Tuesday, April 03, 2007

 

If Tax and Spend Can't Cure Poverty, What Will?

[Sorry if this is a longer post than usual but it IS a big topic] A comment on my last post by the excellent Bloggers4Labour was sufficiently thought provoking for me to eschew day to day politics to attempt a more measured-but hopelessly brief- response in a separate post. I fear I cannot offer much optimism on the basis of my analysis. For those who have not read it the comment is as follows:

I certainly wouldn't want to rule out - for ever - a policy of soaking the rich, I'm just wary of the idea that it's impossible to make a substantial difference to the poor without going that far. Where would we go from there, if the problem were not solved forever? The sums we're raising and spending as a government are vaster than we could have hoped for in the wilderness of the 1990s, and yet the poor are only "less poor" than they were. Sure, taxes can rise, and loopholes can be closed, but they can't be answers to the fundamental problem...

This seems to me to get to the nub of modern progressive politics. If massive tax and spend fail to improve the lot of the poor except marginally, what can those on the left realistically do? The answer turns on how the economy is approached, especially difficult now we live in a globalized world.

1. Do we seek to sweep away capitalism and replace it by a fairer system?
My view on capitalism is a bit like Churchill's on democracy: 'the worst system in the world, except for all the others'. Communism was certainly inferior as an answer and socialism, as practiced by Old Labour, was revealed a failure by the end of the seventies. It seems we don't have any acceptable alternative just yet, so we're stuck with free enterprise as the best, or least bad, means available for generating wealth. If this is indeed the case, we have to ensure the economy is duly looked after and made to work reasonably efficiently.

2. Do we use democratic means to change society or embrace more robust forms of political action? If the latter involves violence, I would foresee nothing but harm ensuing. It has taken centuries to expunge violence as a political method in the UK and nothing has occurred since the French Revolution to convince me it has any modern cost-effectiveness. Once violence enters the scene you may as well rip up any list of political objectives you might have painstakingly drawn up. So we have to use peaceful democratic means.

3. Do we adopt leftwing policies of even higher tax and spend?
This seems unlikely to bring home the bacon in that the bulk of taxpayers have just about reached the limits of their tolerance and are unlikely to approve any manifesto advocating such a direction. Scandinavian tax levels of up to 50% of GDP are just not feasible in current British conditions. At least Gordon's 'stealth taxes' have allowed a reasonable slice of middle class earnings to be used for the public services- if he had come clean and stated an aim to tax to current levels, Labour would probably not have won three successive elections.

4. Do we give the Conservatives a try with a return to even more unbridled capitalism? The eighties should have cured us of any notion that this is a realistic course of action. Public services in meltdown, a savagely divided society, even more hopeless problems of crime and poverty; these are just some of the likely legacies
of such a course of action.

This survey of the arguments is very simplified but I've tried to provide the beginnings of an answer to B4L. To sum up: if we accept a laissez faire economy plus democracy, our options are few. To compete effectively in a globalized economy, some social injustice seems inevitable and maybe the best we can aim- and fight- for is yet more gradual amelioration along the lines attempted to date. Activists can campaign for more radical change but will not find much traction from the present political culture which is resistant to any radical change in the social and economic order. This may change-just as attitudes towards the environment have changed- but even that took several decades and has nowhere near reached the point required to effect the radical change needed. Well, I did warn I couldn't offer any optimism...

Comments:
socialism, as practiced by Old Labour, was revealed a failure by the end of the seventies

The problem with that line is that capitalism was revealed as a failure at the start of the 1930s (and many times before and, albeit less destructively, several times in the past 25 years). And the lows of the 1930s were much lower than anything experienced in the 1970s, or even under Thatcher - there were actual famines in Britain in the 1930s. And yet, it came back. It would be ridiculous to presume that socialism won't do the same.

