The death of free market ideology

Free market economics is dead as a political idea.

The government’s subsidy to CF Industries to ensure that it supplies a product that is (checks notes) soaring in price is just one of several examples of this. It has also introduced trade barriers within the UK, an almost unprecedent move for any developed nation in modern times. Even before the rise in National Insurance, it was planning on raising the share of taxes in GDP to what the OBR says would be “its highest level since Roy Jenkins was Chancellor in the late 1960s.” And you can interpret all the talk of “levelling up” (and it is all talk) as a renunciation of the free market idea that companies will relocate to areas where land and labour are relatively cheap.

All of this fits with Johnson’s “fuck business” remark; his renunciation of the European single market; and wilful increase in political uncertainty. What we have here is a flat rejection of Thatcherism. 

Of course, markets are still a massive part of capitalism (and I suspect they should be a big part of post-capitalism too). But they have few defenders in government,

Which poses the question: why have we seen so great an intellectual counter-revolution?

It’s a tricky question because of an astonishing fact which demonstrates the emergent genius of the Tory party – that it has made this move without a protracted debate. Whereas the Labour party tears itself apart over much smaller differences, the Tories just get on with it without feeling any need for ideological consistency or introspection. As Sir Keir Starmer says, they have “a remarkable ability to shed their skin.”

Although the Tories aren’t telling us why they’ve made so great a change, I’d suggest several possibilities.

One is the simple empirical fact, that free markets haven’t worked as billed. I don’t just mean that the pseudo-market in retail gas and electricity has failed. I’m thinking also of the financial crisis and the long stagnation in productivity. All show in different ways that markets don’t deliver stability and growth as much as hoped. Of course, free marketers have defences against these points – but the point is that they need defences, and are now on the back foot.

We can turn this around. In what sector is there a clear case for introducing more market forces? It’s not obvious. (No, healthcare isn’t one).

There’s a second reason, which we can derive from Jesse Norman’s admirable book, Adam Smith: what he thought and why it matters. Markets, he says, are not isolated technologies. Instead, they “are sustained not merely by incentives of gain and loss, but by laws, institutions, norms and identities.”

If we have the right such norms and institutions, the self-interest of market actors will indeed promote the public interest. If not, though, we get rent-seeking, corruption and cronyism, as Jesse says:

Capitalism can encourage people to behave in socially productive or unproductive ways: to devote their energies to building homes or finding new tax loopholes; to developing life-saving drugs or running offshore sweatshops. It can stimulate fruitful investment, or the search for unwitting clients to be ripped off.

Latter-day free markets have, however, given us too much of the unproductive activities: fraud; mis-selling; cronyism and rentierism (pdf). Thatcher hoped a market society would give us men like her father; in fact it gave us ones like her son. Actually-existing free markets have not been embedded in the norms and institutions that would make them work in the public good. Which has, maybe unfairly, discredited the case for them.

Relatedly, one lesson of recent years is that capitalism requires a more extensive state than Thatcherites thought - not just to provide infrastructure and regulation but to provide automatic stabilizers and support for those “left behind” by globalization – a group which was never in the free marketeers’ original script.

Perhaps, though, there is something else. Tory support for market forces was strong when they were operating to enrich capitalists and hold down wages, but it has waned now that they are starting to raise wages, if only in a few sectors. Business owners whining about staff shortages are showing a fine sense of entitlement but not so keen a grasp of market economics. The attitude of many on the right to the free market reminds me of Corporal Jones: “they don’t like it up ‘em”.

Perhaps free market ideology was, for many, never a principle but only just one more weapon in the class war, a means of protecting what Tories really care about, which is the defence of private sector hierarchies.

Comments

[ltr]

A superb theoretical essay, but I need a little added help with application. For instance, when Branko Milanovic writes of "capitalism, alone," that cannot mean that the UK is like Vietnam though both have markets. How then does capitalism in Vietnam differ from that in the UK?

[rsm]

》If we have the right such norms and institutions, the self-interest of market actors will indeed promote the public interest.

Why wouldn't market actors use self-interest to change the norms and institutions to benefit themselves more and more?

[aragon]

It's simple:

The Tories protect the rich at the expense of the poor.

Under Blair/Mandelson/Starmer the Labour party do the same.

Ask Liz Truss or Rishi Sunak about free markets. Remember Britannia Unchained?

It turns out that:
Financisation, Asset Inflation, Out sourcing, pPivate Monopolies and Intellectual property are no way to run a country.

Moniterizing the customer/public,
vs Peter Drukers Creating and Satisfying the customer.

They are just firefighting to keep the jury rigged economy afloat.

