Keynes: We need a new language to talk about the economy

 Keynes with Harry Dexter White in 1946. ‘Keynes was a master  of the disruptive metaphor.

Banks trembling, shares tumbling and gathering fears of a new slump. The start of 2016 has been chilling for a global economy that has still to shake off the crisis of 2008. Worse, there is no agreement on what to do should the worst happen again. The big ideas that might make a difference – targeting higher inflation, printing money to give consumers something to spend with, or ploughing serious public funds into infrastructure – remain too contentious for politicians to voice out loud. That is a shame, because history suggests that the words they use matter.

Of course policies and theories have to pass muster, but just as significant in determining which ones end up being pursued are the language in which they are discussed. A smart metaphor can do more to shift the sense of the possible than the negative interest rates that increasingly desperate central bankers are relying on to alter the mood.

From economics seminar rooms to rage-pumped Donald Trump rallies there is a consensus on one thing: we need to do better next time. The last recession was followed by years of anaemic growth and squeezed pay, and taxpayers saddled with the bill for bailing out the banks. Nobody is going to be thrilled with that mix, but the despair is most acute on the left.

A crisis caused by footloose finance and preceded by decades in which the rich had raced ahead of the rest might have ushered in a new order of stability and fair shares. Instead we have quantitative easing – which puffs up asset prices for the haves and renders homes less affordable for the have-nots – and fiscal austerity, which makes the poor poorer and also leaves them more exposed, by knocking down the old storm defences of the welfare state. In the US, the top 1% grabbed more than half the total growth in the first five years of recovery, while in the UK, George Osborne, a chancellor who saw no choice to imposing the bedroom tax, still found room to trim the tax rate on top incomes.

None of this should have been possible, but it was successfully sold as necessary. To understand how, we must reckon with the deep foundations of economic orthodoxy in our culture, especially the language.

It was, RH Tawney explained, the genius of the Reformation, the ideological revolution that readied the way for capitalism, to reimagine the “natural frailty” of human greed “into a resounding virtue”. Whereas poverty, in medieval religious theory at least, had been next to godliness, early modern thinkers from Hobbes to Smith equated wealth with worth. Trade became respectable, and lending money for profit, which had been sinful usury, became a fruitful outlet for thrift. Credit became interwoven with honour and pride, while debt was shot through with weighty moral obligations.

These are the orthodox financial prejudices that have, with brief exceptions, held sway ever since – in Gladstone’s red box as much as Thatcher’s handbag. When the 2008 economic storm hit (a metaphor which itself does ideological work, implying an act of nature rather than a crisis of human folly) the then shadow chancellor Osborne reached for a tried and tested script. “The cupboard is bare,”he sternly announced, likening bankrupt Britain to an over-indebted home.

Economists have objected to lazy comparisons between domestic and national finances for the best part of a century: governments can tax, grow or even print their way out of debt, three important escape routes not open to individuals. In the 30 years after the second world war there were deficits in all but six. But far from this leaving Britain’s cupboard bare, the national debt dwindled from 250% to 50% of GDP.

So the household metaphor is deeply misleading but it remains irresistible to politicians and powerful with the public. It offers a way to make sense of the otherwise baffling billions in national debt through analogy with everyday experience. Furthermore, explains Jonathan Charteris-Black, an expert on rhetoric at the University of the West of England, it embeds “one of the most widely used of all political images: the nation as family, with the government as responsible parent”.

It is all so familiar that only restless, malcontent minds will argue back against the claim that There Is No Alternative. But the awkward squad should not lose heart: with determined effort, the terms in which policies get discussed can sometimes be changed. One modest example was the one-off charge made on the utilities soon after Labour came to power in 1997. Few taxes are popular, but by being badged a “windfall levy” this one came to be seen as a fair way to share good fortune that had dropped into the lap of these firms.

Looking further back, Keynes was a master of the disruptive metaphor. He described the “animal spirits” of investors whose rationality he questioned, and dismissed the self-styled “wolves and tiger” of industry as pathetically “domesticated” beasts. He was even credited with livening technical debate about the efficacy of monetary policy in a liquidity trap by talking of “pushing on a piece of string”. Keynesians across the Atlantic, such as Lauchlin Currie,rationalised the deficits of Roosevelt’s New Deal as “pump priming” the economy. The image here is of an old-fashioned well, where you have to pour in a little fluid to clear air from the valve, which then allows you to pump out a far larger volume of water. It had intuitive appeal for the very many Americans who had then been raised on farms, but hydraulics remains a promising source of imagery. Where orthodox economics and the moralising that goes with it emphasises solid “stocks”, assets and liabilities of particular values – a nasty debt, a nice nest egg or indeed an empty cupboard – the real economy operates through continuous “flows” of payment and activity.

The engineer-turned-economist Bill Phillips illustrated this insight by building a marvellous machine that shunted coloured water about to illustrate how the components of national income related to one another. But there is no need to go to the lengths of constructing a physical metaphor to make the point about how the bubbling stream of a healthy economy can wash away the debris of debt. Or, indeed, how decisive interventions can be required to clear blockages in the arteries of finance.

The question endlessly put to the Labour opposition is whether it can put together a “credible, costed package of alternative economic plans”, and doing that will, of course, have to be part of the answer – but only part. For no such programme, whether it stacks up or not, will compete with Osborne’s until the public can be persuaded to talk about the economy differently.

John McDonnell, the shadow chancellor, has put great effort into assembling brainy economists to help refine his detailed commitments, but the results of their deliberations will likely attract even less attention than his one rhetorical flourish to date – “socialism with an iPad”. A creative writing competition might do more to help him prevail in the battles ahead.