21st century economy which could entirely banish poverty as his society would have defined it.

557
01:00:59,430 --> 01:01:09,000
Satisfying most human wants beyond the dreams of most people living in his time and do so while also hugely extending leisure hours.

558
01:01:09,780 --> 01:01:13,530
Well, we did it and we're still not satisfied.

559
01:01:14,100 --> 01:01:20,580
And perhaps the key conclusion is that we never will be satisfied that difficult social choices and conflicts

560
01:01:21,000 --> 01:01:28,170
do not derive simply from a scarcity of resources which can be banished by any level of economic growth.

561
01:01:28,770 --> 01:01:35,910
Nor is there some level of prosperity, some end point beyond which the human proclivity to compete for relative status declines.

562
01:01:36,480 --> 01:01:40,290
As Keynes said, we cannot transmute human nature.

563
01:01:40,740 --> 01:01:48,090
But the essence of politics is an endlessly changing, never resolved debate as to how best to manage the implications of that human nature.

564
01:01:48,750 --> 01:01:53,820
That debate should be informed by good social science, to which Ralph's professional life was devoted.

565
01:01:54,240 --> 01:02:02,340
And good social science tells us that it is not true that economic growth will make people on average happier or make social conflict go away.

566
01:02:02,820 --> 01:02:09,720
And the justification for economic and political liberalism lies not in its ability to generate economic growth,

567
01:02:09,990 --> 01:02:17,490
which will make conflicts disappear, but in the celebration of variety, diversity and difference as ends in themselves.

568
01:02:17,880 --> 01:02:26,130
And I think had I been able to send this lecture to Ralph for his comments, this is one conclusion with which he might have agreed.

569
01:02:26,280 --> 01:02:37,370
Thank you very much. Britain is exceptionally fortunate in having such an outstanding public servant as Adair Turner.

570
01:02:38,420 --> 01:02:47,000
The qualities which make him so have just been on scintillating display in this first Darren Gough Memorial Lecture.

571
01:02:47,570 --> 01:02:56,480
The rigour of his thinking, the wide range of his interests, his exuberant curiosity and his passion for ideas and for communicating them.

572
01:02:57,170 --> 01:03:02,390
His lecture sets a standard which will challenge future lecturers in this series.

573
01:03:03,290 --> 01:03:10,550
It attempts to answer the question Why does rising average income no longer deliver a rising sense of well-being?

574
01:03:11,570 --> 01:03:19,910
I accept both the premise and the importance of the question, and that is particularly for rich societies like the United Kingdom.

575
01:03:20,330 --> 01:03:29,420
The question is important because post-war politics in Western societies have been based on the promise of continuous economic growth.

576
01:03:30,560 --> 01:03:37,850
Economic growth was seen as the solvent of social conflict and the generator of social contentment.

577
01:03:38,780 --> 01:03:39,679
In a Des view,

578
01:03:39,680 --> 01:03:48,950
the growth objective led inevitably to the embrace of competitive markets and acceptance of at least a degree of inequality by the left.

579
01:03:50,030 --> 01:03:58,750
As he puts it, the shared assumptions across the political spectrum was that economic growth would feed directly through through to rising well-being,

580
01:03:59,180 --> 01:04:03,890
welfare, happiness, contentment, or whatever word we use.

581
01:04:03,950 --> 01:04:11,690
I want to come back to that whatever word we use, because I think if there is a flaw in the lecture, it lies somewhere there.

582
01:04:12,980 --> 01:04:22,760
The fact the fact that it has for some time failed to do so, that is failed to generate these desirable goals,

583
01:04:22,760 --> 01:04:27,560
has shattered the consensual and philosophic basis of post-war politics.

584
01:04:28,310 --> 01:04:31,240
Well, why? What's his answer to the question?

585
01:04:31,250 --> 01:04:42,260
Why doesn't an increase in average GDP per person translate into a corresponding increase in the average sense of well-being, I think?

586
01:04:42,380 --> 01:04:47,240
Well, he offers two main reasons. The first is the familiar law of diminishing returns.

587
01:04:48,380 --> 01:04:57,770
Extra goods produce diminishing satisfaction. You have a joke, in other words, which was illustrated by the diagram from layout.

588
01:04:58,100 --> 01:04:58,940
But in addition,

589
01:04:59,090 --> 01:05:09,230
changes in consumption and production patterns associated with growth growing wealth have had a flattening effect on on on the happiness curve.

590
01:05:09,650 --> 01:05:17,809
The more discretionary our consumption becomes, the more important A becomes relative income and the struggle for relative income.

591
01:05:17,810 --> 01:05:22,370
And I would add the forces of envy and greed.

592
01:05:23,630 --> 01:05:34,220
And the richer the society, the larger the fraction of GDP made up of distributional rather than value adding goods and services.

593
01:05:34,550 --> 01:05:42,590
And again, this is an area des particularly concerned with as regulator, chief regulator of the financial services industry.

594
01:05:43,220 --> 01:05:49,100
And there also points to the negative for the rise in negative externalities of production.

595
01:05:49,370 --> 01:05:57,080
I didn't know whether this was in his talk, but it was in his in his written lecture, like congestion and pollution.

596
01:05:57,410 --> 01:06:01,760
And what was certainly in his talk, the startling increase in inequality,

597
01:06:02,030 --> 01:06:09,590
particularly in the tendency of the bottom and top of the income distribution to pull away from the median.

598
01:06:10,760 --> 01:06:15,230
Now, I would agree with that. Most of that analysis, I think, is very much to the point.

