Sunday, 13 April 2014

The Return of Political Economy

The two most interesting men on the political scene today are a Frenchman whose name sounds English, and an Englishman whose name sounds French: Thomas Piketty and Nigel Farage. In their different ways, both are connoisseurs of power.

The high profile given to Piketty's Capital in the Twenty-First Century confirms the return of political economy to the centre stage. In part this can be ascribed to the reputational damage suffered in 2008 by orthodox economics and its focus on ethically-neutral utility maximisers; in part it is a response to the disillusion felt when neoliberal politicians admitted that they could interfere with markets after all, bailing-out banks and socialising twenty-odd years of looting as public debt; and in part it is the result of the long gestation of the counter-movement against marketisation - the idea that the economy should be freed of social regulation in order to maximise growth.

The return to an ethically-founded view of economics is welcome because it entails a focus on power. The modern defence of capitalism rests on the premise that "wealth is most readily increased in systems where those who are more productive earn greater incomes". In other words, allowing the talented to prosper raises aggregate growth, which in turn benefits all. This is not so much the nonsense of 1980s "trickle down" as a reformulation of the postwar consensus that growth was the engine of greater equality: a rising tide lifting all boats. This ultimately utilitarian approach ignores the impact of power - i.e. the way that incumbency is abused to preserve privilege. The importance of Piketty's work is to show that, without redistributive policies and confiscatory taxation, returns to capital exceed returns to growth, which leads to ever-widening inequality and the concentration of power. You need to address the politics as well as the economics.

Despite the prominence of economic disputes in the 70s and 80s, such as the saltwater / freshwater debate and the monetarist experiment, the real watershed was a political shift in attitudes towards power that ultimately owed more to Hayek than Friedman and was heavily influenced by the anti-totalitarian focus on state agency over private inequality. The resulting neoliberal critique claimed to be the continuation of classical liberalism's concern with the balance of personal freedom and equality: a thread connecting Mill's view of liberty to Rawls's Difference Principle. The latter "permits diverging from strict equality so long as the inequalities in question would make the least advantaged in society materially better off than they would be under strict equality". The Rawlsian theory of justice is now under real pressure, not least because we see how "citizenship and democracy are ... sucked of their meaning by the super-rich". But this raises a question: why has mass democracy, which only arrived after World War One, allowed a return to the levels of inequality last seen in the Edwardian era?

One explanation is that ideology maintains the linked fictions of equality of opportunity and merit, and that this provides cover for the continuation of patrimonial capitalism. Like TV talent shows, superstar executive pay and dotcom billionaires preserve the illusion that wealth is potentially available to all, no matter how humble our origins. Even if this success is the result of gaming the system, or just simple luck, it can still be seen as admirable if the former has the whiff of the iconoclastic upstart and the latter the appearance of a lottery. But the vast majority of people do not actually want spectacular success: their desires are for comfort and the absence of worry, not the furious competition of the free market. The driven individuals of entrepreneurial myth are very rare - if they weren't, the economy would be chaotic.

Another explanation is that democracy "can be anti-egalitarian insofar as it causes politicians to heed the noisy but minor complaints of the privileged whilst ignoring the bigger but silent plight of the genuinely worst-off". In other words, democracy is a contest for attention and thus rewards the organised and vocal. But while there is obvious truth in this - it explains why a mansion tax is deemed less politically feasible than a spare bedroom tax - it doesn't explain why we largely ignore obvious abuses by the super-rich, such as tax dodging, nor why certain highly organised sectors of society are frustrated by their relative lack of influence.

Opinion polls consistently show the electorate to be more pro-social and less pro-market than the political consensus. In other words, less tolerant of the compromises made with power. While some of this may be wishful thinking that evaporates in the voting booth, it's pretty obvious that no major party truly reflects this stance (Labour's terror of nationalisation is not shared by the public). This is not unreasonable - political parties tend to be aspirational, rather than a reflection of the status quo, because they attract people who want to change things, even if only to wind the clock back to a mythical past - but there clearly has to be continuity between the two. This suggests that the key problem with democracy may be one of representation; that the disillusion of recent years, from Iraq to expenses, is symptomatic of a widening gap between majority opinion and the policies on offer in the political "marketplace". In other words, this is another example of neoliberal regulatory capture that has not been rectified since 2008.

In this light, UKIP's cheerful contempt for actual policies, and their reliance instead on vague sympathies, is very much of the moment, even if they did arrive at this position by the accident of incompetence. Much of their appeal concerns the issue of power, both real and imagined: controlling immigration, resisting "rule from Brussels", the over-weening state, the sins of the "political class" etc. In reality, UKIP are anti-redistribution and pro-inequality, which is why I think the claims that they will hoover up working class votes in the North are (outside the comic interlude of the EU elections) misplaced. Most of their party members are people who think they have an entitlement to power, while most of their supporters are people who feel increasingly powerless.

Farage's besting of Nick Clegg in the recent EU debates has been described as the victory of stories over facts, which plays to a patronising belief among progressives that the unsophisticated electorate are suckers for hokey tales and simplistic images. In reality, Farage is simply channelling a wider contempt through dodgy anecdotes that would invite derision down the pub. A bonkers claim, such as that the EU writes 70% of our laws, works because it is bonkers. Farage's real trick is to show utter disrespect for the established parties and the norms of political debate. We actually want the allegations about maintaining a mistress on MEP expenses to be true; we want him to be a card. But the indulgence of Farage does not mean that we wish him any real power. As soon as he shows an appetite for it, we will deny him it. His popularity depends on being seen as anti-authority, not in promising a better authority.

Tony Benn's five questions ("What power have you got? Where did you get it from? In whose interests do you exercise it? To whom are you accountable? And how can we get rid of you?") could serve as UKIP's manifesto, so long as they never get anywhere near real power and have the tables turned on them. The problem, as indicated by their desire to abolish inheritance tax, reduce corporation tax and implement a flat-rate income tax, is that the "interest" they represent is all too obviously the patrimonial wealth behind political power that Thomas Piketty has extensively profiled, and this becomes increasingly obvious the more they formalise their policies. In that sense, UKIP are utterly of their time, and will remain so regardless of the EU or immigration.

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