openDemocracy partnered with the first ever Festival for New Economic Thinking which took place in Edinburgh on 19-20 Oct 2017. The Festival brought together organisations and individuals from around the world to discuss how to advance economic thought and inspire change.

Economics is at a turning point. Society faces mounting challenges, yet our dominant economic models are out of touch. But around the world, new ideas, approaches, and concepts for building a just, sustainable, and resilient economy are being developed.

At the Festival, we spoke to people about the ideas they have for building a new economy. Check out the highlights:

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Since the financial crisis of 2008 there have been hundreds of films, documentaries and features on the causes and the possible solutions to the economic malaise that followed. Who is to blame and how did it happen are the questions that have been hotly debated by experts and politicians. The film ‘When Bubbles Burst’, first released under its Norwegian title Når boblene brister in 2012, looks at the fallout from the 2008 crash through the stories of Vik – a small town in Norway that, along with seven other towns in the country, sued the Citigroup banking conglomerate for investment losses, demanding over $200 million in reparations.

The film, aired at this week’s Festival for New Economic Thinking, attempts to link the overarching reasons for systemic market crashes to the intimate tales of a town laid low by reckless speculation and an inherently unstable financial system designed to fail. Through the testimonies of local campaigners, financial experts and academics, we are taken into a network of links and a narrative that show how mortgage lending in the US could impact a tiny town in Scandinavia.

Around 2001 the Vik municipality found a loophole in the Municipality Act, and proceeded to invest borrowed money from Oslo funds and US Citigroup in the stock market. The trick was a law allowing borrowed money to be invested before seeking local or regulatory permission. Despite Vik borrowing 70 million krona, the Norwegian Ministry of Local Government and Regional Development certified the investments because in its view any debt payments would be secured in future income.

Rooting the story in Vik and then branching out to Detroit, the ultimate symbol of American decline, sharpened the focus on the ordinary people affected and the way in which grand technological advances and political decisions impact on our lives. The narrative of the film focuses on three main themes: firstly on the question of debt, second on technological revolution and finally on what needs to happen to the ‘real economy’.

Visitors from Vik to the US are used as useful commentary threading together the two countries and their joint experiences of pain. As viewers, the journey becomes one of learning of the ability of markets to not in fact be free but to be “designed specifically to fail”, as described by economist Erik Reinert. In his words: “If the system you design is destined to fail then there is in effect no risk. For you.” The film dwells on the notion of the separation of risk for investors, managers, elites and ordinary workers, small businesses and homeowners.

Debt may be utterly necessary to the system, and in fact can be good if leveraged in a smart manner. We are taken to ancient civilisations such as Mesopotamia and the Levant where the use of debt was a necessary evil that added value rather than a tool for coercion and short-term gain. Debt jubilees are touted as a solution to financial servitude for the citizen and economic inequality. In short, when debt stifles growth and opportunity for the majority of citizens, it serves no purpose.

Perhaps the most fascinating part of the film is dedicated to the power of technological revolution in financial markets and the modern economy. Bubbles are to be expected, but speculation increases when there is an advance in a new technology. The 2008 crisis is traced back to the 1971 innovation of the microprocessor which kick started a computer revolution in how data was collected, stored and modelled. The market was now truly global, an epic casino which allowed greater scope for leverage. This suggestion flies in the face of the idea that bursting of bubbles or bubbles themselves can be stopped. In fact, the film suggests the only way to do this would be to cease technological advancement and therefore leans closer to Schumpeter’s idea of creative destruction.

What are we left with? The ‘real’ economy according to Nomi Prins, former Goldman Sachs manager, was something “very close to the 1930s”. When the financial economy and the real economy are so decoupled that you realise that lots profit and wealth aren’t real. Her answer? “We need to address the fraud. They got away with it and are still in charge. It was fraud – plain and simple.”

