I've been a little bit of a fan of Fred Harrison (left), who is the so-called 'Renegade Economist', for some time now. For one thing, he is the only economist who predicted the slump Britain is now experiencing and he did it in the same year Labour came to power: 1997. He tried to warn the Nulab hierarchy of the day, who were the usual suspects - Blair, Brown, Campbell - that a radical change of direction was essential. But as you might expect, he was ignored.
Twenty-twenty hindsight? Maybe. But one thing is now certain: Fred Harrison should no longer regard himself as any sort of a renegade. And he must no longer be ignored.
Some of his ideas for how we might have avoided this catastrophe in the first place are certainly radical - and, in my humble, certainly brilliant. For example, in an article in the Guardian in 2005 he offered these intriguing thoughts:
We should untax people's wages and savings: conventional taxes inflict deadweight
losses on incomes. Instead, public services could be funded out of rents that people
were willing to pay for the benefits they enjoy at a particular location.
That is efficient. Productivity would rise and speculation in gains from land would fall.
Who could possibly disagree with that? (Apart from the entire political class and the small army of plutocrats, naturally!)
On page 7 of this document, Harrison points out in a letter to Tony Blair (no less) that in just six months under Labour, the UK economy lost at least £55Bn because of the taxation system. Make no mistake, while this was, he claimed, 'empirically verifiable', he was not suggesting it was entirely Blair/Brown's fault, in that the tax system itself was to blame.
But he lays the blame squarely at Brown's door for utterly failing to reform it in a way that would significantly lower income tax burdens and encourage savers with tax relief, while pouring lots of cold water on what was to become (inevitably, in Harrison's view) a disastrous, uncontrollable wildfire of property speculation.
In fact, as it turned out, Brown did the exact opposite year after year. Income was squeezed everywhere, savers were penalised at every turn and the wildfire had petrol dumped on it. Meanwhile, vast spending programmes were paid for with debt. Result: cataclysm.
Had the government decoupled the economy from this international frenzy of debt-fueled speculation in the way Harrison advised, we would have been substantially insulated from the events that followed. It didn't - in fact, it recklessly encouraged the bubble to inflate beyond any possible control for reasons of pure, dishonest, political expediency. It was criminal negligence which has led Britain to be the most exposed country in the world. Here, the recession will be deeper and more painful and the damage caused more long-lasting than in any other major economy.
One day, we will see signs that a recovery has begun, and sooner rather than later with the right government (ie: not a Labour government). But that government should employ the services, in some form or another, of Fred Harrison.
And if they listen to him, maybe, just maybe, this nightmare won't happen all over again in 18 years' time.
In the video below, Harrison speaks with a fellow renegade, eminent American economist Professor Michael Hudson, about what to do with all the debt.
I believe as Prof. Hudson does that if we want to look forward with a clear view, we have to look back. So I've been an advocate since the debt crisis began in 2007 of Solon the Lawgiver's solution to a similar problem he faced in 4th Century Athens. It was the cause of much distress and was the result of an economic crisis that began in the time of his predecessor, Draco.
One of the results of the upheaval had been the loss of citizens' land (repossession, if you like) - and it led to indentured servitude on an appalling scale. Thousands of Athenians effectively became slaves to the pentakosiomedimnoi (five-hundred-bushel-men - the Fat Cats of their day!). Solon's solution, so the story goes, was something called, probably, chreon apokope, the cancellation or the forgiveness of debt. In true Gorbachev style, there was another part to the deal: ges anadasmos - the re-division of land. This was no socialist revolution, however. Both policies were designed to both reset and kickstart the Athenian economy at the same time. And it worked! Everyone was happy (apart from the other slaves, of course, who weren't Athenians and so didn't qualify for the bailout).
Clearly, there is an element of poetry in such a comparison. Worlds apart and all that. But this shouldn't distract us from the general principle at work here and Prof Hudson explains why very clearly. He also reveals in the interview that the debt-holiday idea went back thousands of years. Solon knew about it because he was a highly educated man. With good reason he was known in his time as 'Solon the Wise'.
Who, I wonder, will be our Solon?