yes, yes, yes! I’m also baffled by how weak the left (in a broad sense) has been. It’s nice that people are rediscovering the value of Keynes (and even Marx) – but very dispiriting that we’re relying on long-dead economists when the discipline has moved so far forwards – and so far towards the left – in the last couple of decades.

There are basic things that should be blindingly obvious, but aren’t being pushed. That the best way to stimulate the economy is to get more money into the hands of the poor, for example – it’s economic good sense (the poor will spend money, rather than saving it), quite apart from being the Right Thing morally. Or how we could be using the collapse of the housing market as an opportunity to buy some buildings to become council flats – sell it to the rich as a way of propping up house prices, and have the re-distributive effects as a bonus.

But beyond that, we are missing *so many* opportunities to take up new(ish) ideas from economics – about behavioural economics, asymmetric information, institutional behaviour – to show how laissez-faire doesn’t lead to perfect markets. The crisis should be a demonstration that we need the state and culture not to abolish markets, but to create markets which operate to fulfill our social needs.

There’s no shortage of left-leaning economists. And popular opinion on the left may be pretty anti-market, but many of the people in think-tanks and NGOs — the ones who should be writing about the crisis — have nuanced and informed views on markets. So why this dearth of ideas? I’m as confused as you are.

The lefts approach to the financial crisis is analogous to someone who has huge debts, loses his jobs and reacts by getting and maxing out on even more credit cards. The problems are

Having relied on overvalued assets (tangible and intagible) to drive the economy with debt, they are at a loss what to replace it with when the assets are impaired, the debt isn’t avaiable and we don’t make anything any more.

More subtly, having encouraged a generation to see them as the solution to any and all problems, the left are wrong footed by a problem they cannot control. Hence the blizzard of initiatives – must be seen to be doing something, otherwise the proles will realise we aren’t masters of the universe after all.

They are (not explicity of course) encouraging people to take on more debt to “shop” the country out of recession. This is actually quite clever because they can then blame the banks for not lending them the money for retail therapy…………….

Simulatously they are demanding fairly swift reapayments on their reacapitalisaition loans to the banks

You don’t need the brains of an accountant to see that both things cannot be done at the same time, you either rebuild your balance sheet (by not lending anything) and pay off governemnt det with the cash or you lend the cash in the form of loans.

The solution (and I consider this libertarian rather than right) is eyes on, but hands off, let the recession run its course. Allow banks to go to the wall, house prices to fall, unemployment to rise and output to fall, it will hurt but it will also heal quicker, whereas the above simply spreads the pain out – or gives the worst of it to the next government……

There’s no shortage of left-leaning economists. And popular opinion on the left may be pretty anti-market, but many of the people in think-tanks and NGOs — the ones who should be writing about the crisis — have nuanced and informed views on markets. So why this dearth of ideas? I’m as confused as you are.

yup – agreed.

In fact, I echo Rowenna’s article too, because I’ve been saying similar stuff on LC – our ideological response to this crisis has been so poor, and so incoherent, that it’s embarrassing.

Rightwingers have Daniel Hannan – a man who repeats Milton Friedman soundbites without actually doing much of what is commonly referred to as ‘connecting with reality’ (“Iceland’s great, we should be like them!”) – and yet the left’s response has been… well, confused.

I could humbly suggest that the liberal left take a look at the Austrian approach to the crisis (as opposed to the Chicago/Friedman approach), just as many libertarians are at the moment. We might find plenty of common ground on the issue of de-monopolised currencies and free banking. Such an alternative is eminently compatible with decentralist left ideas to do with mutual building societies, co-operatives and other community managed economic systems, and libertarians win from it because it means less overall state control.

Got an invitation to this with Compass and the German SPD at Parliament tomorrow. Looks interesting. Is anyone up for going? Let me know and I could RSVP. (If I’m invited I assume that means anyone can go!)

“Compass and its counterparts in the SPD Germany invite you to the launch of an important joint political project to build a post-crisis social Europe:

‘Building the good society: the project of the democratic left’ by Jon Cruddas MP and Andrea Nahles MdB

Wednesday 8th April 2009 3.00pm – 4.00pm

Room O, Portcullis House, London SW1 3JA

Please allow yourself time to get through security.

