The word socialism
first appeared in 1827. Robert Owen defined socialism as “the abolition of private property”. Karl Marx took a
similar line, and extended the idea of common ownership to the national economy.
At least at that time, socialism and communism were virtually synonymous, especially in terms
of their shared vision of the final goal. They both meant the common ownership
of the means of production, and the end of markets and competition.
Robert Owen
This view persisted throughout the twentieth century, including within the UK Labour Party. George Bernard Shaw wrote with approval: “Socialists are trying to have the land and machinery ‘socialised,’ or made the property of the whole people”. In 1908 the Labour Party Conference passed a resolution, adopting the aim of “the socialization of the means of production, distribution and exchange to be controlled by a democratic state”. In 1924 Sidney Webb summarized his view of socialism as involving “(1) Collective Ownership; (2) Collective Regulation; (3) Collective Taxation; and (4) Collective Provision”.
Similar views were found among Labour
Prime Ministers. J. Ramsay MacDonald saw socialism as “a movement to supplant
Capitalism altogether, by organising communally the services which Capitalism
performs or ought to perform.” In 1937 Clement Attlee wrote of the “evils” of
capitalism: their “cause is the private ownership of the means of
life; the remedy is public ownership.” Attlee then approvingly quoted the words
of Bertrand Russell: “Socialism means the common ownership of land and capital
together with a democratic form of government.”
In my book Is Socialism Feasible?I show the persistence of this view of socialism. I also discuss several attempts to change its meaning, including by Douglas Jay, Anthony Crosland, Deng Xiaoping and Tony Blair. Blair tried to shift the meaning to social-ism, by replacing the goal of common ownership by vaguely-specified “ethical values” and a recognition that individuals are socially interdependent. This attempt to revise the meaning has not made much of a mark.
Deng Xiaoping faced the
problem of persuading the Chinese Communist Party to support his enormously
successful market reforms. Deng declared:
“The essence of socialism is liberation and development of the productive forces, elimination of exploitation and polarization, and the ultimate achievement of prosperity for all … common prosperity is the essence of socialism.”
Note the subtle shift from property to prosperity. If that is socialism, then few people are not socialists.
But the original meaning endures. The Merriam-Webster
Dictionary defines socialism as “a system of society or group living in which
there is no private property” or “a system or condition of society in which the
means of production are owned and controlled by the state.” This is remarkably
similar to the original definitions of Owen and Marx.
How
moderates help Corbyn, and socialists help Trump
Among prominent living politicians today, including
Jeremy Corbyn, Bernie
Sanders and Jean-Luc Mélenchon, Socialism has retained its original meaning,
of widespread common ownership, or at least they have not renounced that original
definition.
Bernie Sanders
At the same time, leading Labour Party moderates
who support a mixed economy continue to support “democratic socialism”. By
doing so they give succour to the full-blooded socialist left, who are much
closer to the enduring traditional view of socialism than the moderates themselves.
We can pretend that the word socialism has
shifted in meaning, but there is little evidence of a major and widely accepted
change.
Moderate or otherwise, those using the “democratic
socialism” label help to sustain the mistaken idea that socialism (in its enduring
and prevalent sense) is compatible with democracy. History and theory both show
that a totalitarian concentration of political power flows inevitably from the unmitigated
concentration of economic power in the hands of the state that is associated
with large-scale socialism.
Alexandria Ocasio-Cortez
A similar problem exists in the US, particularly
after the recent election of a young group of socialists to congress, including
the impassioned and eloquent Alexandria Ocasio-Cortez. Along with Sanders, they
are members of the Democratic Socialist Alliance (DSA) within the US Democratic
Party.
The DSA argues for “a vision
of a humane international social order based both on democratic planning and
market mechanisms”. They also argued that “widespread worker and public ownership will greatly lessen
the corrosive effect of capitalists [sic] markets on people’s lives”. While, unlike many other socialists, the
DSA notably accepts an enduring role for markets, its agoraphobic bias is
revealed by the failure to mention the corrosive effects of bureaucracy on
people’s lives.
In some
statements, leading DSA politicians seem to favour Nordic-style, welfare state
capitalism. But they have not made it clear that they support the large private
sectors and financial markets that are prominent in all the Nordic countries. Instead,
they go along with the abolition of capitalism. They distance themselves from
the Communist regimes of the past. But while the experiment with socialism in
Venezuela has led to a catastrophic human disaster, they
fail to come out in full condemnation of that regime.
This helps
Trump. Not only does he mobilise racist prejudices, he also uses their
self-declared socialism to describe
them as communist. Given that socialism and communism were (at
least originally) virtual synonyms, this ammunition is handed to Trump by his
most fervent opponents.
The changed
meaning of social democracy
When Social Democratic parties were first formed
in Europe in the nineteenth century, most were strongly influenced by Marxism.
They were fully socialist in its original sense.
Some separation of meaning between socialism and
social democracy occurred beforehand, but it was brought to a head by the onset
of the Cold War in 1948. Europe as a whole, and Germany in particular, were
divided between the Eastern and Western Blocs.
All socialist and communist parties had to
choose – the East, the West, or a plague
on both? With Moscow ties in many cases, almost all Communist parties chose the
East. Many moderate Socialist, Social-Democratic or Labour parties chose the West.
SPD Congress in Bad Godesberg 1959
At its Bad Godesberg Congress in 1959, the
German Social Democratic Party (SPD) made fundamental changes to its aims. It
dropped its opposition to capitalism, and it abandoned the Marxist analysis of
class struggle. The
SPD declared:
“The Social Democratic Party therefore favours a free market wherever free competition really exists. Where a market is dominated by individuals or groups, however, all manner of steps must be taken to protect freedom in the economic sphere. As much competition as possible – as much planning as necessary.”
The crucial point here is that the
SPD moved from (temporary or permanent) toleration
of markets and competition, to accepting
markets and competition as desirable, alongside strong public enterprise
and state regulation where necessary.
This explicit and fundamental change in
aims in the world’s largest and most influential Social Democratic Party led to
a separation of meanings of the terms social
democracy and socialism. But it
must be acknowledged that strong residues of old-style thinking persisted, in
the SPD and in social-democratic parties in other countries.
The acid
test
There is a simple test to distinguish a socialist from a social democrat, according to currently prevalent meanings of those
words.
To be a social democrat it is not enough to accept
markets and a mixed economy, as Jeremy Corbyn, John McDonnell and the Democratic
Socialists of America have done. After all, a mixed economy could be accepted
as a temporary staging post in the transition to full-blooded socialism, as Vladimir
Lenin did with his New Economic Policy in 1921.
A modern social democrat must go further. He
or she must make a clear and positive case why markets, competition and a private
sector are more than a temporary expedient. It
must be argued that these things are indispensable, both for economic efficiency
and the preservation of freedom. This is the acid test. The SPD in 1959 understood
this point and it passed the test.
As far as I am aware, neither Corbyn, McDonnell, Sanders nor Ocasio-Cortez have made such a positive case for a permanent private sector. If I am right, then they are socialists, not social democrats. Despite their protestations, they are closer to traditional communism than to modern social democracy, as practiced in the Nordic countries and elsewhere. I would be delighted if they can prove me wrong.
Large-scale socialism is outdated, extreme and
demonstrably incompatible with democracy. At least if these declared socialists
want to win parliamentary majorities and form governments, then they have to
change their terminology, and dispose with outdated and unfeasible ideas.
But while Nordic social democracy remains remarkably successful (as I show in my book Is Socialism Feasible?) the social-democratic brand throughout Europe has declined in electoral support. Although re-naming is necessary, much more than renaming is required. The abandonment of the socialist label is but a first step. But that is another story.
17 July 2019
References
Attlee, Clement R. (1937) The
Labour Party in Perspective (London: Gollancz).
Blair, Tony (1994) Socialism,
Fabian Pamphlet 565 (London: Fabian Society).
Crosland, C. Anthony R. (1956) The Future of Socialism (London: Jonathan Cape).
Democratic Socialists of America (1995) ‘Where We Stand: Building the Next Left’, DSA: Democratic Socialists of America. https://www.dsausa.org/where_we_stand.
Griffiths, Dan (ed.) (1924) What is Socialism? A Symposium
(London, Richards).
Jay, Douglas (1937) The
Socialist Case, 1st edn. (London: Faber and Faber).
Despite their declared support for free trade, Tory libertarians like David Davis and Jacob Rees-Mogg are acting as if there were still a British Empire.
Geoffrey M. Hodgson
The Brexiteers in the Tory Party do not understand the mechanics of modern trade and have no viable blueprint for Brexit.
Substantial harmonization of standards and regulations is required when trade crosses international borders. The EU Single Market enables massive gains from trade within a harmonized system of regulation. EU member states have a say in the development of those regulations, within a common system.
Outside the EU, the UK would have to replace a huge apparatus of EU-wide regulation that has grown up since 1973 when it joined. This regulatory legislation would be an even more formidable burden than any increased tariff levels that would be adopted if the UK leaves the EU Customs Union and Single Market.
This problem creates a dilemma for libertarians who distrust all state machines – especially large ones outside their national comfort zone. Hence, alongside nationalists and hard left socialists, libertarians were in the intellectual forefront of the 2016 Brexit vote in the UK, chiming in with overblown complaints about Brussels bureaucracy, made more strident because this bureaucracy spans national boundaries and is staffed by foreigners.
Some of these libertarians are atomistic individualists, unable to accept that markets consist of more than individuals in isolation. These libertarians are seemingly unaware that all trade and markets must involve commonly accepted rules, as well as the wills and assets of individuals. Markets, in short, are social institutions.
Entering or leaving markets requires dealing with systems of rules. In practice, exit from the EU Single Market means either that regulations have to be developed independently, thus reducing trade possibilities, or that EU regulations have to be accepted for future trade, while having little say in their formation.
The libertarian dilemma
Minimal-state libertarians are thus caught in a dilemma. They have either to accept the adjudications of a foreign court, thus dramatically violating their characteristic anti-state position, by accepting not only state legal system but one outside their homeland, or they have to curtail their cherished ideological ambitions for free trade and markets across national boundaries.
More generally, any contract between sellers and buyers across international boundaries requires agreement on the means of adjudication, if a dispute arises over its terms or fulfilment. Typically it is agreed that disputes will be resolved in the courts of one nominated country. The European Court of Justice was set up to deal with contractual disputes within the EU, and between EU traders and contracting businesses located outside the EU.
Regulatory harmonization and trade dispute adjudication create problems for libertarians. Just as big socialists believe in a fantasy world where the state can do everything, some libertarians believe in the obverse fantasy of a minimal state, where trade somehow operates without an extensive state legal infrastructure. As Jamie Peck put it, these “neoliberals” espouse “a self-contradictory form of regulation-in-denial”.
Nevertheless, when faced with the real world of business and contract, these libertarians acquiesce with the state machine and its legal system within their own national boundaries. Their nationalism means that they can live with that outcome.
But when trade crosses international boundaries, the problems of regulatory harmonization and dispute adjudication compel these libertarians to accept – especially when trading with a larger economic bloc – that disputes may have to be resolved in courts outside their national boundaries.
For closet nationalists in libertarian clothing, accepting the judgments of a foreign court is a step too far. The lenience granted to their national courts is not granted to those of foreigners.
Bring back the British Empire – and other fantasies
British nationalists in libertarian clothing may then call up another fantasy from the past. They can imagine that Britain is still a great power, and that it has the capacity to compel that all trade disputes be resolved in British courts. In their imagination these libertarians bring back the British Empire. Imperial power makes everyone else a rule-taker. They may talk of that bygone world in the corridors of Eton, but it is far beyond the reality of global power today.
Across the Atlantic, American nationalists in libertarian clothing perform ideological gymnastics by allying themselves with politicians such as Donald Trump. He an economic nationalist rather than an advocate of international free trade. As long as these dubious libertarians can concentrate their gaze on the domestic US market and avoid the world beyond, then with some additional fantasising they might continue to believe in their myth of a minimal state.
Instead of the Empire, a US national fantasy is the Wild West. Historically, this was a short-lived zone, partly out of reach of the state and its system of law. Deals were done, aside the barrel of a gun. It is the US version of a mythological libertarian paradise. Global reality today, however, is very different.
