Via John Quiggin at The Guardian:
Socialism is back, much to the chagrin of those who declared it dead and buried at the “end of history” in the 1990s. When the New Republic, long the house organ of American neoliberalism, runs an article on The Socialism America Needs Now, it’s clear that something has fundamentally changed.
The soft neoliberalism represented by Tony Blair, Bill Clinton and Paul Keating has exhausted its appeal, and not just in the English-speaking world. Throughout Europe, new movements of the left have emerged to challenge or displace social democratic parties discredited by the austerity politics of the last decade.
…To reimagine a 21st century socialist economy we need to consider a much broader mix of forms of economic activity than those of the 20th century mixed economy. These include:
- big business
- small business
- government businesses
- public non-market provision
- not-for profits and NGOs
- household production
Under financial capitalism, the standard way of providing goods and services is through big business: large corporations, with an associated network of subsidiaries and dependent contractors. Big business has grown at the expense of the public sector through privatisation and at the expense of independent small businesses through increased market concentration.
At the same time, labour market reforms have reduced the bargaining power of workers and increased that of employers. The combined effects have included increasingly concentrated wealth and power, wage stagnation and slow economic growth. Even the OECD has recognised this.
A socialist program would allocate much less economic activity to big business, and more to other forms of organisation. In deciding what kind of economic activity belongs where, a range of considerations are relevant. These include the scale of the activity, the extent to which it is possible and appropriate to charge market prices, the scope for competition and the relative importance of economic and non-economic motives.
In part this would imply reversing the neoliberal program of privatisation and marketisation. Large-scale capital intensive activities with limited scope for competition, such as the provision of infrastructure, would be returned to public ownership.
We are already seeing the beginnings of this process, with a notable example in the South Australian government’s investment in electricity generation. The Turnbull government denounced South Australia’s policies as those of a “socialist paradise”, sure to lead to economic disaster.
In very short order, however, Turnbull was announcing his own interventions, with the expansion of Snowy Hydro and restrictions on gas exports. We have even seen the suggestion that the commonwealthmight buy the Liddell power station(recently privatised by its state counterparts) to extend its operating life. This is a nonsensical idea, but it illustrates the extent to which the taboo on government intervention has lost its power.
Similarly, we are seeing some attempts to reconstruct the public Tafe system after the fiasco of for-profit vocational training and the Fee-Help system. The Victorian government in particular has taken some positive steps.
A socialist program in the 21st century needs to involve much more than a reversal of neoliberalism. The internet and the information economy have broken the link between productive activity and market returns. Information is a pure public good, which can be shared again and again with no additional costs.
So the production of information (ranging from scientific research to Instagram pictures) has potentially huge social value. On the other hand, the market value of internet activity depends, almost entirely, on the ease with which it can be packaged up with commercial advertising – meaning access is artificially constrained.
The fact that information is naturally a public good creates a huge potential for economic and social benefits of which we have realised only a small fraction. The combination of strong intellectual property laws and reliance on advertising to finance internet content mean that our access to information is artificially constrained. Governments could address this problem, providing vastly increased access to resources of all kinds, from artistic and cultural content to designs to be used in 3-D printers.
But the policies of neoliberal austerity have pushed us in the opposite direction, cutting budgets and pushing public institutions of all kinds towards more reliance on user pricing and advertising.
There is also much more room for voluntary and non-government activity. The neoliberal state, through contracting, competitive tendering and the audit culture, has sought to turn voluntary work and non-government organisations into low-cost providers of government services. In the process, much of the creative potential of civil society has been lost. Expanding the scope for voluntary social initiatives would fit naturally with a socialist program, and this is already beginning with the rise of social enterprises.
The idea of a socialist economy with unconditional access to basic incomes and greatly expanded provision of free services might seem utopian. But in the aftermath of neoliberal failure, utopian vision is what is needed. To re-engage people with democratic politics, we need to move beyond culture wars and arguments over marginal adjustments to tax rates and budget allocations, necessary as these may be in the short term.
