Category: Markets

February 18th, 2018 by geoffhodgson1946

But it does not deserve to be there

 

Geoffrey M. Hodgson

 

Despite the disastrous record of self-described “socialist” regimes, socialism (whatever it means) is remarkably popular.

According to a 2017 survey of American adults, 37 per cent preferred (what they described as) socialism to capitalism. Among millennials (meaning those reaching adulthood in the early twenty-first century), 44 per cent preferred socialism over capitalism. This survey broadly confirmed previous American polls from about 2015, which showed a surge of support for socialism, especially among younger people.

Polling in the UK found that 39 per cent of adults have an unfavourable view of capitalism, while 33 per cent were favourable. Also in the UK, 36 per cent viewed socialism favourably, compared to 32 per cent negatively. Germans were reported as even more positive about socialism, with 45 per cent being favourable and 26 per cent unfavourable.

These polling figures are remarkable, especially when we take into account that regimes describing themselves as socialist led to over 90 million deaths in the twentieth century. Socialism has captured the ethical high ground, despite the poor record of socialist regimes in terms of human rights.

Somehow today’s socialists evade this legacy. They argue that these regimes were not really socialist. Or they were corrupted by bad leaders. Or they suffered largely because of antagonism from the capitalist West. All these arguments assume that a humane socialism is feasible and that there are not congenital flaws in socialism that lead it to dictatorship.

The word socialism has been in existence for almost 200 years and generally it has meant the promotion of common ownership and the abolition or limitation of markets and private property. There have been attempts to change this meaning but they have largely failed.

Love, care and cooperation

Socialism raises the moral flag because it claims to be the creed of love, care and cooperation. By contrast, it is argued, capitalism and markets encourage selfishness and greed.

Socialists point to defenders of capitalism such as Ayn Rand, who like the fictional Gordon Gekko in the 1987 movie Wall Street, promoted the view that that greed is good and altruism is evil.

Mainstream Economists are tainted too: they often favour markets and assume individual self-interest as an axiom. Socialism will subdue markets, private profits and other spurs to greed, and through common ownership create a system that encourages people to cooperate together and act unselfishly.

So the argument goes. But the evidence tells a different story. The socialists, the “greed is good” defenders of capitalism, and believers in our total selfishness are all wrong.

Theory and evidence, from Darwin onwards, show that evolution has provided humans with a mixture of selfish, cooperative and moral capacities, which can be stunted or developed according to different cultural and institutional settings.

There is also strong evidence that market or trading relationships can enhance sentiments of fairness and reciprocity. The notion that markets always make people greedy, selfish and amoral has been refuted. The moral high ground claimed by socialism is challenged not simply by the misdeeds of socialist dictators, but also by extensive evidence about human nature and how it is affected by markets or other institutional circumstances.

Small-scale societies have relied on sentiments of cooperation and moral solidarity that have evolved within groups over millions of years. Solidarity within tribes or bands helped them survive in competition over resources with their rivals. But unfortunately evolution has not disposed us to be nice to outsiders.

The modern world has built up citizen loyalty to nation states, but the downsides have been hostility to foreigners and belligerent nationalism. In the modern world, institutions are needed to encourage mutual understanding and reciprocity on a global scale.

Thomas Paine

One of these institutions is the market. There is impressive evidence that, on balance, international free trade can reduce the risks of war between nations. In larger-scale systems, despite market competition, trade can build bonds and reduce conflict.

While the complete commercialisation of family and community life could undermine trust and altruism, wider trade on a larger scale increases mutual interdependence. As Thomas Paine, Richard Cobden, John Hobson and several others argued, markets can help to build solidarity within and between nations.

Socialism as “obvious”

Yet, despite evidence to the contrary, socialism still clings to the high moral ground. For Jeremy Corbyn and many others, socialism is an “obvious” response, where caring for one another supersedes the greed and profit-seeking that is always fostered by capitalism. Little further detailed evidence is deemed necessary.

If socialism is “obvious”, then how do we explain the failure of other intelligent people to get on board? If they are not stupid, then they must be acting out of personal malice or greed. They must have sold out their principles in some way. Or they are just plain nasty.

When socialism is seen as “obvious”, its opponents are regarded as stupid or evil. Because the solution is “obvious” there can be no doubt. There is no need to look at evidence, to experiment, to seek wise counsel, or to listen to critics. Those that deny the obvious are deluded, corrupt, or in the pay of those that gain from the existing system.

Hence the claim that “socialism is obvious” encourages a remarkable intolerance of those that take a different view.

Modern economies are highly complex, and to pose any system or solution as “obvious” is a dangerous populist naivety. Precisely because something called socialism has now become popular, we are entitled to ask more precisely what it means.

Socialists compare an imaginary “obvious” world with the real world, with all its poverty, inequality and other problems. They simply assume that their imaginary world of love and cooperation will work. They assume that much can be decided democratically, ignoring the fact that it is impossible to make more than a small fraction of day-to-day decisions democratic. They ignore the problems of incentivizing work and innovation, and of ensuring functional autonomy without private property. All these problems became apparent in real-world socialist experiments in the past.

Socialism and dictatorship

A major problem with large-scale socialism is that a large concentration of political and economic power in the hands of the state undermines the economic foundations of countervailing power and empowers totalitarian forces and outcomes. These problems are illustrated by developments in Russia, China and Venezuela.

Such a centralization of economic power requires and promotes a strong executive, unburdened by checks and balances. When this concentration of economic power is achieved, it reinforces political centralization in the absence of countervailing interests and powers.

The argument that “good” leaders will avoid these pitfalls is spurious. Without checks and balances there are strong temptations to cut constitutional corners. Eventually a “good” leader will be succeeded by someone worse, who will have less scruples about abusing executive power.

The conclusion is that democracy and human rights require countervailing power and a market economy with a much smaller public sector. Countervailing interest groups, with their own access to resources and an ability to check or influence the state, are necessary to prevent democratic abuses and over-centralization.

Ignoring this powerful argument, in the face of extensive historical evidence in its support, is morally reprehensible. It betokens a moral irresponsibility in the light of ample evidence to the contrary. The socialist tenure of the moral high ground is illegitimate.

Conclusion

Instead, the moral high ground should be conceded to those who understand that:

– modern economic systems are highly complex and cannot be largely planned from the centre

– genuine autonomy requires rights to private ownership

– the existence of democracy and the protection of human rights require countervailing politico-economic power

– mixed economies have the best economic performance

– a welfare state is necessary to protect the poor and needy

– instead of chasing unicorns, we should follow the example of those capitalist countries that have the lowest levels of inequality.

 

18 February 2018

 

Published January 2018

 

Bibliography                                                     

Boehm, Christopher (2012) Moral Origins: The Evolution of Virtue, Altruism and Shame (New York: Basic Books).

Bowles, Samuel and Gintis, Herbert (2011) A Cooperative Species: Human Reciprocity and its Evolution (Princeton, NJ: Princeton University Press).

Courtois, Stéphane, Werth, Nicolas, Panné, Jean-Louis, Packowski, Andrzej, Bartošek, and Margolin, Jean-Louis (1999) The Black Book of Communism: Crimes, Terror, Repression (Cambridge MA: Harvard University Press).

Darwin, Charles R. (1871) The Descent of Man, and Selection in Relation to Sex, 2 vols (London: Murray and New York: Hill).

De Waal, Frans B. M. (2006) Primates and Philosophers: How Morality Evolved (Princeton: Princeton University Press).

Haidt, Jonathan (2012) The Righteous Mind: Why Good People are Divided by Politics and Religion (London: Penguin).

Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin, Fehr, Ernst, Gintis, Herbert and McElreath, Richard (2001) ‘In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies’, American Economic Review (Papers and Proceedings), 91(2), May, pp. 73-84.

Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin, Fehr, Ernst, and Gintis, Herbert (2004) Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies (Oxford and New York: Oxford University Press).

Henrich, Joseph, Jean Ensminger, Richard McElreath, Abigail Barr, Clark Barrett, Alexander Bolyanatz, Juan Camilo Cardenas, Michael Gurven, Edwins Gwako, Natalie Henrich, Carolyn Lesorogol, Frank Marlowe, David Tracer, and John Ziker, (2010) ‘Markets, Religion, Community Size, and the Evolution of Fairness and Punishment’, Science, 327 (5972), pp. 1480-84.

Hirschman, Albert O. (1982) ‘Rival Interpretations of Market Society: Civilizing, Destructive, or Feeble?’ Journal of Economic Literature, 20(4), December, pp. 1463-84.

Hodgson, Geoffrey M. (2013) From Pleasure Machines to Moral Communities: An Evolutionary Economics without Homo Economicus (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

McDonald, Patrick J. (2004) ‘Peace through Trade or Free Trade?’ Journal of Conflict Resolution, 48(4), August, pp. 211-22.

Sober, Elliott and Wilson, David Sloan (1998) Unto Others: The Evolution and Psychology of Unselfish Behavior (Cambridge, MA: Harvard University Press).

Posted in Common ownership, Democracy, Jeremy Corbyn, Labour Party, Left politics, Markets, Nationalization, Neoliberalism, Private enterprise, Property, Socialism, Soviet Union, Venezuela

January 11th, 2018 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

Although education is not a public good, there are good reasons why the state should support education services.

 

As leader of the UK Labour Party, Jeremy Corbyn has opined that “education is a public good” and drawn the conclusion that it should all be provided by government and funded by taxation.

All three leaders of the UK Green Party since 2012 – Nathalie Bennett, Caroline Lucas and Jonathan Bartley – have repeated the phrase “education is a public good”. They too implied that all education should be free of charge to the user and paid for out of taxation.

Jeremy Corbyn and Caroline Lucas

Similarly, Shakira Martin, who was elected President of the UK National Union of Students in 2017, remarked: “Education is a public good and should be paid for through taxation.” These influential organizations are led by people who have not learned the lessons of Econ 101.

In addition, this inaccurate rendition of the meaning of public good is common among journalists, who also have a moral responsibility to use terms accurately.

What is a public good?

The economist and Nobel Laureate Paul Samuelson established the concept of a public good in an academic paper in 1954, although some of the basic ideas involved had been formulated previously by others.

John Stuart Mill, for example, had argued in his Principles of Political Economy that lighthouses should be built and financed by governments, because their widespread benefits could not readily be financed by passing ships, and no individual had the pecuniary incentive to construct them.

The established technical definition of a public good is a good or service that is non-rivalrous and non-excludable. Non-rivalrous means that its use or consumption by any actor does not significantly reduce the amount available for others.

Non-Rivalrous Consumption

Non-excludable means that potential users cannot practically be excluded from the use of the good or service. This definition can be confirmed by reading any reputable economics textbook.

Consider the example of street lighting. If a town council uses local tax revenues to set up and maintain lighting on its streets, then there are widespread benefits for everyone. But it is not possible to charge people individually, according to whether they benefit from the illumination.

So when elections to the town council occur, self-interested citizens will vote for candidates proposing lower taxes, assuming that they will benefit anyway from any public good provision. Why pay more taxes when the lighting is free at the point of use? Self-interested consumers will try to hitch a free-ride. The outcome is that the street lighting will be underfunded, while everyone would prefer streets that are well-lit.

Free Riders

Samuelson’s argument was popularized by John Kenneth Galbraith in his 1958 book The Affluent Society. Therein Galbraith argued that vital public goods would be under-provided in a market system: there could be the coexistence of “private opulence and public squalor”. The combined efforts of a revered mainstream economic theoretician and of an astute and inventive populariser of economic wisdom helped to pave the way for a wave of interventionist policies in the US and other developed economies.

Do public goods necessitate public provision?

After this action came the reaction. In a 1974 article Ronald Coase (another Nobel Laureate) argued that many early lighthouses in England were privately constructed and financed by tolls at the ports. In fact, an emblematic example of a public good had often been financed privately. Hence “economists should not use the lighthouse as an example of a service which could only be provided by government”.

Ronald Coase

This and other interventions led to a widespread reaction against the Samuelson-Galbraith view that public goods necessarily require public provision or public financing.

It has been pointed out that radio and TV broadcasts and open-source computer software are also public goods. Yet both are often provided by private companies. Private radio and TV broadcasters finance their broadcasts by advertising.

Computer companies sometimes make software readily available to encourage use of their computers, for which the software was designed. The software is given away to help sell the hardware, or there is a charge for support services for software users.

Whether they are desirable or not, in principle there are many possibilities for private provision of public goods. In reality there are numerous cases where the state franchises out the provision of goods or services to private contractors. Such provision could include public goods. In these cases, public financing remains, but provision is private.

The claimed advantages of private franchising would include the introduction of an element of competition between potential franchisees, and the possibilities of efficiency gains through well-focused, relatively autonomous private providers. But here again the proof of the pudding is in the eating. Many public franchising operations have failed to deliver the promised gains. Others have been more successful.

Accordingly, we end up with a pragmatic rather than a doctrinaire conclusion. Economic systems are complex, with varied, interconnected components. Theory simplifies, and does not catch all the interactive effects. Theory has continuously to be appraised in the light of empirical experience. So far it is clear than the existence of a public good does not necessarily imply that it has to be provided by government, just as there is no compelling case that its private provision will also be superior.

Misunderstanding the meaning of a public good

Careful, rational discussion of the issues surrounding vital debates over public and private provision is not simply impeded by the prevalence of opposing ideological extremes. There is also a growing and prominent disrespect for the careful use of the terms that have been established by scholars in this area.

Combinations of sloppiness and ignorance threaten the utility of key terms. They engender ambiguity, degradation and ultimate uselessness. This has already happened with swear-words such as neoliberalism. It is hoped that it does not happen with cheer-words such as public good.

A prominent misunderstanding of “public good”, is that it means “a good that can only, or should only, be provided by government”. But this conflation of public good with public provision is mistaken.

Another, even cruder, misunderstanding is that “public good” means “good for the public”. While anyone who has taken Econ 101 should spot this error, it is nevertheless widespread. Speakers sometimes give their error away when they give relative stress the “good” in the phrase, as if “good” had the meaning of virtuous or worthwhile.

Yet in the correct definition of “public good” the second word takes another commonplace meaning, denoting a possession, or an item of commerce. This second meaning is found in the pledge “with all my worldly goods I thee endow” in the Book of Common Prayer or in “the goods train went through the station”. Bad things, like tobacco, heroin, cocaine, nuclear bombs and personnel mines, are also goods in this sense.

Is education a public good?

First assume that the claims of Corbyn, Lucas and others were true: education is “good for the public” and it should be funded out of taxation, and maybe even provided by a publicly-owned enterprise.

Many additional things are “good for the public”, including clothing, food and housing. By the same logic, these “goods” should all be funded out of general taxation as well, and distributed without further charge to their users. Influential politicians thus suggest that everything that serves basic needs should be financed, and possibly distributed, by the state. The market would simply be left for luxuries. Their logic implies a state-run economy of which Stalin and Mao would be envious.

Second, even if education were a public good (by the Econ 101 definition) then this would not imply that it should be paid for out of taxation. As noted above, free radio and TV broadcasting is generally a public good, but little of it is paid out of taxation, and it would be difficult to make the case that it should be (unless we fancy a totalitarian state that does all the broadcasting and curtails all private radio and TV stations).

Third, while observing the Econ 101 definition of a public good, note that education is generally a rivalrous rather than a non-rivalrous service. Education services require resources, including buildings, infrastructure, equipment and trained teachers. Additional students generally require additional resources. (Although in some cases the marginal cost is low, such as with mass-distributed online courses.) Consequently, education provision is generally rivalrous.

Fourth, again with an eye on the Econ 101 definition, note that education services are mostly (but not entirely) excludable. Schools and universities can readily prevent other people from attending, while it is much more difficult to prevent any passing mariner from observing the light from a lighthouse.

Technically, by the standard definition, most education services are private goods, because their provision is both excludable and rivalrous. But there is no necessary reason why all private goods should be privately provided. The Econ 101 distinction between public and private goods does not readily or directly correspond with public and private provision respectively.

The parts of an education system that are actually or virtually non-rivalrous, such as massive online courses, are technically club goods. Like radio and TV broadcasting they can be provided publicly or privately.

Positive externalities in education

When students receive their qualifications, they often have advantages over others on the jobs market. Hence they reap benefits. Nevertheless, with education there are strong positive spill-over effects.

Educated people help to raise the levels of public culture and discourse, and can pass on some of their skills to others. Educated people are also vital for a healthy democracy. But none of this undermines the general excludability of education services.

The spill-over effects are important, and relate to the question of public versus private provision. Another word for a spill-over is an externality: this is a cost or benefit that affects someone who did not choose to incur that cost or benefit.

