How to avoid the next monetarist consensus IV

Celestial Monetarism

It has long been a dream of leftists that the market might one day be eradicated. Not because state control of production is itself desirable, rather that with the right state planning we might reach a point in history where self-interest evaporates from productive relations and renders both state and market unnecessary. Rather than struggling to outdo each other materially we would employ our skills to sustain and nurture each other. Selfless supply would service legitimate demand: From each according to their ability, to each according to their need.

For the monetarist however this is nothing but a seductive fantasy, a hollow but dangerous sound-bite: The chaos and uncertainty of unfettered supply and demand is not an impediment to social freedom but its core. While harsh and painful, the market is the bedrock of wealth, innovation and liberty.

Of course the left don’t hold the monopoly on idealism. We could similarly distil pure monetarism down to something like:

From each according to their desires, to each according to their desires.

As with the previous adage this has an appealing purity. Demand becomes nothing more than the desire to own something; supply becomes nothing more than the desire to meet those demands. Nothing unwanted gets made (well, not for long anyway) and given a large enough demand (to make it worthwhile for the producer) everything feasible is available for purchase, state of the art, and at the best possible price.

As with collectivist nirvana, the belief is that given the right relations of production the state would eventually disappear, or at least shrink out of all recognition. Get production right and we won’t need unemployment benefit or income tax or the NHS, or so many policemen to bash people over the head for not wanting to join in. Society would be more attuned to individual human needs and wouldn’t require the constant tinkering and bullying of a central overseer.

Feasibility is another matter. Clearly this does not describe the current order. Like collectivist nirvana, monetarist nirvana would have to be actively engineered over a period of time. It would require a wholesale transformation of human nature (or the release of the true human nature currently trapped in the social-democratic lie, if you prefer.)

Interestingly, while collective idealism suggests that economic equality would require minimal policing, monetarist idealism makes the same claim for economic inequality. The supposition is that the benefits provided by the unfettered market would be enough to secure the compliance of those who fare less well: No income tax would mean more pay for the lowest earners. No sales tax would mean cheaper living costs. No welfare would mean everyone would have to work, so less devilry from idle hands. Instead, a fully productive society consisting of a multitude of social strata – with all necessary incentives and human fulfilment provided by the possibility of social mobility.

Terrestrial Monetarism

For all its purity this vision does not have evidence on its side. There is nothing to suggest that the unfettered free market can produce a free, just, or stable society. While it has long been is a mantra of the right that “socialism is all very nice on paper but it doesn't work in practice”, we now have three decades of accumulated proof that while Monetarism is all very horrible on paper, it doesn’t work in practice either.

The monetarist promise of social and industrial peace is a fiction. As long as some people live by wages the same tensions will remain – pay, conditions, workloads, hours, leave. Working people will always have good reason to combine and campaign for a decent living. It’s class-struggle as usual, and we can expect the usual response from the state.

The monetarist response of course is to ‘limit’ the scope of the idealism. Withering the state is reinterpreted as the more modest withering the welfare state. Meanwhile coercive state apparatus mushrooms. The invisible hand is reliably accompanied by the iron fist. Rather than becoming an anachronism, ministries of surveillance, incarceration, torture and murder are the hallmark of the 'free'-market economy.

This violence is usually excused as a temporary phase, a necessary evil during the transition to the peaceful stateless society – a Dictatorship of the Bourgeoisie to lead us to free-market nirvana. Interestingly, as with the Dictatorship of the Proletariat, it seems that the only way to secure an end to state coercion is through increased state coercion: the only way to rid ourselves of the police and army is through more police and army.

In truth these means are the end. For many free-market advocates violence is a regrettable but necessary means of maintaining the natural human hierarchy. Rather than a crime, many see the juxtaposition of opulence and grinding poverty as the natural order of things, a reflection of differing human skills and capabilities. Consequently those whose poor aptitude leads them to be materially poor are likely to thieve and connive and form unions and labour movements, and so skew this natural hierarchy. Consequently, a powerful coercive state apparatus is a justifiable evil, a regrettable waste of resources, but necessary to keep the dogs at bay and maintain human freedom in other spheres.