There's also a fundamentally bogus world view at the centre of this - that Britain was in an entrenched economic malaise in the 1970s and is enjoying some kind of prosperity now. This is based on both a fallacious view of history and on a process of judging economic success by certain specific criteria that reflect the interests of capital (and it's the same kind of thinking that tells us that Germany is currently a failing economy, despite it being more prosperous and productive than Britain and not facing anything like the same levels of actual poverty or social breakdown that we face). Remember that the low unemployment figures celebrated a few years ago were merely the lowest since the mid-70s. Remember also that the economic problems Britain experienced in the 1970s were the result of Ted Heath's attempts to introduce what eventually came to be known as Thatcherism, and the refusal of Jim Callaghan to significantly reverse Heath - not the result of anything that could be described as a socialism.

Looked at objectively, Britain's economic standing clearly continued to deteriorate after the 1970s, and is today only as good as it was in the 1970s. The socialist system of the post-war era was not perfect, but it was certainly better than anything tried before or since, or any approach I know of that's been tried elsewhere in the world. That system was responsible for the unprecedented growth and prosperity enjoyed by Britain during the 50s and 60s - the longest sustained period of economic success in British history and something we're still a long way from matching let alone improving upon.

The primary problem lies with the way people percieve socialism and economics in general. THat's going to be difficult - perhaps even impossible to change. But capitalism is not a sustainable economic system, and our current economic bubble is going to burst. When that happens, it's hard to imagine anything except Old Labour socialism replacing the current system - albeit probably on an EU-wide basis.
 
Greg, what shape would a socialist EU economy take? Price controls, restrictions on the movement of labour, central planning via Brussels, import/export tariffs, restrictions on capital?

We need to acknowledge that the basis of our economic activity will not stray too far from the principles laid out in Adam Smith's Wealth of Nations. You are right to say markets can fail as they did in the 1930s. That's why the Labour Party argues and implements a social democratic state that will help manage the economic cycles, which happily occurred in the 50s,60s and for the last 10 years.

By managing the cycle we keep to an above average growth rate which allows us to generate more government money to spend on social policies such as tackling poverty.

There are many ways to talk about poverty but the fundamental issue is about pouring money into deprived areas over many years. With the money put in the state provides top quality housing, schooling, health and policing in deprived areas and after about a generation of investment we will reap the rewards.

Thats what should differentiate Labour from the Tories. We not only manage the economy more effectively we commit to tackling poverty for a generation because we believe that our society is only as strong as it's weakest area. The Tories believe exactly the opposite no matter what they may say.
 
I must say I agree with Greg. What we saw in the late 190s has shaped how people perceive socialism, but it wasn't even real socialism. Socialist don't try to plan failing economies, instead they plan succesful ones. That's the whole point in economic democracy. More to the point, the reason things turned otu like that is because economic democracy was applied through the state rather than competitive mechanisms, and as a result became far too centralised and top down to ever become responsive to demand.

If you're a marxist, that results in overproduction, and, hance, a lack of proper socialism in the causative process.

If you're a neoliberal, that process results in a lack of demand, and crap products...

but essentially these are two ways of saying the same thing.

There can be a popular and successful socialism, but it won't be one based on centralised state production. It will be about a democratic civil society and an economy that looks much more like the co-operative and third sector does at the moment.

The other point I'd make is that we are talking about the macroeconics of ownership or control, vis a vis capitalism v socialism, but tax is only a small part of this.

While I feel that the rich should be making a larger contribution to fighting inequality, this cannot mean a return to 80pc top rates, as an incentive must be retained in order for the working class to respond to forces of demand (and thus keep growth cycles turning).

As you can see, my idea of socialism is more along the lines of economic planning from the bottom up, which takes account of the public need as consumers. With profits spread more equitably, this could represent a modern and responsive way to a far more socially just society than New Labour has achieved.

often people confuse poverty and inequality though, which really gets me going, as the same people tend to see the two as somehow seperable. There is a trend on the right of the party towards saying that fighting poverty is enough, and all we need to concern ourselves with at the current time.

In contrast, I think that inequality is a primary cause of objective poverty, as well as being largely unjustified in itself. There is therefore a need for more radicalism.

At the same time, since the turn of the century, I have felt that the scope exists in terms of public opinion, but is now beginning to diminish due to the resurgence of the conservative party. We've missed a lot of opportunities.
 
I’m with you I think Skip (but less gloomily!) – there’s no easy answer. Even Mike O's point that the poor in the UK aren't really poor in global terms is valid even if the rest of his comment (on your previous post) made little sense.

