So is this the end of capitalism?

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.

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Where are all the socialists?

Recently I was attending a gathering of some friends and colleagues, and the conversation turned to politics and ideological perspectives. Someone asked me what my politics were, and without a second thought I answered that I was a socialist. This, I have to admit, caused a certain amount of mirth amongst those present. They claimed not to be able to identify much socialism in what they thought were my known views.

I suppose some of these things depend on your definition. If you look at articles on socialism on sites such as Wikipedia or Encyclopaedia Britannica, you will tend to see it defined as an ideological perspective (derived mainly from Marx) that places its main emphasis on the public ownership of the means of production and distribution, and others may also focus on the redistribution of wealth. In fact, socialism has splintered into a bewildering array of groups, some of them with fairly exotic views. But it is true that most people will still regard state direction and control of economic activity as they key aspect.

This seems to me to place method high above outcome – and this is perhaps one of the disheartening features of socialism. In the articles of faith of many socialists, it is not permitted to believe that socially desirable conditions could be created by any means other than public ownership and state direction. This is often due to a very strong commitment to socialist theory which is capable of rejecting facts if they do not match ideology-driven expectations. It is this, for example (and with apologies to my many friends who hold this view), that drives apparently intelligent people to cite socialist principles as a reason for redirecting funds to the wealthier classes (in the context of university fees), simply because that is what received theory seems to require.

But it seems to me that the real ideal of socialism is much more interesting: it is about taking action to create, maintain and sustain a society that is equitable and inclusive and seeks to eradicate poverty and disadvantage. In the economic, technological and cultural conditions of the 21st century it is unlikely that we can easily do all these things by adhering closely to 19th century articles of faith. The challenges are now different, and require different methodologies to tackle them.

I have always, as far back as I can remember, described myself as a socialist, and I propose to continue doing so. But I think that if we are to have a powerful sense of what socialism is and can be and if we are to make that politically influential, we have to move away from the old statist concepts that defined socialism 100 years ago or more. If we cannot do that, it is doubtful that too many people outside that die-hard circle of true believers will be interested in it any longer.

The ideology and reality of markets

For ten years, while I was Professor of Law at the University of Hull in North-East England, I lived in what is usually described as the old ‘market town’ of Beverley. Beverley does indeed have a market. The centre of the town is dominated by the old market square, going by the name of ‘Saturday Market’. And indeed today, as on every Saturday throughout the year, market stalls will have been erected and the casual shopper will be able to purchase a wide variety of goods, from fresh fruit and vegetables, through electrical and consumer good, to textiles and footwear – with lots of other things in between. People will come from the surrounding countryside, and in some respects the scene will not be that different from what it has been for hundreds of years. Markets such as this were usually established in the Middle Ages when the monarch granted the right to local noblemen (usually), so that people from something like a six-mile radius could purchase goods that would have been produced locally.

A ‘market’ in this sense (and in pretty much any other sense) is a place or an interaction where buyers and sellers of goods or services meet to agree a price for the transaction. It works best when there is ‘competition’, that is where there are several buyers and sellers, thereby assuring a reasonable rate for the exchange based on its objective value. Or put another way, a market is a distribution mechanism for goods and services, designed to ensure that the price is objectively reasonable.

As the analysis of trade became more sophisticated by the 17th and 18th centuries, the concept of a market acquired more and more significance in the emerging economic theory. The basis of modern market theory was in particular expressed by the philosopher Adam Smith, in his famous book An Inquiry into the Nature and Causes of the Wealth of Nations (1776), in which he argued that a free market was both the most efficient and also the most benign way of securing and sustaining prosperity.

In England supporters of the concept of free markets as an economic and political tool were by the 19th century styled ‘Liberals’, and in some contexts the label of ‘liberal’ still has that meaning. Indeed ‘liberal’ ideology not only pursued free market goals in economics and trade, but also in personal morality and conduct, as liberals disliked restrictions and regulations and taboos in these areas, thereby providing the bridge to what most people nowadays consider a ‘liberal’ outlook.

Not everyone was enthusiastic about markets as a form of liberalisation or even liberation. Hegel and Marx both were opposed to the free market concept – a particularly interesting critique of Adam Smith can be found in Marx’s Grundrisse der Kritik der Politischen Ökonomie (1861); although it might also be added that the concept of ‘market socialism’ emerged later in the 19th century.

By the 20th century – and the late 20th century in particular – the market had for some become a major ideology in the economics sphere. Markets were no longer just rational mechanisms for the exchange of goods and services, they were a mystical concept with opaque but unstoppable powers. The expression that you could not ‘buck markets’, which was popular in particular in the British Conservative government of Margaret Thatcher and in the writings of some of the high priests of the intellectual movement underpinning Thatcherism and Reaganism (particularly F.A. von Hayek), suggested that markets were not trading or policy devices but forces of nature. The ‘market’ became the God of the capitalist West, set against the ‘Evil Empire’ of the Soviet-style planned economy based on Marxism.