Ten years ago Tony Blair and Gerhard Schroeder produced their declaration of the European third way. To mark this anniversary Compass and its counterparts in the SPD in Germany will publish a new declaration. It will offer an alternative project to build a post- crisis social Europe, and it will form the start of a debate across the European centre-left.

‘ We have a vision of the good society and a more egalitarian economy that will create a secure, green and fair future. But to achieve it capitalism must now become accountable to democracy; and democracy will need to be renewed and deepened so that it is fit for the task. A good society cannot be built from the top down, but can only come from a movement made by and for the people. Creating the good society will be the greatest challenge of our time and it will shape the lives of generations to come

To begin we must tackle the economic crisis:
Implement a coordinated Europe wide fiscal stimulus.
European wide reforms in financial and economic governance
Reform of the European Central Bank and the European Monetary Union.
Bring failed banks into public ownership and extend greater democratic control over the economy by using the 2001 European Company Statute.
Introduce a European minimum wage, corresponding to the national average income
Restore collective bargaining, workers rights to strike, and establish equality for posted and migrant workers across Europe
Europe needs fair policies on taxation. ‘

Andrea Nahles is the elected Vice-President of the SPD and Spokesperson for Labour & Social Affairs of the Social Democratic Group in the Bundestag. She is often tipped as a future leader of her party.

Jon Cruddas is MP for Dagenham. In 2007 he stood for the deputy leadership of the Labour Party and won the most first preference votes of all the candidates, establishing himself as a politician of national significance.

Embargoed copies of the declaration are available and there will be copies available at the event.”

Dan – I applaud you!

“Surely the Fabians’ fantastic network of intellectuals and resources can make a stronger, more coherent case than that?”

You are rather assuming that the Fabians (or the “left” if you prefer) have a coherent economic case, let alone a stronger one.

Looking through some of the suggestions above.

“A fiscal stimulus could provide jobs and build public infrastructure and services for the benefit of all – helping private companies increase productivity over the longer term.”

Erm, building “services” isn´t a fiscal stimulus. That´s a committment to an increase in public spending in the future….not a bolus of such spending now which is the usual meaning of a stimulus.

And I do wish that people would at least ackowledge the issue of the deadweight costs of taxation. I agree absolutely that some taxes are necessary and that the increase in productivity (or wealth if you prefer) derived from their spending more than covers those deadweight costs. I´m simply unconvinced that this is true of further boosts in spending from where we are now, to say nothing of the point that we might already have reached the point of diminishing returns.

” Income could be raised by taxation on industries that pollute and destroy the environment – taking into account their negative externalities – and bringing in much needed revenue.”

This is hardly left wing. I´m at the Adam Smith Inst and I advocate it for the Lord´s Sake. However, there´s one bit of the story that you´re missing. That we want to incoproate externalities into market priceing, yes, of course, but that doesn´t mean that we actually want to either raise the general level of taxation nor increase State spending. The two are entirely different arguments.

It´s generally accepted that Pigou taxation is a good idea: but that it should be revenue neutral. Tax the bad things, yes, but when you do so reduce the taxes on the good things. Even Gordon Brown claims to believe this. The Landfill Tax is rebated (roughly, but still) to company NI payments.

“An increase in social housing would stop more risky lending and save money on the costly externalities of homeless and poverty that are now on the rise.”

Not hugely convinced. As the Cruddas paper points out, owner occupation raises the unemployment level as it restricts labour mobility. True, but an expansion of social housing isn´t the answer. For it takes even longer to move from one social housing area to another than it does to sell and buy a house. Private rentals provide much more labour market flexibility so we should be embracing that, not social housing.

“about behavioural economics, asymmetric information, institutional behaviour – to show how laissez-faire doesn’t lead to perfect markets. The crisis should be a demonstration that we need the state and culture not to abolish markets, but to create markets which operate to fulfill our social needs.”

