A State of equanimity

Jul 04, 2010 Features / Columnists, Ravi Dev

(Both the PPP under a new leader and the possible coalition of opposition forces that is being contemplated (fashioned?) will have to consider what is the best form of the state that can deal with, to begin with, the economic failures exposed by the ongoing world financial crisis. It will not end with Greece. We submit the following piece first issued a year ago.)
It has become obvious to most observers that the present financial crisis will need more than facile cosmetic “tweakings” for us to return to an even keel.
This conclusion has forced many leaders of countries in crisis to re-examine the structural bases of their economies in an attempt to craft comprehensive and coherent responses that go beyond merely ameliorating symptoms.
Such fundamental reappraisals have raised the matter of a word that dared not be uttered for the last couple of decades – ideology.
The triumph of the neo-capitalist model over the socialist alternative at the end of the 1980’s was supposed to have delivered us to the “end of history” and beyond ideology.
The victorious neo-liberals never felt it necessary to really articulate an “ideology” – in true hegemonic fashion, they merely elaborated its tenets as “common sense”.
Its most popular exposition, dubbed the “Washington Consensus”, was merely the title an economist tagged on to his compilation of demands made by IMF/World Bank on faltering Latin American economies.
That happenstance served to reinforce the seemingly positivistic nature of the new dispensation – this was just how the world was and ought to be – and made debate appear frivolous and hare-brained.
Even now, after the collapse of the neo-liberal project, and fundamental changes are being implemented far and wide, the word is still taboo – especially in the economy that sets the tone for the rest of the world – the US.
There, most of the major banks are now effectively owned by the government – but the word, “nationalization” (which is what has occurred partially) would not only suggest an “ideology” but “socialist ideology” cannot be uttered. (Excepting to hit Obama over the head when he proposed universal health care.)
It is clear that the extreme ideologies – pure socialism and unfettered capitalism – have failed the test: the former because of too little incentive and the latter because of booms and busts, unproductive speculations and uncontrolled negative externalities. And unfettered greed.
As most of the countries attempt to pick up the pieces from the neo-liberal Titanic, they are all adopting policies – to a lesser or greater extent – from the “middle-way” social democratic (S.D.) tradition pioneered in Europe over a century ago.
These include a “mixed economy” of both private and publicly owned enterprises, a wide range of subsidized or publicly provided social services – especially health and education, rigorous regulation of enterprises for the benefit of wider societal interests, progressive taxation, rule of law and social justice and entrenched human rights etc.
Those counties that held on to their S.D. policies to a greater degree such as Germany and India have fared better than those that plunged deepest into the neo-liberal vertigo of market fundamentalism – such as Britain and the US.
The latter duo’s praxis – dubbed “Anglo-American” capitalism by the Germans, however, have still denied the assumption of any ideology.
At the onset of the crisis, the greatest focus was placed on rescuing the financial system which crumbled because of the false assumption (market fundamentalism) that the self-regulated market could best spread the risks it was supposed to intermediate.
In S.D. fashion, governments have had to move in massively at both the national and international (IMF) levels to stop the hemorrhaging that is still ongoing.
As the crisis inevitably spilt over into the real economy, the major S.D. tools of governmental fiscal and monetary policy were ratcheted up – they had become standard after WWII.
This is also ongoing. The U.S. is even contemplating intervening to prevent the fall of the major car makers –with possible equity injections –something that had long been accepted in the mixed economy S.D. framework.
At the G20 meetings all governments committed themselves to greater national and international regulation and supervision of financial institutions – a standard S.D. position. (Obama’s latest efforts at “turning the screws” on Wall Street, however, have been risible.)
There now an acceptance of the fundamental S.D. position that government must play a greater role in ensuring that the goals of society are fulfilled and that the primary goal is that that programs must deliver the greatest good to the greatest number (and in all social groups) and not just the top one percent.
With this in mind, it is quite appropriate that other S.D. programs for social justice are being proposed at this juncture.
The US which practices most social democratic welfare ideas is balking at President Obama’s advocacy of a national health care program but it is only a matter of time that this resistance is abandoned. (It was.)
The case for a widening of the S.D. approach may best be made at this juncture in terms of the handling of risks which has been brought to the fore in the financial meltdown.
Social democrats have long argued that the capacity to share and manage risks most effectively is at the societal rather than at the individual level. The set of policies traditionally associated with social democracy may be regarded as responses to a range of risks facing individuals, from health risks to uncertain life chances.
The neo-liberal critique posited that the S.D. welfare state approach killed initiatives but we have seen that unregulated markets are not the answer. (We will have to draw our own lines in Guyana.)
The collapse of the neo-liberal paradigm does not mean an atavistic return to the ideas, policies and practices of the postwar social democratic era.
Social democrats must also learn from the mistakes of that era and retain what was valuable in the failed experiment, including a commitment to sound fiscal policy and a rejection of protectionist restrictions on trade in goods and services.
This constant adjustment to the test of experience rather than arguing only from first principles is the distinguishing feature of the ideology of social democracy. Dare we use the word?