Of course all things must pass, and this particular form of market ideology did, too. And as the ideological battlegrounds of the Cold War disappeared from view after the fall of the Berlin Wall, the certainties of market ideology were also somewhat diluted.

Perhaps the early 21st century is a good time to re-assess markets. I have had a long interest in the idea and use of markets. It is arguable, for example, that you could trace the development of social policy through law by using market metaphors of supply, demand and distribution. And closer to my own current professional life, you could look at universities and education and ask whether markets can provide a useful tool for the development of policy. Furthermore, the restraint and regulation of markets is of major significance in almost all modern activities, and deserves close attention.

In other words, markets are not just locations (as in Beverley) or activities, but a market is also a metaphor for the analysis of policies, activities and conditions.

From time to time in this blog I shall develop this thinking a little further. This is a selfish activity, as I am working on a book on this general topic, and I am looking here for feedback and stimulation. So I am hoping for comments here. Maybe I also need to write a piece on plagiarism, so that I remember to give proper credit to any inspiration I may get.

Has Karl Marx left the university?

The last two decades have not been good for the status of Karl Marx in the university system. As communism fell in Eastern Europe and elsewhere, institutes of higher education named after its founder were quickly re-named, and university programmes focusing on Marx’s writings and theories were either dropped or had their frames of reference changed radically. Some academics who used Marxian (or more likely, Marxist) analysis in their teaching or research either recanted or made subtle changes to show awareness that the world in general had abandoned Marx and moved on. And then Francis Fukuyama, in his book The End of History and the Last Man, finally suggested that the ideological warfare in which Marxism had been one of the key perspectives was irreversibly over.

Karl Marx, who was born 190 years ago this year, had actually intended to be an academic, and was prevented from following this career path only because he had already acquired the reputation of being a radical. But it is in universities in particular that his influence was most keenly felt in Western European countries after the Second World War. Quite apart from the scholars who devoted themselves to studying Marx and the theories which he initiated, many others used Marxism as a tool of analysis in a whole host of other areas and disciplines, including sociology, law, literature, politics, arts – even science and engineering. This cluster of academic Marxism within the academy was able to observe various campaigns, parties and movements in the outside world that were heavily influenced by Karl Marx – in the trade union movement, in politics, in voluntary organisations and elsewhere. If you lived your intellectual life inside this cluster, you could easily believe – say, in the mid-1970s – that the final victory of Marxism was only a short distance away.

But even then, if you were at least a little detached from the movement, you could see signs that it would not be quite that easy. For a start, Marxism (and in particular the Marxism that was visible in universities) was extraordinarily faction-ridden. Every Marxist movement had its disciples, its martyrs, its heretics, its detractors, its traitors and its sworn enemies who were all also Marxists, or said they were. Marxism had its parties, its societies, its ‘tendencies’ and so forth, often serving up a bewildering array of impenetrable theory and with a strong body of demonology – of people and groups who had betrayed the faith. 

And yet, Marxism was a powerful intellectual force. When I was a young lecturer in industrial relations in the 1980s, some of the academic writers I most admired were Marxist. Richard Hyman, for example (then in Warwick, now at LSE in London), wrote accessible but extremely well argued books and articles that influenced generations of academics, most of whom would not have adopted Marxism as a frame of reference. Where Marxism itself often appeared intellectually forbidding, Marxist academics were able to stimulate debate and sharpen discourse in a way that benefited higher education very considerably. So for example, Marxist analysis of literature by writers such as Terry Eagleton produced a rich intellectual rejuvenation in that field; and Helena Sheehan produced a fascinating history of Marxism and the philosophy of science.

But after the fall of the Berlin Wall the fire largely went out in the Marxist camp, and many Marxist academics actually quietly abandoned Marx and moved on. Every so often, someone pops up to suggest that there is now a brighter future for Marxist analysis – see e.g. Andrew Levin in his 2003 book A Future for Marxism? – but the question mark betrays the continuing lack of confidence in the project. Some others argue – like the feminist academic Nancy Fraser – that there is a future for Marxism in a post-Marxian context that will focus on gender and race rather than class.

I suspect that Marxism will never return, either to the universities or indeed to political life, and that the analysis of Marx and the theories he influenced will mainly have an historical dimension. But a significant part of me regrets that – not because I am in favour of Marxism, but because Marxism was a good framework for the assessment of alternative views of a number of branches of learning. Higher education without ideology loses a lot of its analytical punch, and scholarship loses out in that setting. Politically, I would never wish to turn the clock back; but a part of me feels nostalgic for the old days of fiery debates. Maybe we need to find some new frames of reference that can restore some of the edginess that gives academic discourse its real energy.