"All things are wearisome, more than one can say." - Ecclesiastes 1:8

Thursday, October 09, 2008

The bank crisis and the left

When confronted with some issue, event, emergency, some bloggers and journalists of a leftish persuasion are fond of asking, in various ways, "How should the left respond?" I'm not always convinced that this is always a good thing in itself as it would tend to indicate that sections of the left at least are in a perpetual state of not being sure what they think about many things. On this occasion though I wish I was aware of it being asked more often because some of the responses to the current bank crisis and the subsequent government response strike me as being ill-thought out, reactive and, perhaps above all, rather premature.

You didn't ask but you're getting it anyway: my advice? The left - or at least some of it should a) calm down a bit b) stop conflating issues. I won't link them all because no doubt you've come across the sort of thing I'm referring to: this bank crisis is the end of "kamikaze capitalism", "the end of the neo-liberal world order", the refutation of the "unbridled free-market", it represents the nadir of the "Hayekian/Friedman axis of evil"... Ok, the last one was made up but you know what I mean. Naomi Klein - admittedly not one of the left's most subtle thinkers, to say no more than that - even went as far as to suggest that this financial crisis is for neo-liberalism what the fall of the Berlin Wall was for communism. Correction: she said it should be. Very silly, I hope you agree.

This kind of over-reaction mirrors that you find on sections of the right. Simon Heffer, for example, declares that "We are all socialists now, comrade." Because state intervention equals socialism, you see. My concern is that there are some on the left that are effectively agreeing with the bullshit coming from the virulently pro-capitalist, anti-regulation right - only of course they approve. It shows the limits of the unregulated market, of capitalism itself and demonstrates to need for state-intervention. Then they go on to imagine what might be possible if this newly-found dirigiste energy was directed into housing, or employment, into tackling poverty or whatever. It's understandable - but I think those on the left that have been pushing this line should be more careful for the following reasons:

1) It's a pretty simple point but I think some people have rather overlooked it: first of all, might it not be an idea to wait and see if this intervention actually works? For what it's worth, personally I welcome it - but what the hell do I know? I'm finding that having a degree in economic history isn't that helpful in this situation - but what I would insist history teaches us is that anyone who attempts to predict the future in these circumstances is a fool.

2) People have been too quick to claim the precedents of the past: FDR and Keynes are reborn - hurrah! Hang on. Firstly - and I have a very boring essay that I wrote on this subject once and will inflict it on you if you're not careful - FDR was no Keynesian. Furthermore, FDR has been the subject of too many hagiographies by historians of the left who have rather overlooked the actual record. I won't bore you with the details but most economic historians would today agree, I think, that was it not for re-armament, the US economy - which in any event persisted with very high levels of unemployment throughout the New Deal - would have slid back into a very deep recession from 1938 onwards. Even if the scale of intervention that was seen in the Western war economies was feasible, which I doubt - I think it's questionable at best to suggest this is automatically desirable. If I remember rightly, Keynes himself believed that the mobilisation of resources required for the war economy vindicated his theories - but Keynes was not a socialist, which brings me to the next point:

3) The 'neo-liberal' notion of a self-regulating, unfettered free-market has indeed been discredited by events but it was always a myth anyway - it is the last great untried utopia believed only by a handful of ideologues. You expect them to recant their views now? Why should evidence change their minds now when the copious evidence we have already hasn't had this effect before? Simon Heffer and his ilk may equate state intervention with socialism but anyone with even a passing acquaintance with economic history understands that capitalism has since 1945 co-existed with large scale nationalisation, credit controls, exchange rate controls, price and income controls. The 'part-nationalisation' of the banks does not alter in any significant way the essentially capitalist nature of our economy as David Osler remarks here - and such interventions, and much more violent ones, have often been a characteristic of the capitalist political economy as Richard Seymour, amongst others, have already pointed out.

4) I'm concerned about the conflation of concepts and institutions - these being collapsed into lazy cliches about "unfettered free-markets", "the neo-liberal world order" and the like. It's being done with capitalism and markets, for example. But they are two different things. The former has to do with the form of ownership under which goods and services are produced, the latter is a means of allocating these. Obviously historically these have been closely related and how the latter works is very much determined by the former. But damn it all, they are two different things. I'm very concerned that the failure to distinguish between the two, along with the apparent revival of the notion that state intervention is a Good Thing, will result in the people and the parties of the left advocating, and perhaps if they are in power, implementing ideas that would be a complete disaster.

I'm referring to trade here. I simply don't understand some people on the left and their attitude to international trade. In the 19th century, the 'liberal-left' in this country, including sections of what we would now probably describe as the 'hard-left', campaigned for free trade and against the Corn Laws on the grounds that it meant cheaper bread for hard-pressed working class families. Can someone explain to me what the hell happened? You might think, for example, that some might welcome trade with China on the grounds that this means cheap T-shirts for children in low-income families as well as recognising that the expansion of trade in this context forms part of the reason why we have seen in the East the largest rise in material welfare ever recorded in human history. Instead international trade is associated exclusively in the minds of some with environmental degradation, sweated labour and the appeasement of dictatorships. I was careful to say exclusively - absolutely no up-side at all for some folk.

Commentators who talk and write in this hopelessly one-sided and myopic fashion are simply, unequivocally, wrong. I say this because naturally in the present circumstances, the obvious point of historical reference is the Great Depression. No sensible person thinks we've arrived at that place yet but some sensible people think we might, if we have a political response that would, as it did in the 1930s, exacerbate the situation beyond measure and beyond repair. Protection: it's state intervention and it limits the evil "neo-liberal world order" - what's not to like? So far there's no particular reason to think this argument will take hold - and I'm not aware of anyone on the left making this argument particularly. But I'm concerned that in the current narrative of much of the left you don't tend see much in the way of evidence that it would be resisted should it arise.

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