Eric Hobsbawm and the future of socialism

Eric Hobsbawm’s piece in the Guardian on 10 April transcends its tendentious headline about the failure of socialism.  But it throws down a number of challenges to those of us who regard ourselves as being on the Green Left in understanding the current crisis and where it leads us.

Hobsbawm starts by characterising the current situation – planned state socialism failed, the free market has now failed, so the future lies with the mixed economy.  Even social democrats have been sucked into the free market illusion; but now that illusion has been laid bare, and things can change.

Looking to the future, he writes:

You may say that’s all over now. We’re free to return to the mixed economy. The old toolbox of Labour is available again – everything up to nationalisation – so let’s just go and use the tools once again, which Labour should never have put away. But that suggests we know what to do with them. We don’t. For one thing, we don’t know how to overcome the present crisis. None of the world’s governments, central banks or international financial institutions know: they are all like a blind man trying to get out of a maze by tapping the walls with different kinds of sticks in the hope of finding the way out. For another, we underestimate how addicted governments and decision-makers still are to the free-market snorts that have made them feel so good for decades. Have we really got away from the assumption that private profit-making enterprise is always a better, because more efficient, way of doing things? That business organisation and accountancy should be the model even for public service, education and research? That the growing chasm between the super-rich and the rest doesn’t matter that much, so long as everybody else (except the minority of the poor) is getting a bit better off? That what a country needs is under all circumstances maximum economic growth and commercial competitiveness? I don’t think so.

But a progressive policy needs more than just a bigger break with the economic and moral assumptions of the past 30 years. It needs a return to the conviction that economic growth and the affluence it brings is a means and not an end. The end is what it does to the lives, life-chances and hopes of people. Look at London. Of course it matters to all of us that London’s economy flourishes. But the test of the enormous wealth generated in patches of the capital is not that it contributed 20%-30% to Britain’s GDP but how it affects the lives of the millions who live and work there. What kind of lives are available to them? Can they afford to live there? If they can’t, it is not compensation that London is also a paradise for the ultra-rich. Can they get decently paid jobs or jobs at all? If they can’t, don’t brag about all those Michelin-starred restaurants and their self-dramatising chefs. Or schooling for children? Inadequate schools are not offset by the fact that London universities could field a football team of Nobel prize winners.

The test of a progressive policy is not private but public, not just rising income and consumption for individuals, but widening the opportunities and what Amartya Sen calls the “capabilities” of all through collective action. But that means, it must mean, public non-profit initiative, even if only in redistributing private accumulation. Public decisions aimed at collective social improvement from which all human lives should gain. That is the basis of progressive policy – not maximising economic growth and personal incomes. Nowhere will this be more important than in tackling the greatest problem facing us this century, the environmental crisis. Whatever ideological logo we choose for it, it will mean a major shift away from the free market and towards public action, a bigger shift than the British government has yet envisaged. And, given the acuteness of the economic crisis, probably a fairly rapid shift. Time is not on our side.

Which is fine as far as it goes.  But there are some huge issues here.

The first and most significant is that of how hard the guardians of the market – the rich and privileged who have been the main beneficiaries of the market society – will be prepared to fight to maintain their position.  

Perhaps the most impressive aspect of the G20 summit in London earlier this month was the way in which almost every nostrum of Anglo-Saxon capitalism has been abandoned.  Unfettered financial markets are no longer the path to wealth – not even for those who already hold it.  Banks and hedge funds must be regulated.  There’s a sense of leaders who have looked over the edge of the abyss, but whose response is to break out the rhetorical toilet rolls and sticky-backed plastic to cobble together something that looks like business as usual, and convince the public that the underlying system remains sound.  They can’t bring themselves to say “we were wrong”, even if they know it.  And of course to do so would undermine the basis of their wealth and power.  And here in the UK there is every sign that the victors at the next election will be a party whose explicit policy is to return to the deflation of the 1930’s – who appear to want to pretend that Keynes never existed.  