Curiously, given the city’s decades long decline, the film provides a counterpoint of optimism where Detroit is shown to have a possible answer to the crisis. “After every crash there has been a boom but governments have to be bold enough and intelligent enough to create new chances for equity and growth.” Detroit was the site of huge technological growth in the automotive industry following the 1930s due to government action and investment in infrastructure. Petros Christodoulou, Greek economist and Joseph Stiglitz, nobel prize economist, use the FDR years in the 30s as an obvious example of planning and spending which has been overlooked for ideological reasons.

We begin with the economic and end with the political. The political will to imagine a new way of organising labour and capital and a new way to regulate and ensure the real economy is served by technological advancement. The question unanswered by the feature is whether that will exists in a majority of the Western world.

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In recent years China’s growing political and economic relationship with African nations has received much media attention. With significant Chinese investments in industrial infrastructure and energy extraction, it’s easy to see why. However, a quiet revolution has also been gathering pace in terms of trade cooperation between Africa and India. Compared to China, India has chosen to centre its strategy towards Africa in the tradition of South-South cooperation where nations and emerging economies in the global south aid one another to greater levels of growth and self-sufficiency.

In the area of food production, India has been using a combination of educational, technological and economic tools to help improve the situation in Africa. At first this was part of its continued policy of solidarity among developing nations but now it has shifted to a strategy to counter Chinese influence on the continent.

At the Festival for New Economic Thinking, Malancha Chakrabarty, an economist and research fellow at the Observer Research Foundation (ORF), gave a workshop on China, India and African Development. In her presentation Chakrabarty discussed India’s more balanced approach to international development based on anti-colonial principles when helping to improve African yields and food production.

Chakrabarty pointed to India’s green revolution where it has seen agricultural production rise and become far more sustainable since the 1960s. As a result of the legacy of empire, debates over population growth and rapid industrialisation, India has had to come to terms with its own issues of hunger, undernutrition, and low productivity. This is why India-Africa collaboration on food security is seen by both groups as the key not only to the development of African agriculture but also to India’s desire to compete with China.

Chakrabarty argued that India will prove that huge injections of capital and industrial investment – the traditional path of development – is not necessarily the future. Different nations will have different concerns, and food security will determine Africa’s development. India also helps Africa’s food output by offering low-cost technology solutions, building storage capacity, developing micro loan policies and providing improved seeds and agricultural machinery.

African agriculture suffers from a range of problems such as low productivity and limited use of modern technology. Although there has been a marginal improvement in Africa’s agricultural performance in the last decade, African farm yields are the lowest in the world with the average farmer in sub-Saharan Africa producing only 1,433 kg of cereals per hectare, less than half of what an Indian farmer produces.

Another reason for growing collaboration between India and African countries is that, although India has made great strides since the sixties, it still falls short on food security. India’s economic philosophy may be self-sufficiency, but in practice it copes barely better than Africa as a whole.

The reasons behind food insecurity in Africa and India are different. Africa’s challenges relate to increasing the production of cereals by improving agricultural productivity and adopting modern agricultural practices. For a continent that holds 65 percent of the world’s arable land it still relies heavily on food imports. According to a 2014 Africa Progress Report, Africa’s food import bill amounted to $35 billion each year. In West Africa, almost 40 percent of the demand for rice is met by imports. This is explained by economists such as Sam Moyo who blame Africa’s food insecurity on nation’s historical over-emphasis on exporting coffee and cocoa instead of production of food crops for self-sufficiency.

The historical significance of this has seen Africa go from a net food exporter during the 1960s to a net food importer in today’s global economy. As a result, many African nations have become extremely dependent on food aid since the 1980s and under the “structural adjustment programme” imposed by the International Monetary Fund (IMF) in that decade, many African countries were also forced to withdraw agriculture state subsidies leading to a drop in agricultural productivity.

In contrast, India’s achievement of self-sufficiency in food production was a constant focus of politicians and economists from the mid-1960s. India’s five-year plan between 1961 and 1966 prioritised self-sufficiency in food grains and increasing agricultural production to meet the needs of industry. This is effectively the opposite of African states today with rapid scrambles to industrialisation and energy extraction with low grain yields.