Externalities can be positive or negative. Examples of negative externalities are pollution or congestion caused by motor cars. Because a driver will suffer only a fraction of the overall pollution and congestion costs of making a car journey, negative externalities impose costs on others without penalty for the car user. By standard assumptions, unless compensatory measures are taken, car use will be excessive and suboptimal.

Arthur Pigou

The theory of externalities was developed by Arthur Pigou, who argued that in the presence of negative externalities some public authority should intervene to impose taxes or subsidize superior alternatives. By such measures, motor car traffic could be reduced and pollution reduced. Inversely, services such as education with positive externalities should receive subsidies or be provided free, to encourage more extensive participation in these activities.

In a famous 1960 paper, Coase dramatically changed the terms of debate with his argument that if transaction costs were zero, then all the extra costs or benefits could be subject to contractual arrangements and the externalities would disappear. For example, if the owner of every dwelling near a road had property rights in the surrounding segment of the atmosphere, then the driver of a passing and polluting car could be sued for degradation of that property. The pollution externality would be internalized.

Coase’s intention was to underline the implications of transaction costs: the existence of externalities is dependent on positive transaction costs. Coase accepted that in many cases it would be impossible to avoid the transaction burden. For example, enforcing rights in the surrounding atmosphere to curb pollution may be too expensive.

Many pro-market zealots ignored or underestimated the transaction-cost aspect of Coase’s argument. Instead, their foremost claim was that Coase had undermined the case of public intervention based on externalities.

Consider the positive externalities of education. It would be impossible or socially destructive for every educated person to charge a fee to participants in an intellectual dinner conversation, or to invoice the government for making a well-informed choice when casting his or her vote in the ballot box. The internalization of these positive externalities by such means is impossible or undesirable.

The issue of missing markets is relevant here, as I discuss in my book Conceptualizing Capitalism. There are missing markets for future employment because to introduce such complete markets would be tantamount to slavery. The prohibition of slavery means that we cannot have complete futures markets for labour. This means not simply the existence of transaction costs but the enforced absence of transactions, which would be equivalent to making the transaction costs infinite.

Consequently, because of these missing markets, education and training will be undersupplied through markets under capitalism. There is a rationale for some kind of public intervention. Of course, government intervention has its problems too. We must experiment, and compare real-world cases, not idealized models.

Mixtures of public and private provision

There are mixtures of public and private provision of education in most countries. The majority of schools in most countries are run by local government. At the other extreme, most on-the-job training is done by private companies.

The US has a mixture of private and state universities, although both types receive substantial public funds. In the UK most universities receive public money for teaching and research, and in return they are obliged to conform to a myriad of government regulations. They also receive student fees and research grants from the private sector.

Technically all UK universities are private (corporate) entities: they have a legal status equivalent to charities (which are also not-for-profit private corporations). By contrast, in several major countries in Continental Europe and elsewhere, most universities are integrated into the state machinery and all their employees are civil servants. This is not the case in the US or the UK. This international diversity of models provides the opportunity to compare different systems and determine what works best, taking account of the different contexts in which they operate.

J’accuse: abetting Trumpism

A growing danger in world politics – including in the UK and US – is the wilful rejection of the ideas of experts, of the academic community and of science in general. Hence President Donald Trump denies the science of climate change and cries that it is a hoax. UK Cabinet Minister Michael Gove says we listen too much to experts.

This growing disrespect for science and expertise is moving democracies toward an extremely dangerous place, where the general public have increasing difficulty segregating lies from truth. This danger could be called Trumpism.

I do not put Jeremy Corbyn or Caroline Lucas in the same box as Trump. Far from it. For example, they share none of his obnoxious racism and sexism. But Corbyn and Lucas are disrespecting experts and ignoring bits of science nevertheless.

We need a well-informed public conversation concerning the best arrangements for the (public or private) provision of basic needs and services, including education, health, housing and transport. Such a debate is much more difficult if leading public figures, including the leaders of major political parties, promote incorrect and misleading versions of highly relevant analytical terms.

Donc, je les accuse – of abetting the Trumpist degeneration of public discourse with their false claim that “education is a public good”. They should acknowledge the error and make a correction.

 

11 January 2018

 Minor edits: 12-13 January 2018

 

Published January 2018

Appendix

Note 1: As with many such definitions, there are few, if any, pure cases. So a public good refers to a good or service where consumption by one person does not significantly reduce the amount available for others, and where potential users cannot practically or generally be excluded from the use of the good or service.

Note 2: There is a widespread assumption that actors act wholly out of self-interest. But from evidence with humans in laboratory experiments and elsewhere, we know now that this is untrue. People will often agree to pay for public goods, even if they know that they have the alternative of free-riding on the contributions of others. One can conjecture, however, that numbers of people are important. We know from the work of Nobel Laureate Elinor Ostrom (1990) and others that cooperation is possible over the use of non-excludable resources, even when usage is rivalrous and it can degrade the resource. (Non-excludable resources that have rivalrous usage are defined as common-pool resources: they are not public goods.) But Ostrom’s examples highlight the role of face-to-face interaction and the building of trust. But it is doubtful that these mechanisms can be expanded to large-scale societies, at least without additional systems of control and enforcement.

 

Bibliography                   

                              

Bennett, Nathalie (2017)) “#Nathalie4Sheffield – Issues: Young People”. https://www.natalie4sheffield.org/issues/young-people .

Coase, Ronald H. (1960) ‘The Problem of Social Cost’, Journal of Law and Economics, 3(1), October, pp. 1-44.

Coase, Ronald H. (1974) “The Lighthouse in Economics”, Journal of Law and Economics, 17(2), October, pp. 357-76.

Galbraith, John Kenneth (1958) The Affluent Society (London: Hamilton).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Martin, Shakira (2017) “National Union of Students Responds to PM Review of Student Funding”, NUS Connect, 1 October. https://www.nusconnect.org.uk/articles/national-union-of-students-responds-to-pm-review-of-student-funding .

Mill, John Stuart (1871) Principles of Political Economy with Some of their Applications to Social Philosophy, 7th edn. (London: Longman, Green, Reader and Dyer).

Ostrom, Elinor (1990) Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge: Cambridge University Press).

Pigou, Arthur C. (1920) The Economics of Welfare (London: Macmillan).

Rampen, Julia (2016) “Caroline Lucas and Jonathan Bartley: ‘The Greens can win over Ukip Voters too’“, New Statesman, 21 October. https://www.newstatesman.com/politics/staggers/2016/10/caroline-lucas-and-jonathan-bartley-greens-can-win-over-ukip-voters-too .

Samuelson, Paul A. (1954) “The Pure Theory of Public Expenditure”, Review of Economics and Statistics. 36(4), pp. 387-9.

Stretton, Hugh and Orchard, Lionel (1994) Public Goods, Public Enterprise, Public Choice: Theoretical Foundations of the Contemporary Attack on Government (London and New York: Macmillan and St Martin’s Press).

Walker, Peter (2017) “Jeremy Corbyn: UK Firms Must Pay More Tax to Fund Better Education”, The Guardian, 6 July. https://www.theguardian.com/politics/2017/jul/06/jeremy-corbyn-uk-firms-must-pay-more-tax-to-fund-better-education .

 

Posted in Caroline Lucas, Common ownership, Donald Trump, Green Party, Jeremy Corbyn, Labour Party, Left politics, Liberalism, Markets, Nationalization, Neoliberalism, Politics, Private enterprise, Property, Right politics

October 1st, 2017 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

Ken Loach was a prominent celebrity at the 2017 Labour Party conference, being photographed in the main conference hall and elsewhere in close proximity to Jeremy Corbyn. But it seems that Loach was not then a member of the Labour Party. Instead he was a recent founder of a rival political party – Left Unity – which was set up to oppose Labour.

This is not a personal attack on Loach. Generally, he is a dignified and caring person. He is entitled to his views, but they are dogmatic and impractical. The question is why Labour now welcomes with open arms a member of a rival political party, with views far more extreme than those that Labour has traditionally professed.

What does Loach’s invitation tell us about the state of the Labour Party today? We need to look at his political views. We need to understand the politics of a celebrity that Labour now chooses to put on public display.

Ken Loach’s contributions to film and to public debate

Loach is a brilliant film director and his work has rightly received global recognition. Two of his films received the Palme d’Or at the Cannes Film Festival. He has also received BAFTA awards.

His best work shows us in moving, dramatic detail how working class people can be trapped by the system, suffering poverty and the tragic loss of their human potential. Such were the personal and emotional stories in Cathy Come Home (1966), Poor Cow (1967), Kes (1969), Raining Stones (1993) I, Daniel Blake (2016) and other great films. Loach, with his gritty, realist style has awakened and re-awakened us over decades to the shamefully enduring problems of poverty, inequality, discrimination and exploitation.

Other projects by Loach are different in style. He was to direct Jim Allen’s controversial stage play, Perdition. Allen was a Trotskyist and a close friend of Loach, until his death in 1999. Presented as a courtroom drama, the play dealt with an allegation of collaboration between Hungarian Zionists and the Nazis during the Holocaust. This allegation has been strongly contested by historians.

The play was due to open at the Royal Court Theatre in January 1987, but it was cancelled 36 hours before the opening night. This same claim of Zionist-Nazi collaboration, citing the same contested sources, was repeated more recently by Ken Livingstone and it led to his suspension from the Labour Party.

From gritty realism to unrealistic politics

In contrast to the gritty realism of his working class dramas, Loach takes a less realistic line when it comes to history.

For example, Land and Freedom (1995) is set in the Spanish Civil War. The script was written by Allen. Scenes in Land and Freedom depict an ideological battle within the Republican camp. The Communist Party opposes others on the left, including anarchists and revolutionary socialists.

Against the Communist Party, Allen and Loach took the side of the revolutionary socialists calling for a socialist revolution and for the seizure of the land by the peasants. This unrealistic ultra-leftism mars the film. It brushes aside the argument that General Franco’s insurrectionary fascism would have been best fought by the broadest possible popular front, from liberals to communists.

A similar unrealism appears in The Wind That Shakes the Barley (2006). The script was written by Paul Laverty. The film is set in Ireland in the period 1919-1923. It depicts the struggle for independence and the subsequent civil war.

Again there is a sequence where key characters discuss their strategic options. Again full-blooded socialism is mooted as the only way of liberating the country, from poverty and from British tyranny.

But a socialist revolution in Ireland in 1919-23 was even less likely than one in the 1930s in Spain. Ireland was a country of small tenant farmers. It had little urban concentration or industrial development. The small urban working class was not as well organised as in Britain. Socialism had a tiny following.

A socialist revolution in these circumstances was a fantasy of the film’s director and its script writer. Again the insertion of unrealistic revolutionary socialist preaching spoils the film.

Left Unity

Left Unity founded in 2013 when film director Loach appealed for a new party to replace the Labour Party. In March 2014 Loach condemned Labour for following other parties by upholding “the importance of the market economy”. Like other governments, Labour “cuts back on public enterprise and prioritises the interests of big corporations and private companies”. Loach continued:

The demands of the competitive market are remorseless: reduce the cost of labour; privatise everything; remove protection from working people, and maintain a pool of unemployed to discipline those lucky enough to have a job. Trade unions are to be obstructed while the wealthy are courted in the hope that they will find a pliant, flexible workforce that is easy to exploit. … Labour’s … fundamental stance is limited by the same imperative: profit comes before all else. … The Labour party is part of the problem, not the solution.

Loach called on true socialists to abandon Labour and join Left Unity. More than 10,000 people supported Loach’s appeal. In 2014, the party had 2,000 members and 70 branches across Britain.

Left Unity put up ten candidates in the 2015 general election, to stand against prominent Labour figures including Andy Burnham and Harriet Harman. Left Unity also contested some local elections. There is an unintentional irony in the u-word in its name.

Rejecting social democracy

At the launch of his party’s manifesto, Loach said that Left Unity is “against the logic of the market” which he believed had “failed in every respect”.

Loach decisively rejected social democracy. Referring to Labour and other similar parties, he said that “they’re mainly social democrat parties that think you can manipulate the markets to the advantage of ordinary people”.

For Loach, such manipulation is impossible: “The market demands cheap labour, it demands labour that can be turned on and off like a tap, zero-hours contracts, short-term contracts, agency work.” For him, the market offers us no other option. Hence social-democratic reformism and Keynesian intervention are both fatally flawed.

Nationalising the supermarkets

The 2014 Constitution of Left Unity supported a mixed economy, as a transitional arrangement within an over-arching national plan. But in its 2015 General Election Manifesto, Left Unity took a much more extreme line, reflecting Loach’s absolutist anti-market views:

We need an economy run democratically … This means the principle of common ownership of all natural resources and means of producing wealth, and an end to the dominance of private financial interests such as the City of London over the economy. We stand for ‘from each according to their ability, to each according to their needs’. … We are for public ownership of the banking system, as well as all essential public utilities including transport, telecoms, energy and water companies, and the supermarkets.

Note here the common ownership of all “means of producing wealth”. There are no exceptions. Everything, from banks to supermarkets, would be publicly owned. Marx would have liked that.

Lenin would have also liked the suggestion that this fully planned economy should be run democratically. Lenin argued this in his State and Revolution in 1917. But as soon as his Bolsheviks came to power they had to abandon the idea. Such ultra-democracy is totally impractical.

A quick leap to the higher phase of communism

But Marx might have criticised the Labour Unity Manifesto’s conflation of long and short-term aims. In his Critique of the Gotha Programme, Marx wrote that “from each according to his ability, to each according to his needs” could apply only in

a higher phase of communist society, after the enslaving subordination of the individual to the division of labour … and … after labour has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly

By contrast, Loach and Left and Unity put “to each according to their needs” alongside immediate aims in an election manifesto. It seems that they wanted to leap to “a higher phase of communism” right away.

Loach and Left Unity now want to abolish all markets and all private ownership of the means of production. This went much further than Corbyn and his team, who have argued for a “mixed economy”. But Corbyn’s embrace of Loach and his views might suggest that they share the long-term view that all markets and private enterprise should be abolished.

Even in Marxist terms, the position of Loach and Left Unity on markets is rather crude. Markets have existed for thousands of years. Marx never saw them as the key defining feature of capitalism – instead, for him, it was the system of wage labour. Following Joseph Schumpeter, I would also stress the role of finance.

Resemblances with pro-market economics

But remarkably, the views of Loach and Left Unity replicate some arguments by extreme pro-market economists. Against a majority view, economists such as Ludwig von Mises and Friedrich Hayek argued that a mixed economy cannot work. As von Mises put it in 1949:

The market economy or capitalism, as it is usually called, and the socialist economy preclude one another. There is no mixture of the two systems possible or thinkable; there is no such thing as a mixed economy, a system that would be in part capitalist and in part socialist.

Left Unity seems to follow the same logic as these uncompromising, pro-market economists. By contrast, many economists accept that there is a case for some judicious state regulation and intervention in a market economy, to deal with problems such as externalities and market instability.

In my book Conceptualizing Capitalism I go further, to argue that the state is necessary to part-constitute the legal framework of a capitalist economy. Hence some state intervention in a market economy is unavoidable. Given this, the practical question for progressives is where and how it should intervene. The literature on varieties of capitalism shows that many different outcomes are possible within capitalism, and defects such as inequality can be significantly diminished.

In particular, Loach and Left Unity overlook the successes of social democracy, particularly in Northern Europe. During the twentieth century they have built up strong welfare states, redistributed some wealth and regulated markets.

Of course, there have been strong and sustained attempts to reverse these achievements. But it is much more realistic to defend social-democratic gains against the free-marketeers than to urge a quick leap to the higher phase of communism.

Against NATO – for a boycott of Israel

The foreign policy of Left Unity is “anti-imperialist”. Like Corbyn, it calls for Britain to quit NATO. But unlike Corbyn, Left Unity does not support Brexit.

Left Unity calls for “a campaign of boycott, divestment and sanctions against Israel until it complies with its obligations under international law”. It does not call for boycotts or sanctions against other countries that break international law, such as Russia and North Korea, among others.

Loach supports the boycott of Israel, calling it an “apartheid regime”. Before his election as leader, Corbyn also pushed for boycotts of Israel. This selective targeting of Israel now seems a widespread opinion among Labour members, but it is not official party policy.

Rather than accepting that anti-Semitism as a problem within Labour, Loach argues that the claims are false: those that raise the issue are trying to undermine Corbyn’s leadership.

Loach is also noted for his support of the controversial founder of Wikileaks, Julian Assange. It has been alleged that Wikileaks has received support from Russian agents, and that it acted to destabilise the candidacy of Hillary Clinton in the 2016 US presidential election.

Supporting ISIS

Another remarkable incident tells us not so much about Loach, but about some of the people who join Left Unity.

