Saturday, June 22, 2019

Why socialism is back

A cartoon by Clay Jones

From a very interesting and insightful article in The New Yorker:

In the fall of 1999, I interviewed Tony Blair, who was then the Prime Minister of the United Kingdom, at 10 Downing Street. I asked Blair, a former barrister who had rebranded the vaguely socialist Labour Party as the explicitly pro-enterprise New Labour, if he believed socialism was dead. He hemmed and hawed. Eventually, he said that if I meant old-style socialism—extensive government controls, punitive tax rates on the very rich, and a pervasive suspicion of capitalism—then, yes, socialism was done.

At the time, this wasn’t a particularly controversial thing to say. With the collapse of the Soviet Union, state socialism on the Eastern Bloc model had been discredited. China and India had both embarked on historic efforts to deregulate their economies and embrace global capitalism. In many Western countries, the parties of the center-left had adopted, or were about to adopt, more market-friendly policies. Blair and his friend Bill Clinton claimed to be pioneering a “Third Way” between capitalism and socialism.

Twenty years on, Jeremy Corbyn, a lifelong socialist, leads the Labour Party. Bernie Sanders is running for President again, under the banner of “democratic socialism.” Two members of the Democratic Socialists of America—Alexandria Ocasio-Cortez and Rashida Tlaib—are sitting in the House of Representatives. In Germany, the Greens and the socialist Left Party are challenging the once mighty S.P.D. What explains this left-wing revival? There are three answers, I think, and they are all linked: economic cleavages, political capture, and a crisis of legitimacy.

The most basic problem is that in rich countries like Britain and the United States the pro-market tilt failed to deliver the promised results on a consistent basis. (In China and India, the story was different.) Blair was operating under the theory that opening markets, cutting taxes, and stripping away restrictions on businesses would boost the growth rates of G.D.P. and productivity, leading to higher wages and living standards for everyone. Also, faster growth would expand the tax base, which would allow the government to spend more on things like education and health care. For a time, during the economic boom of the late nineteen-nineties, things seemed to be working to plan. But that didn’t last very long, and it culminated in the financial crisis and the Great Recession[GFC], the recovery from which was slow and patchy.

In Britain, the annual rate of productivity growth averaged a dismal 0.4 per cent in the decade after 2008, and inflation-adjusted wages fell sharply. Problems like homelessness and poverty became more acute as the public safety net was cut back under Conservative austerity politics. On this side of the Atlantic, the recovery from recession has been somewhat stronger, but wages have lagged behind growth in productivity, and the long-term trends are alarming. In a speech at George Washington University last week, Sanders noted that “the average wage of the American worker in real dollars is no higher than it was forty-six years ago.” He also said that “three families control more wealth than the bottom half of our country,” and that, in some poorer parts of the population, “life expectancy is declining for the first time in modern American history.”

[In Australia, real average wages have been flat or falling for nearly a decade, even as real GDP has risen]

When a system posited on delivering the goods to the masses fails to accomplish that task, protests are bound to arise, especially if the people at the very top seem to be benefiting from the privations of others. Under state socialism, this led to widespread resentment of the nomenklatura, with their imported foods and country dachas. Under free-market capitalism, it leads to resentment of the one per cent, or 0.1 per cent, and anger at the political system that protects their interests.

In retrospect, a key moment for the revival of American socialism was the Wall Street bailout of 2008 and 2009, when taxpayers were forced to rescue the very rogues who had helped bring about the financial crisis, even as many ordinary families were being evicted from their homes for failing to service their mortgages. From an economic perspective, there were some sound reasons to prevent the financial system from collapsing. From a political perspective, the decision to save the banks persuaded many Americans—on the left, center, and right—that the political system had been captured.

The legitimacy of the market economy is at stake. From Adam Smith to Milton Friedman, defenders of capitalism have argued that it is ultimately a moral system, because competition ensures that it harnesses selfishness to the common good. But where is the morality in a system where the economic gains are so narrowly shared, and giant companies with substantial market power—the heirs to the trusts—exercise dominion over great swaths of the economy? Until a twenty-first-century Friedman provides a convincing answer to this question, the revival of the S-word will continue.

[Read the full article, which is well worth it, here]

I've talked about this before, here, and here and here.  Neo-liberalism clearly isn't delivering for 90% of the population.  It's only logical therefore, if you are a voter, to consider voting for someone who might deliver for you.  And the danger for our democracy is that people who have lost hope might vote (and have voted) for the Right.  Populists such as Trump make big claims about what they'll do for "ordinary" people, but don't deliver.  And to prop up their vote, the Right constructs scapegoats to explain why their policies aren't making working people better off: Mexicans, Jews, immigrants, "Leftists", Blacks, gays ......

Until left-wing parties reconnect to their base, i.e., the poor and the working class, with policies which raise the living standards of ordinary people, the rise of populist right-wing parties will be hard to fight.  Neo-liberalism has failed, and it's time for a re-think.  We certainly won't be getting any new ideas from the Right, because they are still too enamoured of tired dogmas and failed philosophies.  So it is up to the Centre and the Left to re-calibrate, not by moving right and continuing to support the discredited notion of trickle-down capitalism, but by attempting to shift the Overton window so that new, effective policies which stimulate growth along with equality and a good environment come to seem logical and obvious.  Right now, neo-liberalism is the default position.  And that won't do, anymore.

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