Again, I don´t see that this is anything uniquely “left”. All of that is contained with in Adam Smith for example. However, if you´re arguing that the way to deal with markets not operating perfectly is to create new markets then of course I agree. We have this carbon externality for example, and cap and trade is indeed the creation of a market in order to bring that externality into the market system. Robert Shiller argues that the housing boom was in part because not enough people could speculate in housing futures. If that´s what you mean, that the absence of a market means that we should create one then great. Just that this isn´t something which in the English parlance I would call “left”.

Guy – please post the outcome of that will you? Or a link to where it can be read.

Tim –

For it takes even longer to move from one social housing area to another than it does to sell and buy a house. Private rentals provide much more labour market flexibility so we should be embracing that, not social housing.

And the exorbitance of private rented property? They buy them and, in what I have seen you say before, the market dictates what people will pay. But that isn’t the whole story now is it? If there is a lot of housing that is either social or private, rents will come down, no?

Because of the lack of housing stock private landlords can fleece at will. Thatcher brought in right-to-buy, idiotic idea but still – that closed down so much of the stock – she didn’t allow rebuilding hence the shortage even today.

If the private landlord wishes to compete with the local council – I am all for that, but before you can get anywhere near this you need the houses to be built, bought up/converted/made ‘green’ and that means investment from somewhere much like the stimulus we on the left are crying out for – and not one to shore up bankrupt banks.

Will – sure will do.

Have I missed something?

Everywhere I look, lefties have been arguing for bigger council housing building programmes, a big fiscal stimulus, etc. Perhaps revolutionary socialists haven’t been arguing for a big fiscal stimulus to rescue global capitalism, but that’s hardly surprising. Who hasn’t been that should’ve been?

Tim W: i’m not saying that pro-market policies should be exclusively left-wing. I’m saying they shouldn’t be exclusively right-wing or even exclusively centrist.

As you say, the questions of pro/anti market and pro/anti inequality can be separated. What I’m grumbling about is that the pro-market pro-equality case isn’t being made nearly as loudly as it should be.

I can agree with the ASI on taxing externalities, creating markets, etc – and then disagree sharply with your tolerance of massive inequalities of income and wealth. I’m disappointed when my friends’ energy is diverted into fighting against markets rather than fighting against inequality.

Possibly my position doesn’t qualify as ‘left’; I can’t say the terminology much bothers me except on a tactical level.

“and then disagree sharply with your tolerance of massive inequalities of income and wealth.”

I agree that I don´t worry much about inequality. But then that´s because I´m pretty certain that it´s been declining for a long long time.

Leave aside crude measure of simply money incomes. Look rather at consumption. And look at real consumption, not just what money is directly spent upon.

For example, it was widely remarked that the urban proletariat called up in 1916 to hte conscript armies were 6 inches shorter on average than their upper class officers. That sort of inequality caused by malnutrition is now pretty much gone (there is still genetics of course, making some tal and others hort but it is nowhere near as class based as it used to be).

Simlarly, while life spans are indeed wstill unequal I´d argue that they are a great deal more equal than they were: especially if you cxonsider what used to be infant and maternal mortality in the slums.

On a slightly different level, much is made of the way in which many things are no long er provided through hte market. Thus incomes don´t decide whether you get that good or service r not. Education, the NHS, libraries, parks, the internet is pretty much available to all now. Inequality of cash income is simply no where near as important as it used to be….IMHO of course.

Yes, Britain’s poor are better off today than they were in Victorian slums. Great. Now, can we perhaps aim a little higher than that?

Dan: Sure, return to sound money and keep business regulation at bay and we can all look forward to getting slowly but consistently richer, healthier and, so long as we keep the moralisers on both the left and right away, happier.

Nick, you realise how daft “keep business regulation at bay” sounds to most people in the current economic climate, right?

You are rather assuming that the Fabians (or the “left” if you prefer) have a coherent economic case, let alone a stronger one.

As opposed to Daniel “We should all follow Iceland’s example” Hannan?

Pull the other one.

“Nick, you realise how daft “keep business regulation at bay” sounds to most people in the current economic climate, right?”

Yes, which is why my first point was “sound money”, the reason being that our current crisis is one of credit. Unless you think the current crisis is caused by Tesco or something…

How will we return to “sound money” without regulation, though?