In a 2014 conference of Left Unity, a minority proposed support for the so-called Islamic State in Iraq and Syria (ISIS). True to their Leninist credentials, they argued that the left “has to acknowledge and accept the widespread call for a Caliphate among Muslims as valid and an authentic expression of their emancipatory, anti-imperialist aspirations.” They supported ISIS as a “stabilising force” with “progressive potential”.

The motion was heavily defeated. Supporting ISIS is not Left Unity policy. But the fact that anyone could make such a proposal, particularly while describing themselves as left and socialist, is deeply shocking. As Benjamin Jones argued: “this is just the latest flirtation in a long courtship between elements of the British far left and the Islamist far right.”

A warm welcome

In the 2015 General Election, Left Unity’s parliamentary candidates received a pitiful average of 288 votes – all losing their deposits. Later that year, after Corbyn’s election as Labour leader, Left Unity voted against affiliation to the Labour Party but resolved not to put up any more candidates against Labour.

Because of Corbyn’s leadership victory, several hundred members resigned from Left Unity and joined Labour. Left Unity is now a depleted party, without a viable independent strategy.

It seems that Labour is now welcoming their members, ignoring their extremist and unrealistic views and their fervent opposition to social-democratic reform. This is a suspicious unity of a dubious left.

 

1 October 2017

Minor edits – 3, 5 Oct 2017

 

This book elaborates on some of the political issues raised in this blog:
Published by University of Chicago Press in January 2018

 

Bibliography                                

Cohen, Nick (2007) What’s Left? How the Left Lost its Way (London and New York: Harper).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Mises, Ludwig von (1949) Human Action: A Treatise on Economics (London and New Haven: William Hodge and Yale University Press).

Rich, Dave (2016) The Left’s Jewish Problem: Jeremy Corbyn, Israel and Anti-Semitism (London: Biteback).

 

Posted in Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Markets, Nationalization, Private enterprise, Socialism, Tony Benn

September 20th, 2017 by geoffhodgson1946

 

 

Geoffrey M. Hodgson

 

I was born in 1946. I lived in a council house until I was 16. My family were Labour. My privilege was not money, but that my parents and grandparents all valued education and culture. But none of them obtained a university degree, because they were less accessible at the time.

Harold Wilson

I became involved in the Labour Party in 1964 and then saw myself as a Tribune socialist following the steps of great radicals such as Michael Foot. After welcoming Harold Wilson’s election victory in 1964, I became critical of the new Prime Minister because of his nominal support for the US in the Vietnam War.

Vietnam and Marxism

For my baby-boom generation, the Vietnam War was a great generator of radicalism. Like many of my university friends, I became a Marxist in 1966. We were drawn into a turbulent and exciting world that combined activism with ideas and debate. I saw myself as a Marxist until about 1980.

I studied mathematics and philosophy from 1965 to 1968 and economics from 1972 to 1974. Both periods were at the University of Manchester. In the intervening years I taught myself Marxist economics. My knowledge of economics became enduringly significant in my political evolution.

I was at the LSE student occupation in 1967 and one of the Grosvenor Square demonstrations in 1968. In that year I copied Bertrand Russell and tore up my Labour Party membership card in protest against US aggression in Vietnam.

Marxists dominated the activists on the university campuses. The left was divided and fractious. There were Soviet Bloc loyalists in the Communist Party of Great Britain. There were lovers of Mao Zedong and several rival Trotskyist sects. I could not bring myself to support any totalitarian regime – East or West – so I joined the forerunner of what is now the Socialist Workers’ Party, which saw everything existing as “capitalist”.

My departure from the SWP came in 1971 when they expelled a dissident faction with which I sympathised. (That critical faction eventually became the Alliance for Workers’ Liberty, of Momentum fame in the Corbyn Era.)

I flirted briefly with the International Marxist Group, which included glamorous figures such as Tariq Ali, and Robin Blackburn of the New Left Review. The IMG was stronger in its support for the women’s movement and for gay rights.

After a few years among the sects I could see that something was wrong. These groups were aiming to help create a much better society, but they were generally dogmatic and intolerant. Some were ruthless, pugnacious and fanatical. I did not want to see any social system facilitated or run by these people.

But on the other hand I then accepted the Marxist view that capitalism was exploitative and frequently led to oppression and war. The evidence of this was seemingly before our eyes.

Re-joining Labour and changing strategy

After Labour’s electoral defeat in 1970, there was a strong and growing left in the Labour Party and that seemed the best hope for socialists. Against the advice of Ralph Miliband (whom I knew personally) and others, I re-joined Labour in 1974.

In 1975 I published a pamphlet entitled Trotsky and Fatalistic Marxism. This tried to explain the fanaticism and intolerance of many Marxists in terms of their belief in the imminent decay and collapse of capitalist democracies. Trotskyists had failed to appreciate the enormous expansion and dynamism of capitalism after 1945. Their explanations of the survival of capitalism were weak.

Published in 1977, a longer work entitled Socialism and Parliamentary Democracy elaborated more of my thinking. Marxist-Leninists believed that parliament and the capitalist state should be “smashed”. Influenced by Max Weber and others, I argued that in modern democracies, government drew their perceived legitimacy from parliamentary elections. If socialism became a majority view, then socialists could and should gain a majority in parliament.

In the book I criticised the 1968 revolutionary movement in France for boycotting the elections called by President Charles de Gaulle in that year. Victory in the elections gave de Gaulle legitimacy. The huge movement of students and workers was crushed.

Paris – May 1968

As I had anticipated, my heresies were dismissed out of hand by the far left sects. But the book proved to be rather influential in the UK and internationally. It received a strongly sympathetic hearing on the Labour left. It was translated into Italian, Japanese, Spanish and Turkish. It persuaded a leading member of the violent Basque separatist group ETA to abandon terrorism.

I don’t know if he read my book, but Daniel Cohn-Bendit, the leader of the revolutionary movement in France in May 1968, later argued that it had been a mistake to boycott the French parliamentary elections.

Labour had been reconciled to the parliamentary road to socialism since its formation. The sects argued that it wouldn’t work. My response was that insurrection would not work either. In democracies we needed a combination of parliamentary and extra-parliamentary action.

Questioning ends as well as means

The killing fields in Cambodia affected me deeply. After seizing power in 1975 the Khmer Rouge forced everyone into the countryside and obliterated about two million people – a quarter of the Cambodian population – in the pursuit of their communist utopia.

I could not dismiss this as an aberration. After all, the Khmer Rouge aims, which included the abolition of money, private property and markets, were central to the Communist Manifesto by Karl Marx and Frederick Engels.

Khmer Rouge Killing Fields

The far left were able to publish papers and debate ideas because they lived in a democracy that tolerated freedom of expression. But the ideas and actions of the sects, if they gained influence or power, would curtail these very liberties upon which they had depended.

Crucially, I was not naïve enough to believe that freedom and political pluralism could be guaranteed simply by the goodwill of a more enlightened Marxist leadership, who valued these things more than the Khmer Rouge. Good intentions were not enough.

I had retained a good lesson from Marxism. Effective ideas and practices draw their strength from agglomerations of power sustained by the structures of the politico-economic system. Hence a genuinely pluralist and tolerant political sphere depended on pluralism and decentralisation in the economic domain. A pluralist polity requires a pluralist economy.

Beatrice & Sidney Webb

Prominent Labour thinkers such as Beatrice Webb, Sidney Webb and G. D. H. Cole had all argued for a decentralised socialist system. But they still sought the abolition of private property and markets. The state would ultimately own everything. So what institutional, legal or other politico-economic forces could stop it retrieving all delegated powers to the centre, when deemed required, or when goodwill wore thin?

Any viable socialism always needs markets

I came to the view that genuine and lasting decentralisation would depend on the existence of organisations with some genuine autonomy and legal independence, providing powers to own property and trade with other organisations. Any viable socialism would always need markets – it was not simply a matter of tolerating or compromising with them.

This crucial transition of my thinking occurred between 1977 and 1980. I cannot recall the detailed influences. But I am sure that the initial impetus did not come from Ludwig von Mises or Friedrich Hayek. I did not delve deeply into their works until the early 1980s.

János Kornai

There had been several socialist proposals to nationalise the sector producing capital goods but retain competition and markets for consumer goods. I was more attracted by the Hungarian economist János Kornai’s more sophisticated proposal (originally published in 1965) to use a dynamic combination of markets and planning, where planning provided strategic impetus, and markets signalled information and gave scope for innovation and planning adjustment.

Over the new year of 1979-1980 I went on a short tourist group visit to the Soviet Union. Some of my companions were dewy-eyed admirers of the system, but I was prepared for its flaws, including the ubiquitous black markets and corruption.

I had been given the address in Moscow of an Englishman married to a Russian. As a former Communist, he explained in detail in his apartment how and why his views had quickly changed: “I challenge any supporter of the Soviet Union to live here just for six months.”

Alec Nove

When Alec Nove published a classic article on feasible socialism in New Left Review in early 1980 I was ready for it. Nove also argued that markets were essential to any viable socialism. He realised that he was attacking deeply-ingrained orthodoxy on the left.

(Later I had the pleasure of meeting both Kornai and Nove several times. Nove died in 1994 but Kornai is still alive. I am delighted to be invited as a keynote speaker at a conference in his honour in Budapest in 2018.)

Labouring as a revisionist

Any acceptance of markets was an anathema to followers of both Karl Marx and Tony Benn. Benn distanced himself from those who supported the persistence of markets.

But I found common ground with Benn and others over what was called “the alternative economic strategy”. I outlined my positive views on this in a pamphlet entitled Socialist Economic Strategy in 1979. It was published by Independent Labour Publications.

Independent Labour Publications was the residue of the old Independent Labour Party, which had played a central role in Labour history from the 1890s to the 1940s. The Independent Labour Party split from the Labour Party in 1931. But in 1975 it formally dissolved as a party and rejoined Labour as Independent Labour Publications.

I was involved in this organisation briefly. Despite outward appearances they turned out to be another sect, lacking any vision of a workable socialism. They too were uneasy about my revisionism. Although my Socialist Economic Strategy was a bestseller by their standards, they refused to reprint it. We parted company in 1981.

Geoff Hodgson, Jean Shepherd & John Maguire in 1979

In 1979 I was the unsuccessful Labour Parliamentary Candidate for Manchester Withington. The seat became Labour in 1987.

I met Benn a few times and supported him in the 1981 deputy leadership election. This alignment was marked in my book Labour at the Crossroads, published in that year. Therein I again supported the alternative economic strategy. But against Benn himself, I argued in that book that in some sectors of the economy “there is no substitute for competition and a market” (p. 206).

(In his important book on The Labour Party’s Political Thought, Geoffrey Foote quotes me (pp. 320, 347) as a “Bennite”. But because of my explicit acceptance of markets, I was unrepresentative of the Bennite stream of thought.)

Subsequently my opinion of Benn shifted. He was a magnificent speaker, but his writings on socialism are vague and unclear. His use of history is unscholarly and cavalier. He was not a well-read intellectual like Michael Foot.

Tony Benn at a Militant meeting

While Benn’s “alternative economic strategy” accepted markets and a private sector for the present, it seemed to me that he wanted to move eventually toward a socialist economy without any markets at all. It was no accident that Benn and his followers defended the Trotskyist sect Militant when they were pushed out of the party from 1985 to 1992.

In 1984 I published my book on The Democratic Economy, where I set out my view on the importance and complementarity of both markets and planning. My argument was framed in socialist language but therein I distanced myself from Marxism. The book received a critical response from many on both the soft and hard left.

The Labour Coordinating Committee

Margaret Thatcher came to power in 1979. One of Thatcher’s most popular policies was to promote the sale of council-owned housing to the tenants. Labour had opposed this policy. The disastrous 1983 defeat of Labour on a Bennite manifesto prompted a rethink, on this and several other issues.

For some of us, this rethink amounted to more than expedient doctrinal trimming. Encouraging home ownership was really a good idea: why should all property be owned by the rich? But while supporting home ownership, we argued that the government should also build more social housing and enlarge the stock available for rent by low-income families.

But these ideas met stiff resistance in the Labour Party ranks, and not simply from Trotskyist entryists such as Militant. The resistance from Benn and his supporters was substantial and even more enduring. It was clear that old-fashioned socialist ideas still had a tenacious appeal among Labour’s membership.

The Labour Coordinating Committee (LCC) became one of the primary modernising forces within Labour. Its leadership included Hilary Benn, Cherie Blair, Mike Gapes, Peter Hain, Harriet Harman, Kate Hoey (the Brexiteer) and others of enduring fame. I was elected to the LCC executive committee. We worked closely with the new leader Neil Kinnock, and with members of his shadow cabinet, including Robin Cook.

Changing Clause Four

I have detailed elsewhere my LCC attempt to bring about discussion to change Labour’s Clause Four. The version that had been in place since 1918 called for the “common ownership of the means of production, distribution and exchange”. This provided for no exception: all production would be in common ownership and there would be no private sector.

Although some Labour Party thinkers began to entertain the possibility of some private enterprise, many party members remained resolutely in support of widespread common ownership.

Against my efforts, the 1983 AGM of the Labour Coordinating Committee defeated the proposal that Clause Four should be rewritten. This was out of fear of antagonising the Benn wing. Instead, the LCC resolved that Clause Four should be “clarified”.

But a resolution on long-term aims, which I had helped to draft, was passed by a large majority. The resolution called for the Labour Party to draft a new statement of aims, upholding “that socialism involves extended democracy and real equality. Democracy under socialism is extended to industry and the community … and must involve a substantial decentralisation of power.”

There was a commitment to “political pluralism” and to “economic pluralism” involving “a variety of forms of common ownership … and the toleration of a small private sector including self-employed workers and other private firms.” The economy must be dominated by mechanisms of “democratic planning … but also accommodating a market mechanism in some areas.”

But there was strong hostility to these mildly revisionist ideas from within Labour’s ranks at the time, including from Jeremy Corbyn and Tony Benn.

Tony Benn & Jeremy Corbyn

The Guardian newspaper reported the LCC conference with the headline: “Labour breaks taboo on ownership”. For a while, the LCC tried to keep the conversation going on the need to revise Labour’s aims. The LCC held a conference in Liverpool in June 1984 on “The Socialist Vision”. But enthusiasm for this discussion fizzled out. By 1985 the LCC’s revisionist initiative had been kicked into the long grass. My efforts had failed.

But to their credit, Neil Kinnock and his deputy Roy Hattersley saw the need for Labour to modernise its aims. I advised them both for a while. But after 1987 I became less active in the Labour Party. My inactivity was born partly out of frustration that it was so difficult to shift Labour from its congenital hostility to markets and private enterprise.

But after a fourth election defeat in 1992 the party became more pliable. Tony Blair was elected as leader in 1994. Blair successfully changed the wording of Clause Four to endorse a strong private sector, but the dramatic rise of Corbyn in the party since 2015 shows that the old collectivist DNA has endured.

Towards liberalism

In many ways I have always been a liberal, especially in my support for freedom of expression, other human rights and democracy. By the late 1970s I also accepted the importance of markets and private property. But the emphasis in my thinking has shifted further in the last 30 years.

My academic works show a few markers of my political evolution. On page xvi of my 1999 book Economics and Utopia I wrote of my common ground with the US liberal John Dewey and with

“British social liberalism, which stretches from John Stuart Mill through Thomas H. Green to John A. Hobson, John Maynard Keynes and William Beveridge.”

These thinkers still inspire me. But I would now also stress the importance of Thomas Paine. Other heroes include George Orwell and Arthur Koestler.

So by 1999 I was a true liberal, of social-democratic stripe. I had already moved some distance from the ideas in my 1984 book, which had over-stressed the possibilities for large-scale planning and for extensive democratic decision-making in large, complex economies.

But I still believe in judicious state intervention and regulation, and I am still an enthusiast for experiments with worker cooperatives and other forms of worker and community participation. With their lower levels of economic inequality, I see the Nordic countries as good role models for in the rest of the capitalist world.

From leaving Labour to joining the Liberal Democrats

In 2001 I left the Labour Party because of Blair’s energetic support for faith schools, Labour’s inadequate proposal for House of Lords reform and its neglect of the problem of economic inequality. I would have left over the Iraq War. Previously I had sometimes voted tactically for the Liberal Party, when they were second behind the Tories in my constituency. But what was tactical was also in growing part a matter of conviction.

I voted Liberal Democrat in the 1997, 2001, 2005 and 2010 general elections. But I did not approve of the coalition with the Tories. So the Liberal Democrats did not get my vote in 2015.

I re-entered political activity in 2016 after the Brexit referendum. My wife (Vinny Logan) had been a critical but close companion on my long journey since 1980. But unlike me she had always voted Labour. After the Brexit vote she joined the Liberal Democrats and I followed her after a few days. It will be a long hard slog to change British politics for the better, but it is vital that we try.