599
01:06:16,220 --> 01:06:18,980
But I have one major quibble.

600
01:06:20,690 --> 01:06:29,600
Maybe it's only a minor quibble, but and that is that there seems to put too much weight on the declining marginal utility of money.

601
01:06:31,100 --> 01:06:38,060
It's perfectly true that any good taken unit by unit yields progressively less utility.

602
01:06:38,480 --> 01:06:41,540
And as he says, one winter coat keeps you warm.

603
01:06:41,780 --> 01:06:51,950
Two winter coats don't. But there are many varieties of winter coat, and there are many other goods which for which the demand is pretty insatiable,

604
01:06:53,330 --> 01:06:56,629
applied to the consumption of a single category of goods.

605
01:06:56,630 --> 01:07:04,550
It's fine. But you can have you can have too much of one good without satisfying your need for another.

606
01:07:05,450 --> 01:07:10,430
As the Swedish saying goes, you have a separate stomach for dessert.

607
01:07:13,620 --> 01:07:21,120
And the law of forced pieces completely when applied to new or different goods as they are rolled out by the production machine over time.

608
01:07:21,540 --> 01:07:27,660
Since there's virtually only since there are virtually unlimited opportunities for adding to such products,

609
01:07:27,900 --> 01:07:32,580
the urgency of wants is is is remains undiminished.

610
01:07:32,970 --> 01:07:39,930
And so there's no reason to postulate a state of satiation to the extent that economic

611
01:07:39,930 --> 01:07:43,979
growth continually adds to the variety of goods and services offered for consumption.

612
01:07:43,980 --> 01:07:51,390
It's hard to see why you get to J Curve. That argument doesn't lead to one.

613
01:07:51,660 --> 01:07:59,520
I'd like to frame I would prefer to frame this argument slightly differently and to say that the longing for more

614
01:07:59,520 --> 01:08:07,200
and more consumption goods and often trivial consumption goods is a classic case of Marxist false consciousness.

615
01:08:07,950 --> 01:08:16,980
I mean, our society societies set up in a way to encourage one kind of consumption as against

616
01:08:17,010 --> 01:08:22,560
other kinds of goods which are simply not available from the way it's set up.

617
01:08:22,680 --> 01:08:26,910
And those goods include very valuable goods, and they're not consumption goods.

618
01:08:27,840 --> 01:08:31,590
As someone recently said to me and I think this is important.

619
01:08:31,740 --> 01:08:36,840
Access to credit is modern, capitalism's substitute for the welfare state.

620
01:08:38,730 --> 01:08:44,880
So you can use that concept also to explain much of what's what's happened recently.

621
01:08:45,450 --> 01:08:55,379
The key principle of policy, which a dad uses is that I quote him and he said this towards the end of his speech We should not treat

622
01:08:55,380 --> 01:09:02,670
potentially adverse consequences on growth as decisive arguments against other desirable objectives,

623
01:09:02,970 --> 01:09:14,340
objectives like mitigating climate change, beautifying the urban environment, economic stability and and and greater equality.

624
01:09:14,430 --> 01:09:21,360
In fact, he echoes Galbraith in urging us to redress the balance between private affluence and public squalor.

625
01:09:22,080 --> 01:09:30,330
And the real case for economic freedom is not the instrumental one, but that it promotes variety, diversity and difference.

626
01:09:30,570 --> 01:09:37,020
And this can best be appreciated if it's delinked from a purely instrumental rationality.

627
01:09:37,360 --> 01:09:40,650
I think that's an important point worth pondering.

628
01:09:41,640 --> 01:09:47,250
But I have one question here. How far would attack go in limiting globalisation?

629
01:09:48,840 --> 01:09:56,520
It's true there are powerful non-economic arguments for globalisation, but for economists the main argument has always been an instrumental one.

630
01:09:56,850 --> 01:10:03,210
It raises world average GDP per capita through its peer efficiency in allocating resources.

631
01:10:03,750 --> 01:10:10,020
And it's a mighty instrument, as we know, for alleviating poverty in developing countries but applied to rich countries.

632
01:10:10,140 --> 01:10:17,820
The case for globalisation is far from clear. The reason is that it contributes directly to the increased inequality,

633
01:10:18,000 --> 01:10:23,460
which there identifies as a key reason for the flattening of the happiness curve.

634
01:10:23,970 --> 01:10:30,840
For example, immigration depresses the relative wages of the unskilled, the native unskilled.

635
01:10:31,050 --> 01:10:35,550
This is the reason. This is, of course, the reason that employers favour.

636
01:10:36,420 --> 01:10:39,510
Let's try a quick thought experiment.

637
01:10:39,720 --> 01:10:44,250
Imagine what might happen to income dispersion without immigration.

638
01:10:45,510 --> 01:10:53,790
Surely, under conditions of autarky, we would expect the wages of unskilled workers to rise relative to the skilled,

639
01:10:54,030 --> 01:11:02,849
or at least to keep pace as unskilled workers become scarce relative to the demand for unskilled labour

640
01:11:02,850 --> 01:11:08,040
created by the expansion of the retail end of the service sector and the construction industry.

641
01:11:08,400 --> 01:11:13,770
Both. I think. Both. Both of which occur as societies get richer.

642
01:11:13,980 --> 01:11:23,700
In other words, there's no real reason, apart from globalisation, for the wages of the unskilled to decline relative to those of the skilled,

643
01:11:23,850 --> 01:11:30,750
just because the unskilled become scarcer as education expands and tertiary and higher education.

