Managing the economy is about moral issues too

Morality is not a question that crops up very much in economics. It is not that economists are immoral people, just that they see their expertise as lying in technical questions rather than value judgements.

But moral questions have been on the frontline of economic debate this week, and with a vengeance. Figures showing how much inequality, pollution and crime have reduced economic well-being have been produced by the New Economics Foundation.

The election campaign focuses on how much Britain is booming or can boom, and politicians engage in puerile debate about how big their tax cuts will be. But the new figures reveal that taking account of all the economic changes that affect our quality of life, we have become worse and worse off.

Conventional economists have very little to say about income inequality. Like the electrician who can't help you with a small plumbing problem, most members of the profession say: "It's nothing to do with me love. You'll need a sociologist for that." Or as one standard introductory economics textbook puts it: "There is no correct solution for any problem involving value judgements."

But, laden as it is with value judgements, an assessment of income inequality is an essential part of the economic debate we ought to be having during this election campaign.

The New Economics Foundation's report was followed by a broadside from the Council of Churches. It criticised all parties for not stressing the problem of unemployment enough, although it also gave Labour - or at least Old Labour - plenty of ammunition by favouring a national minimum wage and a job creation programme, and stressing the importance of workers' rights and trade unionism.

This Christian coalition is in no doubt that morals have some very clear consequences for economic policy.

Apart from these specific reports, there has also been a growing sense that all is not well with our booming economy. It is the sense that made Will Hutton's book, The State We're In, and no doubt his new sequel, The State to Come, a best seller, and that aroused so much interest in George Soros's recent recantation of his unqualified faith in free markets.

In fact, gloomy predictions that unfettered global capitalism will provoke riots and disaster have become all the rage; and such a short time, too, after the definitive defeat in 1989 of the economic systems based on Marx's hypothesis that capitalism contained the seeds of its own destruction.

Our politicians nourish the doom-mongering by imposing such narrow terms of reference on the day-to-day political debate. They will cheerfully hurl marginal rates of taxation at each other, and even argue about setting new priorities within the public spending total, but are very edgy when it comes to moral rather than technical choices. Do they believe that higher tax revenues are needed to fund some aspect of the welfare state that we believe is an essential part of a civilised society?

John Major certainly stuck to his view that the managerial problem of getting the economy to grow is more important than all this moral nonsense. "There's no point in wearing your heart on your sleeve if you have nothing in the national wallet with which to help them," he said, asked to reply to this week's reports.

But in the context of most people's feeling that there is more to life than the contents of your wallet, it is illuminating to look at a book first published three years ago but newly released in paperback.*

Philosopher David Haslett uses the classic tools of moral philosophy to come to the rescue of capitalism. Private ownership and freedom from central economic planning are essential for freedom, and he concludes that capitalism trumps socialism on this criterion.

Yet capitalism with morality "is a form of capitalism that differs significantly from any current forms", he writes. And some of the differences he identifies would be welcomed with glad cries by Old Labour types who would be happy to describe themselves as socialist despite the fact that it has gone so horribly out of fashion.

They include worker control of the businesses they work for, a limit to the amount that can be inherited, an earned income credit that would lift almost everybody above the poverty line, and measures to assure full employment and government provision to ensure equal access to health care, education and child care.

Before those of a free-market inclination condemn this list out of hand as a crypto-socialist agenda, it is worth spelling out that some of the consequences of this check-list are unexpected. For example, Professor Haslett argues that minimum wages, labour market regulation and most existing welfare systems tend to cost jobs and are incompatible with his full employment requirement. He would scrap all of that traditional type of safety net. He would also exclude unions, progressive taxation, government ownership of capital goods and any state planning of the economy.

The keys in this moral framework are freedom, equal access to basic necessities and the spread of power in a democracy through the dispersion of wealth.

He wraps up the book by saying: "The critics of capitalism see the extreme inequalities of wealth and opportunity that it breeds, the burdens it places on ordinary working people, and they conclude that capitalism is immoral ... It is not capitalism per se that is immoral but current capitalism."

Now, Professor Haslett's specific conclusions might differ from those our own value systems would lead us to. But he presents a case that engages with political and moral philosophy.

Hard as it is to imagine any of the party leaders adopting such a radical package as that proposed in this book, it would help most of us feel that they were a bit more in touch with the concerns of their electorate if they could admit that there might be one or two non-technical and even moral issues in economic policy.

*Capitalism with Morality, DW Haslett, Oxford University Press. Paperback price pounds 16.99.