Tuesday, 7 June 2011

A picture paints a thousand essays

Michael Taft: After all the arguments, tables, charts and footnotes, sometimes it takes just a picture to tell it as it really is.  Courtesy of Mark Thoma - the logic of austerity.


Paul Hunt said...

And here's another picture that might give those on the 'progressive-left' some pause to reflect:

And this provides a bit more background:

Rory O'Farrell said...
This comment has been removed by the author.
Tom McDonnell said...

@ Paul
Thanks for the guardian link

To sum up the guardian article, their policy prescription for the left is as follows:

To provide an analysis of the causes of the crisis and develop -

1. A strategy for regulating financial markets that promotes the public good, tackles systemic risks and reforms banks that are "too big to fail".

2. An industrial modernisation plan that would rebalance our economies away from a reliance on financial services, and invest in services and knowledge-based industries as well as traditional manufacturing.

3. A strategy for reforming the tax system, one which would clamp down on tax evasion and fraud while restoring the progressivity of tax, while using redistribution to tackle inequalities.

Each of these policy areas is a major research area in and of itself. It is clear that the progressive left needs to articulate a vision of society that extends beyond the massively simplistic worldview that came to dominate Western ideology from around 1980 onwards.

Adam Curtis takes one angle on the development of this ideology in 'The Trap'.
See here: http://video.google.com/videoplay?docid=404227395387111085#
And here:

The crisis and its fallout may eventually give birth to a concrete 'progressive' framework to challenge this limited and damaging worldview.

Time will tell.

Paul Hunt said...

Thanks, Tom, but my heart always sinks when I see 'there needs to be' or 'there should be'.

Identify those things that have turned them off, change them and just reach out with a positive message to those in the centre whose natural home is on the progressive-left. The path to economic well-being and prosperity leads through the political process.

By attacking the malign Neocon fantasies one is implicitly attacking those in centre who deserted the progressive-left for being dupes of the Neocons. Nothing surer to get their backs up. Seize the narrative. Forget the 'should bes' and 'needs to bes'. There is a better way. Tell the story - and dump some of the out-dated ideological baggage that turns so many people off.

Rory O'Farrell said...

@ Paul Hunt

At its most basic I consider the aim of progressives/Left to be equality. Equality of income, but also of power. The two are obviously linked.

In some ways the Left has been hugely successful over the past 50 years. Apartheid is gone, people can divorce. There are now institutions that can redress power imbalances. Such as allowing tenants get redress from bad landlords without the expense of going to court.

Regulations in the economy should be to protect the little guy from abuse at the hands of big organisations (such as banks giving dodgy financial advice). I see the problem of elder abuse in some nursing homes in the same way I see the issue of protesters in Syria, and Palestinians in the Gaza strip. They all involve people being abused by those with greater power.

Its only by coming together against the powerful that these issues can be solved. Sometimes we can use the state to do this (such as with an ombudsman, or regulations against unsafe work practices). Sometime the state is the cause (like apartheid South Africa).

Even though the left may only be in power in a minority of EU countries, there is still plenty that can be done via trade unions, credit unions, NGOs etc.

After WWII to the 1980s the Left was the consensus because people directly remembered the troubles caused by the Great Depression. Followers of Hayek sometimes forget that various regulations were put in place for a reason.

Fortunately not many people have a direct memory of the Great Depression. But the current recession can help remind people of the need to curtail the power of elites to prevent a repeat of our economic crisis.

Paul Hunt said...

@Rory O'Farrell,

You make many valid points, but in your haste to make them you glide over many more fundamantal ones.

The current recession has demonstrated - one would hope conclusively - that capitalism can do more more damage to itself than the Left could ever inflict on it in a democratic polity. It has also shown itself adept at bleeding the state to compensate for the losses incurred due to its self-immolation.

But whatever glee the Left might derive from kicking the beast when it's down, it is empty and pointless as the challenge is to heal it but then to shackle it in the public interest. While the Left retains and expresses a desire to supplant or (in the words of Eric Hobsbawm) to supercede capitalism it will never secure the popular consent to achieve its valid (and vital) political and economic objectives.

Discarding this desire might split the Left, but such an expression of honesty would allow the Left to regain much of the popular support it has lost. And there needs to be more honesty in terms of the role of collective action. TUs exist to advance the individual self interests of employees collectively and in an adversarial manner to counterbalance employers' pursuit of their self-interest.

And the interests of individuals and groups will conflict; that's why we have democratic systems of governance and the rule of law to resolve these conflicts.

The desire to suppress these conflicts (which very much benefits those who exercise economic power and influence) and the failure to establish and apply collective action in Ireland may be seen most clearly in the areas of competition policy and economic regulation.

