A radical new approach to economic policy that addresses the symptoms and causes of inequality in Western society today
Fueled by populism and the frustrations of the disenfranchised, the past few years have witnessed the widespread rejection of the economic and political order that Western countries built up after 1945. Political debates have turned into violent clashes between those who want to “take their country back” and those viewed as defending an elitist, broken, and unpatriotic social contract. There seems to be an increasing polarization of values. The Economics of Belonging argues that we should step back and take a fresh look at the root causes of our current challenges. In this original, engaging book, Martin Sandbu argues that economics remains at the heart of our widening inequality and it is only by focusing on the right policies that we can address it. He proposes a detailed, radical plan for creating a just economy where everyone can belong.
Sandbu demonstrates that the rising numbers of the left behind are not due to globalization gone too far. Rather, technological change and flawed but avoidable domestic policies have eroded the foundations of an economy in which everyone can participate—and would have done so even with a much less globalized economy. Sandbu contends that we have to double down on economic openness while pursuing dramatic reforms involving productivity, regional development, support for small- and medium-sized businesses, and increased worker representation. He discusses how a more active macroeconomic policy, education for all, universal basic income, and better taxation of capital could work together for society’s benefit.
Offering real answers, not invective, for facing our most serious political issues, The Economics of Belonging shows how a better economic system can work for all.
Paolo Mauro on Finance & Development wrote:
"Belonging, here, is about not being left behind, rather than group identity. Those whose earnings have stagnated, who hold precarious jobs, live in towns scarred by austerity — they are the Unbelongers. [...] Much of the first half of the book explaining how this came about will be familiar to readers of Sandbu’s FT columns. Poor education is a major culprit given the skill-bias of technological change. [...] Linked to technological change, the economic magnetism of cities and the corresponding cost of staying in a left-behind town amplify this fundamental labour market inequality. Sandbu also blames the shift toward services, where traditionally female “soft” skills are more in demand, though jobs traditionally low paid. [...] The real argument of the book comes in the second half, namely that a set of radical but feasible policies holds the solution to inequality. [...] What are these policies? Spend more on education, and combine it with active labour market policies, a high minimum wage, and limits on top pay. Skilling up the workforce and compressing the wage distribution, as in the Nordic economies, will remove the incentive to hire low-wage, low-skill workers. [...] Sandbu rightly notes that many of these measures could be implemented if there is a will to do so. That, however, is a significant “if”. The response to the 2008 financial crisis was to implement none of the above policies."
John Tomaney on LSE Review of Books wrote:
Martin Sandbu sets out an ambitious policy agenda to recreate an economy where everyone feels they belong. Readers of his “Free Lunch” columns in the Financial Times will not be surprised by his sophisticated economic analysis and engaging presentation. [...] His proposed policy package pushes the boundaries of the economics consensus but is not going to shock those who have followed recent debates. Key elements include net wealth taxes, universal basic income (or negative income taxation), and carbon taxes and dividends. [...] This book is a thorough and compelling overview of recent economic analyses of the factors underlying the electoral travails of the democracy / globalization model. I would have liked the author to venture more into the art of political persuasion. Even if the ultimate source of discontent is economic, political messages that resonate with people’s moral preferences stand a better chance of passing through parliament. Sandbu takes tentative steps in this direction. For example, he presents an intriguing right-wing perspective on universal basic income. He also points out that piecemeal reform efforts may be easier to block than his ambitious package. This reader hopes for more analysis of how to overcome political obstacles in Sandbu’s next columns and books."
Amitrajeet A. Batabyal on ResearchGate wrote:
"Sandbu’s aim is to defend an open, liberal-democratic, market-based order against its detractors. While critical of recent policy directions, like John Maynard Keynes he comes not to bury capitalism, but to save it. [...] The Economics of Belonging is an important contribution to the debate about the ‘left-behind’. Sandbu offers a highly readable and carefully argued narrative, which marshals evidence adroitly and proposes a range of policy prescriptions, many of which are persuasive and deserve serious attention. But does it amount to a convincing programme for the left-behind? Among the obvious gaps, Sandbu has little to say about the contemporary geopolitics that are reshaping patterns of international trade. [...] Crucially, Sandbu never really presents a clear definition of belonging: the term does not appear in the index. In practice, his analysis rests on a methodological individualism in which utility-maximising individuals respond to (social) market signals. He overlooks the affective and collective dimensions of belonging and the complex ways people form attachments to place and the uses they make of them. Sandbu’s analysis also rests on assumptions about the essentially ‘illiberal’ culture of left-behind communities arising partly from an overdrawn distinction between the economic and cultural. In fact, we lack deep, qualitative understandings of the complex interplay of cultural and political change in such places. Left-behind places come in many shapes and sizes and this will likely confound well-meaning technocratic solutions."
Matt Whitaker on The Society of Professional Economists wrote:
"Taking issue with some of Harvard economics professor Dani Rodrik’s research about whether globalization has gone too far, the author contends that “the problems of the left behind are not caused by globalisation going too far, but by technological changes and policy mistakes...” (p. 72) [...] Let me conclude my appraisal of The Economics of Belonging with four observations. First, as noted above, this book suffers from a small number of errors of commission and omission. Second, the book is broadly supportive of free markets as long as governments comprehend that corrective mechanisms will occasionally be needed to curb the excesses of free markets. Third, the book intelligently discusses the symptoms and the causes of economic inequality in 6 western nations today and it suggests thoughtful ways in which this inequality might be attenuated. Therefore, subject to the above caveats, I recommend this book to all readers who would like to learn more about how it is possible to be economically open and pursue meaningful reforms that will improve the lives of those left behind by the present-day economic and political order."
"Aptly enough given the subject at hand, many economics books are prone to a fundamental trade-off: they are either well written or they are full of great thinking. Thankfully, Martin Sandbu falls into that rare class of author who can combine the two. His latest offering, The Economics of Belonging, is an accessible, compelling and timely read. [...] perhaps the most important message coming out of the book is its case for optimism. Rather than viewing the general economic malaise of the last decade and the specific challenges being faced by the left behind as inevitable consequences of globalisation and capitalism, Sandbu highlights the considerable level of autonomy countries retain over their destinies. We could, and should, have done more in the past to protect the left behind from the shifting economic backdrop; and we could and should do more going forward."
About Martin Sandbu
Martin Sandbu has been writing about economics for the Financial Times since 2009. Having started out as the newspaper’s economics leader writer, he is currently FT’s European economics commentator and writes its Free Lunch premium economics newsletter. Previously, he was a senior research fellow at the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania. His books include Just Business and Europe’s Orphan (Princeton). Twitter @MESandbu.
Table of Contents of The Economics of Belonging
Part I. What Went Wrong?
- The End of Belonging
- Who Are the Left Behind?
- Culture versus Economics
- Half a Century of Policy Mistakes
- Scapegoating Globalisation
Part II. What Is to Be Done?
- Economics, Jobs and the Art of Car Maintenance
- Economic Policies for Empowerment
- Macroeconomic Policy for the Left Behind
- A Smarter Financial System
- A Tax Policy for the Left Behind
- Whose GDP?
Part III. The Way Forward
- Globalisation with a Human Face
- Beyond Left and Right