Going Backwards

Delivering on this:


Brexit terrifies me. It reminds me that our basic human operating model is tribalism, and our default economic model is feudalism. What we thought was a new civilised way of sharing growth turned out to just be a brief respite brought on by those who experienced the horrors of tribalism first-hand. Now those memories have just barely passed out of living memory, we’re back to jeering at each other, egged on by lords in high towers.

The Economist sums it up thusly (read that article, because there’s a nugget of hope that we’ll come back to later*):

Inequality […] fluctuated for 130 years to 1950, before falling sharply in 1950-1980, in what the report calls an egalitarian revolution. Since 1980 it has risen again (as Thomas Piketty, a French economist, has shown), back to the level of 1820.

Seems like someone decided that the egalitarian revolution wasn’t good enough. We needed more, and we needed it faster, so we took the brakes off and removed the safety features.

Some of you are screaming at your wonderful smartphone screens right now, arguing that we wouldn’t have 400dpi smartphones if we still had the regulations of the 70s. Rubbish. By some measures innovation has fallen off a cliff since the 80s, and while that paper asserts an “economic limit of innovation”, Occam’s Razor might have a different opinion:

Sitting on trillions of dollars of cash resulting from high profits these days, corporations buy back hundreds of billions of dollars of their own shares to boost stock prices, a systematic practice documented closely by the economist William Lazonick. They often do so rather than invest in new ideas or research.

So to my central point: multiple generations have now pushed us to privatise more, grow faster, to climb the ladder even if that means standing on the hands below you. Socialism is bad. They assert that government spending is irreparably inefficient, and only The Market can give us the innovation we need. We’ve ended up with massive and growing income inequality, and now xenophobia strong enough to tear apart the bonds we made in response to our exposure to the worst of  human nature.

Neoliberalism is to blame. Not in some abstract left-vs-right low level policy debate, but in concrete terms:

Neoliberalism is a policy model of social studies and economics that transfers control of economic factors to the private sector from the public sector.

By now you’ve all seen Torsten Bell’s graphs: the ones showing that low income households voted to leave the EU. Our economic model du jour says that those families don’t deserve more; that they are the sadly necessary cost of growth and wealth. We’ve hinted to them that immigration is to blame because there’s someone willing to do a job cheaper than they would. It’s bullshit.

We’ve chosen laws and models that specifically move money from those in need to those that don’t need it.

We have enough wealth in the world to support everyone, to house everyone, to help everyone. More than enough. But we’ve chosen not to, because Neoliberalism says it’s incorrect to do so. Now it’s literally tearing the world apart.

*The nugget of hope? Potentially Britain could fix their internal inequality problem more easily by being a separate economic entity. The chances of that happening with Boris Johnson in power are below zero.

7 Comments

  1. Lets hope that Boris doesn’t get to be P.M Ironically he still represents the elite despite his support of the Leave vote.

    Will Davies wrote “Thoughts on the sociology of Brexit”
    http://www.perc.org.uk/project_posts/thoughts-on-the-sociology-of-brexit/

    And clearly this has been a long time coming for the U.K. I hope it is a wake up call but it could also be a signal that Trump could win the U.S election. Not because anything he says makes any kind of sense but because voters are sick of the entire electoral system and are voting for self destruction.

  2. Neoliberalism was borne out of the experience of the 1960s, 70s, and 80s which showed that governments were crap at running businesses. And I mean really, really, crap.

    As I grew up in the UK during those decades, the government there owned and ran pharmaceutical, oil exploration & distribution, aerospace, telco, postal, rail, sea ferry, gas, electricity, coal mining, and vehicle manufacturing companies, to name a few. In many instances, they were by law the only organisation allowed to operate in their market. They were each, to a greater or lesser degree, a shambles – with highly politicised management and workforce focused on everything but producing a decent product.

    There is ample evidence to demonstrate that, when it comes to actually doing stuff, by and large the public sector couldn’t find its arse with a mirror on a stick. It was from this realisation that the move to privatise the economy, the first step on the path to neoliberalsim, was born.

    The other side of the coin, and where conventional neoliberalism misses the mark, is that – by and large – private enterprise is not averse to shafting either its customers or its workforce if doing so will increase profit. Neoliberals will say that free-market competitive forces will constrain companies’ ability to do that, but of course they don’t. In a laissez faire free market, information asymmetries, natural monopolies, and various other factors combine to allow private enterprises considerable latitude to exploit both workers and consumers.