A third fantasy is the idea of Jeremy Corbyn that Britain can leave the EU and build socialism. This is a mythical as the other fantasies. Corbyn does not understand markets and has no viable blueprint either – but that is the subject of other blogs. In the meantime, we note that all these efforts to leave the EU are based on fantasies that have little connection to the world in which we live today.
9 July 2018
Published by University of Chicago Press in January 2018
Stretching the word “neoliberal” to cover people as different as Deng Xiaoping and Donald Trump has turned it into an absurdity.
Geoffrey M. Hodgson
Once upon a time, the word neoliberalism might have been confined to an extreme form of individualism that eschews state regulation, promotes economic austerity and a minimal state, opposes trade unions and vaunts unrestrained markets as the solution to all major politico-economic problems.
But today the usage of the word neoliberalism is no longer so restricted. I have been told more than once that anyone who is not a socialist is automatically a neoliberal. Any defence of the existence of markets now risks quick rejection with an angry neoliberal stamp upon it.
More frequently these days, a wide range of politicians, from Margaret Thatcher and Ronald Reagan at one extreme, to Bill Clinton, Hillary Clinton, Emmanuel Macron and Tony Blair at the other limit, are all described as neoliberals, despite, for example, hugely varied policies on taxation, government expenditure and the role of the state.
In their book on Neoliberalism, Damien Cahill and Martijn Konings describe the US President Donald Trump as a neoliberal. Yet he is a supporter of protectionism and he has imposed import tariffs: he does not believe in free trade. The word neoliberal is now stretched beyond credence and coherence.
Sneaky Deng Xiaoping was a neoliberal
Guardians of socialist purity have described some errant Marxist or socialists as neoliberals. In his Brief History of Neoliberalism, Marxist academic David Harvey described revisionist-Marxist Deng Xiaoping as a neoliberal.
From 1978, Deng supported the reintroduction of markets into the Chinese economy. But he still proposed a strong guiding hand by the state, including centralized management of the macro-economy and the financial system.
Harvey admitted that Deng’s policies led to strong economic growth and “rising standards of living for a significant proportion of the population” but he passed quickly over this ellipsis.
In fact, Deng’s Marxist-revisionist “neoliberal” reforms lifted more than half a billion people out of extreme poverty, albeit unevenly and at the cost of greater inequality. That was about one-twelfth of the entire world population in 2000. With this development, China halved the global level of extreme poverty. The bulk of the poverty reduction in China came from rural areas.
This achievement is unprecedented in human experience. If China’s extension of markets is neoliberalism, then neoliberalism is the most beneficial economic policy in history.
Vladimir Lenin and Josip Tito as neoliberals
But earlier contenders for the title of “the first neoliberals” can be found. In her book on Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism, the sociologist Johanna Bockman found roots of neoliberalism in the experiments in so-called “market socialism” in Josip Tito’s Yugoslavia from the 1950s and in Hungary from the 1960s.
There is no stopping this neoliberal treachery – infiltrating socialism as well as capitalism!
Josip Tito
Adopting the methodology of Harvey and Bockman, I would like to nominate Vladimir Ilyich Lenin as the first neoliberal, for his betrayal of socialist central planning and his introduction of the New Economic Policy (NEP) in Soviet Russia in 1921. In this admitted “retreat” from socialism, Lenin re-introduced markets and profit-seeking private firms.
Crucially, in support of this nomination, there is evidence that Deng’s post-1978 reforms drew a strong inspiration from Lenin.
“A brainless synonym for modern capitalism”
Of course, I am being ironic. My point is that, thanks to Harvey and others, neoliberalism as a term has become virtually useless. As Philip Mirowski and Dieter Plehwe put it, neoliberalism for some has become “a brainless synonym for modern capitalism.”
Mirowski also complained that opponents “often bandy about attributions of ‘neoliberalism’ as a portmanteau term of abuse”. But Mirowski did not drop the term.
Geoffrey Hodgson & Philip Mirowski
In his superb history of the Mont Pèlerin Society, Angus Burgin commented critically on the term neoliberalism:
“It is extremely difficult to treat in a sophisticated manner a concept that cannot be firmly identified or defined.”
The word is no longer sound currency. Bad usage has driven out the good. It has become a swear-word rather than a scientific term.
Neoliberalism as a ruling class strategy
Part of the impetus behind the excessive and ultimately destructive use of the word neoliberal is the Marxist belief, expressed by David Harvey among others, that neoliberalism is a strategy serving the interests of the capitalist class.
Following the post-war settlement of 1945-1970, which conceded greater power and shares of income to organized labour, rising neoliberalism allegedly rescued the capitalist class.
Their evidence is that in several major countries from the 1970s, trade unionism declined in strength and the shares of national incomes going to the top five per cent increased.
Second, in several countries, including most dramatically in China, standards of living have increased, even for the lower income deciles. While for many people in the US, real wages have stagnated, this has not been the case in several other countries, particularly prior to the 2008 crash.
Third, the argument may exaggerate the degree to which the capitalist class is united, in terms of their real interests or of their perceptions of them.
Fourth, it is questionable that capitalist interests are best served by declines in real wages, given the powerful Keynesian argument that capitalist prosperity depends on effective demand in the economy as a whole. Higher real wages can increase prosperity across the board, and serve the interests of capitalists and capitalism.
Fifth, there are other, possibility more effective, strategies for countering the power of organized labour and reducing the incomes of many people in favour of the top five per cent. These alternatives include economic nationalism, which can take the extreme form of fascism. Generally these are not free-market, small-state approaches. If they are all labelled neoliberal, and regarded as the grand global strategy of the bourgeoisie, then the analysis becomes dangerously insensitive to the increasingly probable threats of economic nationalism and fascism.
Neoliberalism and the Mont Pèlerin Society
Perhaps the most well-informed and intelligent attempt to give neoliberalism a distinctive meaning is by Philip Mirowski, who associates it, more or less, with the Mont Pèlerin Society.
But the Mont Pèlerin Society changed to a degree, in substance and direction. It began under a different name in the 1930s and was first convened under its current name in 1947. It was then an attempt to convene different kinds of liberals in defence of a liberal market economy, just after the defeat of fascist tyranny, during an expansion of Communist totalitarianism, and while witnessing the rise of statist socialist ideas in Western Europe and elsewhere. Liberalism broadly was on the rocks: it needed its defenders.
As a measure of the relative inclusivity and internal diversity of the Mont Pèlerin Society, consider the testimony of the philosopher Karl Popper, who was a friend of Hayek and a prominent Mont Pèlerin member in the early years. Popper wrote to Hayek in 1947 that his aim was “always to try of a reconciliation of liberals and socialists”.
Michael Polanyi and Wilhelm Röpke
Michael Polanyi – the brother of Karl Polanyi – was a founder member of the Mont Pèlerin Society. He advocated Keynesian macroeconomics in a market economy, alongside a radical redistribution of income and wealth. He rejected a universal reliance on market solutions, seeing it as a mirror image of the socialist panacea of planning and public ownership. He did not mince his words against this “crude Liberalism”:
“For a Liberalism which believes in preserving every evil consequence of free trading, and objects in principle to every sort of State enterprise, is contrary to the very principles of civilization. … The protection given to barbarous anarchy in the illusion of vindicating freedom, as demanded by the doctrine of laissez faire, has been most effective in bringing contempt on the name of freedom …”
Polanyi had drifted away from the Mont Pèlerin Society by 1955, stressing its inadequate solutions to the problem of unemployment and its promotion of a narrow view of liberty as the absence of coercion, neglecting the need to prioritize human self-realization and development.
Michael Polanyi
In its early years, the Mont Pèlerin Society hosted debates on the possible role of the state in promoting welfare, on financial stability, on economic justice, and on the moral limits to markets. Like Polanyi and other early members of the society, Wilhelm Röpke argued that the state was necessary to sustain the institutional infrastructure of a market economy. The state should serve as a rule-maker, enforcer of competition, and provider of basic social security. Röpke’s ideas were highly influential for those laying the foundations of the post war West German economy.
While they received a more sympathy from Hayek, Ludwig Mises regarded Röpke’s views as “outright interventionist”. Mises once became so frustrated with these ongoing arguments in favour of a major role for the state that he stormed out of a Mont Pèlerin Society meeting shouting: “You’re all a bunch of socialists.”
The rise of Milton Friedman
Angus Burgin’s history of the society shows how its early period of relative inclusivity was followed by schisms, departures, and a narrowing of opinion. People like Polanyi and Röpke became inactive. Eventually the primary locus of the Mont Pèlerin Society shifted to the US, with greatly increased corporate funding under the rising intellectual leadership of Milton Friedman.
Milton Friedman
Hence the Mont Pèlerin Society evolved from a broad liberal forum to one focused on promoting a narrow version of liberalism that is more redolent of Herbert Spencer than of Adam Smith, Thomas Paine or John Stuart Mill.
This ultra-individualist liberalism entailed a narrow definition of liberty as the absence of coercion, it relegated the goal of democracy, it neglected economic inequality, it overlooked the limits to markets, it saw very limited grounds for state welfare provision and intervention in financial markets, and it stressed self-interest rather than moral motivation.
Perhaps Friedman was a neoliberal. Perhaps Hayek too. But if we add Lenin, Tito, Deng or Trump to the list, then we are in the realms of absurdity – the term becomes useless.
1 June 2018
This book elaborates on the issues raised in this blog:
Published by University of Chicago Press in January 2018
Bibliography
Bockman, Johanna (2011) Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism (Stanford: Stanford University Press).
Burgin, Angus (2012) The Great Persuasion: Reinventing Free Markets since the Depression (Cambridge MA: Harvard University Press). See esp. pp. 57, 80-86, 116, 121.
Cahill, Damien and Konings, Martijn (2017) Neoliberalism (Cambridge UK and Medford MA: Polity Press). See esp. pp. 144-5.
Harvey, David (2005) A Brief History of Neoliberalism (Oxford and New York: Oxford University Press). See esp. pp. 1-3, 120-22.
Jacobs, Struan and Mullins, Phil (2016) ‘Friedrich Hayek and Michael Polanyi in Correspondence’, History of European Ideas, 42(1), pp. 107-30.
Mirowski, Philip (2013) Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (London and New York: Verso). See esp. pp. 29, 71.
Mirowski, Philip and Plehwe, Dieter (eds) (2009) The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (Cambridge MA: Harvard University Press). See esp. p. xvii.
Pantsov, Alexander and Levine, Steven I. (2015) Deng Xiaoping: A Revolutionary Life (Oxford and New York: Oxford University Press). See esp. p. 373.
Polanyi, Michael (1940) The Contempt of Freedom: The Russian Experiment and After (London: Watts). See esp. pp. 35 ff., 57-58.
Ravallion, Martin, and Shaohua Chen (2005) ‘China’s (Uneven) Progress against Poverty’, Journal of Development Economics, 82(1), pp. 1-42.
Although education is not a public good, there are good reasons why the state should support education services.
As leader of the UK Labour Party, Jeremy Corbyn has opined that “education is a public good” and drawn the conclusion that it should all be provided by government and funded by taxation.
All three leaders of the UK Green Party since 2012 – Nathalie Bennett, Caroline Lucas and Jonathan Bartley – have repeated the phrase “education is a public good”. They too implied that all education should be free of charge to the user and paid for out of taxation.
Jeremy Corbyn and Caroline Lucas
Similarly, Shakira Martin, who was elected President of the UK National Union of Students in 2017, remarked: “Education is a public good and should be paid for through taxation.” These influential organizations are led by people who have not learned the lessons of Econ 101.
In addition, this inaccurate rendition of the meaning of public good is common among journalists, who also have a moral responsibility to use terms accurately.
What is a public good?
The economist and Nobel Laureate Paul Samuelson established the concept of a public good in an academic paper in 1954, although some of the basic ideas involved had been formulated previously by others.
John Stuart Mill, for example, had argued in his Principles of Political Economy that lighthouses should be built and financed by governments, because their widespread benefits could not readily be financed by passing ships, and no individual had the pecuniary incentive to construct them.