644
01:11:31,020 --> 01:11:38,429
So I think this this is an interesting example and I raise it and not and I raise it just

645
01:11:38,430 --> 01:11:43,110
to make the point that people who are worried about immigration aren't all bigoted.

646
01:11:46,520 --> 01:11:51,570
And my final my final comment is of a more philosophical nature.

647
01:11:52,660 --> 01:11:57,270
I don't want to wean our societies away from excessive reliance on growth.

648
01:11:57,960 --> 01:12:04,860
His method is to point out that beyond a certain point, growth does not add to the subjective feeling of contentment.

649
01:12:05,670 --> 01:12:11,700
But in making this argument, he implicitly accepts that some measure of contentment should be.

650
01:12:11,970 --> 01:12:16,650
A goal of policy. Now, I know he he actually sort of shies away from that.

651
01:12:16,770 --> 01:12:25,680
Rather late in his lecture, he introduced the bill to introduce the concept of justice as as an independent value.

652
01:12:25,980 --> 01:12:33,630
But mostly, he hedges by using the terms happiness, contentment, welfare and well-being as synonyms.

653
01:12:34,110 --> 01:12:36,630
But in fact, they're very, very different from each other.

654
01:12:36,900 --> 01:12:43,920
The language of happiness and contentment has its source in the economist's notion of subjective one satisfaction.

655
01:12:44,370 --> 01:12:50,250
Welfare has an objective correlation such things as life expectancy, health,

656
01:12:50,460 --> 01:12:56,850
years of schooling and so on, which have no direct relationship, just subjective feelings of happiness.

657
01:12:56,850 --> 01:12:59,069
But now we use these things.

658
01:12:59,070 --> 01:13:08,700
We like them because in principle they're quantifiable and therefore they start an argument on a so-called scientific basis.

659
01:13:08,850 --> 01:13:12,300
And it's the only language we really have for conducting this argument.

660
01:13:12,450 --> 01:13:16,380
Well-Being is problematic because that's a moral word, really.

661
01:13:16,650 --> 01:13:19,890
It refers to quality rather than quantity.

662
01:13:20,040 --> 01:13:22,980
It refers to some concept of the good life.

663
01:13:23,250 --> 01:13:30,270
But we can't talk about it because as soon as we start talking about that, we sound like the Archbishop of Canterbury.

664
01:13:30,270 --> 01:13:38,040
And we're not. That's not what. That's not what. That's not, you know, how how scholars should or should talk about these things.

665
01:13:41,100 --> 01:13:48,060
And I just want to I just want to illustrate one little, you know, the strange phenomenon of happiness studies.

666
01:13:48,330 --> 01:13:56,580
A number of economists, notably Richard Layard, have revived Bentham's original project of providing an independent measure of happiness.

667
01:13:57,030 --> 01:14:04,439
Inspiration has come from neurological studies showing a correlation between reported happiness and

668
01:14:04,440 --> 01:14:10,409
certain kinds of brain activity and social surveys recorded recording that beyond a certain level,

669
01:14:10,410 --> 01:14:12,390
increased income doesn't make people happier.

670
01:14:12,570 --> 01:14:18,780
So if happiness has an objective measure independent of consumer choice, then we have a respectably scientific,

671
01:14:18,780 --> 01:14:24,240
value neutral platform from which to criticise the unrestrained pursuit of growth.

672
01:14:24,420 --> 01:14:26,640
And that's exactly what Richard does.

673
01:14:26,880 --> 01:14:35,880
But but of course, it fails this project for reasons that should be obvious to anyone who isn't a relentless utilitarian.

674
01:14:37,980 --> 01:14:45,660
First, you know, the concept shares the characteristic subjectivism of of of the modern world.

675
01:14:46,230 --> 01:14:52,320
For the ancients and medieval thinkers, a happy life was a successful and admirable one.

676
01:14:52,710 --> 01:14:56,550
Today it signifies merely a life filled with pleasant states of mind.

677
01:14:57,000 --> 01:15:00,390
Such a life need to have nothing worthy or admirable about it.

678
01:15:00,570 --> 01:15:06,360
It might be a product of constant drug use, for example, or full frontal lobotomies.

679
01:15:09,100 --> 01:15:15,670
And and of course, the dare no more than I wants to make this a goal of national policy.

680
01:15:15,900 --> 01:15:20,770
But the language he's driven to sort of opens opens this up.

681
01:15:21,130 --> 01:15:28,780
And and also happiness understood in this Bentham Sense can't provide us with a measure

682
01:15:28,780 --> 01:15:36,670
of sufficiency against which to criticise the the the continual expansion of wealth.

683
01:15:37,150 --> 01:15:44,980
We don't really want to substitute the hedonic hedge mill treadmill for the growth treadmill.

684
01:15:45,460 --> 01:15:52,510
So the main message I got from a DES lecture is that some ways of life are intrinsically more valuable

685
01:15:52,510 --> 01:16:00,310
than others and that we should not sacrifice these on the altar of continuous economic growth.

686
01:16:00,910 --> 01:16:06,370
But I am not sure he has yet found the right language for talking about these things,

687
01:16:06,370 --> 01:16:12,520
and I think it is an extremely difficult language to find because we have to at some point introduce moral,

688
01:16:12,820 --> 01:16:16,960
moral considerations, and that's something we shy away from.

689
01:16:17,470 --> 01:16:24,010
But he has opened up a rich, fascinating, important subject, and no one could have done it more stylishly.

