Archive for June, 2010

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“If I can’t retire, then where will I work?”

Wednesday, June 30th, 2010

http://www.flickr.com/photos/myglesias/ / CC BY-SA 2.0Matthew Yglesias in the US had a good post recently on retirement ages. It’s worth reading in its (relatively brief) entirety, but I particularly found my head nodding at this bit:

The other issue is that as best I can tell from the labor market fate of people in the 50-65 age bracket, employers aren’t exactly chomping at the bit to hire older workers in any capacity . . . It seems to me that if your desire is to see more people in the 60-70 range working, that you have to show me you’re making some progress on creating meaningful labor market opportunities for older people. Just yanking the safety net out isn’t much of a solution.

As I’ve stated before, I think it’s important that the progressive movement debate the issues around savings levels, retirement incomes and the general costs of an ageing society in an informed and forthright manner.

I’ve published two guest-posts so far by economist Peter Harris, in defence of aspects of the current model. I’d be interested in publishing further guest-posts as well, on either side of the argument. If you’ve got something to say (or know somebody else who does), then send an email and let us know.

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Posted in Progressive Path to Prosperity | Comments Off

Commentary Round-up

Wednesday, June 30th, 2010

This is a new regular feature as part of the July experiment.

Different people have differing ways of keeping up with their favourite columnists and commentators. These days I rely pretty heavily on RSS feeds that collect their latest writings as they are published.

It’s a little frustrating therefore that some of the most insightful and knowledgeable New Zealand commentators on policy and economic issues don’t currently have working RSS feeds.

I’ve decided therefore to put out a regular post linking to their latest writings myself, partly as a public service and partly as a prompt to myself to check in to see what they’ve written.

The three writers I plan to do this for initially are Brian Easton, Rod Oram and Colin James, but if you’ve got suggestions of others I ought to add, I’d be interested in hearing them.

I do have a few criteria for my list though: they should be publishing pretty frequently; they should be writing on substantive policy issues rather than political communication and strategy; and they should be difficult to follow regularly through mechanisms like RSS feeds, subscriber newsletters, etc. I’m also concentrating on New Zealand commentators at the moment, though if there’s a handful of overseas writers who meet the other criteria, I’d consider doing an international round-up as well.

So here’s an introduction to the commentators and this week’s round-up:

Brian Easton is one of this country’s leading progressive economists. He’s been producing publications since at least Economics for New Zealand Social Democrats (1981) and has been The Listener’s economics columnist for 33 years, meaning that he has probably helped introduce two generations of New Zealanders to economics.

He continues to write a column for The Listener each fortnight. The Listener places its content behind a paywall for a fortnight after print publication, so I’ll link to these columns as they become ‘unlocked’. I’ll also link to other articles, papers and speeches that go up on his website.

This week: Bird in the mire (published in the June 12-18 Listener) considers the complaints former Telecom chief executive Theresa Gattung makes about ‘unexpected’ local loop unbundling (in her autobiography Bird on a Wire) .

Rod Oram is almost certainly New Zealand’s most interesting and original business journalist. He has been quite critical of the current government and his arguments often make common cause with progressive themes, although some of his advice (like the recent support for part-privatisation of Kiwibank) might sit less comfortably with progressives. He has a regular column in the Sunday Star-Times business section, and a weekly session on Radio New Zealand’s Nine to Noon programme each Tuesday.

This week: Hide gets his Act together (in the Star-Times) focusses on the Regulatory Responsibility Bill, but also takes a sideswipe at the Emissions Trading Scheme (following Bertram and Terry). This week’s Nine to Noon session is about the Conservative/Lib-Dem austerity Budget in Britain and the latest summit of the G20 group of nations (podcast available here).

Colin James has been writing about politics even longer than Brian Easton has been writing about economics. His books on the Fourth Labour Government, The Quiet Revolution and New Territory, are still definitive. He writes columns for the Fairfax papers (each Monday) and the Otago Daily Times (each Tuesday), and a monthly column in Management Magazine.

This week: in the Fairfax papers The Gillard question speculates on the implications of the new Australian PM for transtasman relations, while in the ODT Managing China looks at our relationship with China.

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July Experiment

Wednesday, June 30th, 2010

As subscribers to the Policy Progress e-newsletter already know, I’m trying something a bit different this month.

I’m going to cut back the long-form ‘column’-style posts to once a week, on a Tuesday, and supplement that with some shorter posts.

The guest-posts will stay much the same, but will now be published on a Thursday (subject to availability).

This is an experiment, so let’s see how it works.

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Know your economics before you get into power

Tuesday, June 29th, 2010

Last week, in a Red Alert comments thread discussing Rob Salmond’s recent Policy Progress guest-post on “Why the progressive movement should talk more about economics”, prominent progressive commentator Chris Trotter set out an opposing view:

The important lesson to be drawn is that “economics” is a language used by the powerful to justify their behaviour towards the powerless. Like politics itself, it can be reduced to that crucial, two word question Lenin posed to his followers: “Who? Whom?”

. . . Labour people don’t really need to learn the language of economics. All they really need to know is: Who cornered the lion’s share of society’s resources? How and from whom they were taken? And, the best means of returning them to their rightful owners.