I accept (though think they should be subject to regulation too) that regulating Tescos is different from regulating hedge funding, but financial institutions are businesses, so at the very least you’re advocating business regulation in some areas.

Free banking is one possibility, and would just require removing regulation, for which I can recommend this fascinating and recent lecture: http://video.google.co.uk/videoplay?docid=2495820480786986515

Alternatively, we could return to some form of commodity backed currency. Perhaps thats “regulation”, but it is regulation in the sense that it prevents what used to be considered straightfoward fraud.

Lib Dem policy bingo:

“fiscal stimulus could provide jobs and build public infrastructure”

Check (though the LDs aren’t claiming any direct link to an “increase in productivity for private companies”, quite rightly because this is a tenuous claim at best.)

“taxation on industries that pollute and destroy the environment – taking into account their negative externalities”

Check (and in fact this is often a libertarian viewpoint as well, the environment being a common resource from which we benefit; see also Tim Worstall above).

“An increase in social housing”

Check.

BINGO!

Now I personally am not that happy with some elements of the LD Economic Recovery plan – “job creation” in particular is always a worrying phrase, and the whole thing is meaningless without a regulatory overhaul anyway. But if you’re happy with all that then it seems to me you could do worse than vote Lib Dem. I’m not sure I even know who “the left” are any more.

By “removing regulation” Nick means (I imagine) removing the kind of regulation that allowed high street banking to become monopolised by a few well-placed giants because nobody else could struggle through the red tape and punitive small business taxation to compete. Those giants had no incentive to improve. Excess profits and near monopolies indicate an inefficient market, and that’s what we’ve had (and anyone who has ever been on the phone to Abbey will have seen that borne out).

Well for a start, the left needs to stop being so accepting of new labour’s many, many (treacherous) shortcomings.
You’re looking in the wrong (New lab, new establishment) places for answers, among the wreckage from the damage wrought by the entryist Newlab spivs and charlatans, who now spout guff about connecting with the masses, but run a mile from true grass-roots work, being scared both of the grass-roots as they’re off-message, and of proper work, as opposed to blue-sky thinking/head-up-arsery, solipsistic wonking, and general parasitism.
Only a socialist overview and regulation of markets can defend democracy from capitalism’s inevitable tendency to concentrate capital at the top of the system, but that must be an open and accountable socialism (not a phony socialism, but one with grass-roots, and not concoted in a think-tank ideas lab), rid of cronyism and favouritism.
The best line in that CiF piece came from LesterJones, which was simple but encapsulates the mission:

we need to “regulate the private sector into public usefulness”

The best line in that CiF piece came from LesterJones, which was simple but encapsulates the mission:

we need to “regulate the private sector into public usefulness”

Encapsulates it for those who understand it.

What you will get out of that from the wingnuts is that it is a matter you are regulating private industry (though few remains) and making everything a matter of ‘owning the means of production’ – that is how they fight what they see as socialism.

What they cannot get their heads around is understanding why, when people are unemployed and in desperate means, crime etc goes up – with a bang.

Work is a matter of social networking as much as going to the pub – people do want jobs, yet wingnuts like the Tories try to keep wages as low as possible to generate greater profit – they see life as a matter of CoD.

When investors come to realise that investing is also about social policy as well as a financial return things will eventually change – which it is all about simple financial return we will have what we have today.

In other words the wrong type of people have the money to invest hence the never ending circle.

Utopian? I don’t think so – Socialism is a possibility but it will take a lot of education to get there.

@ Will (34). You’re right in that it takes a little nous to ‘get’ it:Private profit and private efficiency are nothing unless they provide some wider good too.

“Yes, Britain’s poor are better off today than they were in Victorian slums. Great. Now, can we perhaps aim a little higher than that?”

Sure. Britain´s poor are better off than they were in Edwardian slums, George V ian slums, George VI ian ones too.

I realise that much of the debate here is rationl (by my twisted standards of course) in that we´re trying to work out how to make capitalism work better according to our own definitions of “work better”.

