The state & growth

Edward Skidelsky, perhaps inadvertently, draws our attention to the difference between the social democratic and Marxian views of the state. He says:

The state...should drop the mask of neutrality and come out in favour of the good life...An economic system geared to the production of baubles and gadgets leads us away from the good life, not towards it.

This is the social democratic conception of the state - that it should help promote individuals' flourishing. To which the Marxist replies: It ain't gonna happen, chummy.

This is because, to Marxists, the principal function of the state is not to promote human thriving, except as a by-product. Instead, as James O'Connor wrote in The Fiscal Crisis of the State (which hasn't aged badly in the last 40 years):

The capitalistic state must try to fulfill two basic and often mutually contradictory function - accumulation and legitimation.

Both these functions point to the state acting against Skidelsky's conception of the good life.

In order to support capitalist accumulation and profits, the state must ensure that there's a ready supply of labour: one aim of the Beveridge report was to "make and keep men fit for service." This keeps welfare benefits sufficiently low to stop people dropping out or downsizing as Skidelsky would like, and compels them to enter the labour market.

Secondly, as part of its legitimation function, the state must supply social services such as health or education. As MacIntyre said, the state is "a bureaucratic supplier of goods and services, which is always about to, but never actually does, give its clients value for money." But thanks to the Baumol effect, the relative cost of many of these services tends to rise over time. This requires tax revenues to rise, and the least painful way of ensuring this is to pursue economic growth.

The endorsement of economic growth, then, is not a mere intellectual error of the state to be deplored by high-minded people such as Skidelsky. It is instead, a fundamental feature of it.

Now, one criticism of the Marxist view is that it is not falsifiable. If the state pursues growth-friendly policies, we say it is pursuing its accumulation function, and if it does other things we say it's pursuing the legitimation function. We win each way.

In this context, though, this criticism is wrong. If the state were to introduce a citizens' basic income - sufficiently high and unconditional to permit more people to downsize to what Skidelsky calls "simpler, less acquisitive modes of living" - then the Marxist view of the state would be falsified.
My suspicion is that this won't happen because Marxists are right.

Comments

[Luis Enrique]

Or because "a sufficiently high CBI" is not feasible. The more people drop out of the labour force, the fewer workers there are to produce the output to be redistributed.

and since when did social democrats see it as the state's job to tell people what to do - i.e. not to buy baubles and gadgets?

[chris]

If it's "not feasible", it's precisely because it would blunt work incentives and so worsen the conditions for capitalist accumulation. This might strike you as a bad thing, but I get the impression Skidelsky would welcome it.
I used the phrase "social democratic" rather than "liberal" to hint that there's always been a paternalistic/nannying trend within social democracy.

[Luis Enrique]

hmm, that makes it sound like a high CBI wouldn't be feasible because capitalists wouldn't like it, them no longer being able to accumulate like they want to, and they are the true holders of power behind the scenes. But what I had in mind has nothing to do with that, and would be true if the economy was one big worker-owned coop: if the CBI is sufficient to permit dropping out of the labor force, lots of people will drop out of the labor force, and there wouldn't be enough workers to produce output needed for a real CBI sufficient to permit dropping out of the labor force.

I take your word for it social democrats have nannying tendencies, but what Skidelsky seems to have in mind seems far more extreme than a bit of nannying.

[chris]

@ Luis - it could be that a high CBI would lead to people dropping out of coops. But one argument for coops is that they create more pleasant working environments and hence less desire to drop out.
The obverse of this is that one argument for a CBI is that it would force firms to improve working conditions in order to retain staff - but this might tend to squeeze profits.

[Luis Enrique]

maybe at the margin, but my guess is not nearly enough. I know workers at my local Co-op would quit like a shot if the state unconditionally gave them enough money to live comfortably on.

[Mark Brinkley]

The problem with the Marxist viewpoint is that it is essentially paranoid. It requires some wicked overlord to manipulate the state for their own ends. Marxists call this the ruling class. But the ruling class eg Cameron and Osborne just aren't that clever. Are you suggesting the are acting as unwitting agents? If so, to who?

[Account Deleted]

Realistically, a CBI would not be high enough to allow most people to quit their jobs. The limited trials (notably Mincome in Canada 1974-8) showed a marginal (5%) decrease in hours worked, rather than people quitting, and mainly among mothers and students who wanted to maximise non-labour time. The CBI seems to provide flexibility, reduced stress, and improved health.

The social democratic justification for a CBI is similar to that for the NHS. Treating the workers well raises productivity. This happens because poor productivity is shaken out of the system - i.e. much overtime is poor quality presenteeism undertaken to boost wages. When underpinned by a CBI, many workers will produce the same output in fewer hours. They exchange marginal wages for marginal time.

At an aggregate level, the wages saved due to reduced hours are offset against the cost of the CBI. The latter will be larger, as non-workers will get the CBI too, so the balance must be made up in taxation, which means a distribution between workers.

Remember, someone earning £100k could already downshift, but chooses not to (or not yet) in order to maximise their career income. Under a CBI, there will still be the same number of median and above earners (vacancies will be filled). Low earners will also continue to work as a progressive tax system would mean they keep almost all they earn (unlike the current benefits clawback trap). They'll just be choosier about working conditions.

So long as the CBI is carefully calibrated, the net effect can be fiscally neutrally but result in a massive leap in productivity. But this is not restricted to only a one-off boost.