Rob responded with a strong counter-argument :

@Chris Trotter: I think your statement here betrays exactly the kind of stylised thinking that hamstrings the left. You say that you believe economics to be inherently right-leaning and therefore it should be rejected wholesale. Your premise is entirely false, as the catalogue of prominent, progressive economists cited by me and others shows. You also claim that “all Labour people need to know” is four things, none of which is “where do society’s resources come from, and how can we ensure that they keep on coming.” Any political philosophy that fails to even seek an answer to that question, as yours does not, is in big trouble.

Perhaps unsurprisingly, I support Rob in this debate. I think that it would be dangerous for a movement that aspires to govern not to have a clear analysis of the ‘political economy’ of the country — which includes Chris’s four things but also Rob’s additional two.

And, building on recent posts on Theoretical Foundations, I’d like to illustrate that point with reference to the British Labour Party in the late 1920s and early 1930s. In doing so, I’ll once again draw upon Donald Sassoon’s magisterial history of the West European left, One Hundred Years of Socialism.

First, a bit of context: by the late 1920s parties like Labour had followed Eduard Bernstein’s doctrine and abandoned revolution in favour of acquiring power through parliamentary means (splitting the West European left between social democrats and communists), but in general they still saw their end-goal as the move from a capitalist economy to one where the means of production was in common ownership.

As a result, they had given very little thought to how to manage a capitalist economy in a progressive way.

This failure came home to roost in 1929 when Labour found itself in a coalition government with the Liberals at the onset of a worldwide depression. Labour had a number of policies about nationalising key industries but neither economic conditions nor their coalition arrangement would allow these to occur; they had no theoretical framework that would help them decide what to do about a depression.

Two alternative course of action were put to them. One was advocated by the Cambridge economist John Maynard Keynes and the Trade Unions Congress and called for the government to undertake public works and stimulate the economy. The other was what has become known in the history of economic thought as “the Treasury view”. The Treasury and others held that fiscal stimulus would be ineffective and the government should maintain a balanced budget.

With no analytical tools of their own to deconstruct the Treasury view and distrustful of Keynes as a Liberal, Labour opted for the former. The coalition government ran a balanced budget while the economy rapidly got worse. Finally, faced with a suggestion to cut the unemployment benefit, the Cabinet split. Labour was thrown out of office at the next election (where it remained for the next decade); and its leaders Ramsay MacDonald and Philip Snowden were denounced as traitors to the movement. (Sassoon, pp. 56-58)

Another strand of this story is also worth following. One of the few senior Labour MPs who advocated for the public works approach was a man named Oswald Mosley, who is now remembered with disdain for his rather unsuccessful attempt to create a British fascist movement. It was quite probably the defeat of his ideas for taking action against the Depression that drove Moseley to leave the Labour Party and drift towards the fascist approach. (The career of leading “neo-socialist” planner Hendrik de Man of Belgium had a somewhat similar trajectory.)

British Labour’s failure of analysis and nerve was echoed elsewhere in Europe. Léon Blum’s Socialists in France were described as equally “ill-prepared to provide an alternative to the orthodoxy of Finance Ministry officials”, and Blum was reduced to later claiming that “he had wanted to be the ‘loyal manager of capitalism’” (Sassoon, p. 55).

In Germany, the Social Democrats under Rudolf Hilferding blocked the stimulatory WTB Plan put forward by the trade unionists Woytinski, Tarnow and Baade because they were already committed to the deflationary policies of the coalition government that they were part of. Hilferding condemned the plan as “unMarxist”. In a tragic parallel with Mosley, the plan was picked up in part by the Nazis as part of their public works programme (Sassoon, p. 61). Some writers believe that a German ‘New Deal’ based on the WTB Plan might have forestalled the rise of Nazism.

The analytical rout was not uniform, however. In Sweden, Finance Minister Ernst Wigforss had independently come to the same analysis as Keynes, and his work and that of the Stockholm School formed the basis for a distinctly Scandinavian approach to social democracy based on a somewhat managed economy and a ‘class compromise’ between business and unions. In many ways this set the pattern for postwar social democracy.

This typifies for me the importance of a coherent framework for analysing the political economic situation existing within the progressive movement, rather than dismissing economic reasoning as the purview of organisations like the Treasury or even than relying on sympathetic outsiders like Keynes. It may seem counter-intuitive, but when difficult choices need to be made, the lack of a confident understanding can lead you to be more conservative.

(The 1930s was a complex period and I have inevitably simplified. For instance, unlike MacDonald, Hilferding in Germany did have a guiding analytical framework in ‘organised capitalism’, which saw monopoly capitalism as an important step toward socialism. Unfortunately, this gave him no guidance as to how to cope with a crisis of underconsumption.)