The established technical definition of a public good is a good or service that is non-rivalrous and non-excludable. Non-rivalrous means that its use or consumption by any actor does not significantly reduce the amount available for others.
Non-Rivalrous Consumption
Non-excludable means that potential users cannot practically be excluded from the use of the good or service. This definition can be confirmed by reading any reputable economics textbook.
Consider the example of street lighting. If a town council uses local tax revenues to set up and maintain lighting on its streets, then there are widespread benefits for everyone. But it is not possible to charge people individually, according to whether they benefit from the illumination.
So when elections to the town council occur, self-interested citizens will vote for candidates proposing lower taxes, assuming that they will benefit anyway from any public good provision. Why pay more taxes when the lighting is free at the point of use? Self-interested consumers will try to hitch a free-ride. The outcome is that the street lighting will be underfunded, while everyone would prefer streets that are well-lit.
Free Riders
Samuelson’s argument was popularized by John Kenneth Galbraith in his 1958 book The Affluent Society. Therein Galbraith argued that vital public goods would be under-provided in a market system: there could be the coexistence of “private opulence and public squalor”. The combined efforts of a revered mainstream economic theoretician and of an astute and inventive populariser of economic wisdom helped to pave the way for a wave of interventionist policies in the US and other developed economies.
Do public goods necessitate public provision?
After this action came the reaction. In a 1974 article Ronald Coase (another Nobel Laureate) argued that many early lighthouses in England were privately constructed and financed by tolls at the ports. In fact, an emblematic example of a public good had often been financed privately. Hence “economists should not use the lighthouse as an example of a service which could only be provided by government”.
Ronald Coase
This and other interventions led to a widespread reaction against the Samuelson-Galbraith view that public goods necessarily require public provision or public financing.
It has been pointed out that radio and TV broadcasts and open-source computer software are also public goods. Yet both are often provided by private companies. Private radio and TV broadcasters finance their broadcasts by advertising.
Computer companies sometimes make software readily available to encourage use of their computers, for which the software was designed. The software is given away to help sell the hardware, or there is a charge for support services for software users.
Whether they are desirable or not, in principle there are many possibilities for private provision of public goods. In reality there are numerous cases where the state franchises out the provision of goods or services to private contractors. Such provision could include public goods. In these cases, public financing remains, but provision is private.
The claimed advantages of private franchising would include the introduction of an element of competition between potential franchisees, and the possibilities of efficiency gains through well-focused, relatively autonomous private providers. But here again the proof of the pudding is in the eating. Many public franchising operations have failed to deliver the promised gains. Others have been more successful.
Accordingly, we end up with a pragmatic rather than a doctrinaire conclusion. Economic systems are complex, with varied, interconnected components. Theory simplifies, and does not catch all the interactive effects. Theory has continuously to be appraised in the light of empirical experience. So far it is clear than the existence of a public good does not necessarily imply that it has to be provided by government, just as there is no compelling case that its private provision will also be superior.
Misunderstanding the meaning of a public good
Careful, rational discussion of the issues surrounding vital debates over public and private provision is not simply impeded by the prevalence of opposing ideological extremes. There is also a growing and prominent disrespect for the careful use of the terms that have been established by scholars in this area.
Combinations of sloppiness and ignorance threaten the utility of key terms. They engender ambiguity, degradation and ultimate uselessness. This has already happened with swear-words such as neoliberalism. It is hoped that it does not happen with cheer-words such as public good.
A prominent misunderstanding of “public good”, is that it means “a good that can only, or should only, be provided by government”. But this conflation of public good with public provision is mistaken.
Another, even cruder, misunderstanding is that “public good” means “good for the public”. While anyone who has taken Econ 101 should spot this error, it is nevertheless widespread. Speakers sometimes give their error away when they give relative stress the “good” in the phrase, as if “good” had the meaning of virtuous or worthwhile.
Yet in the correct definition of “public good” the second word takes another commonplace meaning, denoting a possession, or an item of commerce. This second meaning is found in the pledge “with all my worldly goods I thee endow” in the Book of Common Prayer or in “the goods train went through the station”. Bad things, like tobacco, heroin, cocaine, nuclear bombs and personnel mines, are also goods in this sense.
Is education a public good?
First assume that the claims of Corbyn, Lucas and others were true: education is “good for the public” and it should be funded out of taxation, and maybe even provided by a publicly-owned enterprise.
Many additional things are “good for the public”, including clothing, food and housing. By the same logic, these “goods” should all be funded out of general taxation as well, and distributed without further charge to their users. Influential politicians thus suggest that everything that serves basic needs should be financed, and possibly distributed, by the state. The market would simply be left for luxuries. Their logic implies a state-run economy of which Stalin and Mao would be envious.
Second, even if education were a public good (by the Econ 101 definition) then this would not imply that it should be paid for out of taxation. As noted above, free radio and TV broadcasting is generally a public good, but little of it is paid out of taxation, and it would be difficult to make the case that it should be (unless we fancy a totalitarian state that does all the broadcasting and curtails all private radio and TV stations).
Third, while observing the Econ 101 definition of a public good, note that education is generally a rivalrous rather than a non-rivalrous service. Education services require resources, including buildings, infrastructure, equipment and trained teachers. Additional students generally require additional resources. (Although in some cases the marginal cost is low, such as with mass-distributed online courses.) Consequently, education provision is generally rivalrous.
Fourth, again with an eye on the Econ 101 definition, note that education services are mostly (but not entirely) excludable. Schools and universities can readily prevent other people from attending, while it is much more difficult to prevent any passing mariner from observing the light from a lighthouse.
Technically, by the standard definition, most education services are private goods, because their provision is both excludable and rivalrous. But there is no necessary reason why all private goods should be privately provided. The Econ 101 distinction between public and private goods does not readily or directly correspond with public and private provision respectively.
The parts of an education system that are actually or virtually non-rivalrous, such as massive online courses, are technically club goods. Like radio and TV broadcasting they can be provided publicly or privately.
Positive externalities in education
When students receive their qualifications, they often have advantages over others on the jobs market. Hence they reap benefits. Nevertheless, with education there are strong positive spill-over effects.
Educated people help to raise the levels of public culture and discourse, and can pass on some of their skills to others. Educated people are also vital for a healthy democracy. But none of this undermines the general excludability of education services.
The spill-over effects are important, and relate to the question of public versus private provision. Another word for a spill-over is an externality: this is a cost or benefit that affects someone who did not choose to incur that cost or benefit.
Externalities can be positive or negative. Examples of negative externalities are pollution or congestion caused by motor cars. Because a driver will suffer only a fraction of the overall pollution and congestion costs of making a car journey, negative externalities impose costs on others without penalty for the car user. By standard assumptions, unless compensatory measures are taken, car use will be excessive and suboptimal.
Arthur Pigou
The theory of externalities was developed by Arthur Pigou, who argued that in the presence of negative externalities some public authority should intervene to impose taxes or subsidize superior alternatives. By such measures, motor car traffic could be reduced and pollution reduced. Inversely, services such as education with positive externalities should receive subsidies or be provided free, to encourage more extensive participation in these activities.
In a famous 1960 paper, Coase dramatically changed the terms of debate with his argument that if transaction costs were zero, then all the extra costs or benefits could be subject to contractual arrangements and the externalities would disappear. For example, if the owner of every dwelling near a road had property rights in the surrounding segment of the atmosphere, then the driver of a passing and polluting car could be sued for degradation of that property. The pollution externality would be internalized.
Coase’s intention was to underline the implications of transaction costs: the existence of externalities is dependent on positive transaction costs. Coase accepted that in many cases it would be impossible to avoid the transaction burden. For example, enforcing rights in the surrounding atmosphere to curb pollution may be too expensive.
Many pro-market zealots ignored or underestimated the transaction-cost aspect of Coase’s argument. Instead, their foremost claim was that Coase had undermined the case of public intervention based on externalities.
Consider the positive externalities of education. It would be impossible or socially destructive for every educated person to charge a fee to participants in an intellectual dinner conversation, or to invoice the government for making a well-informed choice when casting his or her vote in the ballot box. The internalization of these positive externalities by such means is impossible or undesirable.
The issue of missing markets is relevant here, as I discuss in my book Conceptualizing Capitalism. There are missing markets for future employment because to introduce such complete markets would be tantamount to slavery. The prohibition of slavery means that we cannot have complete futures markets for labour. This means not simply the existence of transaction costs but the enforced absence of transactions, which would be equivalent to making the transaction costs infinite.
Consequently, because of these missing markets, education and training will be undersupplied through markets under capitalism. There is a rationale for some kind of public intervention. Of course, government intervention has its problems too. We must experiment, and compare real-world cases, not idealized models.
Mixtures of public and private provision
There are mixtures of public and private provision of education in most countries. The majority of schools in most countries are run by local government. At the other extreme, most on-the-job training is done by private companies.
The US has a mixture of private and state universities, although both types receive substantial public funds. In the UK most universities receive public money for teaching and research, and in return they are obliged to conform to a myriad of government regulations. They also receive student fees and research grants from the private sector.
Technically all UK universities are private (corporate) entities: they have a legal status equivalent to charities (which are also not-for-profit private corporations). By contrast, in several major countries in Continental Europe and elsewhere, most universities are integrated into the state machinery and all their employees are civil servants. This is not the case in the US or the UK. This international diversity of models provides the opportunity to compare different systems and determine what works best, taking account of the different contexts in which they operate.
This growing disrespect for science and expertise is moving democracies toward an extremely dangerous place, where the general public have increasing difficulty segregating lies from truth. This danger could be called Trumpism.
I do not put Jeremy Corbyn or Caroline Lucas in the same box as Trump. Far from it. For example, they share none of his obnoxious racism and sexism. But Corbyn and Lucas are disrespecting experts and ignoring bits of science nevertheless.
We need a well-informed public conversation concerning the best arrangements for the (public or private) provision of basic needs and services, including education, health, housing and transport. Such a debate is much more difficult if leading public figures, including the leaders of major political parties, promote incorrect and misleading versions of highly relevant analytical terms.
Donc, je les accuse – of abetting the Trumpist degeneration of public discourse with their false claim that “education is a public good”. They should acknowledge the error and make a correction.
11 January 2018
Minor edits: 12-13 January 2018
Published January 2018
Appendix
Note 1: As with many such definitions, there are few, if any, pure cases. So a public good refers to a good or service where consumption by one person does not significantly reduce the amount available for others, and where potential users cannot practically or generally be excluded from the use of the good or service.
Note 2: There is a widespread assumption that actors act wholly out of self-interest. But from evidence with humans in laboratory experiments and elsewhere, we know now that this is untrue. People will often agree to pay for public goods, even if they know that they have the alternative of free-riding on the contributions of others. One can conjecture, however, that numbers of people are important. We know from the work of Nobel Laureate Elinor Ostrom (1990) and others that cooperation is possible over the use of non-excludable resources, even when usage is rivalrous and it can degrade the resource. (Non-excludable resources that have rivalrous usage are defined as common-pool resources: they are not public goods.) But Ostrom’s examples highlight the role of face-to-face interaction and the building of trust. But it is doubtful that these mechanisms can be expanded to large-scale societies, at least without additional systems of control and enforcement.
Mill, John Stuart (1871) Principles of Political Economy with Some of their Applications to Social Philosophy, 7th edn. (London: Longman, Green, Reader and Dyer).
Ostrom, Elinor (1990) Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge: Cambridge University Press).
Pigou, Arthur C. (1920) The Economics of Welfare (London: Macmillan).
Samuelson, Paul A. (1954) “The Pure Theory of Public Expenditure”, Review of Economics and Statistics. 36(4), pp. 387-9.
Stretton, Hugh and Orchard, Lionel (1994) Public Goods, Public Enterprise, Public Choice: Theoretical Foundations of the Contemporary Attack on Government (London and New York: Macmillan and St Martin’s Press).
Although the two biggest UK political parties are very different in important respects, Labour under Jeremy Corbyn and the Conservatives under Theresa May have each converged on different forms of pro-Brexit, economic nationalism.
Economic nationalism prioritises national and statist solutions to economic problems. Although it does not shun them completely, it places less stress on global markets, international cooperation and the international mobility of capital or labour. It believes that the solutions to major economic, political and social problems lie within the competence of the national state.
