The epoch that started in 2008 is defined by a single worry. Equally defining is the visible form that this angst takes. Millions of people in the West are now worried about the relegation of their life to a subsistence one. There are crowds of people on the streets of big cities and they are not just marching in demonstration, they are occupying public spaces, Wall Street in NYC, Puerta del Sol in Madrid, and Syntagma in Athens. Of course there is always symbolism involved in all forms of public protest. Besides the obvious symbolic value of a Stock Exchange or a Parliament, the act of occupying signifies both a claim to the symbolic interactions of a physical building and the staying severity of the sentiment that drove the people there in the first place. As any unemployed person can tell you the very thought that you don't have a job recurs excruciatingly throughout any given day. Not all occupants are unemployed just as they all come from different walks of life and diverse ideological and social backgrounds. One can describe them as people personally affected by the crisis who feel disenfranchized and deprived of any social mobility prospects. While it is true that there are country specific circumstances that spawned these movements, one can identify a common thread: that our systems create inequality, unfairness and social misery. In their rhetoric they essentially negate political decisions made in the recent past as erroneous and taken in absentia. Their presence outside buildings associated with power and wealth essentially reclaims their stake in public policy and amplifies their call for the end of torpor. Despite their preferred forms of action and reprobation of free-market capitalism these are hardly left-wing movements as their constitution and self-definition can tell you. They certainly are progressive though and in this sense they are aligned with modern thinking in mainstream politics and economics.
I like to follow a blog by journalist John Cassidy on the New Yorker site because he usually offers insightful opinions on matters of global finance. In this post however Cassidy reports that when asked "whether the financial crisis and Great Recession produced any big new economic ideas [...] my immediate response was that it hasn't, or, if it has, I wasn't aware of them". He goes on to list some that he considers "rediscovered". I beg to differ. I think that the crisis has caused one big idea in current economic and political thinking and this is that the neoliberal model of free markets has failed dramatically -- its down mainly caused by the fact that it produced great inequality.
I have recently interviewed two thinkers from traditionally opposing schools of thought who converge in their critique of neoliberalism and I consider them representative of a new paradigm that will in the following years crystallize in mainstream political practice .
Dr. Phillip Blond does not tolerate liberalism, he believes that it creates atomised relativism in society and state absolutism. He does not have a problem with the term radical though; he describes himself as a Red Tory, coming from a tradition of communitarian civic conservatism. He has studied Philosophy and Theology and is keen on linking political thinking with questions of morality. In search of the ideological roots of the current ills of our society he finds culprit the social liberalism of the 60s that resulted in the economic neoliberalism of Thatcher and Reagan. In his seminal article in Prospect magazine he says that "[the left] has destroyed both middle and working class morality; in the name of permissiveness, it commodified sex and the body [and] its true legacy has been the dystopia of divided families, unparented children and the lazy moral relativism of the liberal professional elite. In this sense, the left was right-wing years before the right, and it created the conditions for universal self-interest under Thatcher. The current political consensus is left-liberal in culture and right-liberal in economics. And this is precisely the wrong place to be."
As director of ResPublica, a London think tank with great influence on the policies of the British Conservative Party, he was instrumental in the development of the Big Society project that is now part of Mr Cameron's legislative programme. This is the idea of empowering local communities, encouraging people to start up local businesses, and essentially transferring powers from the state to local enterprises controlled by the people. "The right wing recognizes that, in the name of free markets, we have produced massive concentration of wealth and power that prevents ordinary people from getting ahead" he says. He views the crisis as evidence of the failure of the neoliberal model. "This liberal settlement has stripped away economic wealth and power from the majority of the population that relies just on wages and not ownership. Monopolies and oligopolies essentially own the wealth and have become rent-seeking organizations. If we are going to resist this we are going to need radical anti-monopoly laws to break open the markets so ordinary people can actually own and have a return above and beyond wages. Otherwise we are re-creating serfdom and the reconstitution of lordship, only now these lords are transnational. Therefore we need recapitalization, not of banks, but of people. We need to make people, who currently own just their own labour, own something they can trade and enter the markets with, to improve their own lives and that of their families". I ask him about his views on the Occupy Wall Street movement because he has recently returned from a tour in the US. He tells me that he considers it extreme but finds its criticism of free-market accurate and believes that this idea will eventually find its mainstream expression "because they talk about genuine problems".
