All entries for October 2008
October 13, 2008
‘This is not a time for outdated thinking or conventional dogma. Extraordinary times call for bold and far reaching solutions”
- Gordon Brown, announcing the £500 billion bail-out package on the morning of 9th October 2008
British Politics is witnessing a seismic shift in the nature of the State and the role it plays. Having undergone an extensive reworking through the course of history, the UK might be about to experience a further mutation.
Under New Labour, the State took a decisively new role, deemed by many Modern Liberals at the time as the ultimate role that the State should take. Modern Liberals prescribed the State as an extra-social arbiter that serves as an ‘activator’ or an ‘enabler’; to regulate, but never to define markets – including specifically, the employment markets. The notion that the State should serve as an activator is a subtle, but nevertheless decisive, departure from both Neoliberalism’s projection of the State as a minimal market facilitator and from Old Labour’s previous inclination that the State should lead economic management. In other words, the notion that the State should serve as an ‘activator’ should not be deemed as a compromise between socialism and capitalism, but rather as an independent idea.
To understand why, we must first appreciate the historical and political context in which the New Labour project was born. Despite the theorised economic efficiency that the system promised, Thatcherism failed to yield the fall in unemployment that neoliberals projected by ‘freeing up the markets.’ New Labour believed that this failure was rooted in a misunderstanding of ‘meritocracy’ and the inherent barriers to social mobility that halted it. The response therefore was to try and remove these barriers by increasing investment in ‘Education, Education, Education’ and other public services in order to emancipate the individual’s self-serving capacity. In other words, the State was deemed, in a strictly utilitarian sense, as a way of unlocking people’s talents – a way of enabling self-realisation, but ultimately a self-realisation that the individual must recognise for him or herself and hence an allowance for job-seekers as opposed to the jobless.
This definition helps us to understand the fundamental difference between New Labour’s State and what it could soon become. As we have already seen, one way to improve Thatcherism is to remove physical barriers – the way that New Labour adopted. But there is also a further way of improving upon Thatcherism, a more cynical way that can arguably be drawn from recent projections of society issued by both Brown and Cameron.
This demands the State to take rational decisions for and directly shape the path of the individual: to become a ‘Social Implementer’.
If we assume Gidden’s’ analysis of society to be correct – that public institutions are only effective in so far as individuals interact with them (which it undoubtedly has under New Labour), we can begin to uncover the potential advantages, if not genuine need for the State to assume this new role in a time when collective action is more favourable than individual choices.
The Modern Liberal belief propagated by New Labour that the State should limit itself to defining the limits of and regulating the market failed to provide the fundamental structural changes to Thatcherite capitalism that were (and still are) necessary to avoid the ‘boom and bust’ cycles witnessed every decade from the end of the Second World War. What we saw and continue to witness are contradictions between economic institutions and the State. Where once before we saw conflict between the Unions and the State – a conflict, which dominated economic policy from the 1950s right through to the early 1990s (it was after all Kinnock’s attack on the militant urges of Liverpool Labour councils and their leader, Derek Hatton, that would signal the end of Labour’s relationship with the TUC – a task completed by Blair) – the late 1990s and the early 2000s has witnessed the creation of a new antagonism between the State and the City, under which bankers and investors have been able to negotiate for increased economic freedom – at the cost of macro-economic stability.
In other words, New Labour’s attempt to provide economic stability by substituting State-intervention with Market-regulation has simply failed to facilitate the uneasy marriage between socialism and capitalism that its post-modernist architects naively thought could be achieved. Instead, a fundamental misunderstanding of capitalist economics has allowed New Labour to preside over increased relative poverty levels and has allowed ministers to overestimate their capacity to avoid the boom and bust cycle. An attempt to review the interaction between the economy and the State is therefore long overdue.
However, we shouldn’t be fooled into thinking that Brown has the answer, for the reactionary conception of the State that is now invariably emerging, very easily jeopardise our longer-term economic and political safety. We’re already witnessing this in the government’s role in the holding and selling of banks. By orchestrating big bank takeovers – such as selling Bradford and Bingley to Santander, the government is allowing the monopolisation of the banking industry and thereby exacerbating its oligarchic nature. This has two profound implications for the economy and the individual agents placed within it.
Firstly, an in a strictly practical sense, a private banking monopoly would severely undermine the effectiveness of the government’s macroeconomic strategy – especially monetary policy. With the wealth of an entire people in its hands, the bank could avoid cash flow regulation and could potentially undermine efforts to cut inflation. The government’s current actions could therefore entrench the power of certain bankers at the cost of the State’s
Secondly, and more threateningly, it would irrevocably confirm a capitalist hegemony. By specifically investing for the first time in banks’ assets, tax-payers have become share-holders – and shareholders gain the ability to direct banks, which for Brown and Darling, is where the significance lies. By become share-holders, the individual tax-payer is being given the opportunity, if not responsibility, to shape the banking sector. Or so it would seem. For by setting up the recovery package in this way, Brown is not so much offering the tax-payer the opportunity but rather is compelling us to support the banks – he is in effect ‘agenda-setting’ – and as such actively forcing us to subscribe to his vision of economics. In effect Brown is conducting a very cynical attempt at marrying thinly disguised social-democratic policies with rational-choice theory in a bid to make State action representative of the people. This therefore suggests that leaving economic necessity to one side, the State is assuming a monopoly of knowledge and demands us to comply with it.