Socialists have always seen short-term political struggles as part of a long-term project of transforming society for the better. It is this fact which explains why conservatives have always used the term “socialist” as a bogeyman. It’s also why the term has retained its appeal through decades of neoliberal retrenchment. Social democratic and liberal parties, compromised by their acquiescence in, or embrace of, neoliberalism, need to make a decisive break with the recent past. An explicit embrace of socialism would make that break clear.
Terrific stuff from Australia’s equivalent to Paul Krugman. And lot’s that should be embraced to right our sinking liberal ship:
- privatisation of natural monopolies is often a bad idea though public ownership also has its issues (see poles and wires);
- redress for the power of labour is a must, via various mechanisms;
- market concentration in large businesses is obviously destructive to the public good, something Adam Smith himself explicitly recognised;
- better public spending is always welcome;
- and a universal basic income is a good form of debt-deleveraging on the run.
However, there are a lot of policy choices here that do not fall under the banner of “socialism”. Many are, in fact, market-friendly. I’m talking actual functioning markets that promote competition as a utilitarian goal.
There is a hidden assumption underpinning Quiggin’s vision that makes it much more radical than it appears. To run big government investment programs, a drive for full employment, universal basic income etc, you obviously need to be able to run large, very large, fiscal deficits.
So, first you have be able to fund them without causing inflation and losing access to markets. If you borrow a lot offshore as we do then that’s complicated as Australia’s relatively low public debt guarantees its monstrously high private debt.
Thus, if Australia were to do these things unilaterally then the outcome is likely to be pretty ugly as the nation’s credit worthiness and/or currency collapses. We’d see a very swift adjustment to our living standards.
That’s not necessarily not worth doing if you think that that adjustment is coming anyway, as I do. But it brings me to the second and even more radical point to Quiggin’s shift. For this brand of socialism to work, the very mechanisms that create money in our economy are going to have to change. The private banks that offer cheap mortgages supported by an independent central bank will be at minimum curtailed. In their place we’ll have a central bank working hand-in-glove with the government to print money into existence via buying the sovereign bonds that fund various forms of agreed public income generation – infrastructure investment, basic income, digging holes, filling them in, etc.
And that brings me back to the first point. There is no way this can be done while global markets are still operating on Monetarist principles.
So, that does not mean the Quiggin vision is not coming. What it means is that we are not big nor powerful enough to implement it by ourselves. It will have to come from overseas fist, probably from the US, after another crisis. Granted, Professor Quiggin may well be writing for that audience.
However, we don’t want to throw out the baby with the bath water. Socialism is better than corrupted markets at managing certain public goods. But it’s not better at other things, such as the most efficient deployment of resources into the cheapest possible production of goods and services for households. For that, market principles such as competition, free trade and meritocracy work much better.
Moreover, do we really want to throw out the principle of individual excellence implied by the socialism rubric? Socialism comes with it own forms corruption, as we know, as government favours on production decisions replace those of an “in theory” transparent market. Do we really want to write a blank cheque for the Canberra carpet-baggers? As well, I’m sure even the most ardent lefty would see the danger of creating a permanent welfare underclass paid for by the central bank.
My own preference would be to see our “neo-liberalsim soft” turn into something much more pragmatic in its approaches to market management rather than become recognisably “socialist”. That is, we need to inject a lot more of the competition and market transparency that we’re supposed to have now: running monopolies from government control; breaking up private cartels; restoring policy by restricting private influence, and deploying many different fiscal reforms aimed at repairing tradable sectors and competitiveness.
Rather than universal basic income from the central bank let’s put the printed money into free education or specific and gigantic Manhattan Projects, such as huge injections into science, research and development that lifts the lowly paid with new skills and higher wages. Sure there’ll be waste but there’ll also be winners, progress and meritocracy.
That said, I acknowledge that this still needs to come with the curtailment of private money creation to kill financialised capitalism so that its commercial version can flourish again. Much higher capital, Tobin taxes, shifted lending incentives from mortgages to business would do it.
In short, kill bankers not liberalism.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.