If profound inequality is the natural state of being, so be it. For many free-market advocates the natural order of humanity seems to be a super-rich elite, a modest-sized middle class, and a mass of dirt-poor. And, of course, a formidable ministry of violence to keep everything from boiling over. It sounds harsh, and indeed it is harsh, but it’s nothing new. Throughout human history the wealthy have been dreaming-up justifications for inequality, and justifications for using violence to maintain their status. It’s just the latest excuse for business as usual.

What is to be done?

The most important weapon in the fight against the next monetarist consensus will be honesty. The honest truth is that unfettered capitalism does not lead to wealth and freedom. It only further entrenches inequality and powerlessness. Equally however, the left need to be honest about the problems that arise from collective organisation of economics.

The first truth is not something you would deduce from the corporate friendly media. The economic ‘miracles’ reported in Time and Newsweek were just miraculous accumulations of profit for global corporations, and came at terrible cost to domestic populations. From Chile to Russia to Poland to South Africa the story was the same. A monetarist controlled World Bank and IMF blackmailed desperate countries into privatising their economic and social infrastructure; the booty was divided up between multinationals, Mafiosi, and the stooge governments of the host countries. (For the awful details see Naomi Klein’s Shock Doctrine.)

It’s been a funny game when you pan out a little. Monetarists campaigned to convince every country in the world that it would face ruin if it didn’t embrace the free-market. Thatcher insisted that if we didn’t slash state spending at home we would be out-priced in the global market. And indeed, as long as we were funding good health and welfare how could we possibly complete with the unit cost of production in Taiwan, Malaysia, Mexico and the new China?

The darkly amusing thing is, the reason those other countries had such high rates of productivity was because they had been bombed and bullied out of their own hopes of decent welfare by the very same ideological clique imposing their plans at home. Reagan and Thatcher at one and the same time set out to smash welfare domestically and in the developing world.

Clearly for monetarists the fear is not that any one country that allows welfare will make itself uncompetitive, but that if the whole world adopts minimal welfare standards the general level of exploitation will fall, that is, corporations will make less money out of us as a species. Clearly the national interest of neither first nor third world country is being served by monetarism; it is a third entity, the global corporation that benefits.

Monetarists have contrived to keep the whole world desperate, every nation, business and worker in a state of perpetual fear of the other, for the sake of corporate profit. But we can find hope in this policy of despair. If destroying welfare in one county helps to destroy it elsewhere, we must conclude the opposite is also true: Any country that refuses to treat its population as corporate fodder is cutting slack for others to do the same. The greatest threat to monetarism is the threat of a good example.

Free-market thinkers are certainly aware of this fact, hence the desperate measures taken against any country that falls out of line. Only by insuring that most workers get paid peanuts can they ensure that most workers get paid peanuts.

It’s a counter intuitive after decades of being set at each other’s throats, but it is nonetheless the case. Refusing to participate in the monetarist game is the best way to help other countries to refuse. Every victory for a particular labour movement is a general victory for the entire labour movement. The best way to fight for a better deal globally is by fighting for lower productivity globally, and higher public spending globally.

The second point about honesty relates to the credibility of this fight. One of the most powerful weapons in the monetarist arsenal is the perceived idealism of the left. Just as the ideal total market economy has been discredited, the same must be admitted for collectivist idealism. Wilfully naive monetarism is unlikely to be defeated by an equally naive belief in the collective.

If the left have nothing to offer in place of monetarism but equally dogmatic demands for wholesale common ownership then the prospects for change seem bleak. While it is easy to condemn the capitalism of Haliburton and Walmart, there is little to be gained by lumping all forms of private enterprise in the same bin. A credible political alternative will require careful consideration rather than blanket condemnation. It will involve picking between good and bad examples of market forces.

Consequently we can also forget about setting anything in stone. There will be no end of history, left or right. Progressives will, as ever, push for greater collective action and collective ownership. But we can forget about finding a permanent solution to economics.

It shouldn't really come as a surprise. Economics is such a complex network of interests and desires. There are managers, owners, workers, unions, competitors, products, resources and the environment to consider, and that's before you even get to the desires and ambitions of politician and party. You can see the temptations of idealism – the idea that if you could only lop-off one or more of these heads you might create something stable. But like the hydra, they just keep growing back.

The end of The End of History

Both monetarist and collectivist idealists strived for a pure application of their beliefs. Each dreamed of a world washed clean of the ideology of the other. Accordingly any concession was seen as deadly contamination, the thin end of the wedge, the first steps on the road to defeat. Nothing less than the pure market economy, or the pure market-less economy would do.