Against this background, it seems perverse to imply that the fiscal stimulus packages have changed very much.  They’re about shoring up the status quo, and helping to ensure that power and wealth stay pretty much where they are now.  There’s nothing radical here at all.

The second question is about democracy.  Hobsbawm perceives that things have changed – how widely is that view shared?  Governments and financiers are trying to ensure that the damage is limited; that we are facing a variant of “business as usual” (and, within the parameters of capitalism, perhaps we are).  Hobsbawm provides no more than the starting point.  The question the article begs is, “so what do we do next?”  

It seems to me that Hobsbawm asks most of the right questions.  It’s the answers that really matter, though.

Lessons from Ireland

The Republic of Ireland has recently introduced an emergency budget to address the effects of the economic downturn.  It’s the latest in a set of measures in an economy which, to an even greater extent than Britain, has been dependent on speculation and booming property prices.  The contraction of the Irish economy has been savage – official estimates suggest it will be 8% in 2009.  The rhetoric is about stabilising the public finances in order to bring a huge deficit under control, to restore confidence in the Irish economy.

The Irish policy response is interesting because it reflects quite closely the sort of policy framework that David Cameron and George Osborne have been setting out for the UK, in opposition to Gordon Brown’s stimulus package.  So it’s a useful exercise to unpack it to assess what Conservative policy could mean for the UK.

There’s an interesting analysis at Though Cowards Flinch which demonstrates how, despite the rhetoric that those who earn the most should pay the most, some of the changes in the tax regime actually bear down hardest on those least able to pay, by reducing income tax thresholds.

But this follows on from the announcement earlier this year of the Pensions Levy, which is in effect a swingeing pay cut for public sector workers.  The justification is simple; public sector workers enjoy substantially better pension provision than those in the public sector, and should therefore pay more for it.  Understandably it has provoked fury and mass resistance in Ireland, and the recent budget package modified it so that that it did not apply to lower-paid workers.

It’s a measure that fits closely with the rhetoric coming from the British Tory Party and its supporters in the Press.  In particular, the Daily Mail has been banging the drum about featherbedded public servants and their gold-plated pension provision, and individual Tory spokesmen have been making guarded comments on the subject (ever mindful of the fact that there are 600,000 voters in the public sector who have to be convinced somehow that voting Conservative is in their interests).  Others, like London’s Mayor Boris Johnson, have been much more outspoken.

The truth, of course, is totally different.  Mailwatch dissects the poisonous rhetoric about public sector pay here better than I could and some of the specific lies about public sector pensions are nailed by the Secretary General of the PCS, Mark Serwotka, in a radio interview in December last year.  Mailwatch points to the fact that public sector workers – who are overwhelmingly among the lower-paid in our society – have enjoyed years of below-inflation pay increases, while the private sector has forged ahead.  It however forbears to comment on the spectacle of Cameron and Osborne – both of whom sit on piles of vast inherited wealth -denouncing as bloated the average public sector pension of £7000 p.a. – barely enought to equip a member of the Bullingdon Club with tails and waistcoat.

The official Conservative line is that nothing has been ruled in or out.  But if the Tories win the next election, watch for the assault on the public sector.

Golden age of liberty?

I was fascinated by this piece by Rafael Behr in the Observer today; he argues that we are freer now than we have ever been, because taboos about personal behaviour have disappeared.  Behr regards this as much more significant than the fact that, in Britain at least, the level of surveillance has in the past few years increased hugely and the right to dissent has been curtailed.

I think what angered me about the place was its complacency; it’s very much the sort of thing that a relatively affluent media worker, engaged with the popular cultural zeitgeist, might write – a Pangloss for the twenty-first century.

So what’s the problem?

Behr’s analysis is entirely self-regarding and individualist; there’s no sense of the collective.  It’s a very market-driven, post-modern view of freedom; in the end he reduces the liberal critique to a fear of being ignored, the mentality of the toddler crying me, me, me.  And it comes dangerously close to the old policeman’s adage,”the innocent have nothing to fear.”  Try that one on the Guildford Four.

