Still no ideology?

Oct 16, 2011 Features / Columnists, Ravi Dev

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The imminent collapse of the Eurozone, brought about by the profligacy of the PIIGS based on neo-liberal market fundamentalism and financialisation, reminds us that the 2008 US-induced crisis was not a quite a “black swan” event. Facile cosmetic “tweakings” were insufficient to return their economies to an even keel. We offer following (the gist first written in 2009) in the hope that our political leaders will appreciate and articulate a new model for our political economy.
The triumph of the neo-capitalist model over the socialist alternative at the end of the 1980s 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”. Their imposition of the Washington Consensus on developing world reinforced 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 (the Latin American guinea pig dumped it first), and fundamental changes are being implemented far and wide, the word “ideology” is still taboo – especially in the economy that sets the tone for the rest of the world – the US. There, Wall Street – whether “occupied” or not – is still protected, blameless, and in charge. The financialisation of their economy is still the default mode.
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. As most of the countries attempt to pick up the pieces from the neo-liberal Titanic (2009) most are adopting policies – to a lesser or greater extent – from the “middle-way” social democratic (S.D.) tradition pioneered in northern 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, 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 have fared better than those that plunged deepest into the neo-liberal vertigo of market fundamentalism – such as the PIIGS, Britain, and the US.
At the onset of the first crisis, the greatest focus was placed on rescuing the financial system which crumbled because of the false assumption that the self-regulated market could best spread the risks it was supposed to intermediate. In S.D. fashion, governments moved in massively at both the national and international (IMF) levels to stop the hemorrhaging.
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. At the G20 meetings in 2008-09 all governments committed themselves to greater national and international regulation and supervision of financial institutions – a standard S.D. position. But by 2010 they reverted to their old ways and the Eurozone disaster is the latest consequence: the US is only being held up by China.
There now is a grudging acceptance (save in the US) 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 programs must deliver the greatest good to the greatest number and not just the top one percent. With this in mind, it is quite appropriate that other S.D. programs for social justice and financial controls are being proposed at this juncture.
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.
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 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 reflexive 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?

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