The Competition Authority has deliberately been deprived of the powers and resources to identify and sanction effectively anti-competitive practices that seriously damage the intersts of consumers and citizens. On the rare occasions when it is able to identify conslusively an anti-competitive practice, the sanction or remedy it is empowered to apply is the equivalent of being hit by a feather duster.

It is even more the case in the economic regulatory sphere where ‘public consultations’ are conducted that are really optical illusions to conceal the underlying negotiation between the regulated business and the regulator (which has either been captured by the regulated business or is implementing implicit government policy to advance the interests of the regulated business or both), where tame consultants are retained to examine tightly defined elements of the regulatory process in a way that supports the nonsense advanced by the regulators and regulated businesses, where the underlying conflicts between providers of finance and the management and staff of these regulated businesses, on one side, and the interests of consumers, on the other, are totally suppressed - to the benefit of the former and the detriment of the latter, where every effort is made to ensure that consumers interests are not advocated in an effective, adversarial manner, where there is no potential to contest and rebut, using theory and evidence, the woolly-thinking and special pleading and where anyone who has the gall to critique this consumer- and economy-damaging charade is either ignored or villified.

(It is more than a tad ironic that actions to enhance the powers of the CA to deal with abuses in the private sheltered sectors and to reform the semi-state sector and its regulation are being compelled by the Troika - with the latter being blindly opposed by the 'progressive-left'. No government, of any hue, would have the guts or gumption to tackle these without external direction.)

There is a huge requirement and scope to broaden the role of collective action on behalf of consumers and citizens in a broad range of sectors. The 'progressive-left' should be leading this and, thereby, increasing popular support for its political and economic objectives - rather than nursing a desire to supplant capitalism and defending narrow sectional interests.

Brian McLoughlin said...

@ Paul Hunt

There are alternatives to capitalism and advocating them need not be divisive nor lose popular support for the Left.

The current recession demonstrates yet again that market capitalism is not fit for purpose. It destroys human potential, is grossly wasteful and inefficient, does not meet material needs, is environmentally unsustainable and is inimical to democracy. The economics of competition and greed sucks. It should follow communism into the dustbin of history.

It is not the end of history; capitalism is not an eternal social order any more than feudalism or communism and it does not constrain our options for a better society, one more attuned to our human nature. Participatory economics is an alternative I admire because it is formulated on principles of equality, solidarity, diversity and democratic self-management. For a description I refer you to ‘The Political Economy of Participatory Economics’, by Michael Albert and Robin Hahnel.

While I do not believe I will see any widespread adoption of participatory economics in my lifetime, I do think it or something akin to it will take root in this century and supplant capitalism. As I continue to make the case for participatory economics I also support reforms that promote a more equitable and cooperative economic order. This approach need not threaten a split of the Left and seems to me more likely to increase popular support.

Reforms to be sought right now include subordinating finance to the service of the real economy, pursuing full-employment fiscal and monetary policies and industrial policies, embracing a wage-led, rather than profit-led growth strategy – a full Keynesian program. There should also be reforms to make the safety net safe, to introduce progressive taxes, provide universal healthcare, develop public education, strengthen the public sector and curb the market.

The most successful attempts to humanise capitalism were in the Scandinavian economies in the 1960s and 1970s. These reforms then came under attack and all have been dismantled or significantly rolled back. This retreat of social democracy in Scandinavia stands as a powerful reminder why we must go beyond reforming capitalism if we expect to sustain progress toward the economics of equitable cooperation.

Paul Hunt said...

@Brian McLoughlin,

Thank you for your considered response. I'll respond with two quotes:

1. "The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals."

2. To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature.

You advocacy of participatory economics suggests you would aspire to the behaviour described in the second. Unfortunately we are all required to live in a world characterised by the first. Indeed one characterised by a desire to speculate to accumulate, to accumulate to speculate. We may wish it to be other, but some form of democratic governance is required to promote the beneficial and to restrain the excesses.

And yes, both quotes are by Adam Smith. The first from the Wealth of Nations, the second from the Theory of Moral Sentiments.

So, I fear, the best we can hope for is to tame capitalism. Supplanting it is not, nor should it be, possible in a democratic polity. And one test of the quality of democratic should be its ability to foster and protect a diversity of economic organisation. But imposing one or proscribing another cannot be a valid objective.

This is the perennial conflict on the left: between those who seek to tame capitalism and those who seek to supplant it. The former are frequently compromised and the latter frequently end up defending the indefensible. It's no wonder that voters are confused, turned off or are prey to the wiles and lures of the Neocons.

Brian McLoughlin said...

@ Paul Hunt

Thank you for taking up the discussion.

‘Adam Smith’s suggestions about the economic psychology of early man were as false as Rousseau’s were on the political psychology of the savage. Division of labour, a phenomenon as old as society, springs from differences inherent in the facts of sex, geography, and individual endowment; and the alleged propensity of man to barter, truck, and exchange is almost entirely apocryphal.’ – from ‘The Great Transformation’, by Karl Polanyi.