690
01:16:28,880 --> 01:16:33,950
I'm an economist. And that's not a not a very orthodox one.

691
01:16:33,970 --> 01:16:46,130
I mean, I have to say, I regard the used utilitarianism as as sort of the ethics of Disneyland and though diminishing marginal utility.

692
01:16:46,450 --> 01:16:51,200
Um, well, I'm just reminded of a cartoon in The New Yorker about,

693
01:16:52,100 --> 01:17:01,640
about businessmen surrounded by piles and piles of money and hovering above the businessmen is the fairy godmother.

694
01:17:02,150 --> 01:17:06,570
And she's saying to him, Remember, this is your last wish.

695
01:17:06,590 --> 01:17:18,290
Are you sure you want just more money? And so maybe marginal utility of money just goes on and on and on and.

696
01:17:19,430 --> 01:17:27,290
Let me start with some remarks. Broadly, within my competence as an economist, but I'm an economist and handyman,

697
01:17:27,290 --> 01:17:32,180
so that the pleasure of that is that you can you can go completely outside your discipline.

698
01:17:32,570 --> 01:17:37,130
And I will I will straight firmly into the range of my ignorance and incompetence.

699
01:17:37,730 --> 01:17:41,990
And but let me start with you first.

700
01:17:41,990 --> 01:17:57,590
Just a remark about about the bottom billion, which I'm going to very much agree with Lord Turner, that the growth is not not at all.

701
01:17:57,590 --> 01:18:01,820
A good measure of of of rising well-being shouldn't be our objective.

702
01:18:02,240 --> 01:18:06,260
But I just want to emphasise what he himself said in his lecture,

703
01:18:06,260 --> 01:18:16,820
that that's not true for the bottom billion and that they are not in the range where further income doesn't raise happiness.

704
01:18:17,690 --> 01:18:27,500
And I'm very worried that often the disc, our discourse gets picked up by these little societies and internalised as their own discourse,

705
01:18:27,860 --> 01:18:30,200
and we must be very careful that that doesn't happen.

706
01:18:31,910 --> 01:18:37,610
Incidentally, let me just have a remark about Ralph here, that the the opening sentence of my book,

707
01:18:37,610 --> 01:18:42,500
The Bottom Billion, is the third world has shrunk to Africa.

708
01:18:43,460 --> 01:18:48,590
That's actually a sentence from Ralph, and it was years ago,

709
01:18:48,800 --> 01:18:56,940
and it turned in my mind over and over for a decade and eventually came out as the bottom billion and you know.

710
01:18:58,960 --> 01:19:12,910
The. Let me start with some with a part of Lord Turner's analysis, which is the the economy of distribution relative to the economy of creativity.

711
01:19:12,910 --> 01:19:19,110
And it's what. It's a it's an idea that's been around in economics for a long time, 40 years or so.

712
01:19:19,680 --> 01:19:27,719
The concept of rent seeking and I think it is very important insight that the there has here that that over

713
01:19:27,720 --> 01:19:35,970
time the proportion the size of the rent seeking economy has got bigger relative to the productive economy.

714
01:19:36,930 --> 01:19:49,890
And and and rent seeking is is all over the place and most obviously within the financial sector, where some of it verges on the criminal.

715
01:19:50,160 --> 01:20:01,290
But but some of it doesn't but is still basically the very high returns to very short run information, which is of no social value whatsoever.

716
01:20:01,560 --> 01:20:05,340
It's just a transfer from one to another. It's rent seeking.

717
01:20:06,430 --> 01:20:12,630
And and that sector has got bigger and bigger and bigger in our economy, not just not just finance.

718
01:20:13,270 --> 01:20:18,090
And let me give you an example that otherwise would never occur to you.

719
01:20:19,090 --> 01:20:23,010
And and it's it's related to schooling in Britain.

720
01:20:24,220 --> 01:20:28,870
And I wrote a little article in The Independent, very controversial.

721
01:20:29,590 --> 01:20:36,040
And it just made this point that in Britain, we, the ordinary household,

722
01:20:36,460 --> 01:20:42,790
actually spends a lot on its children's schooling, on getting a better school for its children.

723
01:20:42,790 --> 01:20:45,940
But the way it spends is through the housing market.

724
01:20:46,240 --> 01:20:49,330
Everybody tries to buy a house in a good area.

725
01:20:50,050 --> 01:20:54,430
Now, that is what economists call a zero sum game. It's entirely rent seeking.

726
01:20:55,930 --> 01:21:02,560
What it does is a lot of money is spent on education, but none of it reaches education.

727
01:21:03,400 --> 01:21:06,400
None of that money actually reaches schools. Hmm.

728
01:21:06,940 --> 01:21:16,900
What we have what we have refused to allow in public policy is that the average parent could put money into schools.

729
01:21:18,250 --> 01:21:22,210
You can't do that. The only way you could do that is totally step out of the public sector.

730
01:21:22,810 --> 01:21:31,600
And the tiny 7% who do that. So the 93% who are in the public sector, they spend a fortune on their children's education.

731
01:21:32,020 --> 01:21:41,980
None of it reaches schools. That's rent seeking or the distribution economy instead of the creative, the productive economy.

732
01:21:42,160 --> 01:21:46,840
Right. That's how we've designed our public our public policy.

733
01:21:47,830 --> 01:21:54,100
So the rent seeking is getting bigger and bigger. Rent seeking shows up in the growth statistics.

734
01:21:55,110 --> 01:21:59,310
But it doesn't show up in people's living standards. It's a sham.