It turns out: All for me, is a bad strategy when applied to society.

https://www.theguardian.com/sustainable-business/blog/maximising-shareholder-value-irony

"Roger Martin, dean of the Rotman School of Management at the University of Toronto, goes further by pointing out that maximising shareholder value is actually a bad way to run a business." [or country]

[...]

"The biggest cost of all, however, is neither to the company nor its shareholders, but to our society and our planet. The ubiquitous mandate to maximise short-term shareholder value has driven a deep wedge between business and society. The long term success of any company depends on the health and wellbeing of its employees, customers, and the communities in which it operates."

The Tories are just firefighting and don't understand the fundamentals, the same is true for the very shallow Labour leadership.

Simples!

[aragon]

Karaoke suggestion for the Labour party conference

https://www.ozzy.com/archives/track/road-to-nowhere

All together now.

https://www.ozzy.com/archives/track/road-to-nowhere

Or

https://www.youtube.com/watch?v=LQiOA7euaYA

Add Monosopony to list in previous post.

p.s.
The remaining 35 pages known as "The Road Ahead", are intentionally filled with waffle and erroneous analysis.

e.g
"
https://www.theguardian.com/politics/2021/sep/23/starmers-words-and-what-they-mean-for-labour

My vision for Britain is to make it the best place to do business because it has a government that works in partnership with the private sector … The role of government is to be a partner to private enterprise, not stifle it."

K Starmer

See previous post.

[pandora]

The mantra of free market capitalism is applied when it is politically expedient to do so. When politicians risk losing their jobs, they promise to socialize the wealth created by free market capitalism.

[Aire Soho]

I'm not sure I agree with the message (everything boils down to class warfare), but I do admit that this sentence is brilliant: "Thatcher hoped a market society would give us men like her father; in fact it gave us ones like her son."

[Blissex]

«The Tories protect the rich at the expense of the poor.»

More generally, they further the interests of incumbents at the expense of non-incumbents.

[Blissex]

«All of this fits with Johnson’s “fuck business” remark; [...] a flat rejection of Thatcherism.»

Our blogger is shocked, shocked that rentierism is going on in this joint :-).
As if the Right-to-Buy discount, or the 1-2 trillion pound bailout of the City, or the immense loans for property speculation were extraneous to actually-existing thatcherism.

[Blissex]

«I do admit that this sentence is brilliant: "Thatcher hoped a market society would give us men like her father; in fact it gave us ones like her son."»

http://exepose.com/2016/03/02/thatcher-and-god-an-interview-with-eliza-filby/
«However, it is undeniable that Thatcher’s policies led to a nation that was more individualistic, hedonistic and greedy. With this in mind, I press Filby as to whether Thatcher ever regretted unleashing the forces she did. “Yes,” comes the instant reply. “Peregrine Worsthorne [Telegraph journalist] once said that, ‘Margaret Thatcher came into Downing Street determined to recreate the world of her father and ended up creating the world of her son.’ It’s a pretty damning assessment but it’s actually quite true.”»

[ltr]

September 24, 2021

Coronavirus

United Kingdom

Cases ( 7,601,487)
Deaths ( 135,983)

Deaths per million ( 1,988)

China

Cases ( 95,948)
Deaths ( 4,636)

Deaths per million ( 3)

[ The sadness is ongoing, but neither Tories nor Labour appear to have more meaningful policy suggestions. ]

[rsm]

》Our blogger is shocked, shocked that rentierism is going on in this joint :-).
As if the Right-to-Buy discount, or the 1-2 trillion pound bailout of the City, or the immense loans for property speculation were extraneous to actually-existing thatcherism.

Is it too simplistic to categorize private credit creation backstopped after the fact by central banks as rentierism? Shouldn't we say that private firms have greatly expanded assets much faster than liabilities? The rich create money faster for themselves than prices (including for real economy labor) rise?

[ltr]

https://www.bbc.com/news/business-58641394

September 22, 2021

Gas price crisis: Food firms face huge price rise for carbon dioxide

The British food industry will be forced to pay five times more for carbon dioxide as part of a government deal with a US company to restart production in the UK.

Environment Secretary George Eustice said carbon dioxide prices would rise from £200 per tonne to £1,000.

The government has agreed to pay out tens of millions of pounds to CF Industries to reopen a plant in the UK.

The closure had raised fears over food supplies and the nuclear industry.

US-owned CF Industries recently shut two UK sites that produce 60% of the country's commercial carbon dioxide supplies, because of a sharp rise in gas prices....

[Nanikore]

"Only by reducing liberty to notions of the “free market”, “small government” and “common law” could the idea of the Anglosphere as the principal fount of liberty be imagined."

Neo-classical economics is rooted in Anglo Saxon arguments of individualistic optimisation under constraints. It risibly links free market capitalism and democracy through individual rights.

