Sunday, September 29, 2013

Business partisans don't like to hear about the failure of neoliberalism

This article is hard to process in American political vocabulary. Because it deals with British social-democratic socialism of the 20th century, not with Soviet or Chinese style socialism: Will Hutton, Socialism has failed. Neoliberalism has failed. But Ed Miliband's new deal might just work The Observer 09/28/2013.

More specifically, it talks about a proposal by Labour Party leader Ed Mililband to impose price controls on energy prices. It's not such a radical idea: the United States had federal controls on oil prices from the end of the Second World War until 1981. But I'm intrigued by how Hutton characterizes the debate that Miliband's proposal generated, with his critics shrieking about "socialism":

You would have thought Ed Miliband had just stormed the Winter Palace with the Bolsheviks. ...

[Digby] Jones [of the CBI, which proudly bills itself as "the UK's top business lobbying organisation"] seems in no doubt that the exercise of public authority to shape markets and business behaviour is socialism. He should think before he opens his mouth. Twentieth-century socialism in its pomp asserted that the state should have the senior, directive role in the economy and society, privileging organised labour while aggressively redistributing income and wealth, and owning and controlling what it needed. Although it scored some notable achievements – the National Health Service – in general it failed. To characterise Miliband's evolving political position as a resurrection of a socialist position reproducing, or even to the left of, Clement Attlee's 1945 Labour party is both bone-headed and inaccurate.

It also presumes that the giant neoliberal experiment that replaced socialism as the dominant system of both thought and economic organisation has succeeded when it, too, has palpably failed. The British – and for that matter the western – banking system survived only by massive public intervention. It remains chronically short of capital and vastly overstretched: only implicit and explicit state support allows it to carry on trading. Meanwhile the coalition government – correctly in my view – now champions industrial policy as the means of catalysing firms to assume innovation and investment risks that they could not otherwise undertake in a period when digitalisation is transforming and destroying current business models. There are also huge opportunities – but uncertainty abounds. British firms hoard £800bn of cash. Productivity has gone backwards. There has been the largest and most sustained fall in living standards for close to 100 years.

Messrs Woodford, Jones and all the other hyperbolists want to dodge these grim realities. Both socialism and neoliberalism have failed, and the quest is on for better ways of making capitalism work both for itself – and for workers, consumers and citizens. There is a huge intellectual and political effort, especially in the US, by what American economist Philip Mirowski calls the "neoliberal thought collective" to insist – notwithstanding the events of 2008, the dramatic fall in living standards and the investment strike – that its ideas remain valid. Thus the hailing of economic recovery – however late and weak – as proof positive that nothing is wrong with the basic vision that the best form of economic and social organisation is state-free individualism and free markets. Thus the denial of overwhelming scientific evidence that carbon emissions are growing rapidly along with global warming, which will require some form of governmental and intergovernmental response.

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