My wife and I were each brought up in a social culture where the Tories and the Establishment were the enemy, and the Liberals were seen as wishy-washy waverers in the class war. Labour was the only game in town.

It takes a long time to remove these ingrained preconceptions and learn that liberalism is the greatest legacy of the Enlightenment. It is the strongest guardian of both prosperity and freedom. Although Liberals have been in a minority, they are largely responsible for the foundation of the British welfare state. The NHS was originally a Liberal proposal. The Liberal Democrats constitute the most pro-EU party in the UK.

But some Liberal Democrats do not understand that it is the job of government in a recession to increase effective demand, particularly by increasing investment and raising disposable incomes for the poor. But the party is a broad church, and I will argue my corner in favour of Keynesian liberal economic policies.

But Liberal Democrats are not neoliberals, by any reasonable definition of the latter, much-abused term.

I am a radical liberal. I believe in social solidarity with the less-privileged, as well as in individual rights. As Charles Kennedy showed when he was leader, the Liberal Democrats can succeed when they take principled, radical positions on justice, equality and war.

Today, both the Conservatives (now ruled by deceitful nationalists) and Labour (where the rising hard left dominate the timid moderates) are dangerous threats to the liberal and democratic rights and values that in the past we have taken too much for granted. We must now stand up to defend those rights and values, against dogma, ignorance, intolerance, petty nationalism and deceit.

 

20 September 2017

Minor edits – 25 September 2017, 22 October 2017, 10 April 2018.

This book elaborates on some of the political issues raised in this blog:
Published by University of Chicago Press in January 2018 

Bibliography

Foote, Geoffrey (1997) The Labour Party’s Political Thought: A History, 3rd edn. (London: Palgrave).

Hodgson, Geoffrey M. (1975) Trotsky and Fatalistic Marxism (Nottingham: Spokesman).

Hodgson, Geoffrey M. (1977) Socialism and Parliamentary Democracy (Nottingham: Spokesman).

Hodgson, Geoffrey M. (1979) Socialist Economic Strategy (Leeds: Independent Labour Publications).

Hodgson, Geoffrey M. (1981) Labour at the Crossroads: The Political and Economic Challenge to Labour Party in the 1980s (Oxford: Martin Robertson).

Hodgson, Geoffrey M. (1984) The Democratic Economy: A New Look at Planning, Markets and Power (Harmondsworth: Penguin).

Hodgson, Geoffrey M. (1999) Economics and Utopia: Why the Learning Economy is not the End of History (London and New York: Routledge).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Kornai, János (1965) ‘Mathematical Programming as a Tool of Socialist Economic Planning’, reprinted in Nove, Alec and Nuti, D. M. (eds) (1972) Socialist Economics (Harmondsworth: Penguin), pp. 475-488.

Nove, Alec (1980) ‘The Soviet Economy: Problems and Prospects’, New Left Review, no. 119, January-February, pp. 3-19.

Nove, Alec (1983) The Economics of Feasible Socialism (London: George Allen and Unwin).

Nove, Alec and Nuti, D. M. (eds) (1972) Socialist Economics (Harmondsworth: Penguin).

Posted in Bertrand Russell, Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Khmer Rouge, Labour Party, Left politics, Liberalism, Ludwig von Mises, Mao Zedong, Markets, Nationalization, Private enterprise, Property, Right politics, Socialism, Soviet Union, Tony Benn

September 13th, 2017 by geoffhodgson1946

 

 

Geoffrey M. Hodgson

 

Many people still call themselves socialists. But rarely is it made clear what they mean by the description. Few seem aware of its original definition, which persisted from the 1830s to the 1950s. Some will argue that the word has acquired a new meaning since then. Words do change their meanings. But there is no consensus on what that new meaning is.

Despite its idealistic connotations of purity and principle, the word socialism hangs around the neck of left parties. It serves as an invitation for infiltration by Marxists and others, who may enter any party proclaiming their “democratic socialism” or their “socialist principles”.

Having being invited by the s-word, they simply have to point to its original meaning to justify their maximalist stances on class struggle and public ownership. The retention of the s-word will always feed the hard left.

Owenites and Marxists

The term socialist emerged in English for the first time in 1827 in the Co-operative Magazine, which was published in London by followers of Robert Owen. It moved into wider usage in the 1830s. For Owen and his followers, socialism meant the abolition of private property. It also acquired the broader ideological connotation of cooperation, in opposition to selfish individualism.

Robert Owen

As Owen argued in 1840, “virtue and happiness could never be attained” in “any system in which private property was admitted”. He aimed to secure “an equality of wealth and rank, by merging all private into public property”.

Owen and his followers attempted to establish several socialist communities in the UK and USA. All failed within a few years. The young Frederick Engels attended an Owenite meeting in Manchester in 1843, and was inspired by Owen’s notion of socialism.

In the Communist Manifesto of 1848, Karl Marx and Frederick Engels echoed Owen and others and called for the “abolition of private property”. In 1850 Marx declared: “Our concern cannot simply be to modify private property, but to abolish it”. Marx and Engels proclaimed an economic order in which “capital is converted into common property, into the property of all members of society”.

Marx and Engels wanted the complete abolition of the “free selling and buying” of commodities. They advocated common ownership of all means of production and the abolition of commodity exchange and markets.

Hence, from the 1830s until the 1950s, socialism was almost universally defined in terms of the abolition or minimisation of private property and some form of widespread common ownership.

Statist socialism

Marx and Engels insisted that markets should be abolished and all means of production should be placed in the hands of the state.

Karl Marx

By emphasizing national ownership, Marx and Engels went much further than Owen. They welcomed efforts “to centralise all instruments of production in the hands of the state” and looked forward to a time when “all production has been concentrated in the hands of a vast association of the whole nation”.

Marx and Engels often used the term communism instead of socialism. But this was primarily to distance themselves from the naïve ideas of contemporary socialists rather than to postulate a radically different objective. For them, communism was a label for their movement, rather than their goal. Thus in 1845 they wrote:

Communism is not for us a state of affairs which is to be established, an ideal to which reality [will] have to adjust itself. We call communism the real movement which abolishes the present state of things.”

Sometimes, as in his Critique of the Gotha Programme of 1875, Marx referred to the “lower” and “higher phases” of communism, instead of socialism.

In 1917 Vladimir Ilych Lenin was writing his State and Revolution, on the eve of the Bolshevik seizure of power. Some left critics had argued that Russia was insufficiently developed for socialist revolution.

So Lenin redefined socialism as a transitional stage (still involving extensive state ownership) between capitalism and communism.

By contrast, Marx and Engels did not use the term socialism to refer to a future stage between capitalism and communism. Their aim was described interchangeably as socialism or communism.

French lessons

Engels’ description of Charles Fourier and Claude-Henri de Saint-Simon as “utopian socialists” is inaccurate because – unlike Owen – they supported private ownership of the means of production. They imagined harmonious communities without poverty or strife. But some of Saint-Simon’s followers moved toward socialism.

Philippe Buchez was inspired by Saint-Simon. He promoted worker cooperatives as early as 1831, and his ideas became prominent during the French Revolution of 1848.

Contrary to most of his contemporary socialists and communists, Buchez and his followers eventually recognized the need for multiple, autonomous, worker co-operatives, each owning property and engaging in contracts and markets.

But this tolerance of markets was too much for Marx. In 1875 he described Buchez’s ideas as “reactionary”, “sectarian”, opposed to the workers’ “class movement”, and contrary to the true revolutionary aim of “cooperative production … on a national scale”.

Pierre Joseph Proudhon

In 1840 Pierre Joseph Proudhon published his What is Property? He used both socialism and anarchism to describe his proposed future society. But, like Buchez, Proudhon proposed a system of worker cooperatives linked by contracts and trade. This enraged Marx and Engels, who relentlessly attached Proudhon’s ideas.

Non-statist versions of socialism endured but were overshadowed by statist variants. From the 1870s to the 1950s the dominant view of socialism involved state ownership and control. To emphasise their dissent, Proudhon and other opponents of statist socialism often described themselves as anarchists.

Fabianism

The idea that private property and markets should be abolished was thematic to socialism and unconfined to Marxism. It pervaded the writings of socialists as diverse as Continental revolutionary communists and British Fabians. At least until the 1950s, hostility towards markets and private property were thematic for socialism as a whole. The founding influences of Owen and Marx were long-lasting.

Beatrice & Sidney Webb

Drafted by leading Fabians Sidney and Beatrice Webb, Clause Four, Part Four of the Labour Party Constitution encapsulated collectivist thinking when it was adopted in 1918:

“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.”

This provided for no exception: all production would be in common ownership and there would be no private sector. Although some Labour Party thinkers began to entertain the possibility of some private enterprise, many party members remained resolutely in support of widespread common ownership.

Some Fabian socialists tried to lay out more detail on how socialism would work. The Webbs laid out their ultimate vision of a fully planned and consciously controlled socialist economy where all markets and private ownership of the means of production had been marginalized to insignificance. They wanted private ownership of the means of production to be ended: it was a “perversion”.

They envisaged a massive, complex structure of national, regional and local committees, all involved in decision-making over details of production and distribution. How would these cope with the huge amounts of information and specialized knowledge in modern complex economies? It was simply assumed that this was relatively easy to sort out in some rational manner.

Guild socialism

G D H Cole

The British Fabian G. D. H. Cole is sometimes described as a “libertarian socialist” and as an advocate of “decentralized” or “guild” socialism. But he supported the wholesale nationalisation of industry and the abolition of private enterprise. To his great credit, and unlike most Marxists, Cole did actually try to explain how a future socialist society would work. But his explanation is a failure.

Cole did not show how devolved democracy could function and endure in a society where private property was abolished. His hyper-democratic account of socialism, where individuals make decisions throughout industry as well as the polity, failed to consider the problems of necessary skill in judgment, of obtaining relevant knowledge, and the overwhelming number of meetings and decisions involved.

Cole’s vision of socialism was of an integrated, national system where “a single authority is responsible both for the planning of the social production as a whole and for the distribution of the incomes which will be used in buying it.” Within this “single authority” he also sought devolved worker control. He wanted local autonomy of manufacturing, modelled on the medieval guild.

But Cole was tragically unclear about how the two were to be reconciled. How would the autonomous powers of the latter be protected from the control and centralizing ambitions of the “single authority”? There was no adequate answer. His whole system was unworkable.

Clement Attlee and Bertrand Russell

In 1937, eight years before he became UK Prime Minister, Clement Attlee wrote of the “evils” of capitalism: their “cause is the private ownership of the means of life; the remedy is public ownership.” Attlee then approvingly quoted the words of Bertrand Russell:

“Socialism means the common ownership of land and capital together with a democratic form of government. … It involves the abolition of all unearned wealth and of all private control over the means of livelihood of the workers”.

Bertrand Russell

Even within the moderate and non-Marxist Labour Party, the word socialism endured with these collectivist connotations, posed in opposition to private firms, competition and markets.

Russell represented an important strain of thinking within the British left. He wholeheartedly supported the notion of a publicly-owned and planned economy, but he rejected “Bolshevik methods”.

But is it possible to promote a state monopoly of economic power, while preventing a central-state monopoly and potential despotism of political power? In no historical case has the first happened and the second been prevented. Statist socialism, with viable democracy, political pluralism and effective decentralisation, exits only in the imagination of impractical idealists.

‘Market socialism’?

In the 1930s the economist Oskar Lange and others claimed that mainstream economic theory can show how socialism could work. Lange and his co-workers argued that managers of firms should be instructed to expand production until marginal costs were equal to the declared market price of the product.

Oskar Lange

But this assumed that marginal costs could be calculated and that the central planners could smoothly and readily assess whether there were surpluses or shortages, and adjust prices accordingly. Lange and others wrongly assumed that such information was readily available.

These proposals for “market socialism” attempted to simulate markets within a planning system, rather than to establish true markets with private ownership and commodity exchange. There was no private ownership and no capacity for firms to make contracts. The models developed by Lange and his collaborators involved a high degree of centralised co-ordination that excluded any real-world market.

Significantly, no attempt has ever been made to implement a Lange-type model in reality. Lange himself made no effort to persuade the post-1945 “socialist” government in his native Poland of the value of the idea.

Hence the use of the term “market socialism” in this context is highly misleading. Unlike the proposals of Buchez or Proudhon, and unlike the system of worker cooperatives established under Josip Tito in Yugoslavia after the Second World War, Lange’s proposal did not involve true markets.

Post-war revisionism

In 1956 C. Anthony Crosland published The Future of Socialism. This began Labour’s slow reconciliation with markets, private enterprise and a mixed economy. Signalling an attempted shift of meaning, Crosland argued that the central aim of socialism was not necessarily common ownership, but social justice and economic equality, and these could be achieved by different means. But although his argument was highly influential, it was widely attacked within the Labour Party and elsewhere.

Hugh Gaitskell

In 1959 the (West) German Social Democratic Party abandoned the goal of widespread common ownership. In the same year, Hugh Gaitskell tried to get the British Labour Party to follow this lead, but met stiff resistance. The party did not ditch its Clause Four commitment to the complete “common ownership of the means of production, distribution and exchange” until 1995.

Richard Toye noted that the Labour Party assumed widespread public ownership and failed to develop adequate policies concerning the private sector:

“Labour, until at least the 1950s, showed little interest in developing policies for the private sector. During the 1960s, the party demonstrated continuing ambiguity about whether or not competition was a good thing. This ambiguity continued at least until the 1980s.”

Tony Blair and New Labour

But in 1995, after 77 years, Labour’s Clause Four was changed. Tony Blair successfully ended the Labour Party’s longstanding constitutional commitment to far-reaching common ownership. But this was not without opposition. Tony Benn protested: “Labour’s heart is being cut out”.

Tony Blair

The new wording of “Clause IV: Aims and Values” declared that: “The Labour Party is a democratic socialist party.” But the clause ceased to promote unalloyed common ownership and the full text admitted a positive role for markets and a private sector.

By contrast, the 1918 formulation did not use the word socialism – it had undiluted common ownership instead.

Blair introduced the word socialism in 1995, but he attempted to change its meaning. He promoted “social-ism”, which now meant recognizing individuals as socially interdependent. It also signalled social justice, cohesion and equality of opportunity, within a mixed economy involving both private and public ownership.

Hence, instead of tackling the problem of Labour’s old collectivist DNA more directly, Blair tried to change the meaning of socialism and to airbrush Labour’s history. He failed to promote an adequate alternative vision or philosophy within Labour to replace old-fashioned common ownership. To the traditional left, it appeared as the substitution of purity and socialist principle by fudge and capitalist compromise.

But oddly Blair was responsible for the explicit insertion of socialism in its aims. This inadvertently played into the hands of the party’s enduring, backward-looking left.

Learning no lessons

Blair’s invasion of Iraq in 2003 and the financial crash of 2008 helped to turn the Labour membership against Blair and his compromises with capitalism. As evidence of the Freudian defence mechanism of regression as a response to severe stress, Labour reverted to an earlier stage of its history, re-adopting its infant ideological comforts of collectivism and state control.

The ghost of Tony Benn emerged. His Campaign Group in parliament moved from the margins to the party mainstream.

Like Benn, the current leadership of the UK Labour Party shows little awareness of the chronic problems of managing a modern, complex, centrally-planned economy. They now accept a “mixed economy” as a transition stage, but fail to promote the virtues or enduring role of the private sector.

Jeremy Corbyn

To take one example, Jeremy Corbyn’s 2015 address to the UK Co-operative Party is overwhelming in its blandness and naivety. Therein Corby shows no awareness that viable and meaningful decentralisation of economic power must involve (cooperative or other) firms with the right to own, set prices for, and trade their outputs. He rightly mentions the virtues of worker and consumer participation in decision-making, but shows no awareness of the practical limits of such participation.

Corbyn simply waved the magic wand of “democracy” without any apparent appreciation that it is impossible to involve everyone in more than a tiny fraction of all the complex decisions involved in any modern economy. Corbyn showed no awareness of the practical problems of complex decision-making in large organisations, which are dependent on multiple, localised, skills and expertise.

Withering socialism

Following Labour’s advances in the 2017 general election, the leadership of Corbyn and his allies seems entrenched. Recently they have gained control of the powerful National Executive Committee of the party. For future nominations for the Labour leadership or deputy leadership, it is probable that the 15 per cent threshold of support from Labour MPs will be lowered, making ongoing hard left prominence more likely.

In the 1980s and 1990s the hard left were pushed back with the help of large, moderate trade unions that were affiliated to Labour. Those countervailing forces have gone. The unions are smaller and some are more inclined to the hard left.