735
01:22:00,420 --> 01:22:04,710
And the last decade of British growth is largely illusory.

736
01:22:05,220 --> 01:22:10,380
What are the big sectors that grew financial sector and estate agency?

737
01:22:11,610 --> 01:22:14,759
The estate agents. The sector became bigger than the manufacturing sector.

738
01:22:14,760 --> 01:22:18,290
I mean. Yeah.

739
01:22:18,980 --> 01:22:32,120
So that's that's as far as my core confidence is going to go today, I want to step really out of that altogether and well,

740
01:22:32,120 --> 01:22:38,990
I'll just make one passing remark which yes, globalisation accounts for some of the increase in economic inequality.

741
01:22:39,170 --> 01:22:46,940
Yes, migration through competition with indigenous low skilled labour widens inequality.

742
01:22:47,990 --> 01:22:50,120
But I don't believe that.

743
01:22:50,290 --> 01:23:06,950
And the reason why the people at the bottom have fallen away from the median, I do not believe that is predominantly caused by economic processes.

744
01:23:07,880 --> 01:23:14,300
It's a measurable economic consequence of much more fundamental social processes.

745
01:23:15,170 --> 01:23:20,389
Having said that, I'm immediately way outside my core competence because I'm not at all about that.

746
01:23:20,390 --> 01:23:24,620
It's not the economy, as it were. It's the social processes that are doing it.

747
01:23:25,490 --> 01:23:30,020
And let me let me try.

748
01:23:31,400 --> 01:23:36,650
What you might well decide is a completely mad comparison.

749
01:23:37,400 --> 01:23:43,820
And this is going to be between what happened over the last 40 years in Britain and in France.

750
01:23:43,820 --> 01:23:51,800
But it's also, I believe it's true more largely for for the Anglo Saxon economies versus the continental economies.

751
01:23:52,700 --> 01:23:56,120
And it's in in both societies.

752
01:23:56,690 --> 01:24:00,980
And they started 40 or 50 years ago with with class war.

753
01:24:02,480 --> 01:24:10,100
The class war was fought on two fronts one on an economic front and the other on a cultural front.

754
01:24:11,930 --> 01:24:25,310
Now, as it says, the class war is largely over, but it's largely over because those battles have been fought and won and lost in each society.

755
01:24:27,980 --> 01:24:37,070
In Britain, the economic battle between the middle class and the working class was won by the middle class.

756
01:24:38,510 --> 01:24:42,500
That's why one manifestation of that is very poor social protection.

757
01:24:44,610 --> 01:24:47,760
Very, very, you know, old age pensions and things like that.

758
01:24:51,290 --> 01:25:00,020
So in Britain, the middle class, when the economic boom in continental Europe, the middle class lost the economic war.

759
01:25:00,710 --> 01:25:06,450
So you've got vastly better social protection. But now the culture war.

760
01:25:07,590 --> 01:25:11,190
And in Britain, the middle class lost the culture war.

761
01:25:12,030 --> 01:25:16,560
By that I mean that. Whereas in the 1950s.

762
01:25:18,930 --> 01:25:25,050
People of modest means would have aspired roughly to a middle class style of life,

763
01:25:25,560 --> 01:25:32,280
or the middle class would have maintained its standards and working class people would have maintained a counterculture.

764
01:25:33,000 --> 01:25:37,980
By now, we all have absorbed the culture of the working class.

765
01:25:38,670 --> 01:25:42,570
We don't say anything else. We don't say middle class culture is superior.

766
01:25:43,680 --> 01:25:52,300
And if you want a trivial example of that, you just look at the rise of football as the cultural norm or celebrity as a cultural norm that.

767
01:25:53,410 --> 01:25:59,260
So in Britain, the middle class won the economic war, but the working class won the culture.

768
01:25:59,650 --> 01:26:04,030
If you look at our newspapers, you look at the decline of our newspaper.

769
01:26:04,180 --> 01:26:08,470
You look at television. The collapse in the quality of public television.

770
01:26:09,580 --> 01:26:12,850
Whereas in France, exactly the opposite happens.

771
01:26:14,110 --> 01:26:17,980
The working class wins the economic war and is very good social protection.

772
01:26:18,490 --> 01:26:27,930
But the middle class wins the cultural. That if you take a an average working class household in France or anywhere in continental Europe,

773
01:26:28,290 --> 01:26:33,300
their aspirations are basically set by the norms set by the middle class.

774
01:26:34,410 --> 01:26:48,060
Now that difference in the outcomes of the of the class wars then has massive repercussions for the collapse of the of the household at the bottom.

775
01:26:48,900 --> 01:26:55,620
They lose the social norms of the middle class in the Anglo-Saxon economies.

776
01:26:56,800 --> 01:27:01,210
That is then compounded by a collapse in social cohesion.

777
01:27:03,190 --> 01:27:07,960
And that collapsing social cohesion produces social breakdown at the bottom.

778
01:27:09,640 --> 01:27:19,810
The lack of unemployment. So you get now in Britain three generations with no member of the net, with no adult who's ever worked.

779
01:27:21,760 --> 01:27:27,460
You got a big rise in single parent families in teenage pregnancies.

780
01:27:29,350 --> 01:27:31,620
A collapse in the as it were,

781
01:27:31,630 --> 01:27:44,410
the standard what was the the the lower middle class norms of of prudence and probity and which which which got mocked out of existence in Britain.

782
01:27:45,280 --> 01:27:56,650
And because of that lack of social cohesion, the real reason for the mistake that the real the dominant reason for the impoverishment.