Chakrabarty argues that India can help African states achieve food security goals with technology and an African green revolution. Firstly, India is attempting to address the research and technology gap in African agriculture. International institutions such as the International Crop Research Institute for the Semi-Arid Tropics (ICRISAT) and International Livestock Research Institute (ILRI) are platforms for Indian-African cooperation in biotechnology. ICRISAT has established agribusiness incubators in five African nations, Angola, Cameroon, Ghana, Mali and Uganda, with India agri-bodies partnering with local bodies.

Supporting academic fundamentals of the agricultural economy India has opened a number of scholarships for African students in India with African scientists trained in the Department of Agriculture Research and Education (DARE) and the Indian Council of Agriculture Research (ICAR). ICAR has for the past few years provided month long customised training in water conservation and utilisation; production of seed, sapling and planting material; livestock production; farm mechanisation and post-harvest processing.

India has also extended credit lines worth $1,1 million towards agricultural development and food security in African countries. An example is a series of loans for projects funded by the Sudanese Agricultural Bank. In turn this funds technical and laboratory equipment at Higher Educational Institutions, scientific equipment for the Sudanese Ministry of Science and Technology, local rural solar electrification and the expansion of Sudan Railways.

Burkina Faso has allowed a 100-percent foreign investment deal with Indian companies being able to repatriation of profits, and new companies benefit from a tax holiday for the first few years. Although seen as controversial by some economists, the expertise of Indian technology is already evident in the improvement of African yields. The result has been a jump in foreign direct investment with around 80 Indian firms investing $2.3 billion in Ethiopia, Kenya, Madagascar, Senegal, and Mozambique. There are plans to invest a further $2.5 billion on millions of hectares in East Africa, to grow products such as maize, palm oil and rice.

Some African countries have gone as far offering land on lease to Indian farmers and a number of farmers from Punjab and Andhra Pradesh have taken up the chance to migrate to these countries. For example, the Andhra Pradesh government sent 500 farmers to cultivate 50,000 acres of land in Kenya and 20,000 acres of land in Uganda.

Chakrabarty’s conclusions may present a puzzle for UK policymakers and civil servants in charge of aid and trade policy with the African continent. The UK’s legacy of colonialism and current debates over the amount and commitment to aid leaves little room to reform the relationship between Western governments and African economic and agricultural development. If smarter agriculture that can strengthen grain yields and account for climate change is the foundation of lasting economic development, than India and China look set to be the main drivers of investment in Africa. This South-South collaboration may not be as turbo charged as the potential gains of Western financial booms but it is tailored to the fundamental needs to African economies.

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Last week openDemocracy attended the first ever Festival for New Economic Thinking which brought together people and organisations who are committed to advancing economic thought and inspiring change.

As part of the ‘Help the OECD write the new Narrative’ workshop, OECD official Patrick Love presented the organisation’s draft report ‘Towards a New Narrative’ in which 20 experts explain what was wrong with the OECD’s methods and advice from 2003 to 2008 and beyond.

The OECD (Organisation for Economic Co-operation and Development) has come in for rough criticism since the 2008 crisis in the way in which it has measured economic progress, market movements and growth. One example of the body rooting its research in flawed assumptions was a 2008 report that said that “a consensus had been secured that financial deregulation was an optimal contribution for economic development”, a comment that passed without further analysis.

Love suggested that both the tools economists used and way in which data was used has led to crisis the faith that institutions such as the OECD can effectively track economic behaviour. One particular macroeconomic tool for research used by treasury department’s, central banks, think tanks and academic institutions are DSGE models.

What are they?

For those of us who are not macroeconomists, DSGE stands for dynamic stochastic general equilibrium.

“General” indicates that the model includes all markets in the economy. “Equilibrium” points to the assumptions that supply and demand balance out rapidly and unfailingly, and that competition reigns in markets that are undisturbed by shortages, surpluses, or involuntary unemployment.