Donald Sassoon is scathing about Labour’s inability to recognise even in hindsight how much its analytical weakness had cost it:

At no stage in the Labour Party’s rethinking during the 1930s was there a serious attempt to understand why such a programme of economic reorganization and development [as was put forward in 1934] had not even been attempted in 1929-31. The only explanatory category which was used was that of ‘betrayal’: Labour failed to advance towards socialism because it was betrayed by its leaders — MacDonald and Snowden. This explanation, by ascribing the sole responsibility for the Labour rout of 1929-31 to its leaders, prevented further thought. All that was necessary was for the Labour Party to be led by good and consistent socialists. (p. 63)

As it turns out, a rather similar critique of the ‘betrayal thesis’ has been made in the context of the First Labour Government in New Zealand, by none other than Chris Trotter in his book No Left Turn:

But here’s the question that neither [John A] Lee nor [Bill] Sutch ever satisfactorily answered: why did Savage, Fraser and Nash demur? . . . For Lee and Sutch the answer could only be couched in terms of individual inadequacy: Savage was vindictive: Nash was timid, Fraser was ambitious. But is this explanation sufficient? . . . Or did Lee and Sutch prosecute their old comrades for historical crimes of which they were entirely innocent? Did they become the scapegoats of a left-wing that never fully understood the power and tenacity of the forces arrayed against the first Labour government? (pp. 148-9)

In fact, all of Chapter Six of No Left Turn is a valuable account of Labour’s early years of power during the 1930s. This includes a very realistic appraisal of the constraints that the Depression placed upon its leaders (although Trotter is consistent in that the focus is on power relations rather than impersonal economic logics).

I’d encourage progressives to take their cue from Chris Trotter’s considered analysis in No Left Turn rather than that off-the-cuff exhortation on Red Alert.

Links

Further Reading

  • Donald Sassoon, One Hundred Years of Socialism. The West European Left in the Twentieth Century (1997), Chapters 2 and 3.
  • Chris Trotter, No Left Turn. The distortion of New Zealand’s history by greed, bigotry and right-wing politics (2007), Chapter 6.

The next long-form post, or ‘column’, will appear on Tuesday 6th July. A number of shorter posts will appear between this post and that one.

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Posted in Theoretical Foundations | 3 Comments »

Towards accommodation with capitalism?

Thursday, June 24th, 2010

This is the third in a series of posts about the development of progressive ‘theoretical foundations’ over time. The first part set out a ‘potted history’ of progressive thought from Marx onwards, while the second discussed how the neoliberal policies undertaken by some progressive parties during the 1980s (included the Fourth Labour Government) fitted into the ‘progressive canon’.

A recent comment from Greg highlighted that some of the theorists I’ve cited in my ‘potted history’ “seem to want to mount an attack on capitalism as a mode of production while others seem to want to work within it to further social justice and the development of human potential.”

Yes, that’s true, but I think that’s a fair reflection of the breadth of progressive theorists. Some have wanted to replace capitalism, while others have set out ways to reform it.

Moreover, my perception is that, with some variation (notably in the 1960s and ’70s), the move has been from the latter to the former, and with increasingly modest reform aspirations.

Let’s retrace our historical steps briefly. From Marx who argued that capitalism would bring about its own collapse, we move to Bernstein and his contemporaries who believed capitalism could be transformed from within.

In the 1930s and 1940s Keynes, Beveridge and their fellow-thinkers provided the basis for a managed model of welfare capitalism, and theorists like Crosland reframed the scope of the progressive project to fit this.

More recently, following the 1980s neoliberal ascendency I’ve described in my previous post, Third Way theorists like Giddens have reframed the project again. They have addressed the neoliberal critique and refuted some of it, but also taken into account things like a much reduced belief in government intervention.

We can envisage a sloping line, varying up and down over time but trending in a single  direction, which is away from a wholesale rejection of capitalism and going further and further in its accommodation with it. Not just in terms of abandoning any alternative to capitalism, but also accepting that market logic should prevail in most forms of economic activity. That is something that would have been regarded with horror during the high-tide of the mixed, managed economy in the 1950s and 1960s.

And I should emphasise that I’m not talking about the politicians here. Progressive theorists have also moved to a position of far greater accommodation.

I realise that these assertions may be rejected by some readers. Some of you may say, “Oh really? Which progressives?Which theorists?” You might claim that the pure heart of true progressivism is still beating strongly and radically, and has simply been obscured by the likes of Blair and Giddens. You will probably be able to point to individual theorists who are not accommodationists, and I’m sure some of them are doing important, ground-breaking work.

But. The centre of gravity is elsewhere.

The progressive theorists who get cited in all the journals, who have schools of thought built around them, and who the leaders of progressive political parties listen to and cite (or even the leaders of the left-bloc of parties – I’m thinking John Cruddas in the UK) are on the whole far more accommodationist than their equivalents a generation ago.

And, if anything, the serious theorists (as opposed to dissident polemicists) working out of a broadly Marxian tradition are probably where this shift is strongest. I’ve talked about Castells and the Regulationists; even if you add in Antonio Negri, things have still moved a long way from the time of Althusser and Marcuse, or Mandel and Miliband (snr). (In response to a another post, terence has cited another example of this: “Herb Gintis and Sam Bowles – two American economists who’ve made the long journey from Marxism to behavioural economics and game theory but who, in doing so, haven’t foregone left wing ideals.”)

But. Things could change.

In many ways the Global Financial Crisis was (or should have been) to neoliberalism what 1970s stagflation was to Keynesian demand management. In the initial reaction to the crisis, one could see a real opening for new ideas. For the moment, orthodoxy has reasserted itself and the problem has been reimagined as being essentially about government indebtedness, but that may not last.

And meanwhile, within the strands of progressive movement closest to the Third Way, we seem to be beginning to see projects like Open Left and the Amsterdam Process saying: perhaps we went slightly too far with accommodation.

It remains to be see whether, and how far, the pendulum will swing back towards a bolder progressivism. And if so, the question becomes how that will manifest itself in theoretical terms.