783
01:27:57,720 --> 01:27:59,820
At the bottom of our society.

784
01:27:59,970 --> 01:28:13,410
The poorest decile is not the economic forces of globalisation, it's the social forces that have broken up the order of the bottom of society.

785
01:28:13,830 --> 01:28:19,770
And because of that, there's less sympathy with the poor than they used to be.

786
01:28:20,580 --> 01:28:31,590
And here I cite a survey last year by the Rowntree Foundation, which surveyed attitudes to inequality in Britain and was amazed by what it found,

787
01:28:32,220 --> 01:28:39,840
because what it found was that most people thought, yes, the poor were poor, they deserved to be poor.

788
01:28:40,920 --> 01:28:44,460
The sympathy with 50 years ago, we'd have felt, is no more.

789
01:28:45,030 --> 01:28:48,090
Because it's seen that the poor deserve their fate.

790
01:28:49,140 --> 01:28:51,360
And of course they don't. But that they are.

791
01:28:51,490 --> 01:29:00,300
They can be, as it were, the reasons for their poverty and not fundamentally the giant economic forces of globalisation.

792
01:29:00,600 --> 01:29:06,840
They are the micro forces of family collapse. So I end with a very uncomfortable note.

793
01:29:07,930 --> 01:29:16,960
That he we have the phrase in law turners the celebration of variety, diversity and difference.

794
01:29:17,470 --> 01:29:19,720
That celebration ends in itself.

795
01:29:20,700 --> 01:29:30,030
But the celebration of variety, diversity and difference are actually synonymous with saying goodbye to social cohesion.

796
01:29:31,170 --> 01:29:37,770
Maybe that is a wonderful, wonderful thing that has made life vastly richer for the middle class,

797
01:29:38,580 --> 01:29:42,870
but maybe it's made life vastly more difficult for the people at the bottom of society.

798
01:29:42,990 --> 01:29:56,140
Thank you. We're now going to go back in reverse order, obviously picking and choosing from this smorgasbord of comments and questions.

799
01:29:56,160 --> 01:30:00,720
Paul, is there anything you'd like to pick up? Very little, I think.

800
01:30:01,050 --> 01:30:09,840
And Dave, a good point that we got sort of convergence and politics, divergence in society,

801
01:30:10,290 --> 01:30:18,030
and maybe maybe the convergence in politics is a is a recognition of the failure

802
01:30:18,270 --> 01:30:24,329
of the sort of market driven economy of the early the eighties and nineties.

803
01:30:24,330 --> 01:30:30,720
I think nobody is really advocating going that's the model to to emulate.

804
01:30:31,200 --> 01:30:36,900
And so the idea that there is a policy convergence,

805
01:30:37,950 --> 01:30:49,150
but it's between statist and communitarian approaches to quality of life rather than to the ideology of the market.

806
01:30:49,230 --> 01:30:53,290
The so pronounced two decades ago. Thank you, Robert.

807
01:30:54,100 --> 01:30:57,500
Well, I just wanted to make two comments.

808
01:30:57,590 --> 01:31:06,250
I mean, first of all, I do think, Paul, as a contrast between the different faiths,

809
01:31:06,880 --> 01:31:14,510
the different faiths of the two class wars on the continent and the United Kingdom is interesting and profound.

810
01:31:14,530 --> 01:31:21,790
I feel that I felt that very strongly. The middle classes have won the economic war but lost the cultural war in this country.

811
01:31:22,090 --> 01:31:26,170
And that's what people mean when they talk about dumbing down and all that.

812
01:31:26,440 --> 01:31:30,519
And I think we have the most horrible media in the world almost.

813
01:31:30,520 --> 01:31:44,590
And that is a direct consequence of of some play playing to a presumed idiocy in in the population, which I don't think is there.

814
01:31:45,490 --> 01:31:47,170
But that's the doubt they're given.

815
01:31:48,220 --> 01:32:00,520
On David's point, David Goodhart And I do I do think your paradox it is an interesting one as, as, as income dispersals increased.

816
01:32:00,520 --> 01:32:10,329
So political convergence has grown. I think it's partly due to the fact that the political parties have declined enormously and

817
01:32:10,330 --> 01:32:18,050
political parties were actually the ways of mobilising opinion and creating arguments in politics.

818
01:32:18,250 --> 01:32:23,640
They don't exist any longer. And in that form, of course, they exist.

819
01:32:23,650 --> 01:32:28,360
The party membership has gone. Interest in political issues has declined enormously.

820
01:32:28,690 --> 01:32:36,790
And what's left is something rather vapid. I mean, in other words, you know, you're in favour of God, an apple pie.

821
01:32:36,790 --> 01:32:42,790
Everyone's in favour of good things, and it's partly reflected in certain trends in policy.

822
01:32:42,790 --> 01:32:47,919
But I think many of the dominant trends have been more in the direction that at

823
01:32:47,920 --> 01:32:55,240
their turn to describe rather than this agreement on on a social democratic state.

824
01:32:55,720 --> 01:33:07,750
I'd like to see that translated much more into policy by whoever wins the next election than than than I think you're suggesting.

825
01:33:08,260 --> 01:33:12,760
Thank you very much, Robert. There's obviously a huge amount to chew on for your next book.

826
01:33:13,000 --> 01:33:17,400
Would you like to pick and choose a few? Well, let me begin with David Good Hart's point.

827
01:33:17,410 --> 01:33:23,770
And one possibility is that this lecture is five years too late to be ahead of the curve.