In many ways, Behr needs to get out more.  To Kingsnorth, perhaps,  where police used anti-stalking legislation to confiscate soap and clown costumes from peaceful environmental protestors, while making totally fraudulent claims about being victims of violence themselves.  Or to Britain’s borders, where it seems that increasingly intrusive checks are about to be introduced for travellers.

The inconsistencies in Behr’s analysis are made startlingly clear in this paragraph:

How much more freedom could we possibly have? Or, for that matter, how much more privacy? Our neighbours don’t grass on us, they don’t even know our names. You may feature somewhere as a number in a government database; you used to appear on carbon-paper duplicates in government filing cabinets. Before that, your ancestors were scratchily transcribed entries in leather-bound ledgers. So what? No one in government gives a monkey’s who you are or what you’re thinking. Whitehall knows less about you than Tesco. The Home Office holds the same data on you as you gave to Ryanair last time you booked a flight.

If it’s gathered by commercial organisations, Behr hints, it’s OK.  But what gets done with this information?  At what point, crucially, do the commercial interests of business and the political interests of Governments coincide?  And if Behr really understood the debate about personal data, he’d know that the real question is less that of what information is held by individual organisations, but what happens when that data is merged and mined.  Much of this information is held by private companies because legislation requires it.

Behr needs to understand that information is power; and that in an age when political dissent is bound up with the collapse of the economic and social assumptions that underpin the diminishing political space in which mainstream debate is undertaken in Western democracies, the risk that the information will be abused is growing.  The abuse is particularly clear when we see how legislation created for one purposeis  being used for another; legislation about stalking is used to stop peaceful protests.

And, above all, Behr fails to understand that one of the reasons why the personal taboos he mentions have gone in some societies – in secular Western democracies – is because they are no longer relevant to the maintenance of power.  Look at the culture wars in the US; the debates about gay marriage and abortion are still alive, and are about who wields power over whom.   In a week when an Afghan student journalist is imprisoned  for twenty years for downloading feminist literature from the internet, Behr’s view of this as a golden age of liberty looks particularly sick.

It’s an old truism that the price of liberty is eternal vigilance.  Perhaps the lesson of this piece is that it’s too precious to be entrusted to zeitgeist-toting journalists.

The resistible return of Ayn Rand

It’s been fascinating to read that the writings of Ayn Rand - in particular her dystopic novel Atlas Shrugged - are gaining currency again.  Celebrities queue up to be numbered among her admirers.   In many ways, of course, she’s never been away; she’s one of the great influences on neocon ideology, and it’s well known that Alan Greenspan was among her most influential cheerleaders, although no academic philosopher takes her work remotely seriously. But it’s widely reported that as the world sinks into economic depression, sales of her books are booming.

Atlas Shrugged is about individualism, and sets out the Rand philosophy most fully.  It describes a society in which the “men of the mind” – really a euphemism for entrepreneurs – withdraw from a society which is intent on bleeding them dry with regulations and taxes into their own mountain fastness.  The world descends into a mire of war and bureaucracy, until those same bureaucrats beg the entrepreneurs’ leader to bring them back out of exile.

So, what’s the appeal?

One explanation is that there is a similarity to what is happening today, with vast handouts to failed bankers at the expense of the prudent.  And there’s always been a tendency for the Right in the United States to hitch itself to any ideology which legitimises the refusal to pay taxes and condemns public altruism.   This is a body of work which is uniquely useful to anyone who wants to legitimise private greed and avoid any guilt about those whom society leaves behind.

But I think the issue goes a bit deeper than that.  One of the really interesting things about this work becoming more popular now is that what is happened in the real world is the complete antithesis of what Rand predicted.  The current crisis is above all the creation of the “men of the mind” who have increasingly been let of the leash; who have pursued their version of entrepreneurship without the petty burden of regulation, in an environment in which the ruling ideology has been that their enrichment of themselves has been beneficial to society.  Rational self-interest on Rand’s model has proved to be irrational and destructive.

