The recent appointment of Jesse Klaver as the new leader of GroenLinks, a progressive left-wing party in the Netherlands, has sparked a new debate in Dutch politics. Klaver used his first speech as political leader to attack a concept called “economism”. Although the wording suggests that economism is a belief system with economics at the center, the precise definition of economism is difficult to distillate. To explain the concept of economism, and more importantly, to address the assumptions and consequences of economism, Klaver recently published his book “The Myth of Economism”. He then took the stage in Paradiso to discuss the book with students of Room for Discussion (FEB, UvA) and the audience. As we will find, the book does not provide a convincing story. It fails to prove that economism is a leading paradigm in Dutch politics. It also does not show that economism leads to bad outcomes, or more accurately: worse outcomes than an alternative worldview. Finally, the alternative ideas that form the basis of Klaver’s politics are generally not that new in left-wing politics. The new ideas he does present are not realistic or desirable.
The Myth of the Myth of Economism
To see why Klaver’s idea of widespread economism is not in line with reality, we dive straight into an example. Speaking in Pakhuis De Zwijger in Amsterdam a few months ago, during a Tegenlicht Meetup, he presented economism as efficiency politics. Just prior to the meetup, a report from the CPB (Netherlands Bureau for Economic Policy Analysis) came out that showed the costs of students repeating a year of schooling when they fail to pass the year. Various politicians took the opportunity to state that alternatives to this system should be explored. Klaver addressed this report during the meetup, making it clear that he does not agree with the proposition to look at alternatives. Why would we change a system purely due to its high costs? To Klaver, it seems the focus has shifted only to the financial side, and we fail to incorporate anything non-financial in our assessment. The example is repeated in Klaver’s book, where he states that we only think from a cost-perspective, rather than looking at the benefits or the needs of the student. Klaver’s criticism does not hold. The CPB report is called “Repeating a year of schooling in primary and secondary education: an overview of pros and cons”. The report indeed concludes that the concept of repeating a year of schooling is expensive. However, it strongly takes account of benefits, contrary to what Klaver argues (see paragraph 5 of the report, and compare this to the claim “nobody thinks of the fact that repeating a year can have benefits for students”, p. 98). The conclusion of the report is not so much that we should abandon the idea of repeating a year due to the high costs. The conclusion is that the money is likely better spend on a less-crude system, thereby increasing the quality of schooling. This is especially beneficial for those who have difficulty learning. Therefore, the report advises to experiment with alternatives. The approach of Klaver is, in this case, best described as conservative. He seems to be afraid of looking at how we can spend the available budget in a different way, even if it can improve outcomes on all aspects (both financially and in terms of education quality). He seems to be afraid of looking economistic.
Klaver seems to be afraid of looking economistic – resulting in conservative politics
Throughout the book, the same pattern appears in every single example. There is absolutely no indication that any decisions were made purely due to cost considerations, without looking at qualitative aspects. The book shows a misunderstanding of economics by thinking that economics is only about money. This misunderstanding continues in the concept of economism, and results in many wrong conclusions. The most prominent concerns Groningen, presented as the prime example of economism. Purely due to monetary considerations, the government has continued to extract gas from the region, thereby increasing the risk of earthquakes, which has recently become a serious problem for the inhabitants. Reading this, on first sight, seems to confirm the thinking of Klaver. We extracted the gas for the earnings, and it led to a significant decrease in the living conditions for many people in the region, making the houses difficult to sell. However, an economist should look a bit further. And to be frank, so should a politician. What if we would not have extracted the gas? This would have cost the state 12 billion euro’s, in 2013 alone. These were the years where austerity was already needed to meet the 3% criteria on the deficit (to be fair, Klaver argues the 3% is arbitrary and pointless, which is simply not true. The fact that we have a fixed percentage creates certainty, and therefore reduces volatility of expectations). Needless to say, by stopping the extraction of gas from Groningen, the government would have to cut costs by 12 billion euro’s elsewhere in society. And this is where we go beyond the monetary argument (but stay within economics). Choices have to be made, and these are in some sense rational, but for a large part moral. Do we cut costs in healthcare, or do we extract gas from Groningen? Do we lower the funding for the military, or do we extract gas from Groningen? These choices are not clear-cut. They are economic choices and moral choices. Money is, in this case and many other cases, only a means to reach goals, to create a society in line with political morals. All considered, it seems apparent that politicians spend most of their day making choices that may have a financial foundation, but are inherently moral and political, rather than what Klaver calls economistic.
Using Economism for the Good
Essential to the criticism on economism is that economism leads to a worse outcome than an alternative worldview. Klaver rightly argued, during the discussion in Paradiso, that the reason to do something is important too. His example concerned a patient with a wish for euthanasia. The doctor can let the patient die out of compassion, or because he dislikes the patient. The outcome is the same, but the motivation behind the doctor’s decision is completely different. We all know which doctor we would prefer. However, and crucially, Klaver fails to take this reasoning one step further. Why would we prefer the compassionate doctor if the outcome is the same? We prefer a compassionate doctor because of the other decisions he could make. What if we do not desire to die, but desire to be healed? We prefer a doctor who helps us (positively) in every situation. The situation of euthanasia is an exception, rather than the rule. This example implies that we should judge economism on the general outcome across many situations. The motivation behind it, how non-humanistic it may be, is only a middle step in this story.
