Paradoxes of control

"Why do the British dislike the free market?" asks John Rentoul, pointing to public support for nationalization and opposition (pdf) to privatization: he might have added support for rent and price (pdf) controls too.  

For me, this raises three paradoxes.

Paradox one is that, as John says, "left-wing" policies are popular but left-wing parties are not.

One reason for this, at least in May's general election, is that as Jon Cruddas has said the voters disliked Labour's opposition to austerity.

There is, though, no contradiction between voters being "left-wing" on nationalization and price controls but "right-wing" on austerity.  

The key word here is "control". People support nationalization and price controls for the same reason they support immigration controls; they want to feel that the government is in control. They under-estimate the extent to which spontaneous order or emergent processes produce benign outcomes without state direction*. The invisible hand is well-named: people can't see it.

I suspect that support for austerity arises from this same urge for control. People want to believe that the government is in control of its finances. They don't like the idea that government borrowing is the uncontrolled (and often benign) outcome of private sector choices to save or borrow.

Which brings me to a second paradox. Although voters want the government to expand its sphere of control, they don't want to expand their own control. There is pitifully little demand at the political level for greater worker control of firms.

I say this is a paradox because of a simple principle: control should be exercised by those who know the most and who have the most skin in the game. Many workers - those with job-specific human capital - have a lot to lose if their firm is badly managed and have the dispersed fragmentary knowledge to improve management. But the same isn't true for politicians: for example, George Osborne doesn't know better than the market or Low Pay Commission what is the right level for the minimum wage, and it's no great loss to him if he gets it wrong. We'd therefore expect to see more political demand for worker control than state control. But we don't. Which brings me to...

Paradox three. Although there's no political demand for worker control, many people vote for it with their own feet. Since current records began in 1984 the numbers of self-employed have risen by 67.5% to over 4.5m - an increase from 11.1% to 14.5% of all those in work.

Rick is of course right to point out that many of these are making little money in inefficient and doomed businesses, and many have been compelled into self-employment by a lack of decent alternative. But I suspect that people are also choosing self-employment even if it is insecure and badly paid because they want more control over their lives - or at least the feeling of control - than they can get from hierarchical employment. Research by Bruno Frey and colleagues has found that the self-employed are "substantially more satisfied with their work than employed persons" in many countries because they value autonomy in itself.

All this has an important implication. The phrases "left" and "right" are horribly misleading. The issue is: are uncontrolled emergent processes benevolent or not? Very many voters think not - which explains the otherwise paradoxical fact that they support "left-wing" price controls and "right-wing" austerity.

This in turn poses big political questions: how can we ensure that emergent processes are only reined in when they are harmful? Can we persuade voters of the virtues of spontaneous order without sounding like capitalist shills? Are there efficient means of satisfying the demand for control? These questions, rather than waffle about left and right, deserve more attention.

* Granted, capitalism's apologists sometimes overstate this point.

Comments

[SpinningHugo]

"Paradox one is that, as John says, "left-wing" policies are popular but left-wing parties are not."

Two reasons you don't mention.

First is free ponies. When offered a free pony most people say yes please. "Would you like Energy prices to be frozen? Yes please!"

That doesn't mean you trust the person offering you the free pony.

Second, you may have "an accumulation of policies, even if individually popular, that, taken together, contradict that strategy and send us too far left."

As somebody who knows about this kind of thing said

http://www.theguardian.com/commentisfree/2015/may/09/tony-blair-what-labour-must-do-next-election-ed-miliband

You might get away with promising one free pony. Half a dozen, and you won't be trusted.

Not that any of this kind of rational stuff matters for the immediate future of the UK left.

[Matt Moore]

"Which brings me to a second paradox. Although voters want the government to expand its sphere of control, they don't want to expand their own control. "

How is this a paradox? It's only a paradox if you think people see the government as an extension of themselves, which the vast majority do not. You have highlighted two consistent views - I want government to have more power, and I want management to have more power. These both come from a misguided faith in experts and an under-appreciation of the importance of local tacit knowledge. They are consistent, in my opinion.