To some extent I think this will involve a return to the major thinkers of the 20th century like Keynes. But it is likely that it will also rely on new insights, and I imagine that many of them may be driven by the need to incorporate environmental sustainability into our standard economic models.

This series of posts has been largely silent so far about the work of environmental progressive theorists. There does seem to have been some important work we can turn to here — and the comments threads on recent posts have suggested some examples — but my sense is that progressive ecological political ecology has not yet seen its equivalent of Keynes’ General Theory (or Marx’s Capital or Smith’s Wealth of Nations, depending on your preference).

I’d also predict that a fruitful source of new insights over the coming period will be a cross-pollination between this ecological thinking and more mainstream economists (and political theorists) who are disillusioned by the crisis, concerned about the climate challenge, and looking for a new theoretical way forward.

An important part of the Theroretical Foundations topic will be trying to identify some of the emerging threads of that new synthesis as it begins to develop.

Links

Further Reading

  • Michael Hardt and Antonio Negri, Empire (2000)
  • Antonio Negri in conversation with Raf Valvola Scelsi, Goodbye Mr. Socialism (2008)
  • Donald Sassoon, One Hundred Years of Socialism. The West European Left in the Twentieth Century (1997)

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Posted in Theoretical Foundations | 1 Comment »

Why compulsory savings should not be on the agenda

Wednesday, June 23rd, 2010

“Compulsory Kiwisaver” is bubbling up on the agenda, the latest being a call for it at the recent stock exchange AGM. It is easy to see why the NZX wants it. Not only does it add liquidity to the capital market, but somebody else (the government) does all the hard work – and carries all the cost – in raising the capital, collecting it, distributing it to investment agencies and regulating providers. The quintessential “free lunch”!

There are four strong reasons to resist making Kiwisaver compulsory:

  • If the government is going to tell people how to allocate a part of their incomes, compulsion would almost certainly have to be backed by some form of compensation and protection, either through extended tax concessions and/or capital guarantees, and intrusive regulation and supervision of providers. This increases the chances that a larger proportion of Kiwisaver balances will simply be savings transfers (as savers chase the bigger subsidies and extended protection), not net new savings.
  • There is a risk that with compulsion, savings levels could actually be artificially capped. The government is telling me to save, therefore it is also by implication telling me how much to save. (It knows better than me).
  • With compulsion, rules are required for withdrawal (emigration, hardship, matrimonial property settlements, ill-health etc). These become incredibly complex and arbitrary, and tend to generate resentment, which works against promoting a savings culture.
  • Compulsion tends to be inequitable because it captures a portion of savings that some people make reluctantly (otherwise a voluntary system would be sufficient) and transfers it to preferred providers, who are typically quite well paid: it takes money off people who don’t want to use it that way to support the earnings of finance industry employees.

The net effect is a small – or potentially minimalist – increase in savings levels, won at considerable fiscal cost, excessive regulatory prescription on both saver and provider, and much more complexity.

Worse though, it sets up the pre-conditions for ending or scaling back the flat rate, universal New Zealand Superannuation. If people have to save, there is a perception that this is because NZS is on the way out. There can be no other legitimisation of compulsion. If people want to save (to augment NZS) that is entirely a private matter.  The perceptions and the politics work to divide opinion and diffuse commitment to defending NZS.

Remember that NZS is fundamentally equitable: it does not try to replicate in retirement the inequities that emerge during working life, it protects those (typically women) who live longest, it fences inflation risk off and it compensates (in part) for the fact that some retirees leave paid work with few financial assets. It is though, barely adequate as a retirement income. It is not generous.

Augmenting it is an entirely legitimate choice, but it is a private choice.

Last week, my son had a letter from his KiwiSaver provider reminding him that as a part time worker (he is a student) he had not qualified for his full tax credit, and that if he wanted it he would need to make an additional contribution before the end of the tax year. Sadly, his response was that he had better do that because the whole point of KiwiSaver was to replace the existing pension!

This compulsion thing is corrosive. NZS is worth saving.

_____________________

Peter Harris is an economist who specialises in public policy, the labour market, and primary industry issues. He has been Economist for the Council of Trade Unions (CTU) and economic adviser to Dr Michael Cullen. Peter was also chair of the Savings Product Working Group, whose report was the founding document for what evolved into the KiwiSaver scheme. Further biographical details can be found here.

Peter’s previous post for Policy Progress was Good policy process – the case of New Zealand Superannuation.

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Are progressive theories different from theories followed by progressives?

Tuesday, June 22nd, 2010

In the first half of the 1980s an energetic new progressive government came to power, and began governing in ways that surprised its traditional supporters. They devalued and deregulated the currency, deregulated capital markets and the financial sector, cut corporate taxation and taxation on high income-earners, corporatised and to some extent privatised state assets, and changed the focus of monetary policy from preserving employment to tackling inflation.

I’m referring of course to the Social Democratic Party of Sweden.

But another 1980s progressive government also prioritised inflation over employment or corporatised publicly-owned enterprises. Plus, they cut public spending, froze benefits, and even imposed a ‘hotel’ charge on hospital patients.

This was the French Socialist Party under the presidency of François Mitterrand.

None of this is to suggest that the ‘Rogernomics’ era of the New Zealand Labour Party was simply part of a worldwide trend. In many respects, they went further in the neoliberal direction than any other progressive party, or than most conservative parties.