Pardon me posting this, but it's very poignant:

https://www.theguardian.com/commentisfree/2021/sep/25/the-anglosphere-is-just-a-cover-for-the-old-idea-of-white-superiority

[Nanikopre]

I think Kenan Malik's view is somewhat consistent with the blogger's post. China is seen as threatening an Anglo Saxon hierarchy, which has served existing hierarchies within Anglo Saxon countries, very well.

In the past, capital in Anglo-Saxon countries has been able to win-over and absorb capital and authorities in others. It has kept the hierarchy intact.

However, they are now finding that China, and especially its communist party leadership, is not playing its game.

[ltr]

Kenan Malik's view is somewhat consistent with the blogger's post. China is seen as threatening an Anglo Saxon hierarchy, which has served existing hierarchies within Anglo Saxon countries, very well....

[ Interesting and very, very important though a saddening determination. ]

[ltr]

https://www.theguardian.com/commentisfree/2021/sep/25/the-anglosphere-is-just-a-cover-for-the-old-idea-of-white-superiority

September 25, 2021

We should not allow the Anglosphere to distort the history of liberty
By Kenan Malik - Guardian

[ Terrific essay. ]

[ltr]

Nanikore:

Neo-classical economics is rooted in Anglo Saxon arguments of individualistic optimisation under constraints. It risibly links free market capitalism and democracy through individual rights.

[ Brilliantly expressed. ]

[Blissex]

Oh please the Malik argument is a tedious list of smears by selective citing of past authors with "nasty" views, which were instead widely common outside the "anglo-saxon" and "white" world thousands of years before the "anglo-saxon" were more than savages in forests, famously in India with its caste system, but nearly everywhere in Africa and Asia too, where slavery, and also ethnically motivated slavery, was common.

The use of the word "hierarchy" is a classic neoliberal tell, as it is from Corey Robin's argument that the right is about protecting hierarchy against emancipation, that is politics is identity based, rather than class/interests based.

[ltr]

Obviously, the American-British-Australian efforts at recreating a Cold War with China are racially and imperially based. Simply look to the media in each country and have the sensitivity to be shocked at the imagery. The Economist is writing as though this were the period of the Opium Wars. The New York Times is savage....

Look to the writing and understand the racial-imperial resentment of China, then hopefully argue however mildly for a softening change. This Cold War needs approach to be stopped for all our sakes now. China wants community.

[ltr]

Related and especially important:

https://www.nytimes.com/2021/09/25/opinion/charles-w-mills-dead.html

September 25, 2021

The World Lost a Great Philosopher This Week
By Jamelle Bouie

This has been a sad week for those of us who read, study and care about political philosophy. That’s because Charles W. Mills, a U.K.-born and Jamaica-raised philosopher whose life’s work was the interrogation and critique of the foundations of liberalism, died on Monday.

Throughout his long and fruitful career, Mills worked to show how, despite its pretenses to universalism, liberalism as a political tradition and philosophy has historically been strongly biased toward the material interests of white people and white polities to the detriment of nonwhite peoples and nonwhite polities....

[rsm]

Who wouldn't want to join a community where sissy boys are banned from TV under threat of CCP state violence?

Are Taiwanese racist for not bowing before the CCP?

[ltr]

The point, of course, is the Britain really needs a partnership with China, while China would also benefit but simply does not need Britain. Britain's antagonistic foreign policy is self-defeating and will increasingly limit Britain:

https://fred.stlouisfed.org/graph/?g=F7ZN

August 4, 2014

Real per capita Gross Domestic Product for China and United Kingdom, 1977-2020

(Percent change)

https://fred.stlouisfed.org/graph/?g=F801

August 4, 2014

Real per capita Gross Domestic Product for China and United Kingdom, 1977-2020

(Indexed to 1977)

[rsm]

Could we be experiencing another great inward closing of China, as the CCP signals a willingness to let foreign investors suffer Evergrande losses while making domestic investors whole?

》There is a famous story from 1792 when King George III’s ambassador led a trade mission to China with a cargo of the latest European technologies to present to the Chinese emperor — telescopes, globes, barometers, lenses, clocks, carriages, and other such things.

》Historians report the Chinese emperor said: “There is nothing we lack — we have never set much store on strange or ingenious objects, nor do we want any more of your country’s manufactures,” thus reflecting his insular view.

》A complicated set of factors, including weak Chinese leadership, internal conflict and a rejection of Western technology led to China turning inward and missing out on the Industrial Revolution. This left China significantly weakened, and subject to invasion and Western humiliation.

https://www.google.com/amp/s/theconversation.com/amp/lessons-in-chinese-history-as-america-shuts-off-from-the-world-99360

Is financialisation today's industrialization, and is the CCP about to try to repeat history?