Given how the concept of economics is bandied about in Australian political rhetoric as an excuse for all manner of ham-fisted decision-making, the title of Gerard Lyons book, The Consolations of Economics – how we will all benefit from the new world order, could almost make a susty type run screaming from the bookshop. But it soon becomes crystal clear that the economic advisor to the Lord Mayor of London has a socially conscious, inclusive, green and global future in mind.
As he lays out the track record of the global economy from its earliest days through to the “Apollo 13” moment of the GFC, he draws out threads around human needs, risks and rewards, and builds a solid business case for what he sees as an inevitable green industrial revolution, where innovation, investment in human capital through health, housing and education, and global trade elevate increasing numbers of the world’s people into the middle classes.
For the non-economist, it’s also a very lucid explanation of the workings of policy instruments in relation to the market. Lyons makes a strong point that the market left to its own devices, without appropriate government supervision, is not the wholesome “invisible hand” that some would have us think.
He states very clearly that the use of the investment, foreign currency and financial markets as a kind of open-slather gambler’s den where greed is rewarded is contrary to the way the stock market and financial services sectors should and can work.
Lyons also makes a very educated case for a better understanding of corruption as not only the kind of bribery-driven law enforcement that features in some developing world economies, but something alive and well in major economies such as Australia, as industry groups use financial clout and invest heavily in public relations campaigns to gain benefit for their own short-term interests at the expense of the greater good.
“It is essential that there are safeguards in place to protect against oligopolistic and monopolistic behaviour. If not, the rules of the game don’t provide a level playing field for all. The dangers include consumers paying too much, and the competition suffering as new firms find it hard to enter… Capitalism works when existing firms fail and new firms form – a version of nature’s survival of the fittest. The last thing that should happen is for failures to be shored up and for new entrants to be faced with insurmountable obstacles.
“Curbing corruption often requires a cultural shift. But it also highlights the importance of having the right institutional infrastructure in place. This requires openness and transparency about public procurement processes, improved governance and greater accountability of company boards, an open and free media, and a legal system that operates over and above the heads of rulers.”
An acceptance of climate change is clearly stated, and Lyons identifies carbon pollution as one of the major risks to economic growth and stability, along with too little energy, too little clean water, too much corruption and too little awareness of the risks. There is a lovely vignette of a trip he made to Masdar City, and how it seemed like he was standing in a “dream or in the future” in this sustainably planned, solar-powered example of green building and engineering.
Some of the most cherished furphies of current Australian economic dialogues fall down in a heap when measured against Lyon‘s global view. Inevitably the ability to source cheap labour in the developing world will, he says, come to an end, which means manufacturers should be looking instead to how to leverage skill, innovation and technology to improve the productivity and profitability of operations.
As he observes, most periods of high growth have involved access to cheap energy, cheap land, or cheap labour, and none of these three will exist indefinitely.
While some of parts of the book are quite dense, in general there is an accessibility and humanity to Lyon’s language, and so many well-told anecdotes about different parts of the world, this really is a very positive and affirming read for anyone who puts the planet firmly in the assets column of the global economic balance sheet.