Cuddly capitalism

Capitalism With Morality - Real Freedom For All - The World After Communism - Economic Democracy - Passions and Constraints
October 26, 1995

One of the characteristics of cold war thinking about politics was the tendency to view the 20th century as a titanic struggle between freedom and tyranny, or capitalism and communism. In an early celebration of the end of the cold war, Francis Fukuyama declared the battle of ideas was over. The West had won, there was no longer any plausible alternative to liberal capitalism. In place of ideological struggle, there would be only empty economic calculation. There would be no art or philosophy, "just the perpetual caretaking of the museum of human history".

Robert Skidelsky's work, The World After Communism, is a restatement of the triumphalist thesis, albeit one which rejects the romantic post-historical sentiments of Fukuyama. Skidelsky uses "collectivism" and "anticollectivism" as the ideological antinomy around which he structures his robust argument. The author defines collectivism as "the belief that the state knows better than the market", an egregious error, he says, which found its ultimate expression under communism and fascism. But where Skidelsky adds a twist to the triumphalist genre is with the warning that creeping collectivism can be found across the political systems of a number of advanced industrial countries. For this reason, his prescriptions for repairing the state "after the ravages of collectivism" apply to both older clients and more recent converts to "the liberal project".

The subtitle of Skidelsky's work is A Polemic for Our Times. It is a text for "our times" in so far as it seeks to engage with world politics at a theoretical and a practical level. One of the few positive unintended consequences of the penetration of free market fundamentalism into the university system is the growing recognition that turgid academic tomes must be translated into the terms of everyday political argument. Unlike the other books under review, The World After Communism will appeal to a nonacademic audience, who will no doubt be stimulated by the broad survey of modern world history contained in a relatively slim and affordable volume.

On the debit side, the term "polemic" should not be allowed to mask conceptual inadequacies. The most serious of these concerns the way in which Skidelsky uses his central category of "collectivism". He argues that the crucial index for the degree of collectivism is the ratio of public spending to gross national product. This is buttressed later in the book by his adumbration of an "anticollectivist rule", that public spending "should not exceed 30 per cent of national income". The key weakness here is that the degree of public expenditure tells us very little about the type of state. Military regimes can conform to the "anti-collectivist rule" and systematically deny basic human rights to its citizens. Concomitantly, collectivism is not necessarily synonymous with centrally planned socialism. As Phillipe Van Parijs reminds us: "It is perfectly possible for private ownership to be collective." (Indeed, Van Parijs provides a more adequate definition of collectivist society, where both human capital and material capital are owned by the state in contrast to a socialist society, which does not own human capital.)

There are, however, more general reasons for doubting whether this is a treatise for our times. Skidelsky is right to speak of the burial of collectivism in its pure form, but he is surely premature to interpret "the transition through which we are living" as an unconditional acceptance of the market. The "anti-collectivism" identified with the neoliberal politics of Reagan and Thatcher is now on a life-support system. Theorists and practitioners on the libertarian right are actively searching for a form of capitalism with a human face.

This is the theme which D. W. Haslett addresses in his book Capitalism with Morality. Haslett's point of departure is a spirited rejection of the mind-numbing positivism accepted by many economists. Rather than leaving questions about value judgements to philosophers - an abdication of moral responsibility which has for too long pervaded academic economics, and of which the author is rightly critical - Haslett formulates an ideal economic system that promotes general welfare more successfully than either libertarianism or centrally planned socialism. One of the central features of this cuddly capitalism is the idea of promoting greater worker control.

The goal of increasing worker participation has more traditionally been associated with the Left. In his book Economic Democracy: The Politics of a Feasible Socialism, Robin Archer presents a spirited defence of collectivism in the economic and political realm. He argues that the labour movements in the advanced capitalist world have succeeded in one of their objectives, advancing the welfare state, but only partially met the goal of greater participation. Through the establishment of parliamentary parties, the labour movement has secured a form of participation in the political arena, but has failed to realise the "morally desirable goal" of economic democracy, meaning that "direct, decision-making control over a firm should be exercised by those who are subject to its authority".

Central to the establishment of economic democracy, Archer argues, is a corporatist industrial relations system, defined as "high levels of class cooperation and public involvement". Rather than turning to the well-publicised cases of corporatism such as Scandinavia or Germany, Archer considers the fascinating case study of the establishment of a corporatist industrial relations strategy in Australia in the 1980s. At the centre of Australian corporatism was an accord between organised labour and the government which had wage restraint as its objective in order to facilitate non-inflationary growth and higher levels of employment. Relative to its competitors, Australia managed higher economic and employment growth in the period after the accord.

Archer provides a pertinent contrast between the high level of macroeconomic cooperation between government and organised labour in Australia with the "union-bashing" zeitgeist closer to home. "Whereas in Britain the Thatcher government thought industry could only be modernised by undermining the unions, the Hawke government showed that modernisation could be achieved with the unions in the driver's seat." Despite the compelling evidence for the relative success of Australian corporatism, there remains the question of whether an accord-style corporatism can take root in other political systems. Here Archer makes the valid point that corporatist industrial relations systems are likely to emerge across the European Union, given the generally favourable disposition of both the Christian democratic right and the social democratic left to economic democracy.