Nevertheless, I was put in mind of these other examples when thinking about how to respond to James Caygill’s comment on my previous post setting out a ‘potted history’ of progressive ‘theoretical foundations’:

. . . I think you need to find a place in there (even if we agree we’ve moved on (or back)) to the rise of the monetarists as a critique/replacement for the Keynesians. We can (and do) argue about the continued relevance of the 4th labour government but the fact remains that they saw themselves as consistent with social democratic thinking at the time.

I’d agree that monetarism, or perhaps more broadly neoliberalism or ‘the Washington consensus’, has been one of the most important theoretical (and successful) movements of the last fifty years. And as such the ‘Theoretical Foundations’ topic will definitely need to critically engage with its ideas.

But should they be regarded as part of the story of how progressive theoretical thinking has developed? I’d argue not, for reasons that I’ll explain below.

Perhaps some readers would also deny that the government led by David Lange (and maybe those of Carlsson and Mitterand) were ‘progressives’ at all. Clearly, Roger Douglas who was Finance Minister 1984-88 and now an ACT party MP, can no longer be regarded as a progressive.

But I think if we start withholding the label wholesale because we don’t happen to agree with their policies, then we get into a very slippery slope indeed. Some people might consider Labour to have been a progressive party throughout its history except for the 1984-90 period of the Fourth Labour Government; others would exclude the Moore years (1990-93) as well; others would say it has still not returned to being properly progressive. Some would even say that the New Zealand Labour Party has never been truly progressive, or not since the days of Harry Holland (1919-33).

We end up having a term that’s meaningless because nobody can agree what it covers and what it doesn’t. I think we need to accept all parties that claim themselves to be social democratic or green as being part of the ‘progressive’ movement. (I’d also argue for the inclusion of the US Democratic Party.) That doesn’t mean we need to always agree with or support or like them.

This is also important because it forces us to confront (rather than edit out) periods in our history where parties that called themselves progressive have gone off on bizarre and troubling tangents. So, to that extent, I agree with James.

I also agree that, with important (and growing) pockets of dissent, the Cabinet of the Fourth Labour Government did broadly accept the theoretical framework offered to them by the Treasury documents Economic Management (1984) and Government Management (1987). And that was a neoliberal framework.

Why did they do this? The fact that their French and Swedish counterparts did something similar at around the same time offers some clues.

The economic situation at the time was dire, and had been so for some time, and in a way that people weren’t used to after the ‘golden age’ of the 1950s and 1960s. Also, and even more importantly, the progressive canon of ideas seemed to be powerless to do anything about this, and was becoming discredited in the eyes of many as a result.

It was in this context (and in reaction to the conservative interventionism of Muldoon) that Labour politicians were tempted to ‘reach across the aisle’ to try neoliberal ideas. Or, as economist Peter Harris wrote in a recent comment on this blog:

The resurgence of neo-classicism . . . was a response to the supposed demonstration of the fundamental flaws of Keynesianism evident in the stagflation of the late 1970s (which had entirely different causes, but more on that some other day)

(There were also cultural and generational factors, which have probably been best explored in the New Zealand context in Colin James’s Quiet Revolution; although see also Bruce Jesson’s Fragments of Labour.)

So the incorporation of neoliberal theories into Labour’s programme of action reflected a failure and in some ways a suspension of progressive theory, rather than a change to the progressive theory. The neoliberal programme was largely imported wholesale, without any adaptation into a progressive framework, and then expelled (at least in part) equally quickly.

For this reason, I would not see the neoliberalism of the 1980s as part of the story of progressive ideas.

Rather, I would see its impact on progressive thought as largely occurring a little later, with the active engagement between progressive theory and neoliberal theory and the attempt to develop some kind of synthesis between the two. This was in many ways what the ‘Third Way’ (as an intellectual rather than political project) was all about. As I’ve argued previously, this is where the importance of Anthony Giddens (Beyond Left and Right and The Third Way) comes in. But one could see the efforts of Gordon Brown to theorise progressive action as a response to market failure (whose critique by John Kay we’ve previously covered) in the same light.

That brings us to another noteworthy feature of the development of progressive thinking as I’ve outlined it, which is its trajectory of increasing accommodation with the capitalist system. I’ll address this in my next post, on Thursday.

Links

Further Reading

  • Colin James, The Quiet Revolution (1989)
  • Bruce Jesson, Fragments of labour: The story behind the Labour government (1989)
  • Donald Sassoon, One Hundred Years of Socialism. The West European Left in the Twentieth Century (1997)

P.S. The title of this post is based very loosely on the titles of a couple of article by one of the New Zealand political writers I most admire, the late Bruce Jesson. A series of articles in his self-published magazine The Republican in the 1970s called Labour ‘the party of capitalism’ and National ‘the party of the capitalists’; it’s a distinction that has always stuck with me.

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Posted in Theoretical Foundations | 1 Comment »

Progressive theoretical foundations — an introduction and potted history

Thursday, June 17th, 2010

Following on from my last post, I’d like to place the catalogue of conservative claims that I’m compiling within the context of the Theoretical Foundations topic as a whole.

I should start by saying, that, in previous descriptions of Theoretical Foundations, I’m not sure I’ve always succeeded in communicating that this topic isn’t about the values and principles that guide progressives.