With the Brexit vote in 2016, Britain has entered its most dangerous political crisis since the Second World War. The country is governed by an inept Conservative Party that is tearing up the UK constitution and concentrating unprecedented power in the hands of its duplicitous ministers.

Labour’s 2017 electoral advances were partly due to Tory incompetence. In this volatile climate it is possible that Corbyn could soon become prime minister. Subsequently, an obvious danger would be that the concentration of executive power legislated by Tory opponents would prove too tempting for Labour in power to relinquish. After growing authoritarianism from the reactionary right, we might experience a new, collectivist authoritarianism from Labour.

A Labour government committed to dealing with the severe crises in the health, education and housing sectors can bring positive benefits. Substantial state intervention is needed to regulate markets, especially in the area of finance. But such a programme needs to be tempered by heavy measures of pragmatism, pluralism, cautious experimentation and ideological humility that are alien to the current leadership.

They show no sign that they have abandoned their old, statist socialism. There is no recognition that markets and substantial private enterprise are necessary to sustain autonomy and decentralisation. As has become apparent in Corbyn’s favourite socialist experiment in Venezuela, the road to hell is paved with good intentions.

Conclusion – More French lessons

However outdated, it is difficult to dislodge the core principles upon which any party is founded. France provides an important illustration. Michel Rocard was a leading member of the French Socialist Party and a prime minister under François Mitterand. He long argued that French socialists

Emmanuel Macron

had failed to modernise and to accept the enduring importance of private property and markets.

Emmanuel Macron was a protégée of Rocard. Macron gained presidential power after breaking from the fractured Socialist Party and building a powerful centre force. Perhaps there are some lessons for progressives in Britain. It would not be the first time that the French have shown us the way forward.

 

13 September 2017

Minor edits: 16, 21 September 2017

 

This book elaborates on some of the political issues raised in this blog:
Published by University of Chicago Press in January 2018

 

Bibliography

Attlee, Clement R. (1937) The Labour Party in Perspective (London: Gollancz).

Bestor, Arthur E., Jr (1948) ‘The Evolution of the Socialist Vocabulary’, Journal of the History of Ideas, 9(3), June, pp. 259-302.

Blair, Tony (1994) Socialism, Fabian Pamphlet 565 (London: Fabian Society).

Cole, George D. H. (1920) Guild Socialism Re-Stated (London: Parsons).

Crosland, C. Anthony R. (1956) The Future of Socialism (London: Jonathan Cape).

Harrison, J. F. C. (1969) Robert Owen and the Owenites in Britain and America (London: Routledge and Kegan Paul).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Owen, Robert (1991) A New View of Society and Other Writings (Harmondsworth: Penguin).

Landauer, Carl A. (1959) European Socialism: A History of Ideas and Movements from the Industrial Revolution to Hitler’s Seizure of Power, 2 vols. (Berkeley: University of California Press).

Lange, Oskar R. and Taylor, Frederick M. (1938) On the Economic Theory of Socialism (Minneapolis: University of Minnesota Press).

Proudhon, Pierre Joseph (1890) What is Property?: An Inquiry into the Principle of Right and Government, translated from the French edition of 1840 (New York: Humbold).

Russell, Bertrand (1920) The Practice and Theory of Bolshevism (London: George Allen and Unwin).

Steele, David Ramsay (1992) From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation (La Salle, Illinois: Open Court).

Toye, Richard (2004) ‘The Smallest Party in History’? New Labour in Historical Perspective’, Labour History Review, 69(1), April, pp. 83-104.

Webb, Sidney J. and Webb, Beatrice (1920) A Constitution for the Socialist Commonwealth of Great Britain (London: Longmans Green).

 

Posted in Bertrand Russell, Brexit, Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Lenin, Markets, Nationalization, Private enterprise, Robert Owen, Socialism, Tony Benn, Tony Blair, Tony Blair, Venezuela

September 2nd, 2017 by geoffhodgson1946

 

 

Geoffrey M. Hodgson

 

In terms of basic assumptions, Marxism has more in common with some prominent versions of so-called “neoliberalism” than is generally understood. Obviously, Marxism is opposed to a market economy. But some core ideas by Karl Marx and Frederick Engels are remarkably similar to those of some so-called “neoliberals”. For example, Marx’s definition of property resembles that of Ludwig von Mises.

But the parallels go much further, and are disturbing in their consequences. They concern the independence of the legal system and the nature and legitimation of democracy. They also concern the viability of civil society and the autonomy of personal and social life.

The argument here shows that liberalism – both historically and currently – is very different from some modern versions of “neoliberalism”. This “neoliberalism” is theoretically closer to Karl Marx than to Thomas Paine or John Stuart Mill.

Marxism undermines the autonomy of politics and civil society

The Marxian analysis of capitalism treats law and the state as an expression of class interests, which in turn are grounded on “economic relations”. Hence, for Marx, law and the state “originate in the material conditions of life“. They are part of the “superstructure” built upon the “economic base”.

The Marxist analytical reduction of everything to economics does not stop there. Consider the notion of civil society.

Civil society generally connotes a realm of free, partly self-organising, property-owning citizens, who interact under the rule of the state and its laws. In most accounts it includes private business and markets, but it is not reducible to them. It also embraces many forms of social association (including recreation, religion and philanthropy) that are not driven by business interests.

Thomas Paine

Distinctions between civil society and the state, and between civil society and the narrower world of trade and business, were developed by Enlightenment liberal writers such as Adam Smith, Adam Ferguson, Thomas Paine, Alexis de Tocqueville and others. They are crucial for modern liberal theory.

By contrast, Marx reduced civil society to economic relations, governed by money, greed and self-interest. Marx wrote: “Practical need, egoism, is the principle of civil society … The god of practical need and self-interest is money.Hence Marx concluded that “the anatomy of this civil society … has to be sought in political economy.”

Accordingly, Frederick Engels wrote that under capitalism “the state – the political order – is the subordination, and civil society – the realm of economic relations – the decisive element.” Hence everything became a matter of greed and commerce, to be understood through economic analysis alone.

In its analysis of capitalism, Marxism made the state, law, politics and civil society all analytically subservient to markets and business.

These may be regarded as extreme formulations within Marxism. Certainly there are more sophisticated treatments by Marxists of civil society and the state, not least by Antonio Gramsci. But Marxism is severely impaired by the words of its founders.

The above extracts concern the Marxian analysis of capitalism, not its vision of an ideal society, which of course is strikingly different from that of (neo)liberals. While the Marxian analysis of capitalism undermines the conceptual distinction between civil society and the state – by making them both subservient to economic relations – Marxian politics also dissolves it in practice.

In his early tract On the Jewish Question, Marx argued that civil society and political society should become one and the same. In practice, under socialism, once much of the economy becomes a state bureaucracy. With private association under restriction, the scope of civil society is much diminished.

The conceptual and practical degradation of civil society is but one of the roots of totalitarianism within Marxism. Other sources are discussed elsewhere. The smothering of civil society within the party-state makes opposition more difficult and paves the way to dictatorship – a process witnessed in all Marxist regimes, from Russia to Venezuela.

The reclamation of civil society by Eastern European dissidents

Long before the fall of the Berlin Wall in 1989, underground opposition groups had developed in several Soviet Bloc countries. After the crushing of the Hungarian Uprising in 1956, and after the Soviet invasion of Czechoslovakia in 1968, opposition to the Marxist party-state became most developed in Poland.

Leszek Kolakowski

In 1971 the Polish intellectual Leszek Kołakowski wrote his Theses on Hope and Despair. These were circulated illegally in his home country.

Kołakowski complained that the Soviet-style regime had “monopolistic power” that impelled “the atomization of society and the destruction of all forms of social life not prescribed by the ruling apparat.” He called for a pluralist society with genuine freedom of information, discussion and association.

Subsequently, other Eastern European intellectuals such as Jacques Rupnik called for “the rebirth of civil society”. After the formation of the mass trade union movement Solidarity in Poland in 1980, still more voices were added. The Hungarian Andrew Arato wrote in 1981 of the new dissident wave:

“one point unites them all: the viewpoint of civil society against the state – the desire to institutionalize and preserve the new level of social independence.”

Before its unexpected elevation to political power in 1989, Solidarity saw itself as essentially a movement for the “self-defence” of civil society against totalitarian power.

But while the dissidents drew on Enlightenment and liberal thought, their political philosophy was often underdeveloped. After 1989, many former dissidents became influenced by extreme forms of market libertarianism. But given the parallels – explored below – between this “neoliberalism” and Marxist thought, there was more continuity in their thinking than immediately meets the eye.

Market universalism

To understand the connection between “neoliberalism” and Marxism we need first to address a much broader phenomenon within social science.

There is a widespread tendency to use the language of trade and markets to describe phenomena that are neither traded nor markets. I gave some examples in my Conceptualizing Capitalism book. I here call it market universalism.

Consider the notion of a “market for ideas”, which can be found in the writings of Nobel Laureate Ronald Coase. He did not refer to intellectual property but to conversation and freedom of expression.

Douglass North, another Nobel Laureate, wrote of “political markets”. He was not referring to vote-buying (in countries like India) or political bribery, but to the general process of multi-party competition in a democracy.

In a paper published in 1988, Bruce Benson and Eric Engen envisioned “the legislative process as a market for laws” where interest groups “pay” legislators for laws as “products”.

By minimal criteria, none of these is a market. Rules concerning contracts, enforcement and property rights are lacking.

For example, the ordinary communication or debating of ideas does not involve enforceable contracts. Generally, conversation is not an intentional transfer of property rights.

Similarly, if we vote for a politician or a party that does not typically amount to an enforceable agreement. Competition between politicians or parties for votes or power is not a contest for contracts under any established system of contractual rules.

Likewise, with the supposed “market for laws”, in reality there are rarely any enforceable contracts between interest groups and legislators.

There is a further problem. What would be the system of rules under which these supposed “contracts” between legislators and interest groups are formed and enforced? Hence a “market for laws” would require supra-legal institutions with their own (legal or other) rules. We would need markets for markets-for-laws, or markets for meta-rules.

This reveals a problem of an infinite regress, showing that not everything can be placed on a market. My Conceptualizing Capitalism book gives further reasons why markets cannot be universal. There will always be missing markets.

Market universalism and “neoliberalism”

Although market universalism may be dismissed as the harmless use of metaphor, it contains dangerous policy temptations.

Making everything a market denies the autonomy of law and politics: everything is subsumed within the market zone. All forms of association are regarded as market-like or contractual arrangements. Legal and political relations or rights are reduced to the “economic” facts of possession or control.

The temptation is to downgrade all non-commercial justifications for democracy, law or social life. Everything is forced into the conceptual straitjacket of property and contract, and evaluated in terms of profit and loss.

Previous liberal thinkers had defended rights to private property, other human rights, plus institutions such as democracy. By contrast, market universalism can highlight control over property first, on the grounds that it is the foundation of all other rights and liberties. Property moves from being a necessary but insufficient condition of liberty, to being necessary and sufficient for the same.

This transforms the Enlightenment argument that the government must be legitimated by representative democracy, rather than by tradition or divine rule. The “political market” makes democracy a market, and market-like criteria become the overriding source of legitimation for everything.

Furthermore, democracy may be seen as secondary or expedient, especially when property or markets are perceived as being under threat. By treating democracy as another market, a temptation is to regard markets and property as generally more important or supreme than democracy.

Consequentially, market universalism enables something very different from other forms of liberalism, and it involves a radically modified conceptual foundation. One may be tempted to call it neoliberalism.

This is the label suggested by Philip Mirowski, who addressed what he called the Mont Pèlerin “thought collective”. In a perceptive essay on this influential intellectual movement, which involved Friedrich Hayek, Milton Friedman, Ludwig von Mises and others, Mirowski identified several of its traits including the following:

“Skepticism about the lack of control of democracy is offset by the persistent need to provide a more reliable source of popular legitimacy for the neoliberal market state. Neoliberals seek to transcend the intolerable contradiction by treating politics as if it were a market and promoting an economic theory of democracy.”

Confining the “neoliberal” label to people such as Hayek, Friedman and von Mises would be a suitable way of marking their major differences with other forms of liberalism. But it is doubtful that such precision and restraint can be restored to a term that has become over-applied and highly varied in its usage.

Foundations of anti-democratic authoritarianism

We can now see what Marxists and market universalists have in common. They all look upon capitalism as system where everything is reducible to a market.

For Marxists, this means that civil society is nothing more than the sphere of business and individual greed. In addition, the political and legal spheres are simply reflections of these business interests.

A policy consequence – after the socialist revolution – is to destroy civil society and absorb it into politics and the state. This forms part of the Marxist foundation for totalitarianism.

Of course, for “neoliberals”, markets are always beneficial. But the problem is much more serious than their ever-familiar agoraphilia.

Through notions such as “political markets” and “markets for laws”, market universalist “neoliberals” reduce the state and its legal system to a grand marketplace. The state and law become additional markets alongside others. The policy temptation is the practical marketization of the state and the doctrinal denial of the autonomy of politics.

Once politics and all civil society are seen through the lenses of trade and markets, then the basic elements of property and contract become supreme. Instead of being a necessary but insufficient precondition of liberty, property becomes both necessary and sufficient.

This transforms the Enlightenment argument that the government must be legitimated by representative democracy, rather than by divine rule. The “political market” makes democracy a market, and this becomes the overriding source of legitimation.

Consequently, democracy becomes secondary or expedient, especially when property or markets are perceived as being under threat. By treating democracy as another market, a temptation is to regard markets and property as generally more important or supreme than democracy.

Leading “neoliberals” like von Mises and Hayek have been described as classical liberals. But their views are a departure in important respects from the Enlightenment liberalism of the eighteenth and nineteenth centuries, and from other more recent currents of liberal thinking. In some important respect they are closer to Karl Marx than John Stuart Mill.

Margaret Thatcher and Augusto Pinochet

Their supreme emphasis on property rights explains why some “neoliberals” have dallied with dictators. For example, in a book originally published in 1927, von Mises praised fascism as “an emergency makeshift” that “has, for the moment, saved European civilization”. Hayek was notoriously silent about the human rights violations in Chile under the dictator Pinochet. These fascist or dictatorial regimes were seen by them as saviours of private property.

Conclusion: liberalism is not “neoliberalism”

Despite their opposed policy stances, Marxism and the type of market-universalist “neoliberalism” discussed here have similarities at their theoretical foundations. While Marxism reduces the analysis of civil society and politics to an economistic world dominated by self-seeking egoists, this “neoliberalism” does exactly the same.

Within this version of “neoliberalism”, everything is legitimated by free contract in unfettered markets in all spheres of human interaction, including within the state itself. Like Marxism, it reduces everything to economics.

This entails a radical break from other forms of liberalism, and from all other doctrines that recognise the relative autonomy of the political and legal spheres from the economy and from civil society.

2 September 2017

Minor edits – 8, 10 September 2017

This book elaborates on some of the political issues raised in this blog:

Published by University of Chicago Press in January 2018

 

References

Arato, Andrew and Cohen, Jean (1992) Civil Society and Democratic Theory (Cambridge, MA: MIT Press).

Benson, Bruce L. and Engen, Eric M. (1988) ‘The Market for Laws: An Economic Analysis of Legislation’, Southern Economic Journal, 54(3), January, pp. 732-745.

Caldwell, Bruce J. and Montes, Leonidas (2015) ‘Friedrich Hayek and his Visits to Chile’, Review of Austrian Economics, 28(3), pp. 261-309.

Cohen, Jean (1982) Class and Civil Society: The Limits of Marxian Critical Theory (Oxford, Martin Robertson).

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Keane, John (ed.) (1988) Civil Society and the State (London: Verso).

Keane, John (1995) Tom Paine: A Political Life (London: Bloomsbury).

Keane, John (1998) Civil Society: Old Images, New Visions (Cambridge: Polity).

Kumar, Krishan (1993) ‘Civil Society: An Inquiry into the Usefulness of an Historical Term’, British Journal of Sociology, 44(3), September, pp. 375-395.

Mirowski, Philip and Plehwe, Dieter (eds) (2015) The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective, paperback edition (Cambridge MA: Harvard University Press). (Quote from p. xvii.)

Mises, Ludwig von (1985) Liberalism in the Classic Tradition. Translated from the German edition of 1927 (Irvington, NY: Foundation for Economic Education).

Polan, Anthony J. (1984) Lenin and the End of Politics (London: Methuen).

Venugopal, Rajesh (2015) ‘Neoliberalism as a Concept’, Economy and Society, 44(2), pp. 165-87. http://www.tandfonline.com/doi/abs/10.1080/03085147.2015.1013356.