828
01:33:24,070 --> 01:33:24,370
Right.

829
01:33:24,700 --> 01:33:33,970
That there was a general tendency in the second half of the 20th century of the narrative that I described, which about economic growth in the market,

830
01:33:34,300 --> 01:33:41,500
and that you had this lecture being made in 1997, it would be deeply ahead of the curve, but everybody else is on to it as well.

831
01:33:41,830 --> 01:33:48,390
Right. And, you know, at one level, you could expect that at some stage, reality will begin to come through.

832
01:33:48,400 --> 01:33:52,960
People are aware of the disadvantages of inequality. They're aware of the limits of growth, etc.

833
01:33:53,170 --> 01:33:57,610
And I think there is an element of that. And certainly it is quite startling.

834
01:33:58,090 --> 01:34:04,840
If you were to do a comparison of this election campaign in Britain with the 1997 election, in the 1997 election,

835
01:34:04,840 --> 01:34:11,080
and I know this because I was running the Confederation of British Industry at the time and therefore I was aware of particular issues.

836
01:34:11,440 --> 01:34:20,320
There was huge amounts of focus on things like the UK's growth rate over the previous 20 years relative to the French or German growth rate.

837
01:34:20,590 --> 01:34:26,040
The arguments about point 1% of the growth rate, right.

838
01:34:26,050 --> 01:34:32,950
You know, somebody said we're we're fourth in the growth thing, know, we're at 1.9 and the French are at 1.95.

839
01:34:32,960 --> 01:34:35,440
So, you know, you're complete idiots, you know, because you haven't got.

840
01:34:35,440 --> 01:34:43,300
Is that the Tory campaign in 1997 was heavily about the enterprise centre of Europe, which which Labour would destroy.

841
01:34:44,260 --> 01:34:50,470
But Labour's proposition was very heavily about how they were going to achieve more rapid economic growth.

842
01:34:50,920 --> 01:34:54,640
And that's almost entirely missing now.

843
01:34:54,790 --> 01:34:59,560
And partly I think that maybe because, you know, we've simply moved on.

844
01:34:59,650 --> 01:35:03,969
The question is whether it's really only changed because of the recession or whether the

845
01:35:03,970 --> 01:35:08,920
recession has changed things quite fundamentally and to pick up Alan Turnbull's point of view.

846
01:35:09,070 --> 01:35:19,030
But point a, you know, I think there has been a major shift in attitudes to inequality, which all to do with the perceived fairness of it.

847
01:35:19,300 --> 01:35:27,490
You know, as I say, if people say that person is paid, you know, £1,000,000 a year, and I can understand that in some sense,

848
01:35:27,490 --> 01:35:33,550
they do something, you know, either important or difficult or they have some unique talent.

849
01:35:33,670 --> 01:35:40,629
You know, people accept it. Part of the problem is that they had revealed to them that people were being paid not just a million,

850
01:35:40,630 --> 01:35:46,630
but £5 million a year for things that they perceive have no value whatsoever and indeed which they perceive as a negative value to that.

851
01:35:46,870 --> 01:35:50,560
And that has shifted it. And actually it's shifted the terms of debate quite quickly.

852
01:35:50,860 --> 01:36:01,760
Let's remember. But on this issue of inequality, it's only about three years ago that the Tory party was playing around with ideas of the flat tax.

853
01:36:02,210 --> 01:36:03,740
They never came out in favour of it.

854
01:36:03,740 --> 01:36:12,350
But George Osborne expressed some support for the idea that income tax should be flat, which at that stage, if you had applied,

855
01:36:12,350 --> 01:36:16,950
it would have been bringing down the marginal rate of income tax from 40 to

856
01:36:16,950 --> 01:36:20,630
30% and there were favourable comments about how the Latvians had a flat tax.

857
01:36:20,930 --> 01:36:27,770
We've now in two years got to the Tory Party talking, not at all about that and saying that the increase to 50%,

858
01:36:27,770 --> 01:36:31,460
although they'd like to reverse it at some stage, is very, very low on the risk of priorities.

859
01:36:31,730 --> 01:36:39,860
So I think it's difficult, David, to know whether, you know, what has happened is the slow realisation of the limits of the previous narrative.

860
01:36:39,860 --> 01:36:45,019
And so, you know, I'm not ahead of the game because a lot of other people are there or whether,

861
01:36:45,020 --> 01:36:49,160
you know, the recession and the financial crisis has just produced a crack.

862
01:36:49,430 --> 01:36:52,220
And then, of course, we don't know whether it's a permanent crack or, you know,

863
01:36:52,460 --> 01:36:56,960
maybe in ten years time we'll still be seeing these increases in inequality.

864
01:36:56,960 --> 01:37:02,920
And they will they will come back again. And maybe people you know, the existing narrative will come back.

865
01:37:03,080 --> 01:37:08,540
So that's one. On the point which was made, you know, a status competition is not unique dimension.

866
01:37:08,660 --> 01:37:20,120
I absolutely agree with that. Indeed, I think there's a lot of things that society can do to deliberately encourage multiple forms of status.

867
01:37:20,150 --> 01:37:29,090
Now, this is completely reportable on the before the election, but because it's nice to have a reportable facts but not fact but point of view,

868
01:37:29,600 --> 01:37:37,520
I don't see why we give knighthoods to people who are just successful business people.

869
01:37:38,090 --> 01:37:42,530
I can see why you might give a knighthood to somebody who is a successful business people and has given a very,

870
01:37:42,530 --> 01:37:44,989
very large proportion to charity or spent.