“Dynamic” means that the model looks at an economy over a period of time rather than in a single moment. “Stochastic” refers to a specific type of “manageable randomness” built into the model that allows for unexpected events, such as oil shocks or technological changes, but assumes that the model’s agents can assign a correct mathematical probability to such events.

The models attempt to explain economic growth, business cycles, and the effects of monetary and fiscal policy. They’re rooted in three ideas of how strategic choices in an economy are made:

First of all, they observe the behaviours and habits of “agents” be they consumers, companies, and financial institutions like banks or hedge funds. Secondly, the model takes into account the underlying economic environment of whether it is a competitive economy, how much monopoly power exists or any lack of information and transparency in what we may know. Finally, the model is estimated as a system, rather than equation by equation in the previous generations of macroeconomic models.

So what’s the problem?

Critics say that DSGE assessing an economy’s growth rate or how stable financial markets are based on unrealistic assumptions. They argue that it is fundamentally incorrect to model from individual actors because humans are first not rational and humans are not simply individual actors. The economics will always be flawed because such behaviour can only be understood in context of social interactions. Other suggest the opposite is true: there is too little individuality rather than too much.

Other problems cited is the idea of “general equilibrium.” This is an assumption that in an economy interaction of demand and supply will also level out. In the words of Patrick Love who authored a draft on reforming the OECD’s methods for economic measurements, “I think we need to come up with models that model behaviour, not models that assume that the system will always end at a stable equilibrium.”

Additionally DSGE models fail to look at labour costs, or details such as the relationship between profits and labour costs in order to predict the direction of the economy. In the run up to the 2008 financial crisis, the OECD models failed to take seriously the issue of lower wages combined with rampant household debt. Economists such as Love state that lower wages effectively kill jobs which runs contrary to mainstream assumptions of competition.

The issue of communication is also considered a major factor with communications networks and social media able to spread fear globally. The modelling tools economists used are  as Andrew Haldane Chief Economist and Executive Director, Financial Stability, Bank of England said “incapable of capturing today’s networked world, in which social media shape expectations, shape behaviour and thus shape outcomes.”

Finally economic models face the danger of perpetual obsoleteness because of the failures in understanding accumulative affects of human behaviour. Where this evident is looking at the issue of emergence. Emergent phenomena occur when the overall effect of human individual behaviour is qualitatively different to what each separate human is doing. You can not anticipate the outcome for the whole system of an economy or predict what will happen based on a few individual agents because the large system may add properties that individuals do not have.

These models used to inform policy and analyse the economy are vast and complex with very few outside the world of economists knowing about or understanding them. Love questions whether it is necessary to have such complex tools if they fail to anticipate disasters or point to macro solutions.

The OECD is currently working on developing new models to analyse economic behaviour and as a result win back the trust and sense of accountability in itself as an institution. It wants to educate the public about economic models and the tools that economists and bodies use to predict, anticipate and fix an economy which has seen drastic mutation and left millions feeling increasing insecure. As Patrick Love said during yesterday’s session: “New economics requires new tools and narratives.”

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Economics is having an image crisis. It’s all around us, and yet few of us are able to relate to the subject, let alone feel the agency to transform it. At a time where our dominant economic models are failing us, individuals aren’t equipped to effectively participate in discussion of the
subject – exasperating an already non-functioning democracy. The subject urgently needs to be transformed from a barrier to a bridge for people to engage in critical, grounded and informed political debate.

For most people, economics is recognised as simultaneously ubiquitous and important, but an inaccessible, distant and abstract force over which we have little control. People know it’s all around them, but what it even is (let alone how we can affect it), is a mystery to most. At Economy, we’re working to unpack how people experience the subject, what the barriers to engagement are, and what needs to change in order for it to become a tool to build an economy created by everyone.

One of our first findings last year was that only 12% of the UK feel that politicians and the media tend to talk about economics in an accessible way that makes it easy to understand. Perhaps unsurprisingly, this is even starker in lower income families, dropping to 7%. When it comes to elections, for many the highpoint of the democratic calendar, only a third of us feel that information about the economy in the media is useful enough to help us make an informed voting choice.