 

Posted in Common ownership, Democracy, Karl Marx, Left politics, Leszek Kolakowski, Liberalism, Ludwig von Mises, Markets, Neoliberalism, Politics, Private enterprise, Property, Right politics, Socialism, Soviet Union, Venezuela

August 14th, 2017 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

The world is full of injustice and poverty, while the rich protect their wealth by manipulating the system of power. Consequently, many of the informed and intelligent are lured like moths to the lights of socialist revolution, promising social justice for the many not the few.

Vladimir Ilyich Lenin was a blazing light in Russia a century ago. Many intellectuals were attracted to his Soviet regime. Lenin is said to have coined the term “useful idiot” to describe the naïve among them (but no evidence has been found to support that attribution).

But in 1913 Lenin definitely did quote the old adage that “the road to hell is paved with good intentions”. This was unwittingly self-referential and rather prophetic. Lenin’s post-1917 Bolshevik regime became a hell, in part of his own making. The good-intentioned (with sufficient means or influence) were invited from abroad to visit the young Soviet Republic.

Venezuela – “another world is possible”

But first let us consider the current case of Venezuela. Its experiment in radical socialism began in 1998 when Marxist Hugo Chávez was elected as President. Using the plentiful oil revenues during 1999-2007, his government expanded access to food, housing, healthcare, and education, especially for the poor and the indigenous minorities.

Hugo Chávez

Chávez nationalized key industries and created participatory Communal Councils. He whipped up popular support against the rich elite and their perceived allies in the United States. But constitutional checks and balances slowed down his radical reforms. Criticism from the private press and political opposition countered the populist movement.

So in 1999, the new Constitutional Assembly, filled with elected supporters of Chávez, drafted a new constitution that made censorship easier and granted the executive branch of government more power.

The Constitutional Assembly extended the presidential term. It abolished the two houses of Congress. It also granted Chávez the power to legislate on citizen rights, to promote military officers and to oversee economic and financial matters.

In 2002 Chávez was briefly deposed in a coup, which probably had support from the CIA. But Chávez was restored to power by the army and popular mobilisations.

Chávez then seized control of the courts and the electoral authority, and suppressed much of the opposition media. He removed political checks and balances, seeing them as obstacles to his socialist revolution.

Accordingly, the device of populist democracy was used to push the country in the direction of dictatorship. His supporters were persuaded to approve increases in presidential powers, to protect the “socialist revolution” against its enemies. Since 2004, “defamation” of the government, including “disrespect for the authorities”, has been a criminal offence.

Chávez failed to diversify the economy and reduce its reliance on oil. He antagonised private investors. The state-centred economy was not robust enough to withstand the post-2008 oil price collapse.

Venezuela’s descent into hell

In a state-run economy, business corruption is encouraged by bureaucratic failure. Political corruption is facilitated by the gathering of powers in the hands of the ruling party and the state machine. The Venezuelan government became one of the most corrupt in the world. Serious shortages of food and medicine emerged.

“There’s no food”

Chávez died of cancer in 2013 and was replaced as President by Nicolás Maduro.

In 2015 and 2016, blaming internal “fascists” and US intervention for the severe shortages, President Maduro declared two states of emergency. These gave him powers to intervene in the economy. Arbitrary detentions of dissidents became more common.

The regimes of Chávez and Maduro wasted and misspent much of the money made in the oil boom, while over-extending the powers of their corrupt governments. The private sector was hobbled. The ultimate outcome of Venezuela’s experiment with populist socialism has been authoritarianism, destitution and starvation.

Because of a populist mistrust of liberal, pluralist institutions, Venezuela is lurching toward dictatorship. Press freedom is limited and critical journalists and opposition leaders are jailed.

In Decemb2017 Venezuela took a major step toward a one-party state. Maduro announced that candidates from opposition parties would be banned from the next presidential election.

Supporters of Chávez and Maduro blame the hostility of the US for Venezuela’s distress, just as it was blamed for economic problems in Cuba after its 1959 revolution. US belligerence made things worse, and will probably continue to do so.

But the major cause of economic stagnation in Cuba and Venezuela is the unchecked concentration of excessive political, legal and economic power in the hands of the overbearing state.

Los idiotas útiles

Back in the UK, Jeremy Corbyn attended a 2013 vigil following the death of Chávez, hailing him as an “inspiration to all of us fighting back against austerity and neo-liberal economics in Europe”. As late as 2015, when Venezuela was in ever-deepening crisis, Corbyn’s enthusiasm for the regime was undiminished. He remarked:

“we celebrate, and it is a cause for celebration, the achievements of Venezuela, in jobs, in housing, in health, in education, but above all its role in the whole world … we recognise what they have achieved.”

Corbyn has since been challenged to come out against the hellish Maduro regime. Maduro’s government has been accused of arbitrary arrest, extra-judicial killings and torture.

Jeremy Corbyn and Hugo Chávez

Having managed to dupe many people with the mantra that he was a “peacemaker” in Northern Ireland (rather than a supporter of the IRA), Corbyn tried the same trick with Venezuela.

First he removed all mention of “Venezuela” from his website. Then, in an August 2017 interview, he condemned the “violence done by all sides”.

The Venezuelan opposition includes both rightist agitators and defenders of human rights. By simply condemning violence, Corbyn appeared as morally neutral between the regime and its diverse opponents. He ignored the politico-economic conditions that had given rise to the violence, and the previous actions of the Chavistas in creating them.

I wonder if Corbyn could be taken back in a time machine to the 1793-94 Terror of the French Revolution, or the Soviet Great Terror of the 1930s, or the occasion of Hitler’s invasion of the Sudetenland in 1938, and be asked to condemn with detached neutrality the “violence done by all sides”.

In the same interview Corbyn called for respect for “the independence of the judiciary and … the human rights of all”. He failed to note that Chávez and Maduro were primarily responsible for undermining both.

Questioned about his support for Maduro, Corbyn fudged:

“I gave the support of many people around the world for the principle of a government that was dedicated towards reducing inequality and improving the life chances of the poorest people.”

He omitted to mention that that same socialist Venezuelan government was now responsible for widespread starvation, rampant corruption and mass emigration.

But Jeremy of Islington is in search of socialist sainthood. He does not want the blood of any regime on his hands. He wants to go down as a peacemaker. He left it to his Corbynista Praetorian Guard to make a more forceful case for the Chávez-Maduro regime.

Over to the Corbynistas

Labour MP Chris Williamson tweeted on 11 August 2017 that the violence in Venezuela is “for the purpose of overthrowing democracy, not saving it”. Unlike Corbyn, this blamed all the violence on the opposition. It also overlooked the fact that Chávez and Maduro had been more effective in undermining democracy in Venezuela than anyone else.

Chris Williamson MP & Jeremy Corbyn MP

On the following day, Williamson Tweeted: “The US and global corporations are indulging in economic sabotage in Venezuela to bring down the government”. To a degree this may be true. But the statement ignores the greater part played by Chavista populism and its power-grabbing statist socialism in bringing about the economic and political catastrophe.

Other pro-Chavista idiotas útiles include Alexis Tsipras the Greek Prime Minister, Pablo Iglesias of Podemos in Spain, Jean-Luc Mélenchon the leftist French presidential candidate, Pope Francis and the Five-Star Movement in Italy.

By diverting attention onto the role of the USA and large corporations, the supporters of the Chávez-Maduro regime have their excuses at the ready. This conveniently helps them avoid recognition of their own moral culpability in the Venezuelan disaster.

The erosion of civil liberties and human rights has its roots in the concentration of economic and political powers in the hands of the state, whatever the “good intentions” that originally motivated the leaders and their supporters.

Stalin the Fabian and the Stalinist Fabians

Sadly, this is an old pattern. The Fabian socialist George Bernard Shaw visited the Soviet Union in 1931 and met Joseph Stalin. Shaw declared that Russia was becoming “a Fabian society”. This was at a time of mass famine and forced collectivisation.

George Bernard Shaw

In the preface to his 1933 play On the Rocks, Shaw defended the Russian secret police’s “liquidation” of detainees who could not give satisfactory answers to queries about “pulling your weight in the social boat” or “giving more trouble than you are worth” or had not “earned the privilege of living in a civilized community”.

In a letter published in the Manchester Guardian in 1933, Shaw and others dismissed reports of famine in the Soviet Union as “slander” resulting from a “lie campaign” against the “Workers Republic of Russia”. In fact, from 1932 to 1933, about six to eight million people died there from hunger.

Shaw subsequently attempted to justify the extermination of the Russian peasantry: “For a Communist Utopia we need a population of Utopians. Peasants will not do.” In 1936 Shaw defended Stalin’s purges and mass executions. In 1948 he declared that Stalin was “a first rate Fabian”.

Beatrice & Sidney Webb

Leading Fabians Sidney and Beatrice Webb were highly influential intellectuals in the British Labour Party. In 1932 they made a three-week visit to the Soviet Union. Their generally favourable impressions were reported in 1935 in their massive two-volume study, Soviet Communism: A New Civilisation? In the 1937 edition the question mark was removed from the title.

Their assessments of the Soviet Union were more cautious than those of Shaw, but they also denied the existence of a famine in the Ukraine in 1932-1933 and they opined that the liquidation of rich peasants (kulaks) may have been necessary to collectivize agriculture and increase its productivity. Their book received favourable reviews from left writers and it played a role in nurturing sympathy in the Labour Party for the Soviet Union, at least until the onset of the Cold War in 1948.

“Humane” Mao and the “Korean miracle”

Communism achieved another victory when Mao Zedong came to power in China in 1949. Professor Joan Robinson was a leading Cambridge economist, influenced by both Karl Marx and John Maynard Keynes. An enthusiastic supporter of Mao, she visited China several times.

Despite this first-hand experience, she failed to acknowledge that Mao’s Great Leap Forward in 1958-1961 had been an economic disaster: it had led to catastrophic famine and about 40 million deaths. In defiance she wrote: “the Great Leap [Forward] was not a failure after all, but the Rightists were reluctant to admit it.”

Joan Robinson

In the 1960s Robinson lauded the Cultural Revolution, approving of attempts by Mao and the Red Guards to root out “capitalist roaders” within Chinese society. She praised Mao’s “moderate and humane” intentions. In fact, the Cultural Revolution led to at least half a million and perhaps as many as two million deaths.

Violent struggles ensued across the country and paralyzed the economy for years. Many more millions of people were persecuted at whim by the Red Guards: they suffered public humiliation, arbitrary imprisonment, torture or execution. Countless more died when the army tried to re-establish order. In China’s totalitarian system they had no refuge or legal protection.

As late as 1973 Robinson opposed “market socialism” and advocated a centrally-planned economy. She wrote of the “success of the Chinese economy in reducing the appeal of the money motive”. After extolling the virtues of Mao’s system, she reported that “Chinese patriotism and socialist ideology are pulling together”.

But a few years later, shortly after Mao’s death in 1976, the country overturned the anti-market policies that Robinson had celebrated in her writings. After accepting markets, Chinese growth took off.

In 1964 Robinson visited Communist North Korea and extolled the “Korean miracle” in its economy. She attributed its claimed success to public ownership and central planning.

But, within fifteen years, capitalist South Korea was surging ahead of its Northern neighbour. By the 1990s North Korea was experiencing mass famines. By 2010, GDP per capita in the South was about 17 times greater than in the North.

The “human face” of Soviet Communism

E P Thompson

The historian Edward P. Thompson left the British Communist Party after the 1956 Hungarian Uprising and subsequently played a major part in the formation of the New Left Review. But as late as 1973 he had sufficient residual sentimentalism for the Soviet Union to write of the

“times when [Soviet] communism has shown a most human face, between 1917 and the early 1920s, and again from the battle of Stalingrad to 1946.”

Leszek Kolakowski

Leszek Kolakowski’s response to these rose-tinted words was devastating. He asked what Thompson might have meant by the “human face” of the Soviet Union during these years. Did it mean the “attempt to rule the entire economy by police and army, resulting in mass hunger with uncountable victims, in several hundred peasants” revolts, all drowned in blood”?

“Or do you mean the armed invasion of seven non-Russian countries which had formed their independent governments …? Or do you mean the dispersion by soldiers of the only democratically elected Parliament in Russian history …? The suppression by violence of all political parties, including socialist ones, the abolition of the non-Bolshevik press and, above all, the replacement of law with the absolute power of the party and its police in killing, torturing and imprisoning anybody they wanted? … And what is the most human face in 1942-46? Do you mean the deportation of eight entire nationalities of the Soviet Union with hundreds of thousands of victims … ? Do you mean sending to concentration camps hundreds of thousands of Soviet prisoners of war handed over by the Allies?”

Kolakowski searched for an explanation of Thompson’s incredible description of these events as “a most human face” of Communism. Perhaps this phrase is being used “in a very Thompsonian sense which I do not grasp”? A commentator on Kolakowski’s response wrote: “no one who reads it will ever take E. P. Thompson seriously again.”

Another “distortion”: the killing fields of Cambodia

Robinson and Thompson were not the only top-rank academics to be deluded by ideology. Consider the most important linguist of the twentieth century. Noam Chomsky loathed the American war in Vietnam. For him, to hide its own acts of oppression and mass murder, the West had duped the masses with its slick corporate propaganda. The West was fascism, with a fake mask of democracy.

Noam Chomsky

But when reports emerged that the Communists were also capable of mass atrocities, he suspected an American conspiracy to exaggerate and to draw attention away from their own crimes. Then the evidence emerged of the killing fields of the Khmer Rouge in 1975-1979. Chomsky accused the publishers of the evidence of “extreme anti-Khmer Rouge distortions”.

Khmer Rouge Killing Fields

We now know that the Khmer Rouge obliterated about two million people – a quarter of the Cambodian population – in the pursuit of their Communist utopia. Chomsky’s reputation as a political thinker has never recovered.

Conclusion: what can we learn?

The first lesson is that thousands of highly intelligent people can be political idiots. We know that unintelligent people can be idiots (and even become presidents) but the task at hand is to explain intelligent idiocy. All it takes is a good dose of utopian idealism, combined with the view that the existing system is beyond reform.

Then when the likes of Lenin, or Mao, or Kim Il-sung, or Castro, or Pol Pot, or Chávez raise the red flag, the utopian intellectual flies to the light. A dose of reality may burn the wings. But the light of intellectual hope is so important that it must remained undimmed. Consequently, events as big as famines are based on the dark capitalist forces outside, or their devious agents within.

Many intellectuals are not practical people. They have lingered in their ivory towers. They know little of running organizations or state bureaucracies. Because of their well-motivated discontent and their search for hope, they can be attracted to Corbynism and other versions of leftist populism. But those lights are dangerous. They are ignited by opposition: without practical experience or feasible solutions.

There is now ample evidence to confirm that classical socialism – by definition involving widespread public ownership and control of the economy – is a dangerous formula. It cannot work effectively in a large-scale, complex economy and it concentrates too much power in the hands of the state machine.

Given such centralized powers, even well-motivated leaders will be tempted to curtail dissent and bully minority interests, in the name of the many against the few. Once on this slippery slope, human rights are eroded and the politico-economic system slides toward totalitarianism.

A lesson of the twentieth century is that classical socialism is a dead end. Viable democracies survive because there are countervailing, political and economic powers, which themselves depend upon mixed economies with large private sectors. Classical socialism unavoidably undermines the politico-economic foundations of democracy.

Instead we need to look to ways to making capitalism more egalitarian and inclusive, rather than chasing the dangerous dream of its abolition. Intelligent dreamers need to use their intelligence more wisely.

 

14 August 2017

Minor edits – 16, 20 August 2017, 27 September, 13 December 2017

 

 
This book elaborates on some of the political issues raised in this blog:
Published by University of Chicago Press in January 2018

 

Bibliography

Barsky, Robert F. (1997) Noam Chomsky: A Life of Dissent (Cambridge, MA: MIT Press).

Borger, Julian (2016) ‘Venezuela’s worsening economic crisis’, The Guardian, 22 June. https://www.theguardian.com/world/2016/jun/22/venezuela-economic-crisis-guardian-briefing

Canning, Paul (2016) ‘Venezuela: The Left’s Giant Forgetting’. http://paulocanning.blogspot.co.uk/2016/09/venezuela-lefts-giant-forgetting.html

Cohen, Nick (2007) What’s Left? How the Left Lost its Way (London and New York: Harper). See pp. 157-68.

Cunliffe, Rachel (2016) ‘Corbyn looks the Other Way as Venezuela Self-Destructs’, 18 January, http://capx.co/corbyn-looks-the-other-way-as-venezuela-self-destructs/.

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Hollander, Paul (1998) Bernard Shaw: A Brief Biography (Philadelphia: University of Pennsylvania Press).