As such, a new model of understanding can now be shown to exist, in which the State assumes the authority to define relationships between private institutions and the individual.
So where will the State now try and take us? One clue is offered by the regressive way in which both Brown and Cameron mutually desire to reassert Britain’s international leadership. In this way, our leaders betray an archaic understanding of the world – a Sovereign-State model whose origins date back as early as the late 19th century and one which has arguably become unfashionable, if not incompatible with the dominant understanding of the world as a global community. And it is arguable that such a misunderstanding of eco-political phenomena has already led to unforced errors.
The failure to orchestrate a rescue package in concert with the rest of Europe, almost forced the British Treasury into action against its will. The actions of Germany and Ireland put pressure on the British government to provide a similar package – which it did: £400,000, 000, 000 - in a bid to keep the City alive in the face of being out-competed by foreign banks and without much consideration of the longer-term implications – including increased risk-taking. This in itself serves to ironically highlight how Britain doesn’t actually fit the Sovereign State model that its leaders wish it did.
More devastatingly still, we are also being shown how unilateral action can exacerbate international tensions – particularly between Russia and the West. After declaring itself bankrupt, Iceland had (as in not voluntarily) to resort to a Russian (a country led by nationalists with a well documented desire for territorial expansion) loan, because its usual creditors could barely help themselves. If action is not taken now to ensure global economic cooperation, we could observe empire-building or the accumulation of economic protectorates (as we’ve witnessed of China in Africa and South America), which could severely limit the effectiveness of international banking and as such limit the availability of much needed liquidity, from which economies over the past decade have thrived. In this sense, the solutions that are being prescribed to the global credit crunch have far wider long-term implications that governments have yet to acknowledge.
Or is it that ‘We’ have yet to acknowledge the implications of these actions? Draconian measures are easy to resort to, in a time in which we crave for certainty and justice. But instead of falling prey to such snares, it is our responsibility as citizens to take our government to task and ensure that parties do not capitalise on our vulnerability. In particular we need to safeguard competition between banks - in order to safeguard our status as customers and to avoid entrusting the banks with even further power over our economy. But so too must we be aware of the type of State-intervention being conducted here. In stark contrast to 1997, Labour has now made the State central to the direction of the economy again by proscribing it the role of ideologue - at the expense of freedom of expression.
October 01, 2008
“…Government cannot solve all economic problems or end the economic cycle. But by spending wisely and taxing fairly, government can help tackle the problems…”
- Labour Party Manifesto, 1997
There is no denying that governments have always sought to tax ‘fairly’ - for whom, is a little less certain, but it is always ‘fairer’. However, the particular significance of the above soundbite is drawn from the first six words; the concession that Keynesian economic strategy is no longer compatible in a world, where the British economy is but one constituent of an increasingly autonomous global market.
Believed by many that it died with Blair’s departure, recent statements from rivalling parties would ironically suggest that the New Labour Project has not been axed, but adapted and as such, has been able to gain a degree of permanency.
Cameron’s pledge to ‘nudge’ individual towards social responsibility, coupled with the Liberal Democrats’ leader, Nick Clegg’s campaign for fairer economic redistribution through a proposed modification of the tax system (under which responsibilities once reserved for the State would be entrusted to the individual) , both suggest a desire to if not to perpetuate, but certainly to progress policies witnessed in the mid-1990s as a way of filling the emerging idea-vacuum.
This therefore begs the question: Are we witnessing the emergence of a second phase to Gidden’s Third Way? Initially (and without too much simplification), the Third Way (in this case regarding specifically modern politics, although one cannot deny the underlying similarities with Italian corporativism which shared the same name and dates back to the turn of the twentieth century) provided a way of uniquely marrying capitalism and socialism in a single post-ideological doctrine (for although he dismissed post-modernism, Giddens sympathised with ideas considered to represent late modernity).
Gidden’s Third Way sought to redefine the role of government as a social activator, as oppose to a social implementer. Government was meant to recognise the permanency of market forces and regulate them, as oppose to define them.
But where Blair and Mandelson’s Project sought to make the State responsible for this role as ‘activator’ (to arguably compensate for the absence of direct fiscal and monetary management that Labour’s Left so keenly sought and in some quarters still seeks), both the Conservatives and Liberal Democrats believe that individuals should encourage themselves: Cameron and Osborne want people to be rewarded for their thrift and their voluntary contributions to community projects, while Clegg and Cable seek to reward those individuals who lead ‘healthier lifestyles’.
