In search of the lost paradigm

For an academic community, there is always something uplifting about the arrival of one of its respected members in high office. In Ireland this happened last year with the election of Michael D. Higgins as President. As those who know President Higgins will testify, despite his long and distinguished political career he does not hide his academic credentials – nor should he, for they are genuinely impressive. Yesterday provided the President with an opportunity to display them in an obvious setting, when he was awarded an honorary doctorate by the National University of Ireland in a ceremony in Dublin Castle.

However, I am not really intending to describe or comment upon the ceremony. Rather, I was struck by the theme the President struck in his address to the convocation, which apart from some reminiscences of his life as an academic in Galway took him to a detailed and scholarly exploration of the role of the university in changing times. The speech (which can be found here) is worth reading in full, but let me focus on what was really his major point. He suggested that public and economic policy was hijacked over recent decades by a particular school of thought, and that this exercise in intellectual aggression produced both an impotence of academic discourse and, in the ‘real’ world of people’s lives, great hardship and deprivation and, ultimately, economic collapse. Following the same trail of thought the President suggests that an invigorated and independent academic community willing to ‘recover the unities of scholarship, to strike out for originality, seek as comparative standards the great moments of intellectual work from around the world’ will be able to make its powerful contribution in the recovery of a more humane political and economic settlement.

There is much in his speech worth supporting, and in particular it must be right to encourage the academy to take its place in leading genuinely independent and scholarly debate that actually addresses the issues in the life of the community. But there is also room for some notes of caution. First, I am not at all sure about the President’s focus on what he describes as a ‘new and largely uncontested paradigm’, which he attacks strongly but never quite explains. He references Friedrich von Hayek and the idea of ‘unrestrained market dominance’, and the notion of the total ‘rationality’ of markets. I always used to forbid students from using the (more often than not misused) word ‘paradigm’, which too often gets conscripted to a weak argument, but leaving that aside, there is in all this just a little bit of an unrestrained caricature which sits on top of much more complex realities. Nobody that I am familiar with has ever advocated ‘unrestrained’ markets, nor was the period that ended with the banking disasters characterised by lack of regulation as is sometimes suggested; it was just regulation that (as is so often the case) didn’t work properly; but there was actually lots of it.

We are all vulnerable to the seductive but damaging charms of nostalgia, and often we are tempted to believe that in another age they did things better and got it right. Then we forget that so much has changed. The period after World War 2 which saw the strong development of the welfare state and what the Germans called the ‘social market economy’ was one in which national markets could be easily protected, and therefore social regulations could be sustained without damaging employment, because technology, and information technology in particular, had not developed to the extent we know it now. We cannot return to that time or its basic methods. A global economy is here to stay, at least for all those who don’t want to accept spectacular poverty as a price for not having globalisation.

But then again, while I wish he had left out the search for an ideological rogues’ gallery who can be fingered as the culprits for all recent woes, President Higgins is still right in his broad message. We are where we are, and we must succeed in the economic world we are in; technological innovation is not our enemy – but…: we must engage in a search for a way in which this world can be made into a place that values and enhances the life of the community, and in which academics pursue themes of critical scholarly inquiry that has the capacity to change lives. This is not a return to some lost golden age. It is the search for a new one.

The 3 ‘i’s versus the 3 ‘r’s

This blog post is coming to you from the west coast of the United States of America. It is an interesting place to be right now, as the US swings into election mode for 2012 and therefore looks more thoroughly into its soul. A good bit of the public discourse here follows similar patterns to those across the Atlantic: concerns about economic recession, public debt and unemployment – as well as criticism of the behaviour of bankers, property speculators and politicians. But what caught my eye was an article in the local newspaper here, reporting on an opinion poll that found most Americans feel that 2011 was a bad year; and yet they viewed 2012 with optimism.

Of course 2012 may turn out to be as bad or worse for all of us. Many commentators are predicting exactly that. But I cannot help feeling that the irrepressible American tendency to be optimistic gives them an edge, and a sense of purpose and energy that Europeans sometimes lack.

And here’s something else that attracted my attention. A local politician here said recently that the country will be in peril if everyone just focuses on what he called the three ‘R’s: ‘regulation’, ‘risk’ and ‘routine’. What was needed much more was a push for three ‘i’s: ‘innovation’, ‘information’ and ‘initiative’. Events over the past 3-4 years have pushed people to look for more regulation, when in fact there is not that much evidence that we had too little: rather, we had too little effective application of regulation, and not enough appropriate information. In the end increased regulation usually settles down as bureaucratisation, and a mentality in which caution stifles the drive for renewal.

Universities are in exactly this position: where some believe that more regulation and less autonomy is the answer. It almost certainly isn’t. More responsibility and a greater sense of community is needed, but that’s something quite different.

My hope for 2012 is that we don’t all become mesmerised by the problems we now face, and that we allow innovation and initiative to flourish, while also recognising that we need to do this as a community with a common cause.

Securing compliance?

The Stanford University website contains a list of the university’s ‘compliance offices and officers’. You may wish to note that there are 25 of these, ranging from ‘donor gift restrictions’ to ‘immigration’. And while most of us do not have this kind of wealth of compliance-focused structures, many universities nowadays find themselves almost overwhelmed with regulatory bureaucracy.