Jones, Bill (1977) The Russia Complex: The British Labour Party and the Soviet Union (Manchester: University of Manchester Press).

Judt, Tony (2006) ‘Goodbye to All That?’ New York Review of Books, 21 September 2006.

Kolakowski, Leszek (1974) ‘My Correct Views on Everything: A Rejoinder to Edward Thompson’s “Open Letter to Leszek Kolakowski”’, Socialist Register 11. See pp. 4-5. Available at http://socialistregister.com/index.php/srv/article/view/5323/2224#.VXBUKrFwYy8.

Minney, Rubeigh J. (1969) The Bogus Image of Bernard Shaw (London: Frewin).

Robinson, Joan (1969) The Cultural Revolution in China (Harmondsworth: Penguin). See pp. 19, 35-36.

Robinson, Joan (1973) Economic Management in China 1972 (London: Anglo-Chinese Educational Institute). See pp. 4, 13, 37.

Shaw, George Bernard (1934) Prefaces by Bernard Shaw (London: Odhams Press). See p. 341.

Staples-Butler, Jack (2017) “Starvation and Silence: The British Left and Moral Accountability for Venezuela”, 7 July. https://historyjack.com/2017/07/07/starvation-and-silence-british-left-and-venezuela/

Telesur (2015) ‘British MP Jeremy Corbyn speaks out for Venezuela’, 6 June. http://www.telesurtv.net/english/news/British-MP-Jeremy-Corbyn-Speaks-Out-For-Venezuela-20150605-0033.html.

Thompson, Edward P. (1973) ‘An Open Letter to Leszek Kolakowski’, Socialist Register 10. See p. 77, emphasis added. Accessible on http://socialistregister.com/index.php/srv/article/view/5351#.VXBrZLFwYy8.

Turner, Marjorie S. (1989) Joan Robinson and the Americans (Armonk NY: M. E. Sharpe). See p. 90.

Webb, Sidney J. and Webb, Beatrice (1935) Soviet Communism: A New Civilisation? (London: Longmans Green).

 

Posted in Common ownership, Democracy, E P Thompson, George Bernard Shaw, Jeremy Corbyn, Joan Robinson, Karl Marx, Khmer Rouge, Labour Party, Left politics, Lenin, Leszek Kolakowski, Mao Zedong, Markets, Nationalization, Noam Chomsky, Populism, Private enterprise, Socialism, Soviet Union, Venezuela

May 21st, 2017 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

Although the two biggest UK political parties are very different in important respects, Labour under Jeremy Corbyn and the Conservatives under Theresa May have each converged on different forms of pro-Brexit, economic nationalism.

Economic nationalism prioritises national and statist solutions to economic problems. Although it does not shun them completely, it places less stress on global markets, international cooperation and the international mobility of capital or labour. It believes that the solutions to major economic, political and social problems lie within the competence of the national state.

Other countries have turned in the same direction, including the United States under Donald Trump and Russia under Vladimir Putin. Previously, both Soviet-style and fascist economies have embraced economic nationalism. China has continued along this road, even after its acceptance of private enterprise and a market economy.

Economic nationalism has been used successfully as a tool of economic development, by creating a state apparatus to build an institutional infrastructure and mobilise resources. But it brings severe dangers as well as some advantages. Its reliance on nationalist rhetoric can feed intolerance, racism and extremism.

Furthermore, as it concentrates economic and political power in the hands of the state, economic nationalism undermines vital checks and balances in the politico-economic architecture.

As numerous social scientists (from Barrington Moore to Douglass North) have shown, democracy and human rights cannot be safeguarded without a separation of powers, backed by powerful countervailing politico-economic forces that keep the state in check.

From Thatcherism to Mayhem: Tory economic nationalism

Margaret Thatcher

In the 1970s, Margaret Thatcher changed the Tory party from a paternalist party of the elite to a more radical, free-market and individualist force, embracing the ideologies of Friedrich Hayek and Milton Friedman.

A logical consequence of this market fundamentalism was to embrace the European Single Market, which her successor John Major did in the Maastricht Treaty of 1992. But this was too much for the Tory nationalists, who were already turning against the European Union and all its works.

The tension grew within the Tories between those that pursued international markets in the name of market fundamentalism, and those who worried that global trade and the free movement of labour were undermining the powers of the British nation state.

A compromise option – widely touted during the June 2016 EU referendum – was to exit the EU but remain in the single market. But a major implication of this was that the free movement of labour to and from the EU would have to be retained. May became prime minister and declared that Britain would leave the single market as well as the EU.

This marks a major ideological shift within the Conservative Party. The pursuit of free markets, promoted so zealously by Thatcher, has moved down the Tory agenda, in favour of nationalism, increased state control, reduced parliamentary scrutiny, and lower immigration, whatever the economic costs.

Forward together: the new-old Toryism

This shift is signalled by a remarkable passage in the 2017 Conservative general election manifesto:

“We do not believe in untrammelled free markets. We reject the cult of selfish individualism.”

This could be interpreted as a cynical attempt to attract some Labour voters. Probably, in part, it is. But there is much more to it than that. It shows how all the whingeing about “neoliberalism” is now outdated and much off the mark.

Crucially, the Tory Party was traditionally opposed to “untrammelled free markets” and it worried about the destructive and corrosive effects of individualism and greed.

As Karl Polanyi pointed out in his classic book on The Great Transformation, the first fighters for factory and employment legislation, to protect workers from the results of reckless industrialization in the 1830s and 1840s, were from the ranks of the church and the Tory Party:

“The Ten Hours Bill of 1847, which Karl Marx hailed as the first victory of socialism, was the work of enlightened reactionaries.”1

Benjamin Disraeli

Tories like Anthony Ashley-Cooper, the Seventh Earl of Shaftesbury, were great nineteenth-century social reformers. The Tory Prime Minister Benjamin Disraeli railed against selfish individualism, particularly in his novels. For Disraeli, British imperialism was more important than unalloyed individualism.

May has brought the Tory party back to its pre-Thatcher roots. But, less enlightened than Shaftesbury or Disraeli, she has little appetite for protective legislation or constitutional reform. Instead, she celebrates her own powers of leadership and seeks a mandate to concentrate power in her hands.

She has little enthusiasm for democracy either. If it were not for the heroic efforts of Gina Miller and the decision of the Supreme Court, the triggering of Article 50 – to start the process of leaving the European Union – would have been taken by the executive without a parliamentary vote.

May and her ministers propose in the Great Repeal Bill to further circumvent parliamentary scrutiny over the details of legislation that must replace adopted elements of EU law.

The 2017 Tory manifesto is a maypole for nationalism. “Britain” is one of its most-used words. It says that immigration will be brought down, while existing powers by the British state to read emails and monitor your activity on the web will be increased. She will create an Internet that is controlled by the state. May is developing the infrastructure of an authoritarian nationalist regime.

Bringing the state back in: Labour’s new-old economic nationalism

At least on the surface, there are dramatic differences with Labour’s manifesto, which, for example, contains more measures targeted at the poor and elderly. Labour also gives much more verbal emphasis to human rights and democracy.

But at the core of Labour’s 2017 manifesto is a strong dose of economic nationalism, with Labour’s greatest commitment to public ownership since the “suicide note” manifesto of 1983. There are plans to bring the railways, energy, water and the Royal Mail all back into public ownership.

The 2017 manifesto declares: “Many basic goods and services have been taken out of democratic control through privatization.” But there is little explanation of what “democratic control” would mean under public ownership.

How would it work? Would parliament take decisions on everything? In reality these proposals – whatever their other merits – would enlarge state bureaucracy: there is no explanation how they would extend democracy.

The words “control” or “controls” appear 32 times in the 2017 manifesto. There is insignificant explanation of how “controls” work. The Labour manifesto envisions a concentration of economic power in the hands of the state, notwithstanding its verbal commitment to regional and local, as well as national, public management.

While there are commendable measures to enhance and enlarge an autonomous sector of worker-owned enterprises, there is little recognition of the importance of having a viable and dynamic private sector as well.

Corbyn’s Labour: forward to the past

As May has brought the Tories back to the pre-Thatcher years, Corbyn has brought Labour back to its traditional roots, before the leadership of Tony Blair.

With his 1995 changes to Clause Four of the Labour Party Constitution, Blair brought in an explicit commitment to a dynamic private sector. Labour stood for an economy where “the enterprise of the market and the rigour of competition are joined with the forces of partnership and co-operation”. Corbyn has returned to the spirit of Labour pre-1995 constitution, even if he has not yet changed the wording.

Corbyn has proposed that Britain can be “better off” outside the EU. He argued that EU rules block the kind of state-heavy industrial policy that he favours. But EU countries such as France and Germany already have strong interventionist policies for industrial and infrastructural development. In truth, Corbyn favours repeated doses of statist socialism in one country.

With some Stalinist exceptions in his coterie, Corbyn and his followers are mostly sincere in their commitment to democracy and human rights. But what they do not understand is that their proposed statist concentration of economic power will undermine countervailing politico-economic forces that can help to keep the state leviathan in check.

Jeremy Corbyn and Hugo Chávez

These countervailing and separated powers are vital. Especially in times of hardship or crisis, there will be a temptation by some in power (at the local or national level) to abuse rights and undermine democracy. Every single historical case shows this result.

It has been illustrated clearly by the failed socialist experiments of the twentieth century. Today, in Venezuela, the failure of such socialist ventures is being played out before our eyes.

Attempts “to take control of the economy”, even with measures of decentralization and local power, have led to restrictions on press freedom, arbitrary detentions, abuses of human rights, and even famine.

Forward together: economic nationalists take the helm

Further doses of economic nationalism may be possible in a country as large as the United States. In 2015, exports from the USA amount to about 13 per cent of GDP. Hence economic nationalists in the USA can reduce trade without too much contraction of the economy. It may turn further inwards, cut imports and still survive a loss of exports.

But the UK has become a globally-orientated, open economy, exporting 28 per cent of its GDP in 2015. About 45 per cent of these exports go to the European Union.

By exiting the EU Single Market, and by walking away from EU trade deals with non-EU countries that benefit EU member states, Labour and the Tories would threaten the UK economy with a massive downturn. The British economy would fall off a cliff.

In this crisis, rightist economic nationalists will blame foreigners and immigrants, and leftist economic nationalists will blame the rich.

It will be “the few” – designated by their ethnicity or by their assets – who will get the blame. Their rights will be under threat, as so will the liberties of all of us. Whatever variety is chosen, economic nationalism could severely undermine the viability of democracy in the UK.

 

21 May 2017

Minor edits – 23, 28 May, 29 June

This book elaborates on some of the political issues raised in this blog:

Wrong Turnings: How the Left Got Lost

Published by University of Chicago Press in January 2018

 

 

Endnote

1. Polanyi was right about this and about several other things, but in other respects his analysis was flawed.

 

Bibliography

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Moore, Barrington, Jr (1966) Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (London: Allen Lane).

North, Douglass C., Wallis, John Joseph and Weingast, Barry R. (2009) Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge and New York: Cambridge University Press).

Polanyi, Karl (1944) The Great Transformation: The Political and Economic Origins of Our Time (New York: Rinehart). See esp. pp. 165-66.

 

Posted in Brexit, Common ownership, Democracy, Donald Trump, Immigration, Jeremy Corbyn, Labour Party, Left politics, Liberalism, Markets, Nationalization, Politics, Populism, Private enterprise, Property, Right politics, Tony Blair, Tony Blair, Uncategorized, Venezuela

May 8th, 2017 by geoffhodgson1946

  

 

Geoffrey M. Hodgson

 

This is in part a personal memoir – concerning my role in a minor episode in political history. More importantly, it has lessons concerning Labour’s ideological inertia – the difficulty of modernising the party and bringing it from the nineteenth to the twenty-first century.

Socialism and Labour’s Clause Four

Both Robert Owen and Karl Marx defined socialism as “the abolition of private property”. This kind of collectivist thinking was encapsulated in Clause Four, Part Four of the Labour Party Constitution when it was adopted in 1918:

“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.”

This provided for no exception: all production would be in common ownership and there would be no private sector. Although some Labour Party thinkers began to entertain the possibility of some private enterprise, many party members remained resolutely in support of widespread common ownership.

Clement Attlee

In 1937, eight years before he became Prime Minister, Clement Attlee approvingly quoted the words of Bertrand Russell: “Socialism means the common ownership of land and capital together with a democratic form of government. … It involves the abolition of all unearned wealth and of all private control over the means of livelihood of the workers.”

After 1945, the position of many leading Labour Party members began to shift. First the realities of gaining and holding on to power – as a majority party for the first time – dramatized the political and practical unfeasibility of abolishing all private enterprise. Some nationalization was achieved, but a large private sector remained.

In 1956 C. Anthony Crosland published The Future of Socialism. This sought a reconciliation with markets, private enterprise and a mixed economy. In 1959 the (West) German Social Democratic Party abandoned the goal of widespread common ownership. In the same year, Hugh Gaitskell tried to get the British Labour Party to follow this lead, but met stiff resistance. Clause Four remained intact.

Richard Toye noted that the Labour Party assumed widespread public ownership and failed to develop adequate policies concerning the private sector:

“Labour, until at least the 1950s, showed little interest in developing policies for the private sector. During the 1960s, the party demonstrated continuing ambiguity about whether or not competition was a good thing. This ambiguity continued at least until the 1980s.”

The Thatcher Revolution

There were Labour governments from 1964 to 1970 and from 1974 to 1979. But then Margaret Thatcher came to power.

After this defeat, Labour’s instinct was to turn to the left, in the belief that it could have held onto power if it had held to classical socialist principles. Michael Foot was elected as leader, and Dennis Healey narrowly defeated Tony Benn for the position of deputy leader.

Neil Kinnock

Despite a severe recession with millions unemployed, following the implementation of monetarist austerity policies, Labour suffered a massive defeat in the 1983 general election. Labour’s share of the vote fell below 28 per cent – the party’s lowest figure since 1918. Michael Foot resigned as leader and Neil Kinnock took his place.

Thatcher had boosted her popularity due the Falklands War. One of Thatcher’s most popular domestic policies was to promote the sale of council-owned housing to the tenants. Labour had opposed this policy. The 1983 defeat prompted a rethink, on this and other issues.

Tony Benn

For some of us, this rethink amounted to more than expedient doctrinal trimming. Encouraging home ownership was really a good idea: why should all property be owned by the rich? But while supporting home ownership, we argued that the government should also build more social housing and enlarge the stock available for rent by low-income families.

But these ideas met stiff resistance in the Labour Party ranks, and not simply from Trotskyist entryists such as Militant. The resistance from Tony Benn and his supporters was substantial and even more enduring. It was clear that old-fashioned socialist ideas still had a tenacious appeal for Labour’s membership.

The Labour Coordinating Committee

The Labour Coordinating Committee (LCC) became one of the primary modernising forces within Labour. Its leadership included Hilary Benn, Cherie Blair, Mike Gapes, Peter Hain, Harriet Harman and others of enduring fame. I was elected to its executive committee. We worked closely with Kinnock and members of his shadow cabinet, including Robin Cook.

I had written a book entitled The Democratic Economy where I argued that socialists should support a permanent private sector in the economy. The book was published by Penguin in 1984. Another influential work at the time was Alec Nove’s Economics of Feasible Socialism, which also argued for a substantial role for markets.

On 26 November 1983, at the Labour Coordinating Committee AGM in Birmingham, I proposed that Clause Four of the Labour Party constitution should be rewritten to include an acceptance of a private sector and a role for markets. But I was defeated over the idea that Clause Four should be rewritten. This was out of fear of antagonising the Benn wing. Instead, the LCC resolved that Clause Four should be “clarified”.

But a resolution on long-term aims, which I had helped to draft, was passed by a large majority. The resolution called for the Labour Party to draft a new statement of aims, upholding “that socialism involves extended democracy and real equality. Democracy under socialism is extended to industry and the community … and must involve a substantial decentralisation of power.”

Equality meant the “absence of discrimination on the basis of gender and race, universal freedom from poverty, and a widespread distribution of wealth and power, as well as formal equality under the law and universal suffrage.”

There was a commitment to “political pluralism” and to “economic pluralism” involving “a variety of forms of common ownership … and the toleration of a small private sector including self-employed workers and other private firms.” The economy must be dominated by mechanisms of “democratic planning … but also accommodating a market mechanism in some areas.”

There was also a “commitment to internationalism, disarmament and peace” and “a disengagement from the power blocs” of the West and East.

I think that today Jeremy Corbyn and his followers would accept much or all of this, at least as a temporary stopping-point on the road to full socialism. But in the 1980s there was strong hostility to these revisionist ideas from within Labour’s ranks at the time, including from Corbyn and Tony Benn.