The perception of usefulness of economics is lower than the pitiful average in not only those from a lower socio-economic background, but also the young. In the election this year, our research found that nearly 60% of young people did not feel the information they could access was useful enough to inform their vote. And yet we know that democratic malaise is not the issue; passion, excitement and energy in politics amongst the young is at an all time high.

The problem lies in how the subject is communicated. The single biggest request from the people we speak to is always the same: ‘Explain it in layperson’s terms!’. This statement is often closely followed by a complaint that economic information is not presented in a manner relevant to their lives, and it is often shrouded in meaningless, inaccessible terminology. This sentiment is found in over 70% of participants. It’s a clear message: economics, as spoken about in the public sphere, needs to eliminate jargon, simply and define difficult vocabulary, and drop assumptions about the levels of understanding of its audience. Answers like this are common in our interviews:

“When people talk about the economy, it’s just talking about millions and billions of pounds. So I feel it’s not connected to me at all”

“I feel like [the economy’s] very big, like it refers to something very big… I don’t feel I know enough to have an opinion”

“FTSE? I know that’s a thing that you do with your feet under the table”

 Our research highlights a serious economics literacy problem, leaving economics accessible to those with a certain level of power, privilege and education. This leaves us with a major imbalance between decision makers and citizens – an imbalance that leaves those feeling the worst effects of our economic system the least able to engage in change. New thinking for the British economy needs support from a public that is able and willing to hold those with economic power to account. Moreover, it needs a public that can engage with economic discussion and that has the agency to assert its demands from the economy.

Fixing economics communication cannot be left only to those already doing it. We need to develop a new cohort of economics educators, communicators and commentators, representative of the society the economy should serve. Elinor Ostrom remains the only woman to have ever won a nobel prize in economics (out of more than 75 awarded), and there have only been two non-white recipients. There is little sign that the current arbiters of economic excellence have any interest in bringing more people into the conversation.

We need to reclaim economics as a tool we can all use, take ownership over, and have confidence in. When considering some of the dominant economic narratives of the last ten years (austerity being the most obvious example), it is clear that they haven’t been created in the interests of the many. With better understanding, communication and presentations of the subject, the subject can be used as a catalyst for change.

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The first ever Festival for New Economic Thinking is taking place in Edinburgh on 19-20 Oct 2017. It brings together people and organisations who are committed to advancing economic thought and inspiring change. Here Professor Andy Cumbers explores how to reanimate economic democracy for the twenty first century. 

How do we develop a democratic economy, which is fundamentally underpinned by the values of social justice, rather than exchange value? For me, alongside tackling climate change, this is the critical economic question of our time. The alienation and marginalisation felt by many from three decades of increasingly autocratic neoliberal economic governance is becoming politically manifested in different ways. Horrifyingly – chaotically, brutally and barbarically – through the resurgent economic nationalism of Brexit, Trump, Le Pen, Orban and others on the right.

A revitalised project for economic democracy

There is however a more hopeful and inspiring economic narrative emerging through the Sanders and Corbyn insurgencies on the left, as well as movements such as Podemos in Spain, which involves the rejuvenation of alternative economic thinking. In Scotland, this has been partly invoked by the radical independence campaign, the Common Weal and the intriguing recent commitments by the Scottish government to a new public bank and public ownership in the energy sector. Although, this new economic thinking is still nascent, it does build on important alternative and longer established new left traditions of a more participatory and democratic economics from the 1960s and 1970s.

A critically important document in this regard is the Labour Party’s recent publication on alternative ownership forms in the economy. This has rightly been described by the US based Joe Guinan and Thomas M Hannah of the Next System Project, as “the most exciting economic programme to be developed by the Labour Party in forty years … to reanimate the old promise of economic democracy as we explore new avenues for the wholesale democratisation of the economy and society.”

Reanimating economic democracy for the twenty first century means coming to terms with a dramatically changing global economic context and the restructuring of working conditions, categorised by growing inequalities and an increased concentration of wealth, the gig economy and the collapse of secure employment, and the decline of trade unions as a powerful countervailing force to capital.