Rather, it addresses the ideas about how the world works that progressive use to decide how to put those values and principles into practice. These ideas are what I call the ‘theoretical foundations’ for progressive action.

In theory, it would be perfectly possible for someone to, in terms of their emotions and ethics, completely agree with progressive values, and yet intellectually not be convinced at all by any of these ‘theoretical foundations’. Instead, this person might believe another set of ideas which say that the way the world works makes it very difficult, and often counter-productive, to accomplish progressive goals.

Presumably, such a person would be very unhappy. Yet it seems that very few such people exist. On the whole, and perhaps this reflects the way that human brains work, people with progressive values believe in at least some of the progressive ‘theoretical foundations’, whereas people with conservative or market-oriented values tend to believe that the world works in such a way that acting in accordance with those values is an effective way of achieving societal wellbeing (as they define it).

Sketching very very broadly, I would say that, while progressive ‘theoretical foundations’ will have many variants, the common theme is to assert that it is possible through collective action to achieve outcomes that better accord with progressive values than the outcomes that would arise of their own accord through the natural order of things.

In the twentieth and early twenty-first century, ‘the natural order of things’ means market outcomes. And ‘collective action’ usually, though not exclusively, means action through the state.

The way I wanted to come at this initially, however, is to consider the alternative set of ‘theoretical foundations’ — those which claim that collective/state action will not achieve better outcomes (even on progressives’ terms) than the market — and the reasons that are put forward for this.

That’s what I was asking for assistance with in my previous post. I want to get my head around the range of contrary arguments as I go forward on this topic.

That’s not to say that I think that the ‘theoretical foundations’ for progressivism should be reduced to a series of rebuttals against individual arguments. In fact, one of the reasons for including this topic in the work programme was a desire to contribute to a more systematic theoretical justification for progressive action. As I said when first mooting the topic:

An argument can be made that, ever since the decline in confidence in traditional Keynesian macroeconomic management from the 1970s and the demise of a socialist alternative to capitalism as even a long-term goal for the mainstream left, the progressive movement has lacked for both a long-term project (‘what kind of society are we trying to get to?’) and a convincing theoretical underpinning.

My focus is on the latter. I aim over the course of this topic to restate some of central strands of progressive thinking over time, trace key intellectual developments over the half-century since 1960, and identify if possible some emerging theories coming out of the experience of the Global Financial Crisis and its aftermath.

For now, though, I’d just like to sketch some initial ideas about some of the key points on this trajectory.

I’d argue that the first really systematic account of the structural problem with ‘the natural order of things’ (capitalism), and how ‘collective action’ might address these, comes from Karl Marx in the mid-nineteenth century.

The first important theoretical break with Marx then probably comes from Eduard Bernstein. Writing at the end of the 19th century, Bernstein argued against the inevitable collapse of capitalism and declared he had “extraordinarily little feeling for, or interest in, . . . ‘the final goal of socialism’” and was more interested in achieving “social progress”. He’s regarded as the founder of reformist social democracy.

But Bernstein and his contemporaries had little in the way of a programme for what they would do once power was achieved. Indeed, the first wave of social democrats generally entered government without any distinctively progressive approach of governing. In the English-speaking world it was left to Liberals (ie the predecessors of Nick Clegg’s Lib-Dems) to provide them with a theoretical underpinning, most notably John Maynard Keynes in the field of economic policy and William Beveridge the architect of the British welfare state.

In the immediate postwar era, one can identify the importance of Anthony Crosland’s The Future of Socialism in the UK, which set out a theoretical basis for the postwar welfare state consensus, and in the US The Affluent Society by John Kenneth Galbraith and The Power Elite by C. Wright Mills. In the New Zealand context, one might add the work of Bill Sutch and Wolfgang Rosenberg.

In the 1960s the emergence of the New Left brought a new radicalism, plus a broadening out of the issues to take in feminism, environmentalism and post materialism. Prominent writers within this movement included the ‘Structural Marxist’ Louis Althusser, Michel Foucault and his work on power, and Jürgen Habermas on modernity. Seminal feminist texts included Betty Friedan’s The Feminine Mystique and Kate Millet’s Sexual Politics.

With the 1970s dominated by the oil shocks and stagflation, progressive thinking became both more pessimistic and more defensive. The ’slump’ was analysed through a return to Marxist theories of ‘capitalist crisis’ by economists such as Ernest Mandel and Ralph Miliband (father of the two current UK Labour leadership contenders David and Ed). James O’Connor tried to contend with The Fiscal Crisis of the State, critics like Ian Gough critiqued the welfare state from the left (often in ways that were later appropriated by the right), and André Gorz bade ‘Farewell to the Working Class’. Perhaps the most fundamental challenge to the capitalist order of things however came from the relatively conservative Club of Rome with its 1972 publication The Limits to Growth.

As we get closer to the present day, historical perspective becomes harder to sustain, and choices become more arguable. Amongst 1980s theorists I would point to the French Regulation School which includes Michel Aglietta, Alain Lipietz and Robert Boyer. Anthony Giddens‘ works Beyond Left and Right — the Future of Radical Politics (1994) and The Third Way: The Renewal of Social Democracy (1998) are important as the theoretical touchstone for the ‘third way’ approach of Blair and Clinton (amongst others), while Manuel Castells‘ Network Society trilogy stands as the premiere progressive theorisation of the ‘knowledge economy’.