Since then my own views have adjusted. See my Wrong Turnings book. But this blog is not primarily about me. It is about what has happened to the Labour Party and how difficult it is to change its DNA.

For a while, the LCC tried to keep the conversation going on the need to revise Labour’s aims. The Guardian newspaper reported the LCC conference with the headline: “Labour breaks taboo on ownership”.

The LCC held a conference in Liverpool in June 1984 on “The Socialist Vision”. But enthusiasm for this discussion fizzled out. Many leaders of the LCC wanted a political career, and they wished to widen their support on constituency selection committees.

By 1985 the LCC’s revisionist initiative had been kicked into the long grass. My efforts to change Clause Four had failed.

From Kinnock to Blair

But to their credit, Neil Kinnock and his deputy Roy Hattersley saw the need for Labour to modernise its aims. I advised them both for a while. Another election defeat in 1987 spurred a rethink. But by then I had become inactive in the Labour Party.

As Richard Toye has recorded, in 1988 Kinnock and Hattersley presented a new document on “Aims and Values” to Labour’s National Executive Committee. But “it was criticised by John Smith, Bryan Gould and Robin Cook as being too enthusiastic about the benefits of the market, and was watered down accordingly”.

Tony Blair

Clearly, even after a third election defeat there was still strong resistance, from both the “soft” and the “hard left”, to the idea of embracing markets and private property.

After the next election defeat in 1992, Kinnock stood down. He was replaced by John Smith, who died tragically from a heart attack. Then Tony Blair became leader, with a firm resolve to modernize the party. Four election defeats had made the majority of members more receptive to his ideas.

Blair’s Revision of Clause Four

In 1995, after 77 years, Clause Four was changed. Tony Blair successfully ended the Labour Party’s longstanding constitutional commitment to far-reaching common ownership. Tony Benn protested: “Labour’s heart is being cut out”. The new wording of “Clause IV: Aims and Values” began as follows:

“The Labour Party is a democratic socialist party. It believes that by the strength of our common endeavour we achieve more than we achieve alone, so as to create for each of us the means to realise our true potential and for all of us a community in which power, wealth and opportunity are in the hands of the many not the few; where the rights we enjoy reflect the duties we owe and where we live together freely, in a spirit of solidarity, tolerance and respect.”

The 1918 formulation did not use the word socialism – it had common ownership instead. Ironically, Blair introduced the term in 1995. But he attempted to change its meaning. He promoted “social-ism”, which now meant recognizing individuals as socially interdependent. It also signalled social justice, cohesion and equality of opportunity.

The new Clause Four continued, to make a significant statement in support of competiive markets and a private sector. Labour now stood for:

“A DYNAMIC ECONOMY, serving the public interest, in which the enterprise of the market and the rigour of competition are joined with the forces of partnership and co-operation to produce the wealth the nation needs and the opportunity for all to work and prosper with a thriving private sector and high-quality public services …”

The text went on to cover “a just society”, “an open democracy”, “a healthy environment” and “defence and security”.

John A Hobson

Labour’s new aims and values were indistinguishable from the earlier views of radical social liberals, such as T. H. Green, J. A. Hobson and David Lloyd George. And with its endorsement of “the rigour of competition” and “a thriving private sector” it was a hundred miles away from the collectivism of Robert Owen and other original socialists.

Instead of tackling the problem of its old collectivist DNA more directly, Blair tried to change the meaning of socialism and even rewrote parts of its own history. It is unsurprising that the old socialist DNA survived. It remained viable, partly because Labour still declared itself as socialist. Blair made radical changes but also gave succour to the traditional socialist wing of the party.

Blair’s popularity within the party had waned even before his decision in 2003 to support George W. Bush’s Iraq War. Much of this disenchantment was due to his abandonment of wholesale common ownership.

Blair had failed to develop a fully-fledged alternative vision within Labour to replace old-fashioned common ownership. He had made Labour implicitly embrace liberalism in doctrine. But this was unspoken, and masked by the explicit insertion of socialism in its aims. This inadvertently played into the hands of the party’s enduring, backward-looking left.

Labour’s Love Lost

Just as Labour had shifted to the left after losing power in 1979, after its 2010 defeat it shifted slightly leftwards under Ed Miliband. But the new leader had no clear alternative to the economics of austerity. So after another defeat in 2015. the party membership took a massive lunge to the left. It elected the Bennite, retro-Marxist, perennial protestor, Jeremy Corbyn.

But while old ideas within Labour had survived, the structure of the party and its electoral base had changed enormously in the period from 1983 to 2015. Kinnock had relied on the moderating force of the trade unions, to fight the hard left and move the party toward electability. But by 2015 the unions had been gravely weakened and several had moved toward the hard left.

In 1983, both the affiliated unions and the Labour MPs had a major role in the election of any new Labour leader. But by 2015 the power was almost entirely in the hands of the Labour Party membership, and the other moderating forces were much diminished.

Labour’s history shows how difficult it has been to change Labour’s old-fashioned socialist DNA. Those that put their faith in a revival of moderation within must take into account the near-collapse of those internal forces that brought the party back to sanity in 1951-1964 and in 1979-1997.

In 1983 there was still a strong, traditional, tribal, Labour vote, part of it based on surviving industries such as coal and steel. By 2015 the working class was much more fragmented, with skilled, aspirational cohorts at one extreme, and uneducated, demoralized, welfare dependents at the other.

The old tribalism was challenged by UKIP and by a revived working class Conservatism, playing the nationalist card. Labour’s potential electoral base has been transformed beyond recognition. The division of labour has become profoundly political, as well as enduringly economic.

Today, there seems little hope for a party that calls itself “Labour”, just as there is no future for a party that retains the word “socialism” or the goal of widespread public ownership. The socialist experiments of the twentieth century testify to their failure. Labour, in short, is an anachronism.

 

8 May 2017

This book elaborates on some of the political issues raised in this blog:

Wrong Turnings: How the Left Got Lost

Published by University of Chicago Press in January 2018

References

Attlee, Clement R. (1937) The Labour Party in Perspective (London: Gollancz).

Blair, Tony (1994) Socialism, Fabian Pamphlet 565 (London: Fabian Society).

Clarke, Peter (1978) Liberals and Social Democrats (Cambridge: Cambridge University Press).

Hodgson, Geoffrey M. (1984) The Democratic Economy: A New Look at Planning, Markets and Power (Harmondsworth: Penguin).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Nove, Alexander (1983) The Economics of Feasible Socialism (London: George Allen and Unwin).

Toye, Richard (2004) ‘The Smallest Party in History’? New Labour in Historical Perspective’, Labour History Review, 69(1), April, pp. 83-104.

 

Posted in Common ownership, Democracy, Jeremy Corbyn, Karl Marx, Labour Party, Left politics, Liberalism, Markets, Nationalization, Politics, Private enterprise, Property, Robert Owen, Socialism, Tony Benn, Tony Blair, Tony Blair

April 28th, 2017 by geoffhodgson1946

 

Geoffrey M. Hodgson

 

In the May 2017 run-off between Emmanuel Macron and Marine Le Pen, the defeated first-round candidate Jean-Luc Mélenchon refused to endorse the liberal Macron over the neo-fascist Le Pen. Many of Mélenchon’s leftist supporters did the same, arguing positively for abstention.

Jean-Luc Mélenchon

The abstainers argued widely that Macron is a “neoliberal” and the voters faced a choice between the dictatorship of the market or a fascist president.

Some went further: Marron was a “neoliberal fascist” and there was no reason to favour one “fascist” over the other.

This failure to perceive any advantage of a pro-market liberal over the racist and neo-fascist authoritarian nationalism of Le Pen’s National Front, is a symptom of a deep ideological sickness that has endured for decades on the French Left.

The political degeneration of the French Left, which even exceeds that of its Corbynista counterpart in Britain, would be the subject of another blog. My purpose here is to focus on the abuse of the term “neoliberalism” and how this corrupted and overly-widened word has poisoned political discourse.

I also wish to show how some “neoliberals”, who do not include Macron, and whom I shall attempt to characterise more precisely than the n-word will allow, do indeed have connections with genuine fascism.

After the erosion of credibility in classical socialism, particularly after its failed experiments in the twentieth century, it must be understood that our sole alternative to the rising nationalisms of Le Pen, Trump, Putin, Xi, Erdoğan and others is a modern and democratic version of liberalism. Whatever his flaws, Macron fits into the latter category.

The degeneration of the “neoliberalism” label

The widespread use of the word “neoliberal” to describe anyone accepting a significant role for private property or markets has made the word so imprecise that it has become useless and beyond reform.

Even the foremost historians of “the neoliberal project” have acknowledged the problem. Philip Mirowski and Dieter Plehwe wrote:

“We can sympathize with the impatience for those who use the term ‘neoliberalism’ as a blanket swearword for everything they despise, or a brainless synonym for modern capitalism.”

Colin Talbot pointed out that “neoliberalism” has become “a term of abuse” to be used against “any type of pro-market reform or political position that recognizes markets may – in the right circumstances – be a good thing”. Consequently, everyone “from moderate social democrats to the most lurid free-marketeers gets lumped together under a convenient ‘neoliberal’ label.”

In a superb survey of its usage since the 1980s, Rajesh Venugopal concluded that “neoliberalism has become a deeply problematic and incoherent term that has multiple and contradictory meanings, and thus has diminished analytical value.”

Some may wish to retain the “neoliberal” label, to apply it to those free marketeers who attempt to shrink radically the size of the state, to privatise anything that walks, advocate economic austerity and deregulate the financial sector. This would certainly separate neoliberalism from the genuine liberalism of John A. Hobson, William Beveridge or John Maynard Keynes.

But I think that things are too far gone to allow any useful redefinition of the “neoliberal” label to succeed. It is perhaps best abandoned. Instead I wish to focus on a particular strain of so-called “neoliberalism”. This allows us to concentrate on some key issues.

Ludwig von Mises and fascism

Ludwig von Mises (1881-1973) and Friedrich Hayek (1899-1992) were key figures in the so-called Austrian school of economics. Among their major achievements were their contributions to the “socialist calculation debate” where they showed the practical and epistemic limitations of any system of national planning based on comprehensive public ownership.

Ludwig von Mises

While sharing with liberals the support for a market economy based on private ownership, von Mises and Hayek departed from both classical liberalism (of John Stuart Mill, for example) and from twentieth-century liberalism (of John A. Hobson, John Dewey and John Maynard Keynes, for example), in some important respects.

In a book originally published in 1927, Ludwig von Mises praised fascism as “an emergency makeshift” that “has, for the moment, saved European civilization”. This statement cannot be excused, despite the facts that it was in a book that was otherwise devoted to the promotion of classical liberal values, and that von Mises was a Jew who eventually had to flee the Nazis.

From 1932 to 1934 von Mises continued as an economic adviser in Austria, even to the “Austro-fascist” or “clerical fascist” government of Chancellor Engelbert Dollfuss, who assumed dictatorial powers, closed down parliament, smashed the trade unions, and banned several political parties. This does not mean that von Mises was a fascist, but other economists would have drawn the line at advising them.

Friedrich Hayek and the dictatorship of Augusto Pinochet

Friedrich Hayek

The idea that temporary dictatorships, even if murderous, might sometimes be necessary rubbed off onto von Mises’ student, Friedrich Hayek. Hayek argued that democracy, while desirable, can be temporarily dispensable, particularly in defence of private property.

Augusto Pinochet may have saved private property rights in Chile. But he imposed a vicious dictatorship that tortured an estimated thirty thousand civilians and murdered over three thousand.

The right to life, and freedom from torture, are existentially more basic, and hence even more important, than the right to property. Hayek visited Pinochet’s Chile and he failed to condemn these atrocious abuses of human rights. Hayek’s silence over abuses of basic human rights cannot be excused by his age: he was still publishing major books in the 1970s.

The twentieth century teaches us that Marxist socialism crushes human rights and leads to dictatorship. While opposing Communism, von Mises and Hayek (temporarily) tolerated some dictatorships and their removal of some basic human rights, including the rights of habeas corpus and to live without torture.

While earlier liberals had emphasized human rights, private property rights and democracy, in their reaction against socialism, von Mises and Hayek seemed to elevate private property rights over everything else. But private property rights require the protection of all actual or potential owners from torture or extermination. Basic human rights and democracy are vital, as well as the right to private property.

The Mont Pèlerin Society

The ideas of Mises and Hayek were prominent in the Mont Pèlerin Society, founded in Switzerland in 1947. The society accommodated a variety of views, including mainstream liberals plus some members who had collaborated with Nazism in the 1933-1945 period.

The Mont Pèlerin Society was dominated by economists. No less than eight winners of the Nobel Prize in economics have been its members.

The influence of economists is evident in the draft statement of aims of the Society. It opened with these words:

“Individual freedom can be preserved only in a society in which an effective competitive market is the main agency for the direction of economic activity. Only the decentralization of control through private property in the means of production can prevent those concentrations of power which threaten individual freedom.”

Agoraphobics (i.e. fearers of markets) such as George Monbiot and Naomi Klein will probably disagree, but there is a vital truth in this quotation.

The trouble is that it is also a half-truth. Private property and markets are necessary but insufficient to guarantee liberty, as countless market-based totalitarian regimes, from Putin’s Russia to Pinochet’s Chile, will testify. The Mont Pèlerin statement should have made this clear. Instead it gave licence to a view that only private property and markets matter.

Margaret Thatcher and Augusto Pinochet

Hence Mont Pèlerin fans, including UK Prime Minister Margaret Thatcher and US President Ronald Reagan, supported dictatorships and opposed sanctions against South African Apartheid.

In 1999, Thatcher even thanked the former dictator Pinochet for “bringing democracy to Chile”. Clearly, while addressing someone who in 1973 overthrew a democratically-elected government, she invested the term “democracy” with an esoteric, Thatcherite meaning. In truth, Pinochet was a torturer and an assassin.

Vital differences between liberalism and Mont Pèlerin neoliberalism

Even with this brief account we can see some wide, clear water between mainstream liberals such as Macron and Mont Pèlerin “neoliberals” such as Hayek. Unlike those “neoliberals”, modern liberals uphold the following five points:

  1. While markets and private property are essential, they are not sufficient to guarantee human rights and liberty. Vigilance and debate, within a democratic system with a free press, are necessary as well.

  2. Dictatorships, would-be dictators and all abuses of human rights must all be condemned, in market-based as well as in centrally-planned societies.

  3. The capitalist system contains forces that, if unchecked, will lead to greater inequalities of wealth and income. This problem cannot be remedied by simply making markets more competitive. The solution must involve some redistributive taxation and some economic intervention by the state.

  4. Because the owners of capital and labour do not, and cannot, meet on a level playing field, some legally-limited trade-union activity is warranted, along with reasonable employment rights and other protections.1

  5. While early liberalism was born in an era of small-scale producers, modern industrial capitalism bestows an economic (alongside a moral) need for organized mass education, social security and healthcare, along with regulations and bureaucracies to ensure that markets worked effectively and consumers are protected.

If these liberal principles were understood, along with Macron’s support for them, abstention in the May 2017 French presidential elections would be impossible.

 

28 April 2017

Minor edits 1, 4 May – thanks to Pedra Pereira Hors.

 

My forthcoming book elaborates on some of the political issues raised in this blog:

Wrong Turnings: How the Left Got Lost

To be published by University of Chicago Press in December 2017

 

 

Endnote

  1. Note that Macron (like his Socialist Party predecessor François Hollande) wants to reform the blundering and counter-productive French system of employment law, rather than to abolish all employment rights, which must at least conform to standards within the European Union.

 

References

Caldwell, Bruce J. and Montes, Leonidas (2015) ‘Friedrich Hayek and his Visits to Chile’, Review of Austrian Economics, 28(3), pp. 261-309.

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2016) ‘Some Limitations of the Socialist Calculation Debate’, Schmollers Jarhbuch, 136, pp. 1-26.

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Mirowski, Philip and Plehwe, Dieter (eds) (2015) The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective, paperback edition (Cambridge MA: Harvard University Press). (Quote from p. xvii.)

Mises, Ludwig von (1985) Liberalism in the Classic Tradition. Translated by Ralph Raico from the German edition of 1927 (Irvington, NY: Foundation for Economic Education). (See pages 47 and 51.)

Venugopal, Rajesh (2015) ‘Neoliberalism as a Concept’, Economy and Society, 44(2), pp. 165-87. http://www.tandfonline.com/doi/abs/10.1080/03085147.2015.1013356.

Posted in Democracy, George Monbiot, Karl Marx, Left politics, Liberalism, Ludwig von Mises, Markets, Naomi Klein, Politics, Private enterprise, Property, Right politics, Socialism