Given these unpropitious circumstances, a revitalised project for economic democracy means moving beyond older forms centred upon the workplace and collective bargaining to develop a broader strategy for democratic participation across the economy more generally. Labour rights, unions and collective bargaining will still be important in the struggled for social justice, but a much greater remit is required to democratise the economy. The Labour Party document was important in this regard for shifting the ground in which we think about ownership beyond monolith forms of centralised state ownership to advocate a diversity of forms of democratic collective ownership including cooperatives and community based forms of ownership, and giving decision power to users and consumers of services as well as workers.

Developing new narratives around the economy

But beyond ownership, democratising the economy is also about developing new narratives around individual economic rights, and public participation and deliberation of the economy itself.

The alienation from neoliberal globalisation, which is fanning the flames of reactionary right wing economics and xenophobia of Trump and his ilk, is driven by growing individual economic security, has been produced by disciplinary neoliberal labour policies around welfare and labour market deregulation under the guise of a flexible economy. Combating this requires new thinking and policy around how we generate individual economic freedom – not freedom just to exercise property rights and exploit the labour of others – but freedom to choose how you exercise your own labour.

This is an important but neglected agenda for economic democracy, bringing together the enlightenment liberalism of John Stuart Mill with the radical political economy, remembering that freedom from economic servitude was the animating core of Marx’s thought. In an increasingly automated economy, where decent, secure and well-remunerated work becomes scarce, there is a need to rethink how individuals, families and communities secure the income and resources needed to live decent lives. This needs new thinking around the redistribution of work, new initiatives around working time, and a rebalancing of work and leisure to advance individual economic freedoms and rights to decent sustainable livelihoods.

A second key component of a revitalised economic democracy is the need to open up the economy and in particular decision-making to broader public participation and engagement. Here, one might compare favourably Denmark’s associational economy where there are a high level of cooperative associations, strong trade unions and business associations with countries such as the UK or to a lesser extent US, where elite corporate interests, dominate the economic discourse, often with the result that policy-making becomes very restrictive and tends to favour established vested interests (e.g. property owners, financial elites, media moguls).

Democratising the public sphere and decentring economic knowledge production

This also requires a strong deliberative public sphere where economic ideas and narratives are not the preserve of elites but are the subject of debate, contestation and even conflict between competing groups. The contemporary global economy suffers a knowledge deficit in the sense that economic discourses – alongside wealth – have become appropriated and concentrated through elite interests and institutions. Again, radical liberal ideas, particularly those of pragmatist thinkers such as John Dewey can be wedded to broader political economy concerns in forging more active and radical civil societies that can contest elite hegemony and construct alternative economic narratives. As Dewey family put it:

‘No government by experts in which the masses do not have the chance to inform the experts as to their needs can be anything but an oligarchy managed in the interests of the few… The world has suffered more from leaders and authorities than from the masses.’

Economic decision-making should be embedded within the democratic public realm as far as possible, rather than delegated to a remote class of technocratic experts who end up serving elite and established interests. The triumph of a form of liberal capitalism globally – increasingly enshrined through the institutions of the Washington Consensus and supranational organisations like NAFTA and the EU – has not produced the much-trumpeted democracy or effective freedom of the individual, but instead over time has led to the effective suspension of democratic politics in many places: Greece and Italy for example in the wake of the Eurozone crisis.

If we accept that democracy is ultimately about offering competing alternative visions of society that are given effective voice in public debate, and individual economic rights to both flourish and participate in such public debates, the emergence of an austerity driven last gasp neoliberalism that ruthless represses, neutralises or incorporates alternatives to corporate capitalism is paving the way for the advance of the far right and economic nationalism, shading in to fascism, everywhere.

A more democratic economy would require greater investment in the development of popular education, engagement and participation of the citizenry in economic decision-making through institutional and organisational forms that both foster collective decision-making but also decentralise and disperse economic knowledge and practice throughout the community. Collective learning institutions dedicated to the common good should replace elite institutions (such as the rent-seeking neoliberal university model) that appropriate knowledge and education for commercialised ends.

