I imagine readers already know and adore Ridley’s line in half-truths. Why is this one so interesting? Does he say anything new? Recant for example?
Seem a little unfair? Well Matt Ridley tells this story of how in 1948, Ludwig Erhard – director of West Germany’s Economic Council – decided to lift food rationing, against the advice of almost everyone else. This, according to Matt Ridley, was the day on which the German economic miracle was born. Rationing had been preventing the market from operating and the end of rationing meant that the free-market was allowed to do what it does best.
I, however, did a bit of searching and discovered a book about Ludwig Erhard. On page 71, the book says
The economy would be freed but not completely. The second stated that food and raw materials would remain under control. Third, grain, potatoes, meat, coal, iron, and steel prices and supplies would be freed only with the express permission of the Economic Council. Fourth, textiles, clothes, shoes, and soap would continue to be rationed. Fifth, the government could intervene in the raw materials and semifinished goods market if the need arose.
So, an element of truth but – it would seem – not quite the free-market miracle that Matt Ridley seems to be suggesting. There are two things I would say about this. Firstly, I’m amazed that the Chairman of the first British bank to have a run on its finances in over a hundred years is still spouting forth about de-regulation and free-market capitalism (especially as Northern Rock had to be bailed out by the government). I’m equally amazed that anyone takes him seriously when he does so. Secondly, this seems to be another example of how some try to pretend that a complex topic (economics, what to do about global warming/climate change) is really very simple. These topics clearly aren’t simple and pretending that they are does us all a great dis-service.
However, much of Matt Ridley’s talk focused on optimism. His basic premise seems to be that people like himself are fundamentally optimistic, while those he regards as “alarmist” are not. The world, according to Matt Ridley, is a better place now than it was in the past. Again, this is over-simplifying a very complex topic, but he does have a point. Furthermore, we don’t really need to worry about global warming/climate change because we’re innovative and will solve any problems we might face. Again, partly true but a bit simplistic. Finally, the only way to drive economic growth is through the use of fossil fuels, the energy “wonder drug”. My main issue is that his “don’t worry” is more a bury your head in the sand type of optimism, than a realistic optimism. Also, his views on fossil fuels seem remarkably pessimistic to me. If the only way to drive economic growth is through the use of fossil fuels, doesn’t that imply that once this finite resource is gone, the economic miracle will be over? Our future generations will just have to accept a life of poverty? Seems a bit depressing to me.
In my view, what “alarmists” are suggesting is much more optimistic than what Matt Ridley is suggesting. What most are suggesting is that global warming is continuing – as expected – and that we will likely soon enter a climate regime never before experience by the human species. This seems like a risky thing to do and we should try to do something about this. This will include both an element of adaption and mitigation, but we are an innovative species and so – as long as we put some effort in – we will likely succeed in not only preventing too much climate disruption, but will likely also develop new and valuable technologies that would not have existed had we not acted to both adapt and mitigate against climate change. Seems quite optimistic to me. Not sure why Matt Ridley sees this as pessimism. Maybe it’s time that those who Matt Ridley calls “alarmists” (although “realists” may be a better term) should try some optimistic rhetoric of their own.
I’ll finish this post with another comment about a story Matt Ridley tells in the video. He’s a member of the House of Lords so mentioned that some of his colleagues had been optimistic about the jobs that renewable energy technologies would create. His, supposedly witty, response was to say that if all we wanted to do was create jobs, then we’d just have our economy powered by people riding stationary bicycles. The prime factor in an industry, according to Matt Ridley, is best value for the consumer. This, to me at least, is a classic example of over-simplifying a complex topic. In most Western economies (and maybe in most economies) the consumers are also employees. Ideally you need to consider both best value for the consumer and impact on the labour market. It’s no good reducing the cost of some consumer product if the consequence is thousands of people out of work who then need to be supported by the taxpayer. Similarly, you can’t simply create jobs if the cost to the consumer becomes so high that noone can afford the product anymore. It’s a complex issue and pretending that it’s nice and simple, as Matt Ridley does, really has no value – in my opinion at least.
Those in the audience for his talk and those commenting on Bishop Hill seem, however, to like these supposedly clever little stories. It does make it seem that not only is he simply telling people what they want to hear, those who are listening are quite happy to simply lap it up without really thinking critically about anything he says. I should probably add that this post is really just my thoughts on the topic and I’m certainly no economic expert. As usual, comments are welcome from those who may have different views about what is clearly a complicated topic.