Other countries have turned in the same direction, including the United States under Donald Trump and Russia under Vladimir Putin. Previously, both Soviet-style and fascist economies have embraced economic nationalism. China has continued along this road, even after its acceptance of private enterprise and a market economy.
Economic nationalism has been used successfully as a tool of economic development, by creating a state apparatus to build an institutional infrastructure and mobilise resources. But it brings severe dangers as well as some advantages. Its reliance on nationalist rhetoric can feed intolerance, racism and extremism.
Furthermore, as it concentrates economic and political power in the hands of the state, economic nationalism undermines vital checks and balances in the politico-economic architecture.
As numerous social scientists (from Barrington Moore to Douglass North) have shown, democracy and human rights cannot be safeguarded without a separation of powers, backed by powerful countervailing politico-economic forces that keep the state in check.
From Thatcherism to Mayhem: Tory economic nationalism
Margaret Thatcher
In the 1970s, Margaret Thatcher changed the Tory party from a paternalist party of the elite to a more radical, free-market and individualist force, embracing the ideologies of Friedrich Hayek and Milton Friedman.
A logical consequence of this market fundamentalism was to embrace the European Single Market, which her successor John Major did in the Maastricht Treaty of 1992. But this was too much for the Tory nationalists, who were already turning against the European Union and all its works.
The tension grew within the Tories between those that pursued international markets in the name of market fundamentalism, and those who worried that global trade and the free movement of labour were undermining the powers of the British nation state.
A compromise option – widely touted during the June 2016 EU referendum – was to exit the EU but remain in the single market. But a major implication of this was that the free movement of labour to and from the EU would have to be retained. May became prime minister and declared that Britain would leave the single market as well as the EU.
This marks a major ideological shift within the Conservative Party. The pursuit of free markets, promoted so zealously by Thatcher, has moved down the Tory agenda, in favour of nationalism, increased state control, reduced parliamentary scrutiny, and lower immigration, whatever the economic costs.
Forward together: the new-old Toryism
This shift is signalled by a remarkable passage in the 2017 Conservative general election manifesto:
“We do not believe in untrammelled free markets. We reject the cult of selfish individualism.”
This could be interpreted as a cynical attempt to attract some Labour voters. Probably, in part, it is. But there is much more to it than that. It shows how all the whingeing about “neoliberalism” is now outdated and much off the mark.
Crucially, the Tory Party was traditionally opposed to “untrammelled free markets” and it worried about the destructive and corrosive effects of individualism and greed.
As Karl Polanyi pointed out in his classic book on The Great Transformation, the first fighters for factory and employment legislation, to protect workers from the results of reckless industrialization in the 1830s and 1840s, were from the ranks of the church and the Tory Party:
“The Ten Hours Bill of 1847, which Karl Marx hailed as the first victory of socialism, was the work of enlightened reactionaries.”1
Benjamin Disraeli
Tories like Anthony Ashley-Cooper, the Seventh Earl of Shaftesbury, were great nineteenth-century social reformers. The Tory Prime Minister Benjamin Disraeli railed against selfish individualism, particularly in his novels. For Disraeli, British imperialism was more important than unalloyed individualism.
May has brought the Tory party back to its pre-Thatcher roots. But, less enlightened than Shaftesbury or Disraeli, she has little appetite for protective legislation or constitutional reform. Instead, she celebrates her own powers of leadership and seeks a mandate to concentrate power in her hands.
She has little enthusiasm for democracy either. If it were not for the heroic efforts of Gina Miller and the decision of the Supreme Court, the triggering of Article 50 – to start the process of leaving the European Union – would have been taken by the executive without a parliamentary vote.
The 2017 Tory manifesto is a maypole for nationalism. “Britain” is one of its most-used words. It says that immigration will be brought down, while existing powers by the British state to read emails and monitor your activity on the web will be increased. She will create an Internet that is controlled by the state. May is developing the infrastructure of an authoritarian nationalist regime.
Bringing the state back in: Labour’s new-old economic nationalism
At least on the surface, there are dramatic differences with Labour’s manifesto, which, for example, contains more measures targeted at the poor and elderly. Labour also gives much more verbal emphasis to human rights and democracy.
But at the core of Labour’s 2017 manifesto is a strong dose of economic nationalism, with Labour’s greatest commitment to public ownership since the “suicide note” manifesto of 1983. There are plans to bring the railways, energy, water and the Royal Mail all back into public ownership.
The 2017 manifesto declares: “Many basic goods and services have been taken out of democratic control through privatization.” But there is little explanation of what “democratic control” would mean under public ownership.
How would it work? Would parliament take decisions on everything? In reality these proposals – whatever their other merits – would enlarge state bureaucracy: there is no explanation how they would extend democracy.
The words “control” or “controls” appear 32 times in the 2017 manifesto. There is insignificant explanation of how “controls” work. The Labour manifesto envisions a concentration of economic power in the hands of the state, notwithstanding its verbal commitment to regional and local, as well as national, public management.
While there are commendable measures to enhance and enlarge an autonomous sector of worker-owned enterprises, there is little recognition of the importance of having a viable and dynamic private sector as well.
Corbyn’s Labour: forward to the past
As May has brought the Tories back to the pre-Thatcher years, Corbyn has brought Labour back to its traditional roots, before the leadership of Tony Blair.
With his 1995 changes to Clause Four of the Labour Party Constitution, Blair brought in an explicit commitment to a dynamic private sector. Labour stood for an economy where “the enterprise of the market and the rigour of competition are joined with the forces of partnership and co-operation”. Corbyn has returned to the spirit of Labour pre-1995 constitution, even if he has not yet changed the wording.
Corbyn has proposed that Britain can be “better off” outside the EU. He argued that EU rules block the kind of state-heavy industrial policy that he favours. But EU countries such as France and Germany already have strong interventionist policies for industrial and infrastructural development. In truth, Corbyn favours repeated doses of statist socialism in one country.
With some Stalinist exceptions in his coterie, Corbyn and his followers are mostly sincere in their commitment to democracy and human rights. But what they do not understand is that their proposed statist concentration of economic power will undermine countervailing politico-economic forces that can help to keep the state leviathan in check.
Jeremy Corbyn and Hugo Chávez
These countervailing and separated powers are vital. Especially in times of hardship or crisis, there will be a temptation by some in power (at the local or national level) to abuse rights and undermine democracy. Every single historical case shows this result.
Attempts “to take control of the economy”, even with measures of decentralization and local power, have led to restrictions on press freedom, arbitrary detentions, abuses of human rights, and even famine.
Forward together: economic nationalists take the helm
Further doses of economic nationalism may be possible in a country as large as the United States. In 2015, exports from the USA amount to about 13 per cent of GDP. Hence economic nationalists in the USA can reduce trade without too much contraction of the economy. It may turn further inwards, cut imports and still survive a loss of exports.
But the UK has become a globally-orientated, open economy, exporting 28 per cent of its GDP in 2015. About 45 per cent of these exports go to the European Union.
By exiting the EU Single Market, and by walking away from EU trade deals with non-EU countries that benefit EU member states, Labour and the Tories would threaten the UK economy with a massive downturn. The British economy would fall off a cliff.
In this crisis, rightist economic nationalists will blame foreigners and immigrants, and leftist economic nationalists will blame the rich.
It will be “the few” – designated by their ethnicity or by their assets – who will get the blame. Their rights will be under threat, as so will the liberties of all of us. Whatever variety is chosen, economic nationalism could severely undermine the viability of democracy in the UK.
21 May 2017
Minor edits – 23, 28 May, 29 June
This book elaborates on some of the political issues raised in this blog:
Wrong Turnings: How the Left Got Lost
Published by University of Chicago Press in January 2018
Moore, Barrington, Jr (1966) Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (London: Allen Lane).
North, Douglass C., Wallis, John Joseph and Weingast, Barry R. (2009) Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge and New York: Cambridge University Press).
Polanyi, Karl (1944) The Great Transformation: The Political and Economic Origins of Our Time (New York: Rinehart). See esp. pp. 165-66.
The political earthquakes of 2016 are probably the beginning of a series of major ruptures in world politics. Donald Trump was elected in the USA, Britons voted for Brexit, Turkey lurched toward dictatorship, Brazil ejected a democratically-elected president, Russia extended its global influence, and China tightened internal security while building military bases in the South China Sea.
From America to Asia, authoritarian nationalism is on the march. The future of old alliances is cast in doubt, raising a renewed spectre of global war.
These seismic changes should prompt us to reconsider our priorities. Is ‘neoliberalism’ – whatever that means – our main enemy? Or is it rising authoritarianism and nationalism instead?
We have been here before, albeit with much less dangerous military weapons. The rival imperialisms of the nineteenth century led to the First World War. Collapsing imperial dynasties triggered revolution in Central and Eastern Europe. Communists successfully seized power in Russia in 1917. Post-war political and economic turbulence led to the triumph of fascism in Italy, Germany and Spain. Imperial Japan invaded nationalist China.
I am not suggesting that history will repeat itself in the same way. But it is important to understand how the tectonic plates of political change affected the way we understand and map political positions, and the way in which we prioritise political issues.
The thirty-year squeeze (1918-1948)
Europe suffered economic depression for much of the interwar period. The financial crash of 1929 exacerbated the crisis and led to a collapse of world trade. Liberal defenders of the market economy were put on the defensive: capitalism seemed at the end of its tether.
Beatrice & Sidney Webb
Meanwhile, some intellectuals from the USA and Britain – including Labour stalwarts George Bernard Shaw and Sidney and Beatrice Webb – visited the Soviet Union brought back glowing accounts of an expanding economy and a joyful population. (The Soviet propagandists explained away disasters such as the Ukranian Famine as resulting from sabotage by rich peasants or foreign agents.)
With the crisis of capitalism, the rise of fascism and the apparent success of Soviet Russia, many British and American radicals became Communists or fellow travellers. For them, liberalism and the defence of the market economy seemed a weak or unviable option.
The choice seemed to be between two forms of authoritarian government: much better the one that proclaimed equality and opposed racism. (But in reality, the Stalin regime promoted antisemitism, genocide against several other ethnic minorities, and dramatic internal inequalities of power.)
Stalin, Roosevelt and Churchill in 1941
The alliance between Russia and the West in the Second World War smothered criticism of what was really going on within Stalin’s regime. But, with the beginning of the Cold War in 1948, socialists were forced to make a choice between either supporting an antagonistic and undemocratic foreign power, or aligning with the USA and its allied democracies.
Labour under Clement Attlee aligned with the West. But rose-tinted visions of Soviet Russia or (from 1949) Mao’s China lived on among he Left.
In major European democracies, the thirty years between the end of the First World War and the start of the Cold War had seen liberalism squeezed, between socialism on the one hand, and reactionary authoritarianism on the other.
‘American imperialism’ and the rise of neoliberalism
Things were different in the USA, which polarised between forms of Republican conservatism and Democratic liberalism. But rising tensions in the Cold War, and the eruption of the Vietnam War in the 1960s, made American-style liberalism less attractive for the global Left.
Marxist-led national liberation movements in Cuba, Indochina and elsewhere kept the collectivist vision alive for the Left around the world. Liberalism was see as the fake ideology of American imperialism and the global bourgeoisie.
Some have argued that neoliberalism was reborn in the 1970s, when conservatives such as Ronald Reagan and Margaret Thatcher adopted a vision of expanding markets and a contracting state. Although the Left could never agree on what ‘neoliberalism’ meant, they mostly agreed that it was the main enemy.
Much of the Left, throughout the world, had never got rid of its agoraphobia – its fear of markets. Private enterprise and market forces were always and everywhere seen as the problem. Liberals, who defended private property and markets as well as human rights, were mocked as the bourgeois enemy.
Our brave new world
But the global tectonic plates are now shifting abruptly, in an erupting national and international crisis, as big as anything since 1948.
Nationalist leaders strut around the world stage. They stock up their nuclear and conventional arsenals and jostle for geopolitical advantage.