[James]

People are far more worried about flying (crossing themselves before takeoff etc) than they are about driving even though they know latter is far more dangerous. The difference is they are in control of the car and not the aeroplane. People will often prefer an option where they have control but know that it's not the smart choice.

The other answer to John's question is that what with rail subsidies, oil cartels and a broken housing market, we don't have a free market. If we're going to have monopolies, we should probably have state-run ones.

[Matt Moore]

+1 to James. I don't see a massive call for intervention in genuinely competitive marketplaces, even those that are oligopolistic: groceries, cars, electronics.

Talking of beyond left and right, I think there is big potential on both sides for support for a much more aggressive (although consistent, rule of law, non-political etc) competition authority. Plenty of the more important barriers to entry are regulatory - for example, in banking. Regulation doesn't need to be complex to be effective. I would like to see a competition authority empowered to demand simpler regulation where it creates a barrier.

[Bob]

", is that as Jon Cruddas has said the voters disliked Labour's opposition to austerity."
That may be true, but the solution is to explain to voters why austerity is wrong.

[UberLibertarian]

+1 to James also, and Matt as well. I'm a libertarian but I can see a clear benefit on certainly justice and possibly also efficiency grounds for a different capital structure and general approach to the "natural" monopolies.
The trick is to have a government (and this applies to the main article as well) that acts as a service provider - enabling it's citizenry - rather than nurse bossyboots exacting petty tyrannys because they can.
As CD brilliantly put it once "no government can have a set of priorities different to its citizenry" (or something).

[e]

Of course left-wing policies are popular. Why wouldn’t people want at least the hope of things working better for them? As for why left-wing parties are unpopular, this might be because the Labour party is left-wing, but rarely shows much leg, as it were, and so has a disserved reputation for being a disappointment.
Jon Cruddas et al hears easily reached for shorthand statements conveying a “Labours useless” message and offers them up as something profound about the nature of voters – blinkered or what.

[Bob]

The government is in absolute control. Nobody can bounce a government check. No comparison between that and the "invisible hand." It describes operational reality. None at all. Saying that "they call the invisible hand invisible because it is invisible" is nonsense designed to fool the rubes. It is just a metaphor.

The push for privatization is supposedly about efficiency but it is really about rent extraction. The same with capitalism as a system. The model, based on perfect competition, supposedly "proves" that capitalism is the most efficient system for allocation scarce resources, increasing productivity through innovation, rewarding incentive and distributing by just deserts. That's all based on specious assumptions. The reality is that it is a highly inefficient system as chronic unemployment, boom-bust cycles, and high inequality owing to maldistribution go to show. Squeeze out the rent and the ownership and management classes squeal because they can't extract rent as easily. So they use every means in their power to avoid this.

The real issue is effectiveness, that is, achieving desirable outcomes. It's about ends. Efficiency is about means, essentially getting the most from resources without compromising other vital factor like effectiveness and resilience. Militaries know this, for example. Efficiency is not tops on their list. Being resilient enough to handle contingencies and winning conflicts is way ahead of efficiency.

[Bob]

Nationalise or privatise isn't the argument. That's like left or right. It's an old battle that is no longer relevant in the 21st Century.

The question is how to get maximum productivity in those industries and therefore maximum public good.

The problem is entropy, which you get in any human organisation. Over time things get set in their ways, which is good in one sense in that people have got used to working with each other and are 'performing', but can be bad because you end up getting rigidity. It worse in larger organisations as the politics starts to overtake the need to survive.

So it's never a matter of public or private, but more a question of the age and size of the current operation. You don't want a very new organisation because they haven't worked out the best way of doing things yet, but you don't want a very old organisation that is set in its ways. You don't want a very small operation because it is inefficient, but you don't want a very large one either because it becomes an oligopoly.

Capitalism works, if it works at all, when there is an appropriate level of destruction and fear of destruction. Strange as it may sound the supermarket sector in the UK works really well. The operations are large enough to be effective and the competitive heat is enough to ensure constant innovation. It's not perfect and needs a Job Guarantee to provide sufficient competitive tension in the labour market to prevent exploitation by the supermarkets. But its a lot better than what they have in, say, Canada.