The appropriate question then becomes what kind of economic institutions would be needed to deal with these issues? A citizens income is a critical element to the latter – set at a level that allows individuals the positive freedom to choose how they sell their labour. And democratic forms of public ownership are one important way to deal with the increasing capture of common wealth on behalf of the elite. The devolution of economic decision-making by the state and the increased use of participatory planning and budgeting for a are also essential ingredients. A functioning democratic economy would still require a mix of markets and planning, some private alongside the expansion of public and collective ownership. To retain its dynamism and ability to adapt to changing circumstances, we would also need to encourage the right kinds of markets (e.g. farmers’ markets rather than stock markets), innovation, entrepreneurialism and even competition, albeit with very different forms of social regulation and economic institutions than are currently on offer.

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The first ever Festival for New Economic Thinking is taking place in Edinburgh on 19-20 Oct 2017. It brings together people and organisations who are committed to advancing economic thought and inspiring change. Here Reema Patel explores why economics has a democratic deficit, and what can be done about it. 

There are many reasons for why more democratic approaches to economics are necessary and valuable. As well as shaping better and more informed economic decisions and improving its quality, meaningful efforts to engage citizens on economics helps us explore citizen values and voices about economics, promotes transparency about economic priorities, and strengthens democracy and debate. Despite the enormous potential democratising the economy has for a new approach to economics, there is a serious democratic deficit in economics. This takes three forms:

• The transparency deficit: There is a lack of transparency in economics about the political implications involved when economic decisions are made, and this lack of transparency is compounded by the inaccessibility of economic language.
• The legitimacy deficit: There is a lack of legitimacy in economic decision making caused by the dominance of technocracy and the exclusion of citizen voice. This has fuelled a rise in populism and revoked the ‘social licence’ of policymakers and economists.
• The accountability deficit: Declining accountability has resulted in narrowness to economics itself, with a debate that is less creative, less connected to, and less able to respond to our collective social problems.

The transparency deficit

“Only when the general public displays awareness of these issues will professional economists find it impossible to browbeat them by declaring themselves to be custodians of scientific truths.” – Ha-Joon Chang  (Economist)

Economics is often presented as the domain of the ‘experts’ alone when it is not. There needs to be more transparency about the political choices behind economic policy. Yet despite the clear public interest in asking these questions directly of citizens and engaging them in informed dialogue and discussion, it is rare for economists and policymakers to do so. This is compounded by the existence of jargon that often shrouds simple, intuitive concepts in complex language, resulting in citizens shying away from expressing their views on economics as confidently as they might on other issues that form an important part of public debate – such as gay marriage, or the NHS.

As economist Ha-Joon Chang explains, economics is a fundamentally political and moral subject, its origins being in moral philosophy. To explain that economic decisions are determined by ethical and political judgements, Chang uses the example of child labour, which he notes was a legitimate object of market transaction (even in the world’s richest countries) until the early 20th century. According to Chang, this example demonstrates to us that the market itself is a political construct as opposed to a ‘natural order’ that cannot be tampered with by political intervention. As such, economics is as much about citizens as it is about ‘expertise’; and that expertise must be in service to citizens and their values and ethics, not the other way around.

The legitimacy deficit

Drawing, from RSA Citizens’ Economic Council Inclusion Roadshow workshop in Port Talbot

We live a world in which economics is experiencing a crisis in legitimacy and public trust at the same time as holding disproportionate influence and power. The 2016 referendum on the European Union in the UK exposed an enormous disconnect between citizens and the economic, political and policymaking consensus; as did the 2008 world financial crisis in which we witnessed scenes of political protest from citizens at the site of major financial institutions across the world. In the past year, the Edelman Barometer of Trust has reported a global implosion in levels of citizen trust in policymakers, companies, politicians and economists.[1] Oxford Dictionaries declared the international word of the year in 2016 to be ‘post-truth, defined as an adjective ‘relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief’.[2] The rise in populism and the era of ‘post-truth’ is a signal that politics and democracy itself needs to change. Nowhere is this more apparent than in the field of economics where issues that are cloaked in economic jargon or confusing language conceal trade-offs and choices that are more legitimately the domain for public dialogue and public participation.

