On centrist utopianism

Here are some things we've seen recently:

 - Andy Haldane says shareholder capitalism is too short-termist, without asking whether it is possible to change this, or whether short-termism might in fact be a rational response to massive uncertainty about technical change and creative destruction.

 - There's a warning that the rising minimum wage might cause a "catastrophic failure" in home care. Apparently, higher wages have a cost: who'd have guessed?

 - Alan Milburn seems scandalized by the fact social mobility is blocked by parents' urge to help their kids.

There's a common theme here. It's centrist utopianism - the idea that moderate and feasible tweaks within capitalism can generate big improvements. Haldane seems to think we could see much higher investment if only capitalism could be reformed*; minimum wage advocates might be underplaying the costs of the policy; and supporters of social mobility fail to appreciate that human nature is itself a massive obstacle to greater equality of opportunity.

Here are some other examples of centrist utopianism:

 - The idea that macroeconomic policy can stabilize economies. This runs into the problem that recessions are inherently unpredictable and so policy cannot be changed in advance of downturns; the Bank of England didn't begin QE until 12 months into the recession. It also assumes that governments would want to stabilize the economy if only they could. But as Kalecki famously pointed out, this is dubious.

 - The idea that structural reforms can quickly and significantly increase growth. This is in fact pretty much impossible.

 - The pretty much unquestioned faith in managerialism and command and control techniques; the response to pretty much any organizational failure is a demand for "better leadership". This ignores the possibilities that "leaders" lack the knowledge and rationality to control complex organizations, or that such leadership has costs in terms of facilitating rent-seeking and demotivating employees. This ideology isn't confined to organizations. For a long time, there's been a divide in Labour between those who think change can be achieved merely by winning elections, and others who think there must be broader social and cultural change.

 - The notion that public sector bodies, including the BBC, can increase efficiency by shedding waste. This fails to appreciate a basic lesson of public choice - that bureaucrats look after themselves, and so wasteful layers of management can become entrenched.

I say all this as a counterweight to a longstanding prejudice - that centrists and moderates are realistic and hard-headed whilst we leftists are utopian dreamers. Of course, this accusation applies to some on the left - anything is true of someone - but for me the opposite is the case. I'm a Marxist because I'm a pessimist. It is those who think that (actually-existing) capitalism is easily reformable so that inefficiencies and injustices can be eliminated who seem to me to be the dreamers.

* I might be doing him a dis-service. Maybe he believes that low investment is an ineradicable feature of capitalism.

Another thing. You might object that capitalism has seen huge improvements in workers' well-being. However, just because something has occurred in the past doesn't mean it will continue to occur. Maybe reformers have picked the low-hanging fruits. And if we are in secular stagnation, then the economy becomes a zero-sum game - which reinforces my pessimism.

Comments

[BD Sixsmith]

"It is those who think that (actually-existing) capitalism is easily reformable so that inefficiencies and injustices can be eliminated who seem to me to be the dreamers."

They are, yes, but it is worth adding than *anyone* who thinks inefficiencies and injustices can be "eliminated" is a dreamer.

[Steven Clarke]

You're possibly right, but this probably misjudges how people judge policy.

For one thing, even the most highly trained social scientist couldn't predict the outcomes from many policies - least of all the average voter.

And more importantly, the status quo bias means people will put a lot of weight on how far a policy is from the current ones, rather than on their intrinsic merits.

[Matt Moore]

"Maybe he believes that low investment is an ineradicable feature of capitalism." - low compared to what? Investment has a cost - as you say, in an uncertain world, it makes sense to invest less.

"It is those who think that (actually-existing) capitalism is easily reformable so that inefficiencies and injustices can be eliminated who seem to me to be the dreamers." - You are all dreamers. This is pretty much as good as it gets.

"if we are in secular stagnation"; we aren't, unless you think gene therapy, self-driving cars, nano-robotic, perfect voice recognition, virtual reality, commercial space travel, curing cancer and degenerative disease are all either impossible or just toys. They may come at low prices (creating massive consumer surplus) and add very little to GDP. But that means that GDP is broken more than anything else

[Ralph Musgrave]

Yes: you leftists are indeed “utopian dreamers”. A nice bit of evidence for that is that the above article, like a hundred similar articles by lefties, concentrates on criticising free markets and capitalism, while totally failing to tell us how an alternative system would ACTUALLY WORK.

Lefties’ lack of interest in reality is staggering. For example they’ve recently taken to bashing the EZ and EU. Unfortunately half the relevant of articles fail to distinguish properly between the effects of the EZ (i.e. the Euro) and EU.

As for lefties' ideas on the debt and deficit, the best they can do is ape the economic illiteracy of the political right, as has been pointed out time again by the Australian economics prof, Bill Mitchell.

[Neil Wilson]

"the Bank of England didn't begin QE until 12 months into the recession."

Hence the problem with having people in the loop and relying on New Keynesian equilibrium nonsense.

You need very strong automatic stabiliser responses in the fiscal arena.

[rogerh]

I too am pessimistic about social reformers coming up with a credible alternative. I think we have to think how our mainly capitalist system will evolve. I suspect we are choking on bureaucracy, but hard to see which bit to dump. The human seems always to prefer individual advantage, a tendency that needs bureaucracy to control - or pre-frontal lobotomy on a large scale. Or we don't control it at all and end up with the cunning and sharp-elbowed owning everything ably assisted by the clever. We have been there before and the result is messy and not entirely satisfactory.

[donald]

@Ralph

I think Chris has quite clear suggestions for improving things. Citzen's Basic Income, increased bargaining power, worker ownership and Jobs Guarantee, for example.

[Laban]

"However, just because something has occurred in the past doesn't mean it will continue to occur. Maybe reformers have picked the low-hanging fruits."

Or maybe the labour supply has been suddenly increased (2005?), with the expected impact upon wage rates and the power balance between employers and workers?

"The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it"

[Laban]

@donald - "increased bargaining power" - where exactly is this increased bargaining power going to come from?

[aragon]

The lunatics have taken over the asylum where this passes as serious public policy advice.

"“Any fiscal adjustment hoping to be successful cannot avoid dealing with cuts in the welfare state and in government wages and employment”. This statement by economists Alberto Alesina and Roberto Perotti (see p.227 here) is just one example of the advice commonly given to policy-makers that budget consolidations are only successful (i.e. lead to economic growth) if welfare benefits are slashed."

"Economists argue that the main reason why welfare cuts are crucial to successful adjustments has to do with credibility. Governments that attack the electorally most delicate parts of the budget – namely welfare entitlements which are popular with the majority of voters – show that they are really serious about balancing the budget."

"Secondly, citizens and entrepreneurs acknowledge the determination of the government to reduce deficits. They are more confident about the future, consume and invest more which, again, leads to economic growth."

http://blogs.lse.ac.uk/politicsandpolicy/adjusting-public-finances-by-cutting-welfare-is-the-best-way-to-proceed-seems-far-too-simplistic/

What fantasists are these 'Economists' who pull causes and effects from thin air?

NEF on framing for idiots - sorry politicians.

http://t.co/6DjyWOy1dI (Via Twitter)

[Nextwavefutures]

On Minimum Wage and home care: since the services sector is making net profits of 18.9%, according to the ONS, and this is the highest figure ever, my guess is that it can afford to shift some profits from shareholders to employees' wages.