A heavy burden of proof is required to maintain that there is no alternative to capitalism, as this view greatly limits options for social development and induces a sense of fatalism that I suspect acts as a major barrier to the Left in its efforts to increase its popular support. There are findings in anthropology and psychology and evidence from history that rebut the view. In lighter vein, I would not be surprised, for example, if there were medieval folk who believed there was no alternative to feudalism.

I am persuaded by Chomsky’s views on human nature and accept that our knowledge in this area is limited. I do not profess to know what constitutes the perfection of human nature and am sceptical that there is or can be such a state. Again, I have to disagree with Adam Smith!

A participatory economy does not assume people are altruists, nor does it require a different set of human motivations than people actually have. Its institutions, procedures and rules are designed so that when people act out of self-interest their behaviour would prove socially efficient and equitable as well.

Surely alternative proposals merit full evaluation before concluding there is no alternative to capitalism?

Paul Hunt said...

@Brian McLoughlin,

Thank you once again. Your response is both refreshing and enlightening. As children of the Enlightenment we seem to be locked into this 'either/or' dichotomy; older eastern philosophies seem perfectly capable of dealing with 'both/and'.

My basic argument is that the subset of human desires and motivations that drives capitalism will always exist. The challenge it to provide for, foster and protect a diversity of forms of economic organisation where competition between these forms of organisation - on a level-playing field, with clear rules and a vigilant referee (I hate that metaphor, but it seems to convey the idea) - will ensure that the form most suited is selected to conduct a particular activity.

Once all forms of economic organisation comply with the rules of democratic governance, each will find its own locus of application. There is no requirement to suppress or supplant any particular form of economic organisation; nor is there a requirement to enforce the dominance of any other. Those that are superior in satisfying human needs will flourish; those that fail to do so will decline.

But the 'sine qua non', as Fukuyama, in his latest writings (having recanted his Neocon spasm), points out, is a capable and competent state, fully subject to the rule of law and fully accountable, democratically, to its citizens.

Then, and only then, will citizens be able to select and apply the mix of forms of economic organisation that best satisfies their needs.

While it devotes so much effort both to attacking and seeking to supplant the currently dominant form of economic organisation and then seeking to impose an alternative that is largely centralised and state-determined (but with potential for 'bottom-up' collective arrangements), the Left creates enemies of potential allies and often ends up defending the indefensible.

It is time to break free from these shackles and to advance a diversity of forms of economic organisation subject to effective democratic governance. Otherwise the Left's decline in developed economies will continue unabated.

Brian McLoughlin said...

@ Paul Hunt

I am conscious that we have strayed from the topic of this blog! So I will not continue to address the points you raise and instead will confine myself to explaining what may be some misunderstanding regarding my proposals.

A participatory economy is neither centralised nor state-determined. It has received considerable attention and scrutiny and I am not aware of any criticisms raised that required any of its supporters to defend the indefensible. Unfortunately it will require much advocacy and time before a democratic majority will be won over to it.

In the meantime there are many reforms I have already referred to that now need to be progressed.

Thank you.

Paul Hunt said...

@Brian McLoughlin,

Indeed. We are going off-topic, but it simply reflects an unwillingness on this blog to provide the forum to address the key issues that will need to be tackled to arrest the terminal decline in popular support for the 'progressive-left' throughout the EU.

I don't wish to be critical of you for retreating at the first hint of grapeshot; there are more than enough here who fail to engage.

Thank you again.

Aidan said...

Robert Kuttner has a really good piece on creditor-debtor conflicts in the past.

He says that “Either the creditor class prevails at the expense of everyone else, or governments find ways to reduce the debt burden so that the productive power of the economy can recover.”

Post WW 1 the creditor class had its way. Post WW2 , guided by JM Keynes, the Bretton Woods arrangement, “created a global monetary system in which private financial speculators were denied the power to compel nations to pursue deflation. Cheap money and expansive investment kept America (and Europe) from sinking back into depression. ”

Today, he says “that expansionary logic has been reversed and creditors are once again hegemonic. Banks want cheap money for themselves, draconian terms for others. The banker-afflicted European Union is punishing Greece rather than finding a way to let it grow.”

He concludes by urging that “We need to democratize the money issue once again.”

THe EU is certainly banker afflicted and the creditor class in Europe are likely to stunt the productive potential of many debt stressed countries, including Ireland, and lead to increasing divisions within the EU.

The Irish government must stop following the worldwide creditor/banking agenda and canvas for support within Europe to “find ways to reduce the debt burden so that the productive power of the economy can recover.”


disgruntled observer said...

@ Aidan

He concludes by urging that “We need to democratize the money issue once again.”


disgruntled observer said...

@ All

William Black has an article about Control fraud and Irish banking here. Via. Naked Capitalism.