Capitalists are not necessarily against the CBI (Hayek and Friedman were advocates), as it can potentially result in increased rates of profit, i.e. the funding is through income tax rather than corp tax. The CBI can also aid accumulation as it encourages innovation and therefore higher productivity and growth. New ventures can attract skilled workers without having to pay a risk premium (i.e. the risk is socialised via the CBI), and workers are more willing to switch jobs, which helps spread best practice.

The above does not invalidate the Marxist analysis - i.e. the purpose of a CBI can be both supportive of accumulation and legitimation. The point is that in a modern economy, an immiserated reserve army of labour is not a necessity (in the UK - China is an other matter). The surplus value is less about raw labour power relative to wages, and more about productivity.

The truth is that most people (not all) could do their week's work in 70-80% of the time it currently takes. That is a lot of capital going begging.

[Keith]

Mark Brinkley,

billiard balls probably have less intelligence than call me dave, but they move under gravity according to Newtons Laws without requiring any brains. The ruling class does the dirty work of exploitation as that is the basis of their perks and privilege. But like the billiard balls insight is not required.

It might be better to say that crass materialism has always been deplored by social democrats, marxists, and Anarchists. I don't really see any difference. All Skidelsky is saying is in Godwin in 1798. Godwin says that most work is a waste as it produces luxury goods under capitalism and production should be of necessities only, then work can be minimised in favour of high minded leisure. Cooperatives are a method of reducing unnecessary work but providing all with the necessities. The desire to accumulate goods is a form of false conciousness; people think that such things will make them happy but they are mistaken. Capitalist reproduce this error to keep the status quo.

With modern technology and its ability to substitute capital for Labour there is no reason why all people cannot have access to necessities with minimal Labour. The strange tendency of the contemporary left to buy into the mythical benefits of wage labour and Stakanavite super human effort is baffling. The use of machines to replace human effort is impeccably in accordance with the mainstream left wing tradition. See H G Wells or Marx on the future socialist society where we ride to our leisure time activities on electric trains and trams powered by a source of power as yet undiscovered but which is clean and abundant; with the slums and waged work of capitalism swept away in favour of universal culture and education. What is authoritarian about that? People being bullied by capitalist bosses to work their guts out for profit, that is what is authoritarian.

[Jim]

The simple reason why a CBI will never be implemented is that it would be considerably less than many people get for free from the State already in the form of benefits. So a CBI would in fact be a benefits cut.

[Account Deleted]

@Jim, there is no reason why a CBI would be less than current benefits, assuming no change in the overall share of GDP we allocate to it. As an unconditional income, it would require much lower overheads than discretionary benefits (no means-testing, no interviews/signing-on, minimal fraud etc), so it could be more in cash terms.

Don't forget we already have a large cohort of the population who get a CBI in the form of the state pension. We pretend this is a quid pro quo for past NICs, but we all know it is today's taxpayers who fund it.

Benefits are not "for free". There is always an exchange. Perhaps we pay benefits to avoid having the poor starve in front of us. Perhaps we pay to disincentivise them from looting our homes. Ethically, this is no different to paying them to labour.

[Neilwilson]

"The more people drop out of the labour force, the fewer workers there are to produce the output to be redistributed."

Correct, and that requires the state then to start to organise the labour force to produce again.

So the more successful a 'Universal Pension' is, the more the state has to provide and enforce 'socially necessary' work to make sure there is enough real output to go around.

Which is why it is probably better to structure the idea as a Job Guarantee - where the monetary authority purchases the spare labour in the economy and make it available to the Executive.

The Exceutive can then throw that labour away (if the economy is sufficiently productive to absorb that loss), and/or it can organise for that labour to do things via various mechanisms.

[Luis Enrique]

froma2e

"there is no reason why a CBI would be less than current benefits, assuming no change in the overall share of GDP we allocate to it."

um, but the CBI has to be paid to everyone whereas current benefits are only paid to a sub-set of the population. So the budget has to be spread much more thinly.

But let's say somehow we manage to afford a level of CBI that equates to the current bundle of benefits (housing benefit, income support). Isn't that level regarded in these parts as too low, being designed to compel people to enter the labor force to keep capitalists happy? So the CBI would have to be substantially more generous than the current bundle of benefits.

[Account Deleted]

@Luis, though a CBI would be paid to everyone, for most people it does not result in an increase in income as it is fully offset by an equivalent increase in tax. That offset decreases further down the income scale, so the CBI supports low wages (like working tax credits) and fully comes into effect when you lose all other forms of income. It is a floor beneath which you cannot drop.

A CBI is not an increment on income, like the Alaska Permanent Fund, which pays all Alaskans ca $1,500 a year from energy royalties. A CBI is a system of redistribution founded on an unconditional guarantee. As everyone gets it regardless, the cost of managing it can be much lower than a system of redistribution based on discretionary benefits and allowances.

A CBI is paid to an individual, not to a household. If paid to children, either in full or in part, it avoids family benefit caps and further distributes from singletons to families/sharers. Critics will of course claim it encourages breeding for money, but given the pensions crunch, that may be no bad thing.

The purpose of a CBI is not to encourage people to stop working, and the (admittedly limited) evidence indicates very few do avail themselves of the opportunity to lie in bed all day. The CBI removes the fear of sudden destitution, it removes the stigma of benefit claiming, and it gives people the opportunity and courage to change their circumstances, including investing in skills and education.

Most people will still work because they want the extra income needed to buy a car, a flat/house, a holiday, fine wine and Belgian chocolates. The CBI won't provide those, but it will remove the compulsion to take any crap job.

A CBI makes a lot of sense for an economy that wishes to raise skill levels, productivity and wages. It makes no sense for one committed to low wages, minimal investment in training, and a moral code based on worker compulsion and the demonisation of the poor.