Of course it is important to maintain good practice, and areas such as health and safety, data protection, financial probity and so on should be the focus of vigilance, in universities as elsewhere. However, we have gradually been sucked into a compliance mentality that makes institutions risk averse, with people often concerned with covering their backs while grappling with the extensive paperwork.

Perhaps one of the chief problems is that many, like Stanford, see this as a matter of ‘compliance’. The main context is one of policing wrongdoing, rather than encouraging good practice. It may be time to look again at how standards are maintained and enhanced; the current system may not be the way to do that.

The search for a new economic order

Ever since the wheels began to come off the global economy last year, there has been a lot of chat about whether there should be a new model of economic policy, both for global trade and within individual countries. Furthermore, all this happened while, in an iconic moment, the Bush administration in the United States was replaced by that of Barack Obama. Much of the commentary focused on the assumption that we were experiencing a major crisis of confidence in capitalism, and that what would now happen was that free markets would be replaced by a highly regulated system. The recent G20 summit in London spent some time on all this, with the French President, Nicolas Sarkozy, in particular emphasising the need for regulation (and threatening to walk out if his approach was not adopted).

There are a lot of lazy assumptions in all of this. One of them is that the world economic order before last year was based on totally unfettered markets. Furthermore, the view that George W. Bush was a free market leader is also highly questionable; his administration was economically one of the most interventionist in US history, and presided over an intricate set of regulations, particularly post-Enron. In fact, it could be asked whether the experience of the past few years tends to show that regulation actually does not always work very well. After all, after the events at Enron and Worldcom, people were led off in handcuffs, and yet this appears to have had a minimal effect on the big bonus earners in parts of the financial sector.

Nobody can reasonably presume that nothing needs to change now. Clearly it does. But it must be questioned whether the Franco-German view of regulation (which may be no more than bureaucratisation) is the right way to go. Setting up new regulatory offices whose main effect will be to slow down decision-making and ensure it is increasingly risk-averse is almost certainly not the answer. On the other hand, encouragingthe  people holding the world’s financial levers to take crazy decisions, sometimes based on nothing more than their aspirations for another bonus is also not right. It seems right that we must look at ways in which the conduct of key persons in industry and in the financial sector can be guided into ways that benefit society.

But that won’t bring about recovery. Perhaps the newly unveiled strategy of the UK’s Secretary of State for Business, Enterprise and Regulatory Reform, Peter Mandelson, represents an interesting basis on which to consider a new role for governments to help steer both local and global markets. His strategic document published today – New Industry, New Jobs – sets out a more activist agenda for government in order to identify and support growth areas that can generate employment and prosperity. There is also an interview in the London Independent newspaper in which he explains both the opportunities and risks. In short, what is being suggested here is that growth does need at least some element of strategic planning which looks at future trends and needs and identifies areas to be targeted for growth and support. That may be a more urgent exercise than coming up with even more intricate models of regulation.

Is capitalism always corrupt?

In the light of the drip-drip of revelations over recent weeks and months about the behaviour of business leaders, particularly in the financial institutions, a number of commentators have suggested that what has been demonstrated is that unregulated capitalism will become inherently corrupt, as the instincts of the key movers and shakers in a capitalist economy are corrupt and they are only held in check through effective regulation. In fact, this thesis is not new – it was suggested in an interesting (if flawed) book by John Girling, Corruption, Capitalism and Democracy, published in 1997 by Routledge. In this the author suggested that there is an inherent contradiction, or clash, between the public service ethos of democracy and the private gain imperative of capitalism, resulting in corruption wherever the latter is not held under strong control.

It could be thought that the news over recent times gives strong credence to that argument. How can anyone justify the apparent lunacy into which financial institutions slipped for no better reason than the maintenance of bonus payments for managers; or what we have just heard about personal (but carefully disguised) loans by a bank to its chairman? Not to mention all the stuff we discovered a few years ago about Enron and WorldCom.

And yet, it is facile to suggest that corruption is somehow symptomatic of capitalism, or even of capitalism only. When the Soviet Union and its satellite states went under in the early 1990s, one of the initial things we discovered was the systematic corruption which had pervaded the upper levels of the system. Furthermore, we know that a number of countries with authoritarian but left-leaning governments (Zimbabwe being an extreme example) have demonstrated huge and often violent levels of corruption.

It seems to me that corruption is always a risk that we run, under any system of government, when there is a sustained period of untroubled economic or political development, such as a sustained boom in a market economy, or a dictatorship without any visible or effective opposition. Recent events have demonstrated the need for vigilance, but perhaps also suggest that every so often a disturbance is needed to clean out unacceptable practices and wholesale lapses of ethics. And while of course it is a disaster when a recession deprives people of jobs and security, it may at least have the side effect of pushing to the surface the  reprehensible behaviour of those who have become arrogant.

The sometimes suggested response – greater levels of regulation – is not always ideal, as its main effect tends to be to bureaucratise behaviour and inhibit initiative; but vigilance is always needed, and the determination to ensure that corruption is never accepted as one of the normal characteristics of public or private conduct. And no system can afford the complacency of a belief that it is immune to such risks.