Reality, however, flatly refused to conform to the ideal. However harshly market forces were imposed people still combined to get a better deal. They still struggled and protested and campaigned for social justice. Similarly, as fast as the state tried to smother the free-market, the black market thrived. People persisted in selling their goods and services to each other at the going rate, regardless whether the state approved the deal. The market can never really be eradicated, it just moves underground.

The oppressive nature of Chilean-style capitalism and Soviet-style communism can be seen as a response to this refusal. For all the efforts of the state, Soviets still conceived of themselves as individuals, with individual motives and desires. Likewise, Chileans still conceived of themselves as comrades, compassionate social beings with a stake in each others lives. The only means of maintaining the pretence of purity was fear and violence.

Both monetarist and collectivist absolutisms are doomed to failure because both deny the rational basis of the other. The inconvenient truth is that human allegiance is a complex and unpredictable thing. There are legitimate social desires and legitimate individual desires. There are times when we want to co-operate and times when we want to act as individuals. Some of us may veer more in one direction than the other, but we each posses both impulses. The fact that certain people find one or other of these impulses abhorrent has no bearing on the matter.

Without massive oppression, it seems the mixed economy is the only game in town. The only set-up that stands a chance of sustaining democracy is one that tolerates the desires of both the individual and the collective. This is not to say that massive oppression cannot also occur in a mixed economy, only that it is bound to occur in a society that aims to stamp out either collective or individual will.

Of course we will argue forever about the composition of the mix – perhaps that’s what politics is – deciding what we do and don't want to co-operate over? But we can forget about dispensing with the mix.

How to avoid the next monetarist consensus III

Each of the following responses is rooted in the same observation: There are more important things in the world than economics. Even if everything depends upon economics, it remains the means not the end goal. Even the most hard-bitten monetarist would not argue that the purpose of individual freedom is to maintain the free-market (well, not publicly anyway).

The Limits of Lassez-faire

This in itself places a clear limit on lassez-faire. The market cannot be allowed such freedom that it infringes more basic freedoms. If the cost of maintaining a free-market is fascism, or economic meltdown, or ecological breakdown and the termination of the species, we can safely say that the price is too high.

While there might be sound arguments for ‘letting do’ in some spheres of the economy in many other areas intervention remains essential. Of course it will often be difficult to call, and hellishly difficult to implement. It will never be easy to decide when a company has become too big or powerful to be socially tolerable, and it takes a suicidally brave administration to challenge the corporate beast. Even modest regulation of the worst abusers will be portrayed as arbitrary punishment of ‘wealth creators’. All the power of corporate propaganda and military might will be levelled at those who dare to try.

But such resistance cannot be defended on the grounds of freedom. If the choice is democracy or corporate serfdom, sustainability or ecological breakdown, then the free-market must take second place. If non-intervention is enslaving us or killing us we must intervene, and damn the market.


Productivity

Similarly, we might ask, why do we work? Surely not for the sake of work itself. While one might believe that wealth and liberty are rooted in high rates of productivity, it remains the means not the end. Even Milton Friedman wouldn’t argue that the purpose of human existence is to produce cheap goods, only that the end goals – wealth and liberty – are best served by high productivity.

Consequently, if the high rates of productivity and profit supposedly obtained in a free-market stubbornly refuse to trickle down to the masses then here too the monetarist appeal evaporates. If high productivity just means more wealth and power for the rich then the free-market cannot be sold as the protector of democracy and freedom.

And indeed, experience bears this out. For all the propaganda, the hallmark of a free-market economy is widespread poverty and lack of social mobility. If you are born in the gutter beneath a monetarist sky then odds-on you will die there too. Social democracies with workers-rights and good welfare provision have a far better track-record for nurturing talent and allowing the materially impoverished to advance.

The reasons are obvious enough, once we challenge the oversimplified economic picture painted by monetarists. For one thing, while higher productivity could translate to higher wages there is no evidence to believe it does. The last thing capitalists tend to do with excess profits is distribute them amongst staff.

Less obviously, while it is true that any benefits to workers amount to lost productivity in the short term, an economy is not a closed loop. While taxes certainly do increase unit costs, if those taxes are spent wisely they have the potential to free-up productivity elsewhere. Education, urban renewal, affordable public transport – all have the potential to enhance productivity by releasing wasted resources.