So where does this leave us?  I think Atlas Shrugged is the security blanket of the neocons, a desperate attempt to find some vestige of legitimacy amid the chaos they have created.  The renaissance of Ayn Rand is a spasm of deluded resistance.

Privatisation and death rates

Here’s an interesting piece from The Times that reports on some fascinating research about the impact of mass privatisation in Russia following the collapse of Communism.

A recent piece in the Lancet by David Stuckler, Lawrence King and Martin McKee suggests that the rapid privatisation in a number of former Soviet and Eastern European states coincides with a spike in the death-rate of 18%. They suggest that the link between the two is unemployment, whose link to both stress and ill-health in a general sense and self-destructive behaviours like binge drinking is well-chronicled.

The report has caused a real storm, it appears.  In particular, it has brought forth a robust response from Jeffrey Sachs, the principal proponent of “shock therapy” to bring about irreversible capitalism in countries moving away from command economies.  But as the Times article says, the science looks pretty sound and the conclusion that key support networks risk being swept away in the name of economics is logical.

But most chilling is the fact that privatisation is only one type of economic shock. The toll of the extreme failure of market economics we are facing now could, on that basis, be a lot more than financial.

Dump the bottle

Some months ago, I posted about Elizabeth Royte’s book Bottlemania - a book that not only exposed the idiocy of the bottled water cult, but the damage that it does to the environment.  I see that Johann Hari has a piece in today’s Independent, announcing his intention to give up bottled water for the new year; it’s a useful reminder of one very simple way in which affluent Westerners can make just a little bit of a difference.

Hari also exposes the practices used by Coca Cola in its third world operations – again, an opportunity just to say no.

So what’s the truth about the credit crunch?

There is a conventional wisdom that the current economic crisis is grounded in what has become known as the credit crunch – the freezing-up of the credit system.  Hence the pouring of vast quantities of taxpayers’ money into the banking system to free things up.  But there’s a growing school of thought in the United States that suggests that this simply isn’t the case – and that the gargantuan quantities of money thrown at bankers, with no strings attached, was handed over on the basis of a false analysis.

One example is this article from the Wall Street Journal, which quotes a number of reports suggesting that the credit crisis was simply not as bad as it was painted.  The most noted of these is a paper prepared by economists at the Federal Reserve Bank of Minneapolis in October, which suggested that inter-bank lending – widely presented as being the core issue in the credit crunch – was in fact running at healthy levels.  And a survey of small business in November confirmed that lending was at healthy levels. Now neither of these reports is arguing that the economy in the US is in anything other than a dreadful state – simply that this particular widely-trumpeted feature of he current travails is simply not happening.

The real reason for the economic problems, critics argue, is simply that the what was generated in the boom years was paper wealth, not the real thing; when the bubble burst, people stopped spending, and both individuals and businesses simply stopped applying for loans as a result,  argues Joshua Holland in a recent Alternet piece.    As Holland argues, the issue is crucial; if there is no credit crunch, then the case for throwing money at banks evaporates.

So, if not needed to free up the financial system, what happened to the money.  American columnist David Sirota argues that it was all about corporate profit:

We were punked by those politicians and pundits who said what we had to do to fix the problem was not to both inject capital into the real economy (spending on infrastructure, health care, unemployment benefits, mortgage relief, etc.) and target reasonable amounts of well-overseen taxpayer cash to the specific banking sectors that required immediate aid, but instead to exclusively throw an ungodly amount of unregulated money at Wall Street while completely ignoring the real economy, and more specifically, to throw that ungodly amount of money at Wall Street with absolutely no strings attached.

That argument was not backed up by fact. It was a lie – and a lie with a motive: to make sure as much taxpayer cash as possible was given to one of the largest segments of campaign contributors, and that that cash could be used to subsidize executive pay, shareholder value, shareholder dividends bank consolidation and financial industry profits. And to date, nobody has been able to answer really simple questions that make this point as clear as possible.