But when someone starts to talk about “socialism” or the overthrow of capitalism etc I´m afraid I rather start to see red and become irrational. For capitalism has one defining feature as an economic syste, It´s the only one we´ve ever tried (and I´m using the wide definition of capitalism, from social deomcracy through to laissez faire) which has ever proven to be capable of a sustained and continual increase in hte standard of living of the average person.

That´s actually not a bad result, not a bad outcome from an economic system. Things get better for all continually (please do note that this little hiccup has, so far, reduced the British economy to the penury we suffered under in March 2008….such has been the shrinkage of GDP).

I agree, money ain´t everything, nor are material possessions. But economic growth is an expansion of our capabilities to do things….something I rather like in an economic system.

As to aiming higher….there are still a coujple of billion humans living in the direst destitution. As even Marx pointed out, this liberal capitalism shit is really good at creating wealth. Sure, there might be inequality, might be alienation, anomie even, but if we´re to drag those 2 billion up out of the mire we need to create more wealth. That one thing that capitalism is shit hot at.

Interestingly, if you look at the economic models upon which climate change is calculated from (yes, the IPCC stuff is based on modesl called the “SRES”) you´ll see that these models, the ones that the scientific consensus are built upon, assume that a capitalist, globalised economy is the one that will eliminate that $2 a day poverty in this century. A non globalised economy doesn´t do it and nor does a non capitalist one. But a capitalist, globalised one does indeed.

Even better, some of the lowest emissions also come from a subset of that globalised, capialist economy. Something of a win/win, eh?

So, I´ll aim higher. Let´s eliminate absolute poverty, leave the world as rich as we possibly can to our descendents and try not to boil the oceans in the process. Meaning, as the IPCC assumes, that we should have global capitalism.

Anyone want to raise me on that?

Er, right, Tim Worstall, but how are you going to get the greedy short-termist politicos and financial chiefs to develop enough of a conscience to “eliminate absolute poverty, leave the world as rich as we possibly can to our descendents and try not to boil the oceans in the process”, let alone other noble ends? By socialist thinking, that is thinking of the wider effects and whether certain capitalist practices are actually beneficial to society in the slightest.
(n.b. you say you’re using “using the wide definition of capitalism”, and many on here are using the wider definition of socialism, albeit probably not a definition of socialism broad enough to encompass New Labour)

Rowenna

The broader political and policy narrative challenge is important.

I think the Fabians have done a few more things than the one pamphlet you mention.

This is a speech I gave in Brussels on the post-crisis politics of social democracy last Autumn
http://www.fabians.org.uk/general-news/general-news/katwala-finance-downturn-risks

We published a special issue of Fabian Review on the recession in January, with several policy recommendations and pieces, ahead of our new year conference, which was dedicated to this theme.
http://www.fabians.org.uk/publications/fabian-review/winter-review-fairness-recession

Of course, there is a difference between immediate reactions in publications and events and media interventions – such as the events we have been involved with ahead of the G20 and the budget – which can platform external voices, and more extensive research projects which take longer.

We will next month be publishing a research report on how housing policy responds to the recession and beyond, by my colleague James Gregory.

We have a significant project on how public attitudes changed during the crisis being published around June, based on deliberative workshops over the last several months: it is in the nature of a large-scale project like that one – supported by the Joseph Rowntree Foundation, involving several events around the UK and having an academic advisory panel. It can take some time to produce in-depth findings where new research is being done.

We have reported interim findings here
http://www.fabians.org.uk/images/stories/Fabian_Review_Winter_Fabian_Essay.pdf

@ Alisdair

albeit probably not a definition of socialism broad enough to encompass New Labour

Quite! lol

@ Tim W –

Now, am I seeing the emerging thoughts of a socialist – a wide ranging one at that?

I do agree with you that this ‘crisis’ isn’t as bad as many think – except, as always, for those who are suffering through it. WHich is what we should be allieviating rather than the idiotic idea of “let it run its course, it will hurt a bit but that’s worth it”.

Taking your point of absolute poverty, even if it is based on a figure of $2 (and that is high). Why should it take another 92 years to get people out of that poverty?

Back to the domestic economy – whether you feel that those who are in poverty are really not in poverty because they can buy a can of beans per day is all well and good, yet the social deprivation that leaves in its wake is what socialists feel is just as important as buying a Rolls.