Dr. Ha-Joon Chang is an economist at the University of Cambridge. He specializes in development economics and is the author of the popular economics book "23 things they don't tell you about capitalism". We talk about inequality which he considers both a cause and a result of the financial crisis. "Many people argue, and I agree, that increasing inequality, especially in countries like the US and the UK, played an important role in the making of the 2008 financial crisis. With rising inequality, many people were motivated to 'join in the boom' by borrowing - partly to maintain their consumption but also to move upward by making money through investment in housing - only to find later that they are landed with unsustainable debts". Chang acknowledges his work is grounded on welfare economics and market failure theories; he cites Joseph Stieglitz, Amartya Sen and William Baumol among his influences. His fundamental thesis is that there is no such thing as a free market. "Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. It is impossible to objectively define how free a market is. This is a political definition. Government is always involved and those free marketers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined 'free market' is the first step towards understanding capitalism" he states in the first chapter of his book.
Chang observes that in the past, Britain, U.S., and Germany, all became leading industrial powers by various forms of protectionism. "Most of the rich countries did not use [free trade] policies when they were developing countries themselves, while these policies have slowed down growth and increased income inequality in the developing countries the last three decades. Few countries have become rich through free-trade, free-market policies and few ever will" he writes. With regards to the laissez faire economics Chang claims that fair distribution of the wealth cannot be left to the markets. "Despite the usual dichotomy of "growth-enhancing pro-rich policy" and "growth-reducing pro-poor policy," pro-rich policies have failed to accelerate growth in the last three decades. So the first step in the argument -- that is, the view that giving a bigger slice of the pie to the rich will make the pie bigger -- does not hold. The second part of the argument -- the view that greater wealth created at the top will eventually trickle down to the poor -- does not work either. Trickle down does happen, but usually its impact is meager if we leave it to the market".
Disaster was averted in the crisis of 2008 in the US and during the current debt crisis in Europe after the intervention of governments in the market through their central banking systems. Chang clarifies that his is a critique directed only to free-market capitalism and not capitalism in general. He accepts that the pursuit of profit is the driving motive that fuels our economy and that the market is an efficient tool only if it is controlled. In the final chapter of his book he sketches a brief proposal for the reconstruction of the global economy and among others he suggests that material wealth should be treated seriously but it cannot our sole objective. "Organizations should be designed to reward trust, solidarity, honesty and collaboration between their members. The economic system should be restructured to minimize the influence of short-term investors, so that companies can pursue targets beyond short-term profits maximization. [...] This is not only a moral argument. It is an appeal to enlightened utilitarianism. Allowing short-term speculation dominate everything we risk total destruction of our system [...]".
Chang and Blond are about the same age, they both live in the UK, and their work came to prominence in the pregnant conditions post 2008. It is important to notice that they arrive at the same conclusions from different starting points. After all Blond is a political philosopher who aims to influence conservatives and Chang is an economist close to social democracy. They disagree on the role of the state as they come from opposing schools of thought yet they both ascertain the total debunking of the neoliberal model of markets. In the years to come I expect we will see less and less of free-market rhetoric in winning party platforms as the middle class realizes that it does not favour its aspirations. In the UK there is already public intervention of the academia in public policy and Dr. Chang is first among the 100 economists who signed a letter to George Osborne, Chancellor of the Exchequer, calling for a "Plan B for jobs, fairness and sustainability" . Their proposals, gathered in a manifesto entitled "Plan B: a good economy for a good society", launched in London on Monday 31st October. I cannot guess what a proper collective name for these new ideas could be. I understand that they revolve around the notion that financial initiatives by businesses and individuals can no longer aim to maximize personal gain and pay ever increasing dividends to stock holders but rather create public value. New pragmatism comes to mind but then it too feels worn out.