That brings us into the 21st century, and raises the question: what have been the most important progressive theoretical works of the last decade? I’d welcome your suggestions, along with any comments on or additions to the preceding timeline.

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Posted in Theoretical Foundations | 12 Comments »

Why progressive policies will always fail

Tuesday, June 15th, 2010

In this post, I want to enlist your assistance with an exercise that I think will help to get Policy Progress’s Theoretical Foundations topic underway.

I’ll explain my reasoning about how it contributes to what I’m trying to achieve with Theoretical Foundations in Thursday’s post, but for now I’d just like to jump right into the exercise itself.

The work programme description on this topic starts by saying:

Many non-progressives profess that any significant state or collective action to try to achieve social and economic goals is bound to be ineffective or even counter-productive. They often use complex yet elegant theories and models drawn from neoclassical economics to prove this.

I want to compile a list of all of the main arguments along these lines. Or, as our opponents might put it, a catalogue of the reasons why progressive policies will always fail. Here’s what I’ve come up with so far:

(I should note that I’m not saying that every one of these arguments is necessarily wrong. In some instances, it may be that many progressive would accept the argument, at least up to a point. Nevertheless, they are all arguments that, if true and/or believed, make progressive action harder.)

  1. Government attempts to ‘pick winners’ by giving public assistance to particular companies or industries are misguided, as politicians and public officials cannot allocate resources as well as the market can.
  2. Similarly with efforts to take a strategic approach to assessing what training is needed to meet a country’s skill needs — this amounts to ‘manpower planning’ and has also been discredited.
  3. The market is better at fostering innovation than any form of centralised decision-making can ever be (an argument advanced by John Kay, as described in an earlier post).
  4. Public officials’ actions and advice are guided not by commitment to the public interest but by their own rational self-interest (as predicted by ‘public choice theory‘) leading to budget-maximizing and bureau-shaping activity.
  5. Public sector organisations are inevitably less productive and efficient than private sector ones because they are not subject to the same market discipline, including shareholder demands and the ultimate threat of bankruptcy.
  6. Because ‘exit’ is more effective than ‘voice’, it is better to give people more choice in the services they receive than to give them greater say in decisions about the way those services are provided (see this post).
  7. The effectiveness of government action will be undermined because people do not behave in the way that governments want them to, leading to problems with perverse incentives and moral hazard.
  8. Increases to public activity will ‘crowd out‘ innovation and investment by the private sector (which is where genuine wealth-creation takes place).
  9. Attempts to provide resources to the poor will tend to get captured by the middle class unless they are tightly targeted.
  10. Tax rates need to be kept low and relatively flat (i.e. not too progressive) in order to reward innovation and effort, or else the economy will suffer.
  11. In any case, efforts to tax the rich will inevitably be ineffective as they will find ways to avoid the additional taxation.
  12. Providing too much of a welfare ’safety net’ is counter-productive since unless income support levels are minimal this can create ‘benefit dependency’.
  13. Monetary policy needs to be tightly focussed on keeping inflation rates very low, and cannot afford to take into account the impact of its interventions on employment or investment.
  14. In fact, according to the ‘Policy Ineffectiveness Proposition‘, governments really cannot have any positive effect on the economy, because people will use ‘adaptive expectation’ to respond immediately to any government action (taking into account its long-term costs) and thus neutralise it.

This might seem like quite an economically-focussed set of arguments, and indeed most of them do derive from the discipline of economics.

But their potential application goes well beyond the economy, and has implications for just about any area of social spending. Some of the arguments, like #4 and #7 above, even have implications for the desirability and effectiveness of government regulation of societal behaviour.

It is also, almost certainly, an incomplete list. And I’d like to enlist your help in order to add to it. What other arguments against the effectiveness of progressive action can be included in this list?

I’d also be interested in any help in identifying the definitive texts setting out these arguments (and those that are added to the list). And, for that matter, any assistance in steering me towards devastating rebuttals to these arguments would also be much appreciated (although that’s primarily a task of a slightly later phase of this topic).

Do progressive policies always fail? I don’t believe so. But I also believe that they are much less likely to do so if we are aware of, and able to consider and take account of, the arguments that are mounted against them.

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Posted in Theoretical Foundations | 9 Comments »

Keeping a watch on the Welfare Working Group

Thursday, June 10th, 2010


I spent yesterday at the Welfare Working Group’s Forum in Wellington. Like a lot of progressives, I’ve been a bit concerned at where this process is headed. There’s been some talk of moving to an insurance-based system like they have overseas and/or putting a limit on benefit durations.

Day one of the Forum hasn’t confirmed my concerns, but it hasn’t really allayed them either. So I’ve decided to do something about it.

The Welfare Working Group looks to be following a similar model of operating to the Tax Working Group, which was actually pretty transparent with public meetings and all the documents they deliberated upon available on their website as they went along.

My personal impression is that we as progressives (and I’m sure there were exceptions) didn’t make as much use of that last year as we could have done, to work through our own responses and counter-arguments ahead of the publication of the Tax Working Group’s report. I want to do my small bit to help ensure that that doesn’t happen again with the Welfare Working Group.

To that end, I’ve set up a new website, welfarewatch.org.nz. It’s been established as a venue for people to monitor and comment upon the activities and ideas of the Welfare Working Group.