The global economy is, I believe, and please correct me if I am wrong, is leaving certain nations – say China – holding the can, as it were. Capitalism has worked, once again, for the few in China but we still see abject poverty there, though that is getting better for the scum who work on the factory floor.

What to do after China – will capitalist then move to Africa for cheap labour to produce goods that come in to the UK at 3 quid a pop to be sold for 100 quid?

How is that capitalism helping the worker other than to keep them just above absolute poverty – which is, as we know – and of course wide ranging, just what global capitalists want.

“Tim Worstall, but how are you going to get the greedy short-termist politicos and financial chiefs to develop enough of a conscience to “eliminate absolute poverty, leave the world as rich as we possibly can to our descendents and try not to boil the oceans in the process”, let alone other noble ends?”

By letting them be capitalists.

Do you really not get it? Marx did, why cannot you?

“Taking your point of absolute poverty, even if it is based on a figure of $2 (and that is high). Why should it take another 92 years to get people out of that poverty?”

Because in this real world shit it does take time. I’d love to wave that magic wand and make it happen yesterday. But, sadly, that magic wand just doesn’t exist.

“The global economy is, I believe, and please correct me if I am wrong, is leaving certain nations – say China – holding the can, as it were. Capitalism has worked, once again, for the few in China but we still see abject poverty there, though that is getting better for the scum who work on the factory floor.”

Mmmmmm……scum living better lives, making more. Chinese manufacturing wages have been rising at 14% per year (yes, after inflation) year on year for more than a decade. They are thus 4 x higher than they were. Me? I say this is a good thing.

“will capitalist then move to Africa for cheap labour ?”

I hope so. Capitalists competing for the profit to be mde from employing labour is what raises labours’ income. Marx got it, so should you.

Tim Worstall – “Chinese manufacturing wages have been rising at 14% per year (yes, after inflation) year on year for more than a decade. They are thus 4 x higher than they were. Me? I say this is a good thing.”

Despite the fact that I am almost 100% sure that statistic is incorrect lets assume you are right.*

We have to ask, at what cost? Capitalism needs massive modification to provide the necessary wealth in the right places, and China is a perfect example of what is going wrong.

China’s healthcare has been gutted.

A Peasant in rural China used to be incredibly poor, in fact they still are. However, in an effort to separate them from their communities and their entitlements they have had their healthcare torn away. As poorly funded as China’s healthcare was it was a damn sight better than what everyone else on the same income received. Turning people into the working class means robbing them of some things which we have no right to remove.

Chinese worker’s health has been improving, despite the fact any state entitlements they had have been removed. They are saving and they are paying and they are, on average getting healthier. But, they are not getting much healthier, nor are they getting healthier quickly.

As people become wealthier they nearly always become healthier. Who wouldn’t spend money on a longer life if they could? This is happening in China but slower than anywhere else comparable. Capitalism won’t deliver healthier people as quickly as they deserve it.

China’s environment has been ravaged.

Pretty self explanatory point. 14% increase might take into account inflation but does it take into account that their work is leading to the increase in sea level that will flood their Guandong waterfront home? Or does it take into account that their air is no longer fit for breathing? The link below shows Beijing before and after rain, the rain serves to clear the air of particles and pollution.

http://rightyblog.com/wp-content/uploads/2008/07/beijing_smog_comparison_august_2005.bmp

Both the left and right have had a little love affair with China on and off for the last 60 years, but I think China goes nicely to prove that State Socialism, State Capitalism, Market Capitalism and Market Socialism fuck up the little people.

The Left suggest very little because the western Left are running out of ideas. The Left of Latin America or China’s clandestine Union Movement have plenty of ideas and they usually don’t end well for us.

* I am pretty sure that Chinese wages have not been rising at the rate suggested. Please see this article for more info. It’s a little, how do you say, Marxist, but it contains a wealth of information that neither “the market cured China” or “socialism tamed the market” crowd discuss. Intro available here:

http://www.monthlyreview.org/0704intro.htm.

Unfortunately they are not providing the whole article online anymore, damn greedy Socialists.