The accountability deficit

Economic policy is an area that has considerable influence and impact on the day-to-day lives of citizens through the decisions made by governments about the future of the UK economy. Despite this, there are limited efforts to engage citizens on economics itself. This lends itself to an accountability deficit; often economic decisions are made ‘behind closed doors’, with little, to no public engagement. As a consequence, they often find themselves subject to fierce public scrutiny and criticism when announced. Controversial decisions have been made that have faced public backlash, and have forced a reversal of government economic policy – examples of these have included the government’s plans to introduce the bedroom tax and planned cuts to personal independence payment (PIP) disability allowances.

This approach of ‘decide, announce, defend’, which dominates economics and economic decision making has two effects. Firstly, it is costlier and more damaging to the legitimacy of decision makers in the long term. And secondly, it pushes economics itself further and further away from citizens – perpetuating a vicious cycle of an economics that is resulted in narrowness to economics itself, with a debate that is less creative, less connected to, and less able to respond to citizens’ concerns and problems.

Where next?

In its place, we propose that economic decision makers and institutions prototype, adopt and embed citizen engagement approaches such as the RSA Citizens’ Economic Council and citizen assemblies such as the Brexit Citizens’ Assembly. These are collaborative, co-productive dialogues between citizens, experts and policymakers with a view to strengthening legitimacy, transparency and trust between citizens and experts. Yet we recognise that doing this well is far from easy. It requires us to recognise that there are barriers – systemic and institutional – that need to be addressed to enable democratic innovation to flourish in a sustained way. Our interim report on the Citizens’ Economic Council due to be published later on this year will lay out in more detail the way forward on these issues.

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openDemocracy is delighted to be partnering with the Festival for New Economic Thinking which is taking place on 19-20 Oct 2017 at the Edinburgh Corn Exchange.

Economics is at a turning point. Society faces mounting challenges, yet our dominant economic models are out of touch. But around the world, new ideas, approaches, and concepts are being developed by disparate communities of thoughtful people. The Festival for New Economic Thinking brings together organizations and individuals committed to moving forward economic thought for the future. As we celebrate the nuance and richness of the history of economic thought and the diversity of current economic thinking, the Festival will provide fertile ground for us to inspire economic thinking for tomorrow.

Over the course of the Festival oD will be providing coverage of events and posting interviews with key participants. We will also be sparking a debate on two key themes, both at the Festival and online. These are:

Theme#1: Does economics have a democratic deficit?

Economics affects everyone, but few people feel have any power over the economic decisions that affect their lives. Around the world democracies are often captured by powerful financial interests. Should this be a concern for economists? If so, what alternatives are there to develop more democratic institutions and structures which re-distribute economic power?

Panel session time and date: Thursday 19th October, 16:30 – 18:00, Media stage

Speakers: Laurie Macfarlane (oD), John Christensen (Tax Justice Network), Reema Patel (RSA), Maggie Chapman (Scottish Green Party)

Theme#2: Cutting through the spin: Economics and the media

For most people, politicians and the media are the main sources of information about the economy. But does the way that economic issues are discussed in the media inform people, or alienate them? Do politicians and journalists sometimes reinforce misleading or false narratives about how the economy works? How can journalists and economists work together to improve the quality and accessibility of economic debate?

Panel session time and date: Friday 20th October, 09:30 – 11:00, Media stage

Speakers: Adam Ramsay (oD), Yuan Yang (Financial Times & Rethinking Economics), Antonia Jennings (Ecnmy.org), Izabella Kaminska (Financial Times) & George Kerevan (journalist and former MP)

Check out the full program of workshops, talks and events here.

We hope to see you there!

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