Torture is endorsed. Journalists are threatened or imprisoned. Scientific findings on climate change are denied. Intellectuals and experts are ridiculed. Ignorance and dogma are celebrated. Truth is swamped by lies. Legislation protecting workers and the poor is undone. Minorities are attacked and made scapegoats. Racism is given licence. People suffer discrimination on the basis of their religious or other beliefs. Democratic systems are damaged. Judges and lawyers are treated as traitors. The rule of law is undermined.
In this dangerous new world, it matters less whether that railway is nationalised or whether water distribution is in public ownership. Forms of ownership are always secondary to the actual provision and distribution of vital goods and services. But when our rights and liberties can no longer be taken for granted, questions over forms of ownership move even further down the ranking of priorities.
The ubiquitous, trivialising idea that the Left is defined in terms of public provision, and Right as private provision, is historically recent and a gross reversal of their original meanings. It is also a polarisation of lesser relevance in this world of rising authoritarian nationalism.
Our fundamental rights, our liberty, and the rule of law are now increasingly threatened. Their defence becomes the great struggle of our time.
This lesson is hardest for Americans and Britons, who were spared domestically from the jackboots of twentieth-century despotism. Struggles for British and American national liberty are beyond living memory. We have grown fat and lazy on the fruits of the liberal order. We have taken for granted its institutions and underestimated their fragility. We must repair our vigilance.
The liberal opportunity
For 100 years, for the reasons given above, liberalism has been marginalised. Now is its opportunity – indeed its urgent necessity.
Unlike our grandparents in the crisis-ridden 1930s, we have seen the socialist experiments of the twentieth century and counted their cost at 90 million lives. History and social science have more to teach us. If we wish to learn, we can know more about how markets work. We can understand the informational, organisational and other impediments to comprehensive national planning. We can appreciate why countervailing politico-economic power, based on a strong private sector, are necessary to buttress democracy and resist authoritarianism. The twentieth century has taught us these lessons.
The old Marxist mantra of bourgeoisie versus proletariat is also ungrounded in reality. Instead we have a highly fragmented working class, much of it enduringly aligned with authoritarianism and nationalism. Marxism relies on a quasi-religious and nonsensical belief that the working class – whatever it actually believes or strives for – carries our human destiny.
Class struggle has mattered, but it has never been the main motor of history. What have mattered more have been struggles for power, by individuals, dynasties, nations, religions or ideological movements.
The Storming of the Bastille in 1789
Liberalism was one of those movements. Based on the imperatives of equality and liberty, it matured in the Enlightenment.
Liberalism rose up in the English Civil War of the 1640s, in the American Revolution of the 1770s, and in the French Revolution of 1789, in titanic struggles against despotism and oppression.
Now, once again, liberalism is centre stage, as the enemy of authoritarian nationalism.
The liberal rainbow
Its allies are not those who pander to authoritarianism by eroding civil liberties, or do the spadework of the nationalist Right by making immigration (rather than assimilation) a foremost problem. The prime allies of liberalism are all those who defend liberty and human rights. But therein lies a concern, which must be discussed.
From the beginning, liberalism has harboured different views on the role of the state and of the degree of state intervention required in the economy and society. On the one hand there are liberals – sometimes called libertarians – who wish to minimise the role of the state.
John Maynard Keynes – another great liberal – argued that state regulation of financial markets and counter-cyclical expenditures are necessary to stabilise the capitalist system. Keynes showed that economic austerity is a flawed doctrine. Government deficits are best reduced by growth: budget cuts can contract the entire economy and make the problem worse.
There is a spectrum of views between individualist and social-democratic liberalism, but all liberals are united in their defence of individual liberty, human rights and political democracy. The diverse colouring of this rainbow does not diminish its united opposition to the dark intolerance and division that is exacerbated by authoritarian nationalism.
The struggle for liberty and equality has always been vital. But many twentieth-century radicals were diverted by the delusions of socialism. The renewed rise of authoritarianism has shown us again that liberalism is the vital political movement of the modern age.
28 January 2017
Minor edits: 29 January, 1, 16 May 2017
This book by G. M. Hodgson elaborates on some of the political issues raised in this blog:
Wrong Turnings: How the Left Got Lost
Published by University of Chicago Press in January 2018
Bibliography
Allett, John (1981) New Liberalism: The Political Economy of J. A. Hobson (Toronto: University of Toronto Press).
Beveridge, William (1944) Full Employment in a Free Society (London: Constable).
Clarke, Peter (1978) Liberals and Social Democrats (Cambridge: Cambridge University Press).
Claeys, Gregory (1989) Thomas Paine: Social and Political Thought (London and New York: Routledge).
Courtois, Stéphane, Werth, Nicolas, Panné, Jean-Louis, Packowski, Andrzej, Bartošek, and Margolin, Jean-Louis (1999) The Black Book of Communism: Crimes, Terror, Repression (Cambridge MA: Harvard University Press).
Racist nationalism has returned from the fringes to mainstream politics. In 2016 it played a major role in the Brexit vote in the UK, in the election of Donald Trump in the US, in the presidential election in Austria, and in developments in many other countries.
Racism and other forms of discrimination, including by gender or belief, must be defeated. The Left has played a major role in countering racism, and it should be give due credit for that. But in some other respects the Left on this issue is weak and misguided.
Some things we cannot talk about – but we must
Some things have become difficult to discuss. I once tweeted the (obviously true) statement that “Islam is religion, not a race”. A fellow tweeter immediately assumed that I was some kind of bigot and responded “ugh!”
In this reactive climate it has become difficult to raise concerns about (say) Sharia law without being branded racist or right-wing. Discussion ends. But the fact that rightist bigots – such as Nigel Farage and Geert Wilders – go on about Sharia law does not mean that we cannot discuss it.
Of course, Muslims and others suffer significant discrimination, in Britain and elsewhere. In recent months, Trump has been responsible for major anti-Muslim outbursts and has whipped up violent anti-Muslim sentiment in the US.
We must defend the full human rights of everyone, including members of all faiths. But this does not mean that we must refrain from criticising religious doctrines.
On the contrary, our failure to discuss these issues has favoured conservatives over reformers within these religions, has allowed religious extremism to ferment, and has repeatedly played into the hands of the reactionary and extremist Right.
I explain here where and how the Left has got things wrong in this area. I concentrate mostly on the moderate Left. The sins of many on the Far Left are much worse, including their support for fanatical, religious, “anti-Imperialist”, extremists in Palestine, Iran and elsewhere.
The election of Trump is a wake-up call. We need to find more effective ways to counter racism and other forms of discrimination. We need to find ways to make multi-religious and multi-ethnic communities more inclusive and cohesive.
Immigration – beyond the numbers game
The recent massive increases of immigration into Europe and elsewhere are a fact. But at least as far as the UK is concerned, it has been shown that the economic benefits of immigration are positive.
But much of the political debate is about immigrant numbers. The Tories ignore the economic evidence and start a Dutch auction of targets, to stem numbers. A large part of the Labour Party, facing a seepage of its working class support to UKIP, moves in a similar direction.
Of course, mass immigration becomes a problem when there are not enough school places, health services are severely stretched, housing is limited and inadequate, and the transport infrastructure groans from decades of under-investment.
Labour is internally divided between those that want to restrict immigration, and the leadership around Jeremy Corbyn who propose no restrictions at all. With some notable exceptions, what is missing is a discussion prioritising assimilation.
The Casey Review
Louise Casey
The recently-published, government-commissioned report by Louise Casey suggests that “the tough questions on social integration are being ducked”. Casey and her team found evidence that black and minority ethnic groups are still suffering from discrimination and disadvantage and responses by government and others are inadequate. While she found some evidence of integration, in other areas the outcomes were different:
“In some council wards, as many as 85% of the population come from a single minority background, and most of these high minority concentrations are deprived Pakistani or Bangladeshi heritage communities.”
These concentrated enclaves are more difficult to assimilate and create particular problems for women:
“this sense of retreat and retrenchment can sometimes go hand in hand with deeply regressive religious and cultural practices, especially when it comes to women. These practices are preventing women from playing a full part in society, contrary to our common British values, institutions and indeed, in some cases, our laws. … I’ve met far too many women suffering the effects of misogyny and domestic abuse, women being subjugated by their husbands and extended families. Often, the victims are foreign-born brides brought to Britain via arranged marriages. They have poor English, little education, low confidence, and are reliant on their husbands for their income and immigration status. They don’t know about their rights, or how to access support, and struggle to prepare their children effectively for school.”
Casey argued that fears of being labelled “racist” have prevented society from challenging sexist, misogynistic and patriarchal behaviour in some minority communities. Her report cites claims that some Sharia councils had supported the values of extremists, condoned wife-beating, ignored marital rape and allowed forced marriages.
Her report concluded with a rallying cry:
“The problem has not been a lack of knowledge but a failure of collective, consistent and persistent will to do something about it or give it the priority it deserves at both a national and local level.”
But to “do something about it” requires a clearer understanding of the problems involved and what kind of policies are needed to deal with them. Some people have criticised Casey’s empirical claims and more research is clearly required.
Multiculturalism
As several authors have pointed out, multiculturalism is an ambiguous concept. In one sense, at least, it is unobjectionable. All civilisations have drawn and benefitted from cultural variety. Western countries today benefit enormously from the influx of ideas, skills, fashions, cuisines and experiences that successive waves of immigration have brought. This has been true for millennia. It is no less true today.
Institutions are the stuff of society: institutions are systems of social rules. Some rules – concerning dress and fashion for example – can change profoundly without social collapse.
Other institutions – particularly in law and politics – are the outcomes of centuries of experience, deliberation and experimentation. We cannot put these in a culture-mixing food blender without tearing apart the fabric of society and wrecking social cohesion and solidarity.
Much discourse about multiculturalism ignores these differences in types of rules and institutions. Everything is placed under the vague and overly-capacious category of “culture”, assuming everything can be mixed at will. This soup-making, food-blender approach is dangerous and misconceived.
Cultural relativism
Some parts of the Left have embraced normative cultural relativism. This is the view that one person’s morality is as good as any other. It is said that there is no “objective” or “correct” morality. No overriding importance is given to democracy or to the United Nations Declaration of Universal Human Rights. Other cultures have different codes and priorities: let them be.
According to this view, asking people from other cultures to adopt our over-arching laws and values is seen as a manifestation of “oppression” or “Western imperialism”. We have to be very careful not to jump to the conclusion that Western moral values are superior. But that does not mean that we should reach no judgmental conclusion at all.
Germaine Greer
For example, in her 1999 book The Whole Woman, the self-declared “Marxist” and iconic feminist Germaine Greer asked us to refrain from criticising female genital mutilation, on the grounds that it would impose our cultural values on others.
In his excellent book What’s Left? Nick Cohen gives some further examples of highly misguided cultural relativism, including attempts by feminists and leftists to defend the Indian practice of burning widows alive after the deaths of their husbands.
Analytically, this kind of cultural relativism has major flaws. First, it falls down in dealing with changing attitudes through time in one country. A cultural relativist, time travelling back to 1800, could raise no objection to slavery, or to the lack of women’s rights. If one morality is as good as any other, then there can be no moral force for change.
Second, it is internally inconsistent. Cultural relativism denies that our values are valid or suitable for other cultures. Why should this normative claim (that we should not impose our normative values on other cultures) be adopted by others in different cultures? By the logic of cultural relativism, thinkers in other cultures are not obliged to be cultural relativists. The whole argument is self-defeating.
Third, cultural relativism degrades the role of morality, by treating it as a matter of individual preference. The whole point about morality is that it transcends individual preferences. Moral claims (be they right or wrong) are universal. Humans have developed systems of morality to provide us with rules that help social cohesion while simultaneously protecting individual rights and liberties.
Reticence to act – condemnation of action
As well as the benefits of cultural enrichment, mass immigration has also brought problems of assimilation. In the UK there are large communities where many people do not speak English, or remain ignorant of prevailing laws and values that have evolved over centuries to keep our society together and to protect our interests.
Many of these immigrants had limited experience of any Western-style democracy and had an inadequate appreciation of universal human rights. Many came from rural areas in undeveloped countries, where the state was weak and social and business interactions were governed by custom and religion, based on ties of loyalty to family and clan.