Of course this is an anathema to the free market purists: By definition, if no capitalist is interested in investing in something then it can’t be worth investing in – we must be throwing money away. But again, experience does not bear this out. Indeed history shows that if the collective doesn’t invest responsibly then nothing will. Left to their own devices capitalists tend to see no further than short-term profit. Health, education, leisure, sustainability and economic diversity are their last concern. Everything the mass of us benefit from has had to be throttled out of capitalism by collective action.

Quality of What?

When is it wise to assist a struggling enterprise? Awful as bankruptcy and redundancy are, no responsible government can bail-out a failing business indefinitely. The mere existence of a particular product or company or workforce cannot serve as an automatic justification for its continued existence. Sometimes, the monetarist cries of ‘propping-up dead wood!’ and ‘throwing good money after bad!’ are a fair assessment of intervention.

To paraphrase Marx, production cannot boil down to, from each according to existing infrastructure, to anyone who’ll have it. However cherished, sometimes businesses need to fail. However painful, sometimes people have to be laid-off. How else could the quality of goods and services be maintained?

Much the same, one can see the potential threat to quality posed by state monopoly. In terms of manufactured goods, particularly, it is hard to deny the advantages of a multitude of private producers competing to cater to a multitude of tastes, rather than the state producing one or two items to fit all. With the best of intentions, no government really knows what people want. Better that demand brings products into being, and lack of demand kills them off.

Nevertheless these arguments have their limits, and any attempt to morph them onto the whole economy is quite groundless. The fact of the matter is that some goods and services actually function better when state-owned or state-subsidised. The privatisation of rail and demutualisation of building societies have been unmitigated disasters. The deregulation of mortgage provision has led to global financial collapse. Are any other examples necessary?

And even where private competition does show merit we must remember that there are more important things than state-of-the art products. The human desire to make things and own things may be limitless, but the opportunity to do so is not. We have lost the luxury of this delusion. The sky is not the limit, the limit is terrestrial, and far more humble. Natural resources are not endless. Sustainability is not guaranteed. The environment is not impervious to our schemes. Quality of product cannot be allowed to trump quality of life, let alone possibility of existence. Nor can it be allowed to trump human liberty.

Whose Liberty?

The more apocalyptic warnings of monetarists are born of a mixture of hysteria and cynicism. While there certainly is a navigable route from the planned economy to the planned society, and on to the planned individual, the full journey is not inevitable.

The Soviets certainly travelled a long way down this path, but then that was the expressed intention. The plan was to plan society and transform the outlook of the individual (or if you prefer, release the true human nature trapped inside capitalist false consciousness.) But this is not a necessary consequence of state control and ownership. The more modest industrial intervention and welfare projects of Western-Europe certainly didn’t end in the gulag. At worst they ended in sluggish production and eventual capitulation to private ownership. Meanwhile social and economic freedom in these states remained as good as any in history.

In fact if liberty is the goal there can be few greater impediments than an idealistic interpretation of lassez-faire. Removing economic rules may sound like a libertarian act, superficially. You can cry ‘liberty!’ as you abolish taxes, and restrictions on trade, and the movement of capital and labour, but the consequences of such freedoms can be far from liberating. In an unjust, unequal world, rules are the only means of ensuring a fair competition. For individuals and nations alike, if the pitch is steeped so unfairly in the favour of the rich, simply removing restrictions will only further entrench inequality. The liberty of the poor can only be secured through restrictions on the wealthy. Freedom for all rests upon limiting the liberties of the few.

All said there is some fire beneath the libertarian smoke. State-ownership of production undoubtedly is a concentration of power. To take an extreme example, if you want to work in a car plant but the state owns all the car plants then you will have no choice but to work for the state. If you want to buy a car but the state owns the monopoly, then you will have to buy a car from the state. These are not small or inconsequential limits on freedom.

Similarly, state control over taxation and public spending, housing, health, education and transport are formidable concentrations of power. Even after decades of monetarism, central government still controls the contributions and spending of millions of us. Just who are they to spend on our behalf?

Unsatisfying as it is, the answer comes down to lesser evils. For all the dangers of collective control, if not the collective, then who?