Throughout the book, it is not apparent that the outcome is worse when we use economism. Take the situation of Groningen. Although this outcome is not good for the citizens of Groningen, it may actually be socially optimal, considering the effects on the rest of society. The same can be said of efficiency thinking in education. Is it really preferable to have a system in which there is no incentive to graduate quickly? There is value in “Bildung”, sure, but the additional costs to universities, and as a result to the government, of those extra years of study do not necessarily weigh up to the benefits. We can even argue that economism should lead to better outcomes. Economism brings an inherent moral of itself to the table. It is a practice of making political decisions based on objective facts, which allows for a fairer outcome. This does not imply market thinking, but rather an objective implementation of political values. Think of redistribution of income, through a progressive income tax and other policies. Tools such as the CPB calculations allow for an objective measurement of what the outcome of policy will be. They therefore allow for a fair decision making process, taking account of general equilibrium effects. This may be a political paradigm of itself, but it seems preferable to have a government that makes decisions based on facts and democratic support. Ideally, both facts and democracy are on the same side.
Economism contains an inherent moral of itself – One of fair and objective decision making
A New Kind of Politics, Without Foundation
We examine the case of climate change. Nobody doubts that this is a serious problem, that can have a dramatic impact in the middle- and long-term. The many summits on this issue also show that politicians are committed to address this problem. But no definitive decisions are made, because of two reasons. One, the evidence on climate change and on potential measures against climate change, is often vague. Although the evidence points in the same direction, it does not clearly show what policy measure leads to which reduction in climate change. It’s difficult to make concrete policies based on such a limited pool of facts. To get an (economic) idea of why these policies are so difficult to assess, see for instance Weitzman (JEL, 2007), which explains the sensitivity to assumptions in this specific case. It is interesting to read this together with Klaver’s plan for a CO2 flat tax (p. 158). The second reason there is little action against climate change is that the population does not seem to desire dramatic policies, at least for now. See for instance the CBS report (SCR H23) on the perception of climate change in the Dutch population. Although there is general consensus that climate change is a problem, that often does not lead to according behaviour. Apparently, the cost-benefit calculation of many people is to not act on climate change. We can see this in Dutch politics too, finding that GroenLinks and the PvdD (Party for the Animals) are relatively small compared to, for instance, the VDD or PvdA. Although there can be various reasons why people would vote for a certain party, you would expect GroenLinks and the PvdD to be considerably larger if climate change was an important determinant in voting behaviour. All in all, Klaver does not have any legitimate claims for this policy. There is limited objective, factual, evidence to back those specific plans, nor does he have the electorate to show that his view is the will of the people. Both are required.
In the last chapter of the book, Klaver presents ten gamechangers. They generally do not present any radical new ideas, certainly not for supporters of GroenLinks. Less privatisation, less flex-work, progressive wealth tax, the list goes on. More disappointing is the lack of depth in the gamechangers. They are meant as a guidance towards a new kind of politics, but they end up as nothing more than empty words. Gamechanger 7 proposes to “trust people that rely on benefits”. It sounds nice, but what would the implementation look like? The government has an excellent reason to keep tabs on people on benefits, to see whether they need benefits and whether they are trying to find a new job. That reason is the fact that benefits are not free. They are paid out of taxes, and a primary concern of the government should be that these taxes are used appropriately. It is not bullying to check whether people need benefits. It is a necessary action to maintain the solidarity upon which the entire system relies. If people earn money next to their benefits, it is correct to lower these benefits. If Klaver disagrees (as he does in the book), he should promote higher benefits (which he does not do in the book). There is no legitimate reason to give money raised by taxes to people who can earn (part of) their necessary income elsewhere. Some of the more reasonable gamechangers also lack a strong foundation. For instance, gamechanger 8 on the progressive wealth tax is a very sensible proposition. But then, suddenly, Klaver argues to tax wealth by 30% (below 1 million) and 50% (above 1 million). Where did these values come from? What is the result of this taxation? The lack of substantiation is baffling. A serious politician should refrain from shouting numbers without providing some indication of where these numbers came from.
The lack of depth in the ten gamechangers is disappointing
Back to the Political Reality
Klaver proposes a new kind of politics, and his book provides plenty discussion points for recent debates in society. But we can only hope that this new kind of politics will be more fact-based than what we have seen from Klaver so far. He is stuck in what the Volkskrant strikingly called “Obama-playback”. He uses Obama’s words of hope and change, but fails to provide a strong case. The rejection of economic thinking in politics is presented as a rejection of facts, a rejection of efficiency (forgoing the benefits of efficiency) and in the end, a rejection of accountability. Politicians should present plans that they can defend. This defence should be based on facts, including the financial implications of this policy, and on support in society. The discussion has only just started, and Klaver will surely (hopefully) bring more depth into his arguments in the following months and years. But if he really wants to change the game, he needs to offer a lot more than he does in this book. The discussion in Paradiso was a friendly environment, which was correctly pointed out by someone from the audience. Andrew Makkinga, the discussion leader, presented Klaver as the prodigy child of left-wing politics, immediately putting him on a pedestal. The questions by the students of Room for Discussion hardly showed any criticism, with a single exception. The questions from the audience were more challenging, raising several valid concerns. But in general, the discussion seemed to be an exercise in confirming already existing opinions of the attendees, rather than a critical debate. The points raised in the book deserve a more critical approach. They are serious ideas, by the political leader of a respected party in the Netherlands, and the proposed plans should be assessed accordingly. Klaver should be committed to convincing the critics, and to convince them with facts and better (or more well-developed) examples. This book is a good opening word. But it is not nearly enough.