Ann Cryer
Faced with this issue, many progressive politicians have adopted a stance of ultra-tolerance and inaction. Consider the question of language. Should immigrants be obliged to learn the language of their new country, so that they can understand its culture and its laws? Some other countries take this on board.
But such an assimilationist policy in the UK was highly controversial as late as 2001. In that year, the Labour MP Ann Cryer bravely argued that many Muslims were held back economically and educationally by language difficulties. The problem was especially severe among Muslim women.
But she was faced with criticism and scorn from the Left. Shahid Malik, then a senior member of the Commission for Racial Equality and of the Labour Party National Executive Committee, and subsequently a Labour MP and government minister, responded to Cryer: “Her arguments are sinister and they have no basis in fact … she is doing the work of the extreme right wing.”
Promoting faith schools
Schooling must be central to any viable integration programme. Young people need to learn about the struggles for democracy, independence, rights and human emancipation, throughout the world. They should be free to discuss and evaluate all these things.
Such a broad education is less likely in a school that is linked to one particular religion. Instead it would be more viable in secular schools with pupils from multiple religions, classes and cultures. Broad-based secular education is even more vital in multi-cultural and multi-faith societies.
After coming to power in 1997, Labour Prime Minister Tony Blair promoted a programme of expansion of faith schools. But a 2001 report commissioned by Bradford City Council concluded that its communities were becoming increasingly isolated along racial, cultural and religious lines, and that faith-segregated schools were fuelling the divisions.
In 2001 there were riots in Bradford, which spread to other northern cities. Yet in the same year the Labour Government proposed a large increase in the number of state schools run by religious organizations.
By 2002 there was a major public row, with accusations that some pupils were being taught creationism in and that homosexual acts are against God’s law. Campaigners for women’s rights expressed concern that conservative religious teachers were instructing young girls that women should take a secondary role in society.
Despite his previous opposition to Blair, in 2016 the Labour Leader Jeremy Corbyn expressed his support for faith schools. No major UK political party has dared to come out against them. They are being vigorously promoted by the current Conservative government.
Faith schools have hindered assimilation
David Bell
David Bell warned in a January 2005 speech to the Hansard Society – when he was Chief Inspector of Schools – that a traditional Islamic education did not equip Muslim children for living in modern Britain. He said: “I worry that many young people are being educated in faith-based schools, with little appreciation of their wider responsibilities and obligations to British society.” He continued:
“We must not allow our recognition of diversity to become apathy in the face of any challenge to our coherence as a nation … I would go further and say that an awareness of our common heritage as British citizens, equal under the law, should enable us to assert with confidence that we are intolerant of intolerance, illiberalism and attitudes and values that demean the place of certain sections of our community, be they women or people living in non-traditional relationships.”
Trevor Phillips
His comments were condemned as “irresponsible” and “derogatory” by some senior Muslims, but supported by Trevor Phillips, then chair of the Commission for Racial Equality.
In another lecture Bell said: “We can choose … whether we want to bring our diversity together in a single rainbow or whether we allow our differences to fester into separate cultures and separate communities.”
Phillips came to the conclusion that increasing self-segregation of British communities along ethnic and religious lines was a major threat to national integration and to Enlightenment values. Young people were being brought up with insufficient awareness of these values, in closed communities where extremism could fester.
David Miliband
Ken Livingstone, then Mayor of London, attacked Phillips for “pandering to the right”. During a televised discussion, the prominent Labour Minister David Miliband shook his head and described Phillips’s remarks about community segregation as “fatuous”.
On faith schools, the Casey report noted their role in institutionalising segregation:
“The Government had attempted to alter the segregation of pupils in faith schools by introducing admissions criteria for new faith-based Free Schools. But these did not seem to be having an impact on the diversity of minority faith schools … [their] admission policies do seem to play a role in reinforcing ethnic concentrations.”
But Casey did not take the final step. She wrote: “ending state support for all faith schools would be disproportionate”. But how serious do the problems have to become before it becomes proportionate?
Rather than relying on failed palliatives, state-funded faith schools should be phased out. Taxpayers should not subsidise religion: religion and the state should part company.
A recent poll found that an overwhelming majority of the British public opposed religious discrimination in faith school admissions. Making all faith schools non-discriminatory in terms of religion would be a big positive step.
Fostering extremism
Ed Husain was born and educated in Britain, where he obtained a Master’s Degree. He was drawn toward extreme versions of Islam and was persuaded that Western democracies are irredeemably corrupt and must be replaced by a theocracies based on Islamic law.
After several years he renounced his former extremism, but retained his Islamic faith. In an interview he revealed the segregated life of his upbringing:
“The result of 25 years of multiculturalism has not been multicultural communities. It has been mono-cultural communities. Islamic communities are segregated. Many Muslims want to live apart from mainstream British society; official government policy has helped them do so. I grew up without any white friends. My school was almost entirely Muslim. I had almost no direct experience of ‘British life’ or ‘British institutions’.” (Quoted in Cohen 2007, p. 378.)
British policy-makers have welcomed diversity. But they have defined needs and rights via the ethnic categories into which people were placed, using those divisions to shape public policy. The result has been a more fragmented society, which has nurtured extremism.
In the name of multi-culturalism, Britain has become a more divided society, where inclusive, universal, Enlightenment values are often side-lined or unknown. These communal enclaves, found in France and Belgium as well as Britain, have become hothouses for violent extremism.
Hassan Butt was born in Luton in England in 1980. In 2000 he travelled to Pakistan and worked for the Taliban and other jihadists against the West. Subsequently he renounced his anti-Western views.
Butt explained that “Islamic theology, unlike Christian theology, does not allow for the separation of the state and religion … [they] are considered to be one and the same.” Consequently, since there no righteous Islamic state is deemed to exist, the extremists have “declared war on the whole world”.
Some on the Far Left disowned Butt for betraying the struggle against “Western imperialism”. He was also criticized by one member of the “Stop the War” movement, who is a leading supporter of the Muslim Brotherhood, for his “call to change the face of Islam” (Cohen 2007, pp. 371-2).
Butt’s response was clear: “I believe that the issue of terrorism can be easily demystified if Muslims and non-Muslims start openly to discuss the ideas that fuel terrorism.” However, many on the Left, as well as the Right, are not helping this process.
British values?
Successive British Prime Ministers have reacted to the threat of Islamist extremism by calling for “British values”. After claims that some schools in Birmingham were promoting Islamist extremism, in 2014 the Conservative Prime Minister David Cameron outlined plans to put the promotion of “British values” at the heart of the national curriculum for schools. This is now official policy:
“Schools should promote the fundamental British values of democracy, the rule of law, individual liberty, and mutual respect and tolerance of those with different faiths and beliefs.”
But the official government document outlining this policy mentions respect and tolerance for other races but fails to mention discrimination against women or gays. It rightly mentions the freedom to “choose and hold” any faith, but not the freedom to exit a religion without sanction. It mentions “individual liberty” only once, and fails to uphold freedom of non-violent expression, including when it may cause offence.
Are these omissions an accident, or are they designed not to offend a particular religious minority?
Another problem here is not the values as such, but their nationalistic description as “British”. Democracy was not invented in Britain: Ancient Athens and Viking Iceland have much earlier precursors. The US and France have much earlier claims to the values of liberty and religious tolerance. Britain legally discriminated against Protestant nonconformists and Catholics until the nineteenth century, and it still bars any Catholic from becoming its sovereign.
Apart from being misleading and inaccurate, the label of “British values” would hardly be effective in preventing a young Muslim from being radicalised. On the contrary, the label can help bolster the misperception that Britain and the rest of the West are at war against Islam. This nationalistic labelling readily allows the distortion that “British values” are being promoted by the UK authorities in a global effort to counter Islam.
It would be more accurate and effective to label values such as democracy, the rule of law, individual liberty, and freedom of worship as “universal values” or “Enlightenment values”. They are not simply values that British residents and citizens should adopt. Other countries should promote these values too.
Islamophobia?
Polly Toynbee is a leading progressive, and vigilantly anti-racist, British journalist. Yet in 2004 she was proclaimed by the Islamic Human Rights Commission as the winner of their “Most Islamophobic Media Personality” award.
Polly Toynbee
In her words, she received this ridiculous appellation because she “had challenged the legitimacy of the idea of Islamophobia and warned of the danger to free speech of trying to make criticism of a religion a crime akin to racism.” She rightly noted that the “occasional note of reason from moderate Islamic groups is so weak it hardly makes itself heard”. She highlighted the difficulties involved in starting a serious dialogue on this issue.
The failure to distinguish racism from criticism of religion sadly remains widespread. Many on the Left have done excellent work since the 1970s in campaigning against racism, fascism and discrimination. But the frequent confusion of criticism of religion with racism has diverted their efforts.
It must be repeated that concerns about Islam as a belief system are not equivalent to bigotry toward Muslims. Racism and persecution of Muslims are serious problems and should be vigilantly opposed. But the option to criticise Islam, or any other belief system, is an important right, and it should be protected.
Does it literally mean fear of Islam? Or criticism of Islam? Or hatred of Islam? Or persecution of Muslims? Its intended meaning can range from scholarly criticism of Islamic doctrines to racist acts against ethnic groups who are Muslim. These are obviously very different. Yet they are all lumped together under the same label.
“Anti-Muslim prejudice” or “anti-Muslim discrimination” would be much better terms. They accurately describe this very real and sadly widespread problem.
Criticism of religion can be enlightening – indeed a part of Enlightenment (and British) values, from Voltaire to Bertrand Russell. We should also be free to criticise Sharia law, as we are free to criticise other laws.
Justin Welby
As Archbishop of Canterbury Justin Welby pointed out recently, there also needs to be a discussion about the doctrinal links between religion and extremism:
“This requires a move away from the argument that has become increasingly popular, which is to say that ISIS is nothing to do with Islam, or that Christian militia in the Central African Republic are nothing to do with Christianity, or Hindu nationalist persecution of Christians in South India is nothing to do with Hinduism.”
Extreme and draconian statements can be found in the Old Testament of the Bible as well as in the Qur’an. Believing that they are obeying the word of God, these texts have spurred violent religious extremists, as we are all sadly aware.
Nevertheless, many modern Christians, Jews and Muslims have accepted the power of state law over religious law. They obey the laws of their country. They do not kill homosexuals (Leviticus 20:13), or slay apostates (Deuteronomy 13:6-10), or stone to death a bride who is not a virgin (Deuteronomy 22:20-21), or rape non-Muslim women (Qur’an 23:1-6, 70:22-30), or make war on unbelievers (Qur’an 8:12, 9:5, 9:73, 9:123).
We must help this vital transition from regressive religious law, toward a recognition of modern secular law and democracy. But we do not do so by pretending it is not needed, or refusing to discuss it, or branding those that discuss it as “Islamophobic”.
Signs of hope
On a more positive note, the authors of the 2007 Policy Exchange Report argued for a change of approach. The government and others “should stop emphasising difference and engage with Muslims as citizens”.
Policies of “group rights or representation” for specific Islamic communities are likely to alienate other sections of the Muslim population further. These well-informed remarks went against much of the then-current local and national government policy.
The authors continued: “The exaggeration of Islamophobia does not make Muslims feel protected but instead reinforces feelings of victimisation and alienation.” They also called for “a broader intellectual debate in order to challenge the crude anti-Western, anti-British ideas that dominate cultural and intellectual life. This means allowing free speech and debate, even when it causes offence to some minority groups.”
We need to be honest. Extremist religions of all kinds can threaten liberal, democratic and Enlightenment values. Christianity in particular has been violently repressive and brutal. Some religious sects today are fanatical and intolerant.
These issues need to be openly discussed, in a civilised manner. They should not be swept under the carpet by those on the Regressive Left who act as if they do not understand the difference between race and religion, or would shut down critical discussion of a religion because it might be wrongly construed by others as an attack on a minority, or by other politicians of any stripe who are simply too scared to take the issue on.
In an immensely positive development, the “Muslim Reform Movement” was launched in 2015. In their inaugural statement they defended freedom of speech, gender equality, a secular state and the UN Declaration of Universal Human Rights. They noted explicitly that freedom of speech included the right to criticize Islam: “Ideas do not have rights. Human beings have rights.”