871
01:37:44,990 --> 01:37:51,500
But the idea that you should give a knighthood for somebody for services to business just seems to be flowing,

872
01:37:51,770 --> 01:37:55,730
throwing petrol on the fire of a particular form of status competition.

873
01:37:56,120 --> 01:38:00,319
You know, I mean, if we have a society where for whatever people reason,

874
01:38:00,320 --> 01:38:06,800
people actually attach some status importance to, you know, a things like knighthoods and honours.

875
01:38:07,070 --> 01:38:11,540
We should deliberately use that to lean against, you know,

876
01:38:12,140 --> 01:38:18,110
some tendencies in our status competition which we think we've got over fixated on on the monetary side.

877
01:38:18,110 --> 01:38:19,340
But, but we don't do that.

878
01:38:19,350 --> 01:38:25,399
We've spent the last 20 years basically saying if you're a successful business person, I'll give you a nice life versus successful business.

879
01:38:25,400 --> 01:38:29,600
But, you know, frankly, you've got a couple of million in your bank already. You don't need something else as well.

880
01:38:29,840 --> 01:38:36,650
So, you know, I do think, you know, we have made some of these these tendencies in our society worse.

881
01:38:36,890 --> 01:38:45,120
I mean, finally, I think, you know, I did I think Robert poses a very, very tricky question about globalisation.

882
01:38:45,410 --> 01:38:50,510
I think I think Robert is absolutely right that for rich developed societies,

883
01:38:51,050 --> 01:38:57,260
one of the sort of truths that we don't state is that actually further trade liberalisation has

884
01:38:57,290 --> 01:39:04,399
very little percent potential to increase even the GDP per capita of rich developed societies,

885
01:39:04,400 --> 01:39:07,129
even if we thought that that was, you know, beneficial.

886
01:39:07,130 --> 01:39:14,600
Indeed, it's it's pretty marginal in terms of growth today and I think probably a little bit more than Paul.

887
01:39:14,900 --> 01:39:23,540
I do think that if you look at the American data, one of the drivers of liberalisation of the increasing inequality of the seventies,

888
01:39:23,540 --> 01:39:29,719
eighties and nineties is the complete reversal of the immigration policies after the mid 1960s.

889
01:39:29,720 --> 01:39:40,670
I mean, basically immigration stopped in America in 1925 with the Immigration Act and the subsequent 40 years was damn good for

890
01:39:40,700 --> 01:39:48,620
the American working class and it reversed dramatically back the other way in changes in the sixties and seventies.

891
01:39:48,620 --> 01:39:55,670
And I think this played a non-trivial role in the reduction of the relative status of unskilled workers in America.

892
01:39:55,700 --> 01:40:01,999
Now, you know, this is a tricky area for people who think of themselves as having nice liberal points of view,

893
01:40:02,000 --> 01:40:06,230
but we have to recognise the economic reality as it is.

894
01:40:06,500 --> 01:40:11,959
But I think Paul's points about social cohesion and values are incredibly important.

895
01:40:11,960 --> 01:40:22,610
And I think I'm very aware, you know, all one can try and do in a lecture is throw a partial light and, you know, try and suggest other issues.

896
01:40:22,610 --> 01:40:28,790
And I think this whole issue of what do we mean by values, what do we mean by social cohesion and how,

897
01:40:28,820 --> 01:40:35,660
as Robert does, is well-being the same as happiness is incredibly important.

898
01:40:35,740 --> 01:40:42,380
And and I think also Robert's point of view there about, you know, is happiness the aim?

899
01:40:42,800 --> 01:40:51,110
You know, if we had a dictatorial society, I mean, it may be on Richard Layard measures on his brain scan.

900
01:40:51,890 --> 01:40:59,500
You know, the North Koreans at those big events are happy, but I'm still against that form of society.

901
01:40:59,510 --> 01:41:05,390
So I think, you know, and there's some things that I don't quite know how to resolve there, but I think they're very important issues.

902
01:41:05,990 --> 01:41:13,040
Well, thank you very much. And before I thank our speakers, three quick practical more than practical announcements.

903
01:41:13,040 --> 01:41:18,710
Firstly, for anyone coming to high table drinks or in the senior common room at the top of the best building.

904
01:41:18,740 --> 01:41:26,090
Secondly, if you don't yet feel you know everything there is to know about capitalism.

905
01:41:26,990 --> 01:41:32,540
The European Studies Centre Annual Lecture in this room 21st of May at 5 p.m.,

906
01:41:32,540 --> 01:41:39,560
the distinguished German historian Juergen Koca will tell you more about the history and future of capitalism.

907
01:41:40,070 --> 01:41:52,670
Thirdly, please note in your diaries the date of Friday, the 29th of April 2011 for the next DA and of Memorial Lecture.

908
01:41:53,180 --> 01:41:54,650
Speaker to be announced.

909
01:41:55,550 --> 01:42:05,959
I think we've had an extraordinary premier, I have to say definitely on the creative, not the distributive side of the economy,

910
01:42:05,960 --> 01:42:12,920
in my view, better both in substance and style than the leaders debates on television.

911
01:42:13,340 --> 01:42:22,760
And I can only say to you or Dad, but also to Robert and Paul, I think the greatest compliment I could give to you or anyone,

912
01:42:22,760 --> 01:42:32,120
which is whatever happiness is exactly, and however we measure it, I think Ralph would have been very happy with these two odds.

913
01:42:32,180 --> 01:42:33,920
So thank you both very much indeed.