And it may well be that this type of politics - Third Way Mk II - could be precisely the strategy (if not the only strategy) that governments can feasibly pursue in the face of a looming recession. In the absence of high tax revenues, governments are arguably unable to regulate the markets (including the employment market) at a macro-economic level as Labour had done. Instead, politicians and political thinkers now see government’s role as facilitating micro-economic improvement - were that be cutting taxes (including Capital Gains tax) or specifically lobbying individual firms - particularly in the Energy Industry - to help the rest of the economic community.
Moreover, this thinking is beginning to be extended to social policy. Instead of Sure Start programmes, parties are offering incentives to local charities to do more for local youngsters, while Community Support Officer would be substituted by ‘Have-a-Go Heroism’. In a way, political thinkers want to go one step further than Giddens had proposed and actively get individuals engaged in their communities in a way that he thought people would do voluntarily, once barriers to social mobility were eliminated.
This has a profound implication on the structure of society. Rather than serving as an overseer, we have entered a phase where government’s desire to be an ‘implementer’ has led to a the creation of a governmental “market force”, but one with the power to express and perhaps impose the views of an electoral majority, where the forces of demand and supply are insufficient in gaining a ‘fair’ outcome for the public. Hence Labour’s more proactive role in managing not only Northern Rock but also Energy companies.
On one hand this is arguably more successful than merely ‘overseeing’ or ‘regulating’ the market economy. We can see this in two distinct senses. The first is that the government can be proactively involved in the economy, without damaging entire industries. In other words, the collateral damage incurred by Social Democratic economic policy would be avoided. The second is that the people’s wishes carry a lot more weight in parts of the economy where its oligarchic nature would ordinarily resist interference.
However, it is precisely this point that reveals 3.2’s greatest weakness. The notion of harnessing the public’s wishes may point towards a more democratic state, but in the absence of fundamental structural changes to the parliamentary system, ’social responsibility’ rhetoric may remain just that, as the people wouldn’t be able to assume the economic responsibility demanded of them in the absence of an increased say of where they can and cannot be self-sufficient. In other words, one cannot simply demand the poorest to be economically responsible, unless they are in a position to demand and negotiate for the community’s help - which, by the proposed model, could only be achieved by enlarging the political channels available to them - channels which are being overlooked by these current proposals and channels which could remain irrelevant if the majoritarian system doesn’t allow marginal, but significant groups to express themselves. This carries the implication therefore that a government with a ’social implementer’ agenda are more likely to realise Mill’s Dictatorship of the Majority, or should that be: impose ideas legitimised by the belief that it is sufficient to gain the agreement of a small percentage of a people, on one day every four years?
In order to steer us away from such a situation, Cameron and Clegg must therefore recognise that society doesn’t represent an Fukuyamian homogeneity, but rather an aggregation of different social groups, who - in order to become more politicised - must be articulated, rather than merely represented. In other words, no half measures can feasibly exist - economic responsibility must logically be matched with the delegation of democratic responsibilities to not only maximise people’s well-being in a practical sense, but also encourage their own political autonomy.
But in the absence of concrete proposals to localise politics, we shouldn’t expect 3.2 anytime soon.
If politicians are reading anything this summer, its Richard Thaler and Cass Sunstein’s ‘Nudge: Improving Decisions about Health, Wealth and Happiness’, cited by both sides of the Commons as heralding a distinctive shift in political thinking and policy.
Of course, governments have been trying to dictate society’s behaviour for time immorium - heavy taxation on perceived negative externalities and strict regulation is proof of that. But where Thaler and Sunstein have departed from previous idea is in their hope to integrate voluntarism with government direction in a way that both preserves individual liberty in the face of particularly ‘Green Authoritarianism’ and the Market Economy. Thus rather than legislating, ‘Nudge’ urges governments to encourage social responsibility in a way that echoes the age of communitarianism ushered in by New Labour and has been adopted by the Conservatives in their promotion of ‘Voluntary platoons’, where services ordinarily provided by the state are conducted by charitable organisations.
This raises the question - is ‘Nudge’ new? Governments have urged people to voluntarily ‘help themselves’ since the days of Samuel Smiles, when Post Office Saving Accounts were created to encourage ‘thrift’. Therefore rather than being libertarian, ‘Nudge’ has been attacked as being a cynical re-marketing of paternalism, which would ordinarily be incompatible in a Market Economy, where deference is dead and individual need placed above society’s.
And with good reason. The notion of gaining voluntary consent for a government initiative goes beyond mere 'agenda setting' and increasingly resembles Lukes’ third face of power - ideological control. This is worryingly revealed by the logic behind the ‘Nudge’ itself. The fact that a ‘Nudge’ would be conducted by representatives elected by voters who have not already voluntarily reversed perceived social costs indicates that any ‘Nudge’ would in fact be conducted against the individual’s interest. For some therefore, rather than representing, politicians would therefore serve as ideologues assuming an authority above their electors.
Nudge is therefore a form of ideological paternalism that demands rather than depends upon individual commitment.