Ordinary Hope and the economy: a conversation with Nick Hanauer and Wendy Carlin
On a cold but bright Monday morning in early December 2023, economists, politicians, media commentators, and political advisors packed into the QE2 conference centre in Westminster to learn how Britain might dig itself out of a period of economic stagnation.
The Resolution Foundation’s report, Ending Stagnation: A New Economic Strategy for Britain, set out the scale of the challenge. Attended by both the Chancellor of the Exchequer and the Leader of the Opposition, the event sought to spur the assorted politicians, experts, and advisors into action.
One politician was notably missing from the audience that morning: Alastair Darling. He had sadly passed away a few days earlier, and the Resolution Foundation’s Director, and Darling's colleague and friend, Torsten Bell, opened with some poignant memories of the former chancellor.
'Bread and butter'
“One of the key lessons I took from working with Alastair Darling over many years is that economic policy is not some abstract game. It’s not about fancy charts, although I will show you lots of those; it’s not about your theories. No. Economic policy is about the bread and butter of people’s lives.”
Bell added, looking back on those frantic days as special advisor in the Treasury during the financial crisis;
“When Alastair was worried about the banks back in 2008, his first thought was always what happens to ordinary people who can’t go into the shops and make the payment for their goods that day, for the weekly shop? He was much more interested in that than abstract discussions of fiscal rules. In fact, I can see many people in this room who were thrown out of meetings because he wanted it to stop.”
And to an audience packed with wonkish statistics obsessives, Bell finished by underlining the real fundamentals of sound economic strategy.
“Ultimately, the objective of economic policy is about ordinary people’s lives. Their jobs, their homes, their quality of life.”
As chancellor in the most technical of crises, the fact that Darling still managed to hold on to this truth should force us today, to ask whether current economic thinking lives up to that maxim. Does it deliver for ordinary people and their lives? Their successes and their failures. As many voters express, has it drifted from their reality and hopes of their economic realities?
And if it has, what might an economic policy that once again focuses on the everyday hopes of ordinary people look like? These are the questions we discussed with two of the leading thinkers on the state of modern economics and its connection to ordinary life - Nick Hanauer and Wendy Carlin.
Nick Hanauer is a successful business leader, entrepreneur, and venture capitalist. His work today as a civic leader, driven to make social change, his ideas, captured in the phrase “middle-out economics”, have shaped President Biden’s economic policy. His most recent work on economic narratives, policy and social justice resonates powerfully with the ideas of Ordinary Hope.
“The economy is fundamentally about what we Americans call the middle class, or in the UK you might call working class. And for the vast majority, the economy does not exist as an abstraction. For almost everyone, it exists only as their job and expenses,” Hanauer says with a clarity of an economist used to making their case in the corridors of power.
Hanauer is vocal in his view on the serious political stakes at play. And the urgent need for an economic strategy that provides hope for ordinary voters. He believes that countries like the UK and the US face economic malaise and political crises without a fundamental and sustained shift in economic policy.
At the heart of Hanauer’s argument is the contention that “trickle down” economic orthodoxy, which presumes that economic success is driven by those at the top, is misconceived. For Hanauer, it is that everyday people drive economic prosperity, not just benefit from it.
'Middle-out economics'
“Middle-out economics is a way of understanding economic cause and effect. The simplest statement of it is that a thriving middle class is the cause of both economic progress and political stability. And if that is the only rubric you use and the only heuristic you use to make economic policy, you cannot go far wrong.”
Hanauer thinks Biden has made some progress in affecting people’s everyday lives, and in a way that they notice, and the UK needs to catch up.
UCL Professor of Economics Wendy Carlin, has transformed how the world teaches Economics with her radical rethink of the core ways of learning. Carlin is once again forging innovative thinking on the big challenges of our time as Co-Director of the Stone Centre on Wealth Concentration, Inequality and the Economy at UCL.
This approach has enabled both Hanauer and Carlin to influence others to rethink economic policy, helping recentre it around the lives of ordinary people.