On the public side my thoughts are that the assets should be owned by the state and the workers should be hired and paid for by the state, but the operational management layer should be outsourced on a fixed income contract. That way you can swap out operational management layers if they fail, and they can make a lot of money if they are able to deliver the service more efficiently.

It's all about the best way of transforming labour power into labour services. And that ain't as easy as it sounds.

But never mind that just listen to Chris - "invisible hand" "free markets" and try to undermind "the state." It's all simple really - more freedom. Right?

Libertarians are pure evil.

[Bob]

http://mikenormaneconomics.blogspot.co.uk/2015/09/identity-politics-and-sclerosis-of.html?m=1
The left's downfall.

[gastro george]

Isn't the simple answer to Rentoul that the public realises, unlike him, that the "free market" doesn't exist, and that "pro-market" policies have not given them the promised benefits?

But agree generally on control.

@SpinningHugo: Doesn't the "free market" also promise free ponies? To take your example, competition in the energy was meant to deliver low prices and food customer service, and yet the opposite is true.

[gastro george]

Bizarre typo ... good customer service ...

[Bob]

Yes, the public has been more easily brainwashed by austerity propaganda than libertarian propaganda, since austerity is more intuitive.

[Metatone]

Ok. Can we stop abusing the language of complex systems?

Very, very, very few spontaneous emergent processes are beneficial, benevolent or even benign. That's the evidence collected over the last 50 years.

Until economists can admit that, people aren't going to trust them to decide which ones are harmful.

[Metatone]

The real question is - why are economists so desperate to pretend that spontaneous emergent processes are typically benevolent and typically self-correcting?

[Metatone]

Ironically, you can see what I'm complaining about in the inverse in Andrew Lilico's post about abundance that you link to.

He can't cope with the idea that if basic needs were met, it might change the balance of power away from capitalists. Thus, he has to fall back on straw men to show that if it's not capitalism, it has to be low innovation, neo-feudal, etc. etc.

[Matt M]

Very easily explained: People care about their country.

They think public debt is bad so goodbye.
They think private individuals controlling utilities is bad so goodbye.
They hate hordes of third world immigrants and want to protect their community.
They want more funding for education, health and pensions even if that means higher taxes on the rich.
They want their country to be free from plutocrats living in the Caribbean dictating how their country should be run.

Not a paradox. All those positions above poll in the 60-70% range.

[Bob]

"food customer service, "
Replace the word "customer service" with "bank" and it is about right ;)

[Luis Enrique]

"Very, very, very few spontaneous emergent processes are beneficial, benevolent or even benign."

citation needed.

I have dipped into a few complexity books (Miller and Page's 'complex adaptive systems', Colander and Kupers plus other field-specific books) and I haven't come across that claim.

[joe]

It seems UK is in an age of binary thinking where one policy is 100% or 100% bad, or 100% Left or 100% Right. I like the Norwegian idea where no public service is 100% privatised but parts are kept by the State and their performance compared over a wide range of issues with the private sector's effort. The good bits from both "sides" are then taken up by both "sides".

UK has a 100% privatisation system where the funding taxpayer cannot even get a simple answer as to what the private company is charging Government; investing; or training. No one is allowed to check if the service being paid for is fully provided. All "commercially in confidence".

For utilities the taxpayer funded the assets but the privatised companies that are largely overseas' owned now "cannot afford" to invest in major assets or the share price falls. Then the taxpayer has to directly fund(with no return) private companies as in the new nuclear facilities (a State technology where UK once lead the world).

We had to go to our embarrassed Conservative MP to ask help in even getting a power bill after none for 3 years. (A 5 minute chat to resolve in the days of publicly owned utilities). MPs have direct connection to the complaint's department that taxpayer's do not have. It still took a further year and 3 months to leave the old company, plus "caring" hampers and £1500 compensation, for a new one, ethical Cooperative Energy who are excellent. Ofgem could not legally resolve anything the private company could not put right in 28 days so their "regulation" was useless.

The public are vaguely aware that privatisations are a con on the taxpayer but have so lost faith in Governments to govern for the people that they simply shrug their shoulders and get on with their lives.