I can't agree with Greg about capitalism, I remember earnest Marxists telling me in the 60s that it had in it the seeds of its own destruction but it turned out that it was communism that had those.

Reason to be cheerful: capitalism has delivered at least a third of the world's population away from traditional human existence (ie nasty, brutish and short) and towards comfortable, long and fulfilled lives. And it is possible to lead a happy life on a modest income. And none of the many millionaires I've met seem to be very much happier than I am, many of them seem far less content.

Inequality of opportunity is a real evil and that's what radical parties should be striving to address. But it certainly ain't easy...
 
Simon:
Greg, what shape would a socialist EU economy take? Price controls, restrictions on the movement of labour, central planning via Brussels, import/export tariffs, restrictions on capital?

Democratic control of the economy. I see no reason for that to involve protectionism or restrictions on the movement of labour (althoug both of those are a feature of the EU as an entity, and will be difficult to get rid of). I think it must involve central planning, subsidies where necessary to support employment, and a fair degree of public ownership (both through government-owned utilities and industries as we're familiar with, and through co-operatives and worker control). Price controls would certainly be advantageous in certain areas. Both welfare and trade union rights would be rebuilt.

I suppose what I'm really talking about, in the short term, is a mixed economy, but to me, that's socialism - because socialism is what everybody called it when I was growing up. And I say it'll need to be EU-wide because I don't think it'll be possible for us to quit the union. But we mustn't stand still this time - that's the mistake Labour made in the middle of the C20th, sticking to the post-war settlement rather than moving forward; the failure to pursue further progress ultimately led to the regressive polity that has dominated since 1979.

We need to acknowledge that the basis of our economic activity will not stray too far from the principles laid out in Adam Smith's Wealth of Nations. You are right to say markets can fail as they did in the 1930s. That's why the Labour Party argues and implements a social democratic state that will help manage the economic cycles, which happily occurred in the 50s, 60s and for the last 10 years. By managing the cycle we keep to an above average growth rate which allows us to generate more government money to spend on social policies such as tackling poverty.

But this repeats Smith's mistake, that the economy is some kind of natural system guided by inviolable laws, as if trade is somehow comparable to the motion of the planets. The economy is a man-made thing, and it does what mankind makes it do using the myriad of mechanisms available. It's not a case of trying to manage a cycle or nudge that magic hand in the direction we want: An economy does what those who control it decide it will. Under capitalism (and, indeed, Soviet communism), a small group of entirely unaccountable people decide what it will do, principally for their own benefit; under socialism, the whole community decides, to the benefit of all.

There are many ways to talk about poverty but the fundamental issue is about pouring money into deprived areas over many years. With the money put in the state provides top quality housing, schooling, health and policing in deprived areas and after about a generation of investment we will reap the rewards.

I think that's the case, and that's welfare capitalism and has, at least as a proposition, been with us almost as long as capitalism has. But we've yet to see such a policy re-emerge, or any indication that we can marry welfare and laissez-faire under the current dominant polity. I do think New Labour was the most likely chance of seeing that, and that some in New Labour believed it would happen (Anthony Giddens' piece in the latests New Statesman seems to indicate how disappointed he is, for instance). But it hasn't happened - ten years on and that generation of regeneration hasn't started, and we continue to have a government that believes market mechanisms can deliver improvements to public services and restore social cohesion. Housing is the prime example, and also healthcare where we've seen a significant increase in spending rendered completely ineffective because it was shackled to Thatcherite reforms.

Thats what should differentiate Labour from the Tories. We not only manage the economy more effectively we commit to tackling poverty for a generation because we believe that our society is only as strong as it's weakest area. The Tories believe exactly the opposite no matter what they may say.

That's certainly what should differentiate Labour from the Tories. But looking at Labour's leadership over the past 12 years, and its insistence on sticking to the failed Tory policies of the 1980s, I see little reason to think they really believe in that aspiration any more than the Tories do.
 
Hughes:
I can't agree with Greg about capitalism, I remember earnest Marxists telling me in the 60s that it had in it the seeds of its own destruction but it turned out that it was communism that had those.