As just one example, consider the fact that when aggregating what both the Treasury and Federal Reserve bank has have done, taxpayers have allocated $8 trillion to the financial industry. In a country where 18,000 people die each year because they lack health insurance (that’s six 9/11’s every single year), most believe it would cost about $75 billion to $100 billion a year for universal health care. So just to account for critics, let’s say it costs $200 billion. How does giving $8 trillion to the financial industry save more lives, better help the economy (whose fastest growing sector is health care) and better benefit society than using that $8 trillion to finance universal health care for the next 40 years and save 720,000 American lives?* The fact that Congress didn’t even ask such a simple question and simply allowed that $8 trillion to be allocated to its campaign benefactors on Wall Street means we were punked in a historic way.

I’ve focussed on the United States because this is where the evidence appears to be emerging into the public eye.  It would be very interesting to hear the truth behind the vast handouts of taxpayers’ money to the British banks.

With hindsight …

Among those who will look back on 2008 with some embarrasment are the economic pundits who failed to see what was coming; pieces are already appearing in the media asking why the economic turmoil of the past year came as such a surprise.

That most stimulating of columnists, Anatole Kaletsky in the Times, offers a review of the events of the past year which offers, as well as a mea culpa for not forseeing what happened, some intriguing thoughts about what happened and why.  He offers one very simple explanation:

Almost all predictions for 2008 turned out to be wrong because economics ultimately is driven by unpredictable human behaviour, not by fixed scientific laws – and this is especially true in a crisis. The biggest surprise this year lay not in economic events but in the reactions of financiers, businessmen, regulators and politicians.

Difficult to argue with any of this – but the explanation that he goes on to give can be read as a devastating indictment of the self-deception and hubris of those who live by the market.

Kaletsky points to three fundamental causes that led to the meltdown in September, when things really started to collapse:

The first big accident was the surge in oil and food prices in spring and early summer. This actually did more harm than the original credit crunch to consumer and business confidence and, therefore, to the prospects for economic recovery. We now know that this surge in commodity prices was a purely speculative phenomenon, unrelated to any real shortages of supply. But because of the quasi-religious faith that “the market is always right”, politicians and regulators refused to intervene directly in the oil market to curb speculation, leaving consumers and businesses severely weakened when the Lehman crisis hit.

This is a theme that Kaletsky has discussed before.  Movements in oil prices in particular had nothing to do with fundamentals.  We have in the past year seen a roller-coaster ride in oil prices which has left the argument that the market accurately reflects the realities of supply and demand in complete tatters.  As with so much that has happened in the past year, the movement in oil prices is the entirely predictable outcome of speculation.

The second accident was the series of regulatory blunders that climaxed with the Lehman fiasco but began several years earlier with the adoption of “mark to market” accounting and the perverse incentives created by “market-based” capital requirements determined by private rating agencies’ potentially corrupt judgments. These blunders, all of them ultimately motivated by the fundamentalist credo that “the market is always right”, continued throughout the credit crunch. Instead of quickly implementing a government-led Plan B to end the credit crunch, as I had expected, politicians kept waiting for implausible market solutions and refused to intervene until it was almost too late.

Difficult to argue with this one, except that the regulatory blunders have been going on for a very long time.  Much of what has happened in the Anglo-Saxon economies can be directly attributed to lax regulation.  Indeed, one of the sillier comic turns of recent months has been George Osborne’s repeated calls for bankers and hedge-fund managers who have broken the law to be prosecuted. It’s an obvious cop-out; regulation is so lax that irresponsible speculation has been by and large untroubled by legal sanction.  Osborne knows that focussing on criminality is as good a way as any of keeping his chums – the people who, inter alia,  finance the Tory Party – off the hook.  Politicians in the English-speaking world in particular have been so mesmerised by the language and ideologoy of the market that Plan B was never on the cards.