    So, in a world where state enterprise is incompetent and private enterprise is callous and exploitative, what are we to do?

    Well, the important thing to note is that, although governments may be unable to actually do anything, they can be moderately effective at funding things, and setting rules about things. If they stick to what they are good at, great things can be achieved. I suggest that the government has two roles to play in this regard:

    First: setting and enforcing rules to plug the market defects that would otherwise allow companies to behave badly – environmental protection, occupational health & safety, product standards, shareholder disclosure, avoidance of monopolies, etc.

    Second: fiscal intervention to achieve the social outcomes that the market doesn’t address. A universal basic income would be the most obvious and far-reaching intervention to address many of today’s social ills, including the much lamented income inequality. Funding – but not directly running – research is another (the current farcical “intellectual property” incentives for private R&D delivering as it does quite perverse outcomes).

    Our economy has plenty of examples of government successfully funding private organisations to achieve social outcomes that the market would otherwise ignore – pre-schooling, ambulance services, and post-natal care being the three that we most often come across. And they do so without all the bloat, inefficiency, and disregard for the consumer that a directly government-run organisation inevitably attracts.

    We are heading inexorably towards a post-industrial society where old solutions such as full employment and minimum wage are doomed to fail. We can no longer rely on paradigms that assume that selling one’s labour can be relied upon to deliver a decent income. And in spite of what academics might suggest, the rate of innovation is accelerating far beyond the ability of any government-run enterprise to keep pace. (I wonder whether these academics include in their lists DevOps, Lean thinking, the combination of MP3 and bittorrent, Open Source collaboration, or Uber/AirBNB style platforms…)

    New thinking is needed.

    • Ben

      June 26, 2016 at 4:23 pm

      Amazing comment Gary – and perhaps a bit more optimistic than mine. I hope we can get to a place where Government can regulate to take the sharp edges off corporate belligerence, while also allowing for more agile public institutions.

  3. On the other hand, governments (or state-run agencies) routinely provide many excellent services that are often cheaper or better (or both) than private alternatives where they exist…

    Hospitals
    Schools
    Universities
    Particle accelerators
    Geonet
    Weather satellites
    Air traffic control
    Tramping huts
    Fire brigade
    Prisons

    I also lived through the early 80s, and flew through the old-style Rongotai Airport, and my parents phone service came from the Post Office, and there was import licensing and the railways was a byword for inefficiency, squalor and theft. But it is big stretch to argue that this some proves that “the state” is fundamentally incapable of providing efficient, high-quality services. (Even if public schools don’t all look like Kings, or our hospitals may occasionally lack the bells and whistles you get when you go private.)

    Perhaps the biggest change we need in our thinking is to agree that in fact the world does owe people a living, and to figure out how to make good on that obligation.

    • The problem with saying that various government provided services are “excellent” is that we often don’t know what excellent really looks like. How do we know if the police or the fire service are being as good as they can be, when we have nothing to compare them with?

      There is a huge difference between acknowledging the undoubted passion, commitment, and expertise that many front line teachers, nurses, police officers, etc., bring to their professions, and claiming that the institutions they work for are marshaling the efforts of their staff effectively to deliver excellent results.

      The state spends about $15k/yr on each kid sent to Mangere College, Wealthy parents spend about $22k to send their sons and daughters to King’s or Dio. Is the difference in the calibre of the schools all down to the extra $7k? A hip replacement costs about the same at Auckland Hospital as it does at a Southern Cross Hospital, but public sector patients have to wait for months. That’s not “lacking bells and whistles”, that’s crap.

      For various reasons, I spend a bit of time socialising with both teachers and police officers. Invariably, they complain about how the senior managers in their organisations are much more concerned with their political relationship with the government than they are with the calibre of the social outcomes they deliver.

      I’m not suggesting that police, prisons, etc., should be privatised. But let’s not jump to the conclusion that they must be “excellent” when we have no yardstick by which to measure them, based solely on the passion of those on the front line.

  4. Interesting piece.. However, found the Brexit connection extremely tenuous , wondering why it featured at all?

  5. Well said, Ben. I had a note from my cousin in the UK asking me why I was supporting Remain. He is a policeman in Yorkshire and voted Leave. He said it was time Britain made its own decisions, and wasn’t beholden to Brussels. This piece pretty much sums up my response to him, although you’ve put it much more eloquently!

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