China Rant Over

Unfortunately I only wanted to italicise the “much” in paragraph 6. I’ve sorta spoiled the delivery there. damn

@ Tim W –

Your magic wand could be your acceptance that socialism is a viable alternative to capitalism – dogma can be un-taught.

We can live and dream.

Whereas I do accept that Marx did accept capitalism – he also said that it would be its own destruction did he not?

If I remember it correctly he also also accepted feudalism, too, yet I don’t see many people leaping from the roof tops screaming we should accept that as the only way – well, other than Daniel Hannan & Co.

I hope so. Capitalists competing for the profit to be mde from employing labour is what raises labours’ income.

The ever popular top down approach, Tim. Yet, still odd, you always claim that labour is a cost and a cost that should be routed out as soon as possible. In the next 100 years of human existence we will see great leaps in manufacturing machinery so we can even get rid of bog roll because humans will not be employed – where does that fit into your ideal?

The pursuit of profit is the pursuit of profit with no meaningful acceptance that labour will be involved – so that point is still moot. No jobs, no labour, no wealth generation for those who would be employed. So the natural progression toward socialism, as Marx said, is still true.

“The ever popular top down approach, Tim. ”

Eh? It was Marx himself who pointed this out. As long as capitalists are competing for access to labour then they will bid against each other. Thus leading to rising productivity leading to rising wages. It is only when they collude, become monopsonist employers of labour that they will be able to prevent this happening. As I say, this IS the Marxist analysis and is why so much is made of monopoly capitalism. If you don’t have that monopoly then you’ll not get the stagnant wages.

Worth noting that outside a few cases of one factory towns the only place we ever did see a monopsony purchaser of labour was under the Soviet system and this is indeed exactly what they did. Held down the returns to labour in order to increase the returns to State capital.

I should perhaps clarify something about my beliefs about capitalism and socialism. They describe, at least in so far as anyone has ever given me a clear description of socialism, methods of ownership of productive assets. Individual as against collective perhaps. And I’m not really all that worried about which path is followed. I can see that there are socialist (to some extent) organisations that compete very well in our current economy. John Lewis is a workers coop for example. Legal firms are all partnerships.

I tend to the idea that certain business lines will be best served by a “capitalist” ownership structure. Heavy industry with large capital requirements perhaps. Others not so much. Knowledge workers, where the capital is going up and down in the lifts each day might be much more suited to a partnership or workers coop structure.

What I’m much much more interested in is that we have a market. This is a description of a method of exchange, not of ownership, so it’s not quite relevant to the capitalism/socialism divide. And given that the two ownership methods both have their places I’d like there to be a market in such ownership structures too.

You want mutuals in the banking system? Great, fine by me. In insurance? Pensions? We have them and they do just fine. You want more capitalist structures? Fine, we also have them. As long as people are free to choose which sort of structure they start, they join, they purchase from, I’ve no problem with whatever anyone wants to do.

As long as they’ve that freedom to choose then I’m pretty certain that the most efficient (ie, the best at satisfying human desires from the technology and resources we have) will win out.

And that is what we want from an economic system, isn’t it? That we maximise our statisfaction of human desires, utility, from what we have available to do so with? One description of economics is that it is the study of the allocation of scarce resources to satisfy human desires….it doesn’t strike me as all that odd to think that thus an economy is the structure by which we do this.

Perhaps part of the problem is that most on the left – including myself – are pretty economically illiterate.

There’s a simple two-fold reason for this: 1. modern economics is now incredibly technocratic and esoteric, and 2. the foundational assumptions of most modern macro economics (pre-crash anyway) have taken Friedman rather than Keynes as their starting point.

The result is that only a technocratic mathematical section of intellectuals can handle modern economics, and typically they imbibe underlying right-wing political philosophies in the process, often without realising.

To make matters worse, economists who dissent from the academic consensus may find themselves marginalised. This seemed to be the case with Dr James Forder, Fellow in Economics at Balliol College Oxford (who happened to tutor me to an excellent standard), who believed that modern economics had largely lost its way. He was, however, not a popular man at the economics department.