The third and perhaps most damaging misjudgment has been to subsume macroeconomic management into political morality. As a result of moralistic witch-hunts against debt and consumption, pragmatic Keynesian solutions to the credit crunch have been thwarted by an unholy alliance of ideological monetarists who believe that the market is always right and ideological Marxists who believe that it is always wrong. Even worse, consumers and businesses have started to see recession as a moral retribution for past excesses, rather than a technical problem that macro-economic policy could – and should – readily resolve.

This point needs sofurther exploration.  I for one am at a loss to find the ideological Marxists who have influenced policy-makers in this way; and where are these moralistic witch-hunts?  The response of policy-makers has surely been exactly the opposite; fiscal stimulus packages in Britain, massive state handouts to failed bankers in Britain and the United States.  The problem with Kaletsky’s analyisis here is the implication that we can get away without considering the role of debt and consumption in creating this crisis – especially since his criticisof free-market fundamentalists earlier in the piece seem to argue that it is the very ease with which ideologically-driven policy-makers have accepted the ideology of debt and consumption that got us in this mess in the first place.

The implication is surely clear here.   We need to rediscover economic regulation, put a cap on greed and consumption, and reconsider what- and whom – economics is for.   This implication seems to flow clearly from Kaletsky’s argument, and it is a huge pity (a failure of nerve, one might almost argue) that he shies away from this conclusion in the end.

Whatever happened about bank charges?

As the story of recent events in the banking sector unfolded, and as unprecedented amounts of taxpayers’ money was thrown at Britain’s banks, leading to their effective nationalisation, I’ve been wondering what has been happened in the ongoing litigation relating to penalty charges levied by banks on their customers, and about the implications of the changes in the banking sector.

Officially, a decision in the High Court in April 2008 ruled that bank charges were subject to a fairness test and that the Office of Fair Trading did have the right to assess them.  An appeal by the banks concluded on 5 November 2008 and a decision is expected in early 2009.

Straws in the wind

Much of course depends on the outcome of the appeal.  In the meantime the OFT has been investigating, and there are some indications of the way things are going.  For example, one report claims that RBS staff have been told that OFT has “serious concerns” about the charges levied by the banks; another, more recent report quotes a leaked internal email to the effect that the same bank is gearing up to issue refunds pro-actively, i.e. without customers being required to claim.  This may be no more than rumour, but if so it suggests how the banks are starting to think.

Public ownership?

The interesting political point, regardless of the outcome of the court cases, is really this:  is it acceptable that organisations that are now largely in public ownership – having been bailed out with gargantuan quantities of public money – should still be able to help themselves to up to £40 of their customers’ hard-earned cash for going a few pence overdrawn?  Can the obvious lie that these charges reflect administrative costs be sustained?  

And can people who have, through a combination of greed and ignorance and incompetence, led their industry to the brink of collapse, really find the sheer bloody arrogance to go on levying charges of this order on people who will increasingly struggle to make ends meet?

And will New Labour in Government do anything about it if they do?

Harold Pinter 1930-2008

I was very sad to hear of the death of playwright and Nobel Laureate Harold Pinter yesterday.

Pinter was one of those rarest creatures in the British artistic establishment, someone who believed it was imperative to speak truth to power.  Nothing made that clearer than his acceptance speech for his Nobel Prize in December 2005, made at a time when he was already seriously ill.

My clearest memory of Pinter is his performing his own sketch Press Conference at the Lyttleton theatre in February 2002.  Pinter played the former Head of the Secret Police in an unnamed dictatorship who has become Minister of Culture, giving a press conference in front of a group of supine journalists:

“We believe in a healthy, muscular and tender understanding of our cultural heritage and our cultural obligations.  Those obligations naturally include loyalty to the free market … Cultural dissent is acceptable – if it is left at home.  My advice is – leave it at home.  Keep it under the bed.  With the piss-pot.”

How the great and the good of our own British cultural establishment must have squirmed at that one.  He will be sorely missed.