Welfare Watch will operate somewhat differently to Policy Progress. For one thing, it’ll be much more topical and focussed on current policy controversies.

For another, I don’t intend to be the primary author at Welfare Watch — I’m aiming for it to be much more of a group-blog with a fairly wide cast of contributors. I don’t have enough hours in the day to make this work on my own, and there are a lot of good people out there who have more expertise than I do on these sorts of issues anyway.

So if you’re interested in being part of Welfare Watch, get in touch with me via email. Given the sensitivities of this issue and the somewhat different approach of this site, I’m happy to accept pseudonymous contributors if people don’t feel able to post under their own name.

In the meantime, I’ll start the ball rolling with my own contribution (which will also be posted on Welfare Watch): impressions on the first day of the Forum.
______

The Working Group has put up an outline of the first day of the Forum on their website. It includes links to profiles of most of the speakers and some of the presentations, including Working Group Chair Paula Rebstock’s (text and video). Hopefully, more will go up over the next few days.

Rebstock’s speech is what I’d describe as being in a “technocratic caring” style. She raised many of the dire stats about (quote) benefit dependency (unquote) that I’m sure will be reiterated many times between now and December, and didn’t really relate to people on benefits as individuals, but she did seem to convey the impression that her driving concern was to reform the system to improve their life-chances and especially those of their children. She didn’t talk about the insurance model except to note it being part of their terms of reference, and spoke as if the Group was approaching the Forum with an open mind and without a set policy agenda (“We have a lot to learn, share and consider over the next two days. Every one of you here has an important role to play.”)

Minister Paula Bennett spoke as well (her speech is supposed to be on the website too but doesn’t seem to be so far), and similarly made a virtue about not really saying anything about her own views: “I’m not going to give a speech prescribing what I think should happen”, “my prescriptions can take a back seat”, “I won’t define the problem — this is your turn”.

At the same time, she softly made it clear that she was the final decision-maker: “At the end of the day, it is my responsibility to get this right.” And then there was that odd bit about “this could spark prejudices — we may even see an ugly side of New Zealand” which seemed a bit out of place at the time but turned out to provide a handy sound-grab for the TV news.

In my opinion, though, the most important and welcome presentation of the day came from Peter Whiteford of the Social Policy Research Centre at the University of New South Wales who spoke on ‘Welfare in New Zealand and Australia compared to other OECD countries’. You can find his powerpoint slides here, and they’re sufficiently wordy that you’ll get a pretty good gist of his full presentation.

One of Whiteford’s themes was something that a lot of people don’t realise, which is that New Zealand and Australia’s welfare system are pretty-much unique in the world.

Europe, the US and Japan all have systems that are financed by employers and insured employees, and where benefit levels are often related to a person’s previous earnings. By contrast, NZ and Australia has flat-rate entitlements, which are subject to income and asset tests, but with broad coverage of the population and eligibility based on residence, with no time-limit on duration.

Whiteford looks at how our model compares in term of international stats. He finds that New Zealand:

  • has one of the most progressive structure of benefits of all OECD countries.
  • has lower ‘churning’ than most other OECD countries
  • has the third highest level of transfer efficiency in reducing poverty
  • is above average in reducing inequality.

Australia, with a similar but in some respects more generous model, comes out even better.

Whiteford concludes by musing that processes like the Welfare Working Group have a broad choice between taking a ‘demolition’ or ‘refurbishment’ approach to the system.

It seems to me that his presentation makes a strong case for ‘refurbishment’ — New Zealand’s welfare approach clearly has many virtues and we should be very cautious about jettisoning them just because we don’t conform to the standard international approach.

Whiteford ends with a suggestion that our real problem might precede the interventions of the welfare system:

Despite impressive design features of tax and transfer systems, disposable income inequality in New Zealand is above the OECD average; this means that income inequality before taxes and transfers is higher than in most countries with better inequality outcomes.

If New Zealand wants to be more effective it could either increase its high level of progressivity, or tax and spend more while at least maintaining effective progressivity, or identify the factors associated with its relatively high level of market income inequality and address these problems more directly.

There were two other plenary sessions, one from the OECD (a video of the presentation is included following the Rebstock one at the link above) and one (which I missed) on whether the benefit system will deliver in the future.

The rest of the day was filled with two parallel sessions. I went to one on What contributes to long-term benefit receipt? and the other on Long-term benefit receipt and unequal opportunities for children and young people. The speakers in both of these challenged the assumptions of the Forum as a whole. The former session did this by making people on benefits the subjects (i.e. protagonists) of their narrative rather than its objects, while the latter did so by making child poverty rather ‘benefit dependency’ the central problem.

I found both sessions refreshing and informative, and was glad to see both were chaired by Working Group members (as all parallel sessions were) and attended by government officials. Yet, as someone pointed out to me afterwards, these sorts of voices don’t seem to be scheduled to be featured in any of the plenary sessions, so they are easy enough to step around.

It remains very much to be seen whether the perspectives reflected in these sessions, or the lessons from Peter Whiteford’s analysis, get incorporated into the further work of the Working Group, or whether this is just a polite nod to diverse viewpoints before they get onto the real business of their reform agenda.

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Posted in Child Poverty and Cycles of Disadvantage | 5 Comments »

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