In order to penetrate the radically incompatible understandings of "collectivism" offered by Skidelsky and Archer, it is necessary to examine their differing conceptions of liberty. Indeed, the question of freedom, and the specific institutional arrangements that best safeguard it, is the one theme which all five books address. Skidelsky locates his understanding of liberty in Hayek's paradigmatic conception of liberty as "freedom from" government interference. It is therefore necessary to be permanently vigilant as to the over-accumulation of power at the disposal of the state.

In Passions and Constraints, Stephen Holmes attempts to graft a "freedom to" on to the "freedom from" version of liberty. As he puts it in the preface: "Those who advocate a strengthening of democracy and an improvement in welfare policy I do not have to be antiliberal in the way that many of them still apparently believe." The fact that the virtues of democracy and welfare provision could be construed as illiberal is itself an indication of the grip "freedom from" libertarianism has maintained on the mindset of political theorists and economists since the mid 1970s.

Holmes draws on the idea of constitutionalism as a way of bringing together the two faces of liberty. The rights of individuals and the legitimacy (and hence effectiveness) of the state are, on this reading, mutually reinforcing. Moreover, Holmes's exploration through the intellectual history of the liberal tradition highlights the important allocative role prescribed for the state. Even bastions of free-market liberalism such as Adam Smith and John Stuart Mill favoured publicly funded elementary education.

This touches upon an important paradox in the libertarian argument. Their preference for a free-market economic system requires considerable intervention since a competitive economy needs a healthy and educated work force; markets must be regulated; organised labour has to be undermined; property must be protected; prisons must be built and civil unrest contained. In short, it required government intervention in order to roll back the frontiers of the state. For evidence of this, we need look no further than Thatcher's failed attempt to meet the objective of reducing the degree of collectivism in British society.

Holmes recognises the persistence of "stubborn problems" in liberal capitalist states, such as urban violence, child poverty, economic inequality, the continued marginalisation of women, and de facto racial apartheid, and yet does not reflect critically on the possibility that liberalism might be the cause of these problems. By contrast, Van Parijs's Real Freedom for All opens with the premise that the negative consequences of capitalism are "unacceptable". His second premise is that "freedom is of paramount importance". The challenge the author sets himself is to show the merchants of libertarianism that endorsing freedom need not require tolerating poverty.

Rejecting both capitalism and socialism as adequate ideologies for delivering "real freedom for all", Van Parijs formulates a "left-liberal" theory which conceives of a free society as a just society. In a complex argument, the author seeks to preserve liberty by enforcing a respect for rights that incorporates self-ownership, while incorporating the egalitarian sentiment "that each person has the greatest possible opportunity to do whatever she might want to do". Here the author draws heavily upon the analytical philosophy of John Rawls, who famously argued that one should maximise economic advantages subject to the respect of fundamental liberties. Real Freedom For All requires one to possess the means as well as the right to make choices. This leads Van Parijs to the radical suggestion that taking freedom seriously demands "the highest unconditional income for all consistent with security and self-ownership".

Irrespective of the obvious institutional and practical problems generated by Van Parijs's prescription, his work should be commended for recognising the global nature of the economic and political system. All the other works discussed above treat as more or less unproblematic a territorially circumscribed conception of the polis. Archer advocates economic democracy in one country. Haslett outlines a modified capitalist system because of local rather than global inequality. The universalistic principles of liberalism are at least acknowledged by Holmes before sacrificing these principles outside the jurisdiction of sovereign states. As a consequence, "welfare rights will in fact be limited to conationals". A harsh critic might infer from this statism that liberalism had regressed in the past 200 years. According to Kant, no state is an island. As he put it in his pamphlet Perpetual Peace, first published in 1795, "a violation of rights in one part of the world is felt everywhere".

Van Parijs concludes his work by reflecting upon the global implications for his left-liberal defence of a capitalism which is constrained "and used in the service of real-freedom-for-all". Here the author is self-consciously seeking to go beyond Rawls's Theory of Justice which applied in its original form to the particular "well-ordered society" rather than to the universal common good. Van Parijs responds by arguing "when speaking of real-freedom-for-all we must mean it; for all". Just as his ideal theory led him to prescribe an individual basic income within states, the global dimension of the theory must have as its ultimate objective a basic income for each human being. Realising that this utopian prescription requires a far greater sense of solidarity among citizens of the world, as well as large-scale institutional reform, Van Parijs also wants to appeal to realists who recognise the growing incapacity of states to guarantee the welfare and security of their citizens. His bold exploration into ideal theory is an important contribution to the growing normative literature which seeks to apply theories of justice in a well-ordered society to the wider global society.

Timothy Dunne is a lecturer in international politics, University of Wales, Aberystwyth.

Capitalism With Morality

Author - D. W. Haslett
ISBN - 0 19 8285531
Publisher - Clarendon Press, Oxford
Price - £30.00
Pages - 280

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