By contrast, the blanket and ill-defined leftist rhetoric of “Islamophobia” does not help those Muslims who are struggling to reform and modernise their religion. Instead, the more conservative leaders of Muslim communities protect their regressive and reactionary views behind its smokescreen. Modernising Muslims are thus impaired by an unwitting coalition of leftists and Muslim conservatives.
Responsibility lies on both sides. In a climate of open discussion, we all need to be vigilant against acts of hatred or violence against Muslims and other minorities.
Initiatives to preserve liberal values in a multi-faith and multi-ethnic world should be welcomed. In addition, the Left needs to re-establish its links with the Enlightenment and its project to separate church from state. Within any society, freedom of worship should be protected, as well as the freedom to criticise religion.
Inward-looking, unreforming, dogmatic religion is a major barrier to assimilation. The Left needs to learn that lesson, and to encourage open discussion of the issues involved.
6 December 2016
Edited 7th and 10th December 2016, with thanks to Andrew Ross. Further edit, 23 January 2017.
My forthcoming book elaborates on some of the political issues raised in this blog:
Wrong Turnings: How the Left Got Lost
To be published by University of Chicago Press in November 2017
“One of the most important essays you will read in 2016” @Rokewood
What caused the election of Donald Trump? I am deeply dissatisfied by some of the quick answers to this question.
The leader of Her Majesty’s Opposition had an instant answer. Jeremy Corbyn blamed the left’s association “with the forces of globalisation during the Obama administration”. Instead, he insisted, we need to reject “that free market, economic thinking, which processed deindustrialisation in Britain”.
Naomi Klein
Others used different words on the same “free market” theme. Naomi Klein put it bluntly: “the force most responsible” for Trump’s success was “neoliberalism”. This worldview, “fully embodied by Hillary Clinton and her machine”, was “no match for Trump-style extremism.”
Trump won over US voters because: “Under neoliberal policies of deregulation, privatisation, austerity and corporate trade, their living standards have declined precipitously.”
The Guardian columnist George Monbiot followed with a historical piece, claiming that “the events that led to Donald Trump’s election started in England in 1975”, when Margaret Thatcher embraced the free-market “neoliberal” philosophy of Friedrich Hayek. This was a harbinger of the global rise of free-market thinking that allegedly wrought havoc in recent years.
Both Klein and Monbiot argue that Trump capitalised on the failure of other politicians to deal with the adverse effects of neoliberalism.
There is no doubt that the global expansion of capitalism in recent decades has been hugely disruptive, shifting millions of manufacturing jobs to East Asia. In the absence of adequate retraining and investment, it has led to declining opportunities for large swathes of the working population in North America and Europe.
Trump tapped into working class discontent. In important respects his policies are not neoliberal, by any reasonable definition of that term. In his campaign, Trump used anti-neoliberal, protectionist slogans such as high import tariffs and closed borders.
George Monbiot
But why did it take so long for people to react to “neoliberalism” and vote in this way? As Monbiot argued, the current so-called “neoliberalism” got under way in the 1970s. It accelerated after the beginning of economic reform in China in 1978 and after the fall of the Berlin Wall in1989. The whole world was then opened up for trade.
But while right-populist movements had emerged, they were then far from power. Tony Blair won a landslide election in 1997 and increased public spending on welfare, education and health. Three years after Blair had won a third election, the United States elected its first black President.
If neoliberalism and stagnant living standards had been around since the 1970s, then why did it take 40 years for a Trump-like demagogue to be elected? The political wind swung decisively to the right more recently, after the Great Crash of 2008.
But it is also difficult to explain Trump’s populist success as a targeted reaction to the financial crash. The removal of some banking regulations, by Bill Clinton in the US and Gordon Brown in the UK, did exacerbate the lending boom that led to the crash of 2008.
Yet, despite his protectionism, Trump offers still more deregulation. He is not targeting the bankers as part of the “elite”. On the contrary, he has pledged to repeal the Dodd-Frank Act, which was designed to curb some of the excesses of the financial sector. As Larry Elliott put it: “This looks curious for someone trying to surf a tidal wave of populist anger against the bankers.”
Putting the blame on “neoliberalism” underestimates the way in which outsiders such as Trump and Farage have created populist movements that blame “the elite” and offer simplistic solutions, such as to “curb immigration”. Blaming “neoliberalism” underestimates the pernicious influences of racism and anti-Muslim prejudice. Simplistic economic explanations of Trump’s victory ignore much stronger evidence of other factors at work.
The Pavlovian leftist response of blaming markets or “neoliberalism” for “all our problems” is far off the mark.
What is neoliberalism?
Monbiot is keen to identify “neoliberals” such as Hayek as the villains. According to Monbiot:
“Neoliberalism sees competition as the defining characteristic of human relations. … Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone.”
I shall pass over the many flaws in the essay from which the above passage is quoted. Monbiot conflates the different views of Ludwig von Mises, Friedrich Hayek and Milton Friedman, and he is inaccurate on several details. Note also that Monbiot does not highlight deregulation of the financial sector in this passage.
After taking on board Monbiot’s definition of neoliberalism, let us consider the extent to which it has been achieved in the real world.
Has neoliberalism been achieved in practice?
Monbiot described how in the 1970s “elements of neoliberalism, especially its prescriptions for monetary policy, were adopted by Jimmy Carter’s administration in the US and Jim Callaghan’s government in Britain.” He is unclear on the details, but presumably in part he refers to Callaghan’s embrace of monetarist ideas from 1976 to 1979.
Milton Friedman
Monetarism, incidentally, is not obviously the same as neoliberalism. While monetarists such as Friedman were free-marketeers, monetarism’s central claim is that the main cause of inflation is the rise in the money supply – a thesis that (as Friedman himself recognised) could also apply to a planned economy. Indeed, this central monetarist tenet was adopted by some Marxist economists.
“After Margaret Thatcher and Ronald Reagan took power, the rest of the [neoliberal] package soon followed: massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services.”
He is right. Albeit to different degrees in different countries, these things happened.
But go back to Monbiot’s checklist definition of neoliberalism, as quoted above. He saw neoliberalism as minimising “tax” not simply “tax cuts for the rich”. Has this happened?
Ronald Reagan & Margaret Thatcher
Margaret Thatcher reduced taxation for the rich. But the overall tax burden (all taxes as a percentage of GDP) rose during her period of office. This figure fell in the 1990s and has fluctuated from 1997 in a range between 35 per cent and 38 per cent of GDP. The UK austerity governments since 2010 have not reduced the overall tax take significantly.
Similarly, Ronald Reagan began by cutting income taxes for the rich, but ended his eight-year term of office with a Federal percentage tax take almost identical to that of his predecessor Jimmy Carter, and slightly above the average for the entire 1970-2009 period.
The “neoliberal” mission of massive overall tax cuts was not achieved under Thatcher or Reagan, or under subsequent administrations. Put in a longer historical perspective, taxation and public spending in the UK and USA today are much higher than they were before the Second World War.
The above figure shows the tax revenues, from national, state and local government combined, for the UK and the USA from 1900 to 2016. The alleged era of “neoliberalism” from the 1970s has not been associated with declining tax revenues. If anything, the “neoliberal” era of a minimal state was pre 1914, not post-1975.
What is characteristic of fiscal policy in the UK and USA is not the alleged “neoliberal” overall reduction of taxation but a lightening of taxation on the rich, and a failure to redistribute sufficiently, in the face of widening inequality.
By contrast, Monbiot’s other point, about growing privatisation since the 1970s, has been borne out by the evidence. In the UK, USA and much of the world there has been massive privatisation and outsourcing of public services.
Unlike any false claim that “neoliberalism” has reduced overall taxes, the increase of privatisation is manifest. In addition, it has sometimes led to deleterious consequences including lower pay for workers and a reduced quality of services.
But Corbyn and Monbiot speak and write as if privatisation is necessarily bad – always and everywhere it is seen as a negative policy. This doctrinaire stance simply inverts the claim of the crudest free marketeers, who claim that state provision is always bad and that private provision is always good. The Corbyn-Monbiot stance simply turns this upside-down. It is equally dogmatic. It is based on ideology, not evidence.
Regarding markets as always bad, amounts to agoraphobia or fear of markets (from the Greek words agora for market, and phobia for fear). This is an inversion of the kratophobia of the free-marketeers – a fear of government or of the state.
Instead of these ideologically-driven, simplistic positions, it is necessary to be more pragmatic. Some privatisations work. Others do not. Some state provision is effective. Some is wasteful and inefficient. We need to look at individual cases to understand why.
There are many case studies to look at and they are too wide-ranging to be reviewed here. A good start would be to look at an important early article on privatisation by John Goodman and Gary Loveman in the Harvard Business Review. They wrote:
“the issue is not simply whether ownership is private or public. Rather, the key question is under what conditions will managers be more likely to act in the public’s interest … managerial accountability to the public’s interest is what counts most, not the form of ownership.”
Goodman and Loveman argued that profits and the public interest overlap best when the privatised organisation is in a competitive market. Competition from other companies can discipline managerial behaviour. Consequently, there is little point in privatisation if competition is lacking.
Subsequent research has shown that other factors are involved as well. Instead of being driven by dogma, we need to be pragmatic and experimental, taking account of research.
Jeremy Corbyn
You may respond that Corbyn is pragmatic, because he has declared that he is in favour of a mixed economy: he accepts a private as well as a public sector. But notice the imbalance in his presentations. He treats public provision as ideal, and the private sector as an expedient to be tolerated, at least for a while.
Corbyn says he accepts a mixed economy, but he has offered has no defence of private sector. His “mixed economy” could be a stopping point on the road to a fully-socialist planned economy, where private enterprise is pushed to the side-lines.
Declining public provision?
Ken Loach’s moving film, I, Daniel Blake, portrays the heart-breaking human consequences of the UK Conservative government’s shredding of the welfare safety net for the poor. Attempts to reduce public spending in many countries have led to millions of human tragedies like this.
Doctrinaire austerity policies – which fail in their own terms because they depress economic demand for goods and services and create more unemployment – have been adopted by many governments and imposed by the European Union.
All this is real, and tragic. Millions have suffered because of such misguided policies. But we should not jump to the conclusion that “neoliberalism” has been successful in moving toward a minimal economic role for the state.
In my book Conceptualizing Capitalism I examined differences and changes in public social spending in different developed countries from 1980 to 2005, using OECD data. The principal components of public social spending include health services, old age benefits, unemployment benefits, incapacity-related benefits, family support, active labour market public programs, and housing benefits.
Amounts of public spending as percentages of GDP (in 1980 and 2005) are shown below.
1980
2005
change
Australia
10.3
16.5
+6.2
Austria
22.4
27.1
+4.7
Belgium
23.5
26.5
+3.0
Canada
13.7
16.9
+3.2
Denmark
24.8
27.7
+2.9
Finland
18.1
26.2
+8.1
France
20.8
30.1
+9.3
Germany
22.1
27.3
+5.2
Italy
18.0
24.9
+6.9
Japan
10.2
18.5
+8.3
Netherlands
24.8
20.7
–4.1
Norway
16.9
21.6
+4.7
Portugal
9.9
23.0
+13.1
Spain
15.5
21.1
+5.6
Sweden
27.1
29.1
+2.0
Switzerland
13.8
20.2
+6.4
UK
16.5
20.5
+4.0
US
13.2
16.0
+2.8
Public Social Spending as Percentage of GDP in Selected Countries
Most countries increased their public social spending, during a period when the ideology of privatization was resurgent. The Netherlands is an exception. Note that the increases in public social spending are not explained by rises in unemployment benefit, because generally this comprises a small proportion of public social spending.
Of course, it needs to be emphasised that there is an ideologically-driven agenda that has led to deep cuts in some welfare and has been gravely damaging for the poor. But we are far from re-entering the era of the minimal state.
Pursuing unicorns
Much of the hysteria against “neoliberalism” draws from the Left’s deep rooted antipathy to markets. Let’s briefly address this.
First, they may be alternatives to markets in modern, large-scale economic systems but they would greatly out-do the miseries inflicted on the fictional Daniel Blake and his millions of real-world counterparts.