If you want a real chucle, track down and read testimonies from the late 1970s from various Marxists, including Christopher Hitchens, saying they're going to vote for Thatcher because scrapping the welfare state will hasten the end of capitalism.

But... the seeds argument has a germ of truth. It wasn't the point I was trying to make. My point was that, by most commonly accepted theories, we're likely to see a major market failure at some point in the future; the scrapping of welfare, the introduction of market mechanisms and private capital into utilities, and the government's scandalous abdication from economic management, lead me to think that if and when it does happen it'll be more along the lines of 1931 than anything since. And I don't think people today will be as willing to tolerate the deprivations that were tolerated in the 1930s, so the reaction against capitalism will be that much stronger.

I'm not talking an economic apocalypse here. That's unlikely to happen if for no other reason than because capitalists (like all conservatives) have an infinite capacity for hypocrisy, and will heartily intervene in the market in order to save it. That's what they did as soon as the Great Depression hit, and that's why Britain didn't suffer as badly as the US (where Hoover's government acted to prevent intervention, on the basis of sticking to those worn principles of laissez faire - actually, given how titanically stupid and economically illiterate the leaderships of all three of the parties currently are, it's quite possible that may happen here). But if and when such a downturn occurs, even if capital is able to save itself again in the short term, a very large number of people will see their lives becoming extremely uncomfortable, and almost everyone will be affected on some level - and, as in the 1930s, we won't have a robust welfare system to turn to. I think that in those circumstances, electoral demand for alternatives to capitalism will become insurmountable.

(It might even take that much of a crisis, actually - just disruption in the lives on enough people. The so-called Winter of Discontent managed to trump the memories of actual famine and mass unemployment in the 1930s, thanks to how comfortable life had become by the end of the 1970s; if a couple of mobile phone companies collapsed suddenly and left everyone unable to call or text for a couple of weeks, telecoms - the only to-date successful privatisaton of the 1980s - would be back in the public sector within twelve months. I'm just doom-saying on how bad I think things may get if we don't start reversing the policies of the past 28 years.)

However, in more esoteric terms, capitalism is not a permanently sustainable system: capitalism relies upon growth and the capacity for growth is finite. But we're talking centuries if not millennia here, so it's not really worth worrying about - we'll probably all have died from global warming or bird flu by then.

Reason to be cheerful: capitalism has delivered at least a third of the world's population away from traditional human existence (ie nasty, brutish and short) and towards comfortable, long and fulfilled lives. And it is possible to lead a happy life on a modest income.

But, in this nation at least, we've enjoyed that comfort since the early 1950s. And it's pure propaganda that it came as a result of capitalism - it was down to the post-war settlement.

What we don't currently enjoy, that we enjoyed in that period between WWII and Thatcherism, is security. Individually, most of us don't have job security any more and won't have a safety net to catch us if we end up on the losing end of the market; and as a nation, our economy, whilst ostensibly booming, is teetering on the precipice of bust like never before, because it's become so based on credit. That's what the goverment should be worrying about, and trying to tackle - the lack of a material base in our economy. This would go hand-in-hand with restoring economic security to our lives.

And none of the many millionaires I've met seem to be very much happier than I am, many of them seem far less content.
Inequality of opportunity is a real evil and that's what radical parties should be striving to address. But it certainly ain't easy...


"Inequality of opportunity" is a bogus concept, though. A meritocracy, a society in which those who have risen to the top (whether through luck or work) have more power than those who have not, is still an iniquitous system. Obviously, people should reap the material benefits of your luck and labour, as is (at least on the latter front) only fair (and one thing we should be concerning ourselves with is ensuring that people enjoy the full fruits of their labour - and that means tackling those who are creaming off more than they're owed, which brings us back to taxing the rich). But we should also be woring to end the link between wealth and power. A millionaire, egardlss of how happy she is, should have no greater influence over society, over government policy, over anybody else's life or anything except his own property, than those on the lowest rung of the ladder. That's what equality means, and that's what radical parties should be striving to achieve.
 
Post a Comment

Links to this post:

Create a Link



<< Home

This page is powered by Blogger. Isn't yours?