I would love to be more economically literate. But I dropped economics after 1 year as an undergraduate because I could not access the technocratic mathematical material, and so concentrated on political philosophy instead. In the process, I arguably surrendered the field to the those on the right. But what was I to do?

You could try the Austrian approach while relies on fewer mathematical models: http://mises.org/resources/3250

There are very few Austrian economists in the mainstream either, but they might be making a comeback as some of their theories seem to be better able to explain the crisis than the dominant research paradigms at the moment.

Paul, you’ve hit the nail on the head. What we need is a good old-fashioned teach-in.

Short of that, various friends have been muttering about setting up an online reading-group, which might be a decent second-best.

Or, at a bare minimum, LC could find an economist to root out some readable commentary on the crisis from left/liberal economists, and give them some guest posts.

Sunder,

All these publications and speeches are truly fantastic, but I think you’re missing my fundamental point which is that – six months after the crisis has struck – the left still doesn’t really know where it stands. Specifically, your list of actions lacks three things which I think are fairly symptomatic of the wider problem I’m talking about:

1) It completely steps over certain key issues. What, for example, is your position on the fiscal stimulus? This is something the left should be strongly advocating, not avoiding.

2) A lack of overall coherence. Individual reports on housing or green economics are great, but how do they fit together in a united whole/manifesto? I think a holistic economic approach could help with this.

3) Where is the coalition? The Fabians need to join the dots with other organisations like Compass. We need to check and endorse each others policies. Without a united front, the left will never advance its case.

Of course, the responsibility for all this extends well beyond the Fabians. Other leftist orgs and individuals must play their part – myself included. If you can think of ways you might want to make this happen, please let me know. I’d be more than happy to help and – judging from some of the comments posted so far – others would too.

@ Tim W –

What I’m much much more interested in is that we have a market. This is a description of a method of exchange, not of ownership, so it’s not quite relevant to the capitalism/socialism divide. And given that the two ownership methods both have their places I’d like there to be a market in such ownership structures too.

Then you and I are not that far apart, Tim.

As long as people are free to choose which sort of structure they start, they join, they purchase from, I’ve no problem with whatever anyone wants to do.

I echo that point – yet I do think that, in economic terms, we cannot allow a totally unregulated economic model that allows monopolies to take root and with the disastrous effects we have seen. To me, the only thing monopolies do is bring about stagnation as you rightly said above. Yet that is not just in wages it is in competition, the small guy wanting to get going and start up the small business and possibly become a large business. I won’t go into detail but I know of someone who was crushed because one of those large conglomerates basically said use our product or we will put you out of business – and they did. That meant no chioce for the customer.

That we maximise our statisfaction of human desires, utility, from what we have available to do so with? One description of economics is that it is the study of the allocation of scarce resources to satisfy human desires….it doesn’t strike me as all that odd to think that thus an economy is the structure by which we do this.

Doesn’t strike me as odd either. And one of those satisfactions of human need is for people to be able to go out to work, earn their crust, spend it as they chose and keep the economy rolling.

Stimulus targeting should have been toward small business, new business’ medium sized business and getting wages to where they should be. It is those monopolies that have, through various forms, kept wages artificially low – hence we need stupid tax credits et al. There should be a real, concerted effort to help and establish Credit Unions rather than traditional banks.

And one last point – I feel that the minimum wage per hour should be far more than what it is now – 11 quid seems a reasonable sum. The people who will spend should be helped more – not less, for, simply, they will spend it.

“we cannot allow a totally unregulated economic model that allows monopolies to take root”

But we don’t….we have a competition commission, we fine monopolies up to 10% of turnover…turnover, not profit. We recognise this danger.

“I feel that the minimum wage per hour should be far more than what it is now – 11 quid seems a reasonable sum.

Eeek! You’d make the *minimum* wage close to the *average* wage? You’d make the minimum wage *higher* than the average female part time wage? Than the average male part time wage?

Actually, you want the minimum wage to be higher than the median wage for the country of 10.53 an hour?

http://www.statistics.gov.uk/downloads/theme_labour/ASHE_2008/2008_all_employees.pdf

(Hourly pay excluding overtime)

Ooooh! way to go! Let’s make half the country unemployed!