Karl Marx
Every attempt to get rid of markets, since Robert Owen and Karl Marx proclaimed their redundancy in the nineteenth century, has led to famine, repression and the termination of democracy. Look to Stalin’s Russia, Mao’s China, Cambodia, Cuba and Venezuela. Twentieth-century Communism resulted in over 90 million deaths.
In the light of twentieth-century experience it would be worse than foolhardy to make yet another attempt to minimise markets, or as Klein oddly put it, “corporate trade”.
A better way is possible, but it involves taming and supplementing markets, not repressing them. It means regulating corporations, not casting them as sorcerers of evil. But sadly, agoraphobia still afflicts many on the left.
“It seems to me that the questions we urgently need to ask ourselves are these: is totalitarianism the only means of eliminating capitalism? If so, and if … we abhor totalitarianism, can we continue to call ourselves anti-capitalists? If there is no humane and democratic answer to the question of what a world without capitalism would look like, then should we not abandon the pursuit of unicorns, and concentrate on capturing and taming the beast whose den we already inhabit?”
Excellent. But since then he has gone down the rocky road of blaming “neoliberalism” for “all our problems”. Without defending some role for private property or markets, he thereby allies himself with the many leftists who now describe anyone defending private property or markets as “neoliberal”.
Has Monbiot now abandoned the idea of taming the capitalist beast? Does he wish to kill it instead?
In April 2016 he wrote: “Every invocation of Lord Keynes is an admission of failure.” So he junked the best macroeconomic theory we have for limiting some of the excesses of capitalism. His grounds for doing so were these:
“Keynesianism works by stimulating consumer demand to promote economic growth. Consumer demand and economic growth are the motors of environmental destruction.”
John Maynard Keynes
Wrong. “Consumer demand and economic growth” can destroy the planet, but only if that demand and growth relate to non-renewable material resources. Much demand and growth in modern economies is for services. Intangible assets now make up much of corporate wealth. For example, there are demands for information and education, and such services are added to GDP. There is no necessary reason why economic growth in a modern information-rich economy should ruin the planet. Keynes is still relevant.
Those that have pursued unicorns have imagined that it is possible to design a better system than capitalism. Monbiot says the same, declaring that for the Left
“the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century.”
This puts him in full, unicorn-chasing mode. One of the biggest mistakes by early socialists was to ignore the massive complexity of modern economic systems and attempt to “design a new system” at the behest of some utopian dreamer.
Instead, what is required is careful, incremental, experimental change, retaining the flexibility and devolved autonomy afforded by widespread private property. This autonomy allows for multiple experiments and deeper learning from mistakes.
While state intervention is necessary, no complete or adequate overall “design” is possible, because of the way much knowledge is irretrievably dispersed throughout the economy. The economies of the twenty-first century are more knowledge-intensive than those before. Hence the possibilities of comprehensive central planning or “design” are even more limited.
“as modern psychology and neuroscience make abundantly clear – human beings, by comparison with any other animals, are both remarkably social and remarkably unselfish. The atomisation and self-interested behaviour neoliberalism promotes run counter to much of what comprises human nature.”
The first sentence is valid and important. The second is simplistic. As I elaborate in my book From Pleasure Machines to Moral Communities, strong evidence from psychology, evolutionary biology and primatology shows that the picture of self-seeking “economic man”, which dominated mainstream economics until recently, is deeply flawed.
But that does not mean that we can or should get rid of markets. Our capacities for cooperation evolved culturally and genetically because our ancestors hunted and foraged in groups, rarely numbering more than 200 individuals, for millions of years. Relying on emotions and facial expressions, we developed sophisticated social mechanisms to engender trust and cooperation, and to enforce social rules.
As larger-scale cities emerged about 14,000 years ago, these face-to-face mechanisms could no longer be relied upon exclusively to regulate social interactions. Institutions such as law, property and contract were developed to deal with these more impersonal, non-familial, transactions.
Even the Soviet-style economies of the twentieth century relied on some private property and trade. They failed because state bureaucracy stifled autonomy and innovation. China grew rapidly when it expanded the private sector after 1978.
Of course, the spread of the market would be detrimental if it invaded all our social relations, attempting to put prices on love and friendship and reducing everything else to money transactions. But a system of private property provides a degree of autonomy that is required to maintain non-market interactions at home and at work. Successful corporations create islands of cooperation and teamwork within their organisational boundaries.
Impersonal relations occur in bureaucracies as well as in markets. Large-scale systems of national planning also make much interaction impersonal. People become atomised; they become numbers, to be processed by bureaucrats and computers.
The experience of centrally-planned economies in Russia, China and Eastern Europe shows that systems of state planning can be cesspits of human alienation and corruption, governed impersonally by disillusioned bureaucrats and corrupt state officials. I recommend the film The Lives of Others for a glimpse into that dark world.
Abandoning neoliberalism
I have written at further length elsewhere on the limits to markets. I accept Hayek’s explanation that comprehensive overall planning is dysfunctional. But I do not accept that everything should or can become a monetary transaction in its place.
Indeed, the growing use of information in a capitalist economy puts limits on the role of information as property. Furthermore, the very freedom of waged employees means that there are constraints on entering into contracts for future work. There are limited futures markets for labour. For such reasons, capitalism can never be a 100 per cent market system.
Hayek failed to acknowledge fully the limits to markets. Such free marketeers are the mirror-image of socialists who fail to acknowledge adequately that there are limits to common ownership. We have to transcend both agoraphobia and kratophobia.
Agoraphobics react adversely to any tolerance of markets. Hence economic interventionists such as Tony Blair, and supporters of public healthcare such as Hillary Clinton, have recently and frequently been accused of being neoliberals. This is misleading and absurd.
As Colin Talbot has pointed out, “neoliberalism” has become “a term of abuse” to be used against “any type of pro-market reform or political position that recognizes markets may – in the right circumstances – be a good thing”. Consequently, everyone “from moderate social democrats to the most lurid free-marketeers gets lumped together under a convenient ‘neoliberal’ label.”
In a brilliant survey of its usage since the 1980s, Rajesh Venugopal concluded that “neoliberalism has become a deeply problematic and incoherent term that has multiple and contradictory meanings, and thus has diminished analytical value.”
Some may wish to retain the “neoliberal” label, to apply it to those free marketeers who attempt to shrink radically the size of the state, and to privatise anything that walks. The definition could be further sharpened by adding advocacy of economic austerity. It could also could be sharpened by including deregulation of the financial sector.
But such nuances have been lost in a global storm of “neoliberal” accusations. Klein and Monbiot have added some force and authority to this widening tempest.
They do not confine their accusations to the likes of Hayek. Most seriously, they pointed the “neoliberal” finger at Hillary and Bill Clinton, as Corbyn made the “forces of globalisation” jibe at Barack Obama.
If it means anything, neoliberalism is an ideology and only partly a reality. Austerity and welfare cuts have wreaked havoc, but markets and private enterprise have lifted millions out of poverty. Agoraphobic accusations of “neoliberalism” miss the latter point.
We may ask: what part did the accusers of “neoliberalism” have to play in Trump’s victory? The constant tainting of Hillary Clinton as a “neoliberal” may have helped to persuade many Democratic supporters to stay at home. We know from the data that the below-par turnout by Democrats – especially by the young – was decisive in losing those swing states.
Tainting Hillary Clinton as a “neoliberal” could have played a part in clinching Trump’s success. If so, “neoliberalism” gave us Trump, but not in the way that Klein and Monbiot suggest.
18 November 2016
Minor edits – 19, 25, 30 November, 15, 28 December 2016
My forthcoming book elaborates on some of the political issues raised in this blog:
Wrong Turnings: How the Left Got Lost
To be published by University of Chicago Press in November 2017
Outside the EU, the UK would have to replace a huge apparatus of EU-wide regulation that has grown up since 1973 when it joined. This regulatory legislation would be an even more formidable burden than any increased tariff levels that would be adopted if the UK leaves the EU Customs Union and Single Market.
More generally, any contract between sellers and buyers across international boundaries requires agreement on the means of adjudication, if a dispute arises over its terms or fulfilment. Typically it is agreed that disputes will be resolved in the courts of one nominated country. The European Court of Justice was set up to deal with contractual disputes within the EU, and between EU traders and contracting businesses located outside the EU.
Third, while observing the Econ 101 definition of a public good, note that education is generally a rivalrous rather than a non-rivalrous service. Education services require resources, including buildings, infrastructure, equipment and trained teachers. Additional students generally require additional resources. (Although in some cases the marginal cost is low, such as with mass-distributed online courses.) Consequently, education provision is generally rivalrous.
The issue of missing markets is relevant here, as I discuss in my book Conceptualizing Capitalism. There are missing markets for future employment because to introduce such complete markets would be tantamount to slavery. The prohibition of slavery means that we cannot have complete futures markets for labour. This means not simply the existence of transaction costs but the enforced absence of transactions, which would be equivalent to making the transaction costs infinite.
Published January 2018
Other countries have turned in the same direction, including the United States under Donald Trump and Russia under Vladimir Putin. Previously, both Soviet-style and fascist economies have embraced economic nationalism. China has continued along this road, even after its acceptance of private enterprise and a market economy.
With his 1995 changes to Clause Four of the Labour Party Constitution, Blair brought in an explicit commitment to a dynamic private sector. Labour stood for an economy where “the enterprise of the market and the rigour of competition are joined with the forces of partnership and co-operation”. Corbyn has returned to the spirit of Labour pre-1995 constitution, even if he has not yet changed the wording.
By exiting the EU Single Market, and by walking away from EU trade deals with non-EU countries that benefit EU member states, Labour and the Tories would threaten the UK economy with a massive downturn. The British economy would fall off a cliff.
Marxist-led national liberation movements in Cuba, Indochina and elsewhere kept the collectivist vision alive for the Left around the world. Liberalism was see as the fake ideology of American imperialism and the global bourgeoisie.
But much of the political debate is about immigrant numbers. The Tories ignore the economic evidence and start a Dutch auction of targets, to stem numbers. A large part of the Labour Party, facing a seepage of its working class support to UKIP, moves in a similar direction.
After coming to power in 1997, Labour Prime Minister 
After several years he renounced his former extremism, but retained his Islamic faith. In an interview he revealed the segregated life of his upbringing:
Some on the Far Left disowned Butt for betraying the struggle against “Western imperialism”. He was also criticized by one member of the “Stop the War” movement, who is a leading supporter of the Muslim Brotherhood, for his “call to change the face of Islam” (Cohen 2007, pp. 371-2).
But the official government document outlining this policy mentions respect and tolerance for other races but fails to mention discrimination against women or gays. It rightly mentions the freedom to “choose and hold” any faith, but not the freedom to exit a religion without sanction. It mentions “individual liberty” only once, and fails to uphold freedom of non-violent expression, including when it may cause offence.
Another problem here is not the values as such, but their nationalistic description as “British”. Democracy was not invented in Britain: Ancient Athens and Viking Iceland have much earlier precursors. The US and France have much earlier claims to the values of liberty and religious tolerance. Britain legally discriminated against Protestant nonconformists and Catholics until the nineteenth century, and it still bars any Catholic from becoming its sovereign.
Putting the blame on “neoliberalism” underestimates the way in which outsiders such as Trump and Farage have created populist movements that blame “the elite” and offer simplistic solutions, such as to “curb immigration”. Blaming “neoliberalism” underestimates the pernicious influences of racism and anti-Muslim prejudice. 
Unlike any false claim that “neoliberalism” has reduced overall taxes, the increase of privatisation is manifest. In addition, it has sometimes led to deleterious consequences including lower pay for workers and a reduced quality of services.
Ken Loach’s moving film, I, Daniel Blake, portrays the heart-breaking human consequences of the UK Conservative government’s shredding of the welfare safety net for the poor. Attempts to reduce public spending in many countries have led to millions of human tragedies like this.
The first sentence is valid and important. The second is simplistic. As I elaborate in my book 
Impersonal relations occur in bureaucracies as well as in markets. Large-scale systems of national planning also make much interaction impersonal. People become atomised; they become numbers, to be processed by bureaucrats and computers.
But such nuances have been lost in a global storm of “neoliberal” accusations. Klein and Monbiot have added some force and authority to this widening tempest.