Posted tagged ‘capitalism’

In search of the lost paradigm

January 26, 2012

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 dangers of recession

February 22, 2009

I recently came across a political pamphlet which had been distributed at a mass rally. A key passage in the pamphlet ran as follows:

“The end of capitalism is imminent. It has been caused by the natural greed of the owners of capital, and by the reckless behaviour of the banking system, pushing people and firms into excessive debt, and seeking unearned and scandalous personal benefits for the bankers. Capitalism is dead, and we will help to bury it. “

The whole pamphlet was full of righteous indignation about the unacceptable nature of the capitalist system and the pain that its troubles were inflicting on working people; it ended by advocating a popular uprising that would take financial institutions into public ownership and force them to work for the people, rather than for greedy businessmen.

It may be interesting to say a little more about the origins of this pamphlet. First of all, this was not written as a response to current events, it was dated October 1932. Secondly, it was written in German (the above is my translation). And finally, right on the front cover we learn that it was published by the National Socialist Workers Party of Germany, the Nazis. And of course we know that whatever they wanted to do about the events they described, within about three months they were in a position to do it, and much more besides. What followed were some of the most horrific years in human history.

I am of course not suggesting that all those have been attacking capitalism in response to recent developments are in reality fascists. But dramatic economic crises bring all sorts of dangers in their wake, particularly where these crises are accompanied by an erosion of confidence in the key organisational structures of the economy and the political establishment. The conditions today are still, thankfully, nowhere near what they were in the late Weimar Republic, but it is still worth remembering that the risks we run are not just economic and financial.

What is worrying right now is the continuing growth of cynicism and anger, and the strong desire evinced in various public commentary to see someone ‘punished’ for the mismanagement that has been evident. Of course we need a vision and a plan. But as I have suggested before, this needs to be effectively communicated to the wider population. There is much to do, and the time for doing it is now.

Is capitalism always corrupt?

December 21, 2008

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.

So is this the end of capitalism?

October 1, 2008

I received an email yesterday in which the writer suggested that the end of capitalism was nigh, and that the laissez faire, deregulated and privatised economy had been shown to be deeply flawed and was now imploding. In fact, he’s not particularly alone in expressing this view. All over the place recently, as the credit crisis took over the news columns, people have been predicting the imminent demise of free markets and the arrival of a leaner, less greedy but more ethically satisfying era.

Of course predictions of the end of capitalism are not new. For a hundred years or more there has always been someone on a soap box, quoting Marx and speaking fearlessly about the internal contradictions if capitalism and the inevitability of its imminent death. It hasn’t happened, but every so often capitalism seems to reinvent itself and return to the market in a slightly different form. Some of the key defining moments of change were, for example, the development of the ‘social market economy’ under Konrad Adenauer and Ludwig Erhardt in West Germany after the Second World War (for those who can read German, here is an interesting short account of the origins); and perhaps even more significantly, the acceptance of the market economy by Germany’s Social Democrats in Bad Godesberg 1959, which created a political consensus around a socially aware market economy that would dominate European economic policy for 25 years or so. Then there was the dramatic recasting of the understanding of the market under Margaret Thatcher and Ronald Reagan in the 1980s. And now we can all speculate on what will come next after the international credit crisis – but I suspect it won’t be the end of capitalism.

The Guardian newspaper recently ran an interesting piece on how a number of well known leftwingers are reacting to the credit crisis. One of those interviewed was Daniel Cohn-Bendit, whom I mentioned in one of my last posts and who was one of the student radicals leading the protests in 1968. Forty years later he says that capitalism, when in crisis, always has ‘the intelligence to reform itself’. But he adds: ‘However, the belief that the market is god is over. It must now be regulated.’ This indeed is the response of many commentators, including recently Fintan O’Toole in the Irish Times. Broadly speaking this response suggests that what we are now learning is that government intervention and regulation is a good thing, and that the small-government-and-deregulation brigade have had their day.

Actually, one of the myths surrounding economic policy since Thatcher is that  we have had an increasingly deregulated market watched over helplessly by small and ineffective government, in which anything goes. It’s hard to see the substance in that picture: since the 1980s a whole plethora of new regulatory frameworks and agencies has emerged; indeed the corporate misdeeds of Enron and others created a regulatory firestorm so intense that it became nearly impossible to recruit company directors. Nor did any of the governments most visible in all this, from Reagan and Thatcher to Blair and Bush, preside over shrinking government; under all of them government has grown significantly, even if it was occasionally differently distributed.

What we have just seen is the collapse of a seriously crazy business model that had gripped part of the financial industry in recent years. And because this industry holds the funds that fuel both production and consumption its troubles cast a long shadow over everyone else. But it isn’t the collapse of capitalism, nor the birth of a whole new economic order in tune with Marx’s Das Kapital. Capitalism will survive, with maybe a new twist or two.

In fact, for those looking for the birth not so much of a new world order, but the return of ideology as the defining point of difference between those competing for power this may yet all turn out to be a massive disappointment. There may actually be a little bit of me – that part of me that enjoys the sheer fun of political debate based on ideas – that will also be disappointed by that.