One concrete political recommendation to flow easily from the middle-out theory of the economy has been the push for a real living wage, or, in the US, a higher minimum wage. Although the idea that working people need to thrive in order for the economy as a whole to thrive has a clear intuitive appeal, Hanauer uses the example of the minimum wage to show just how far that has been from the orthodox view in the last few decades.
“When we cooked up the idea for the $15 (£12) minimum wage in 2012,” Hanauer explains, “and I started speaking about that publicly, not one of the 9,000 or so practising economists in the United States of America wrote in support of that idea.”
“I got not one email, and no one published a single article in support. There was just zero support from this, from the economic institutions, you know, for that incredibly simple idea.”
So Hanauer and colleagues kept pushing. With the emergence of right-wing populism and Donald Trump, there came an ever-clearer demand from progressives to construct an economic strategy grounded in the need to improve the everyday lives of working Americans.
By 2022 President Biden had signed an executive order that all federal employees must be paid at least $15, and had begun to make “middle out” economics the core of his overall economic and political strategy.
'It's about dignity'
To put it another way, Biden had made a small step towards his commitment to the idea that ‘a job is about more than a paycheck. It’s about dignity’.
Hanauer believes the $15 wage was a small but essential step towards driving economic recovery, expanding economic dignity for millions and central to reshaping a winning political narrative at the same time.
Wendy Carlin shares the excitement.
“There's now a massive accumulation of evidence demonstrating, as Nick intuitively thought, that increasing the minimum wage would not impact job creation. And in fact, may even improve the economy and increase jobs.”
This is partly about moving away from what Carlin summarises as a “one-dimensional” view of the economy. Along with her co-author Samuel Bowles, Carlin has increasingly called for a more complex and nuanced understanding of how a developed economy operates in recent years, in a way that echoes many Ordinary Hope themes.
“If you only think of policy as a battle between market and state. It will leave you with a very impoverished approach to economic policy,” she explains.
Instead, we should see the economy as a multi-dimensional complex ecosystem, Carlin outlines. In doing so, we begin to understand that the drivers of growth and prosperity are found in realms beyond the state and market.
“To produce better economic outcomes for people, and for people to produce better outcomes for themselves, we need to think about other dimensions of the economy, such as the whole of civil society. This is by no means a warm, fuzzy place. Thinking in this richer way where you've got this whole space where you can think about the design of different combinations of what markets are good at, and what states are good at. Civil society and social movements can help with economic transitions. Realising that allows you to integrate a discussion about policy that is effective in delivering for ordinary people but also speaks to their lives.”
Everyday human drives
This new expansive way of thinking about economic choice and agency forces us to think about economic renewal as essentially a multi-dimensional collaboration. One that includes impulses for community, learning and culture. Productivity and prosperity are unlocked when policymakers recognise the very everyday human drives that create conditions that enable ordinary people to drive economic prosperity.
In both Hanauer and Carlin, we see not only a new economic narrative emerge but also the beginnings of an argument that can enable policymakers to rebuild the bond of respect with ordinary people that has been so ruptured, at least since the Great Financial Crisis.
“Economic narratives are incredibly consequential because they are the cognitive shortcuts that we use to define our human relationships and priorities. And economic narratives are about more than just a policymaking heuristic. They also affect culture and preferences, how people see their place in the world, and what they expect of their leaders,” Hanauer explains.
“That is why it is essential to generate these high-level political narratives that policymakers and cultures can latch onto to guide their direction in thinking.”
As we work to define an economy that embodies Ordinary Hope, this economy too must work to embody the elements present in Wendy Carlin and Nick Hanauer's work. Where economic renewal is founded on the ability of ordinary people to flourish and grow, where workers' aspirations and hopes are forged by the many dimensions of our economy: markets, state, civic, cultural, and more.
Or the freedom to flourish.
“When we think about freedom, we should think about it as the freedom to be all you can be right to maximise your capacity as a human, to make a contribution to the world and to your community and to your family and friends. All of which is impossible if your existence is so precarious and fragile that any move you make may send you into the abyss.”
And if, as Alastair Darling made so clear, the objective of economic policy is about ordinary people’s lives – then providing them with the tools and freedom to meet their full potential could well be a good place to start.
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