Monday, 5 October 2015

Hayek, Liberalism and the story of the past half century

OK, here's a question. Can you guess which book is represented on Wikiquote by the following two quotations?

"Conservatism, though a necessary element in any stable society, is not a social programme; in its paternalistic, nationalistic and power adoring tendencies it is often closer to socialism than true liberalism; and with its traditionalistic, anti-intellectual, and often mystical propensities it will never, except in short periods of disillusionment, appeal to the young and all those others who believe that some changes are desirable if this world is to become a better place."

"The more the state 'plans' the more difficult planning becomes for the individual."

Have you guessed? It is the founding document of neoliberalism, Friedrich von Hayek's The Road to Serfdom.  These were the only two quotations listed and they make both the two points I wanted to make. That, at the dawn of what became the Liberal heresy neoliberalism, Hayek was:

1. Writing a manifesto that was intended to be explicitly Liberal.

2. Aiming at a target that wasn't so much Keynesian economics - Keynes liked the book - but the pseudo-science of state planning.

I have been thinking about this because I have been listening to the New Economics Foundation podcast series about neoliberalism, and you won't hear either of these central ideas articulated.

It seems to me that the Left's narrative about neoliberalism is too naive to overcome it - it understands none of the appeal of its original ideas. It is somewhat vacuous - a fairy tale about nasty people overturning the great and enlightened Keynesian consensus of 1945.

Until we can develop a better understanding of where neoliberalism came from, and why it became such a perversion of itself, we will never force a path beyond the neoliberal consensus we need. And I use the word 'heresy' advisedly - a heresy is an ideology that takes one aspect of the truth and pushes it to absurd lengths.

Part of my counter-narrative is here, but even that fails to do justice to the power of Hayek's original ideas. We need to realise that the history of social policy since the Second World War in the UK, about self-determination and the rejection of state-approved scientific progress, was led originally by Hayek.

What Hayek launched, and others too - like Borsodi in the USA and Schumacher in the UK - was a challenge to conventional progress, just as it was a challenge to conventional categories. We broke out - we rejected the the idea that the government would decide where to funnel resources, and launched a whole series of movements that rejected the Spirit of '45, along with big bureaucracies, official instructions, closed shops, concrete jungles, high rise flats - anything that treated us individuals as amorphous groups.

The result has been the roller-coaster ride we have all travelled during my lifetime - the end of deference, the beat generation, the Liberal revival, the voluntary sector, gender and sexual equality, Shelter, and the breakdown of simple class divisions, the green movement...

Those who voted Margaret Thatcher to power in 1979 were people in the grip of Hayek's original ideas, but also those in search of a sense of independence who were in the grip of his spirit. 

Unfortunately, thanks to those who waited in the wings, on both sides of the Atlantic, neoliberalism turned out to be wholly illiberal (this is my conspiracy theory).  It shored up the status quo, rather than undermined it.  It became an apologia for monopoly rather than a critique of it. Instead of a manifesto for the small to challenge from below, it became a justification for protecting the strong and wealthy.

And in direct contravention of Hayek's purpose, neoliberalism emerged - not as a critique of pseudo-science, but yet another pseudo-science itself.

But don't let's pretend that Hayek's original ideas had no power to move. They were hugely influential on our lives, and - instead of naively talking in terms of the fairy stories of good and evil - we need too go back to the original source and see where it all went so horribly wrong.

And if you don't believe me, see how the Hayekian fury with government planning had set in by the time they made the film Passport to Pimlico (1949, see picture above burning ID cards). Someone shouts at the official loudspeakers:

"We're sick and tired of your voice in this country - now shut up!"

That was the Hayek spirit before neoliberalism undermined it. For my Liberal colleagues, it is worth realising the story of our own journey this past half century. It began as the political wing of the counterculture, but getting a bit muddled as the counterculture became so incredibly vast that it could even encompass the man who represents the Spirit of '45, Jeremy Corbyn himself.

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Thursday, 1 October 2015

Everything changed in 1972. Or did it?

We seem to be hurtling towards a turning point in the zeitgeist, as I may have mentioned before - though my sense is that Corbyn is symptom rather than cause.  So I have been thinking about other turning points - not the economic ones this time, but the social ones - and I've settled on 1972.

No it wasn't the ending of exchange controls (1979) as I argued in my book Broke. Nor was it the Three Day Week as I have been writing more recently (1973/4 - more on that later). Nor is it the moment I remember, as a child, when I was no longer forced to wear a cap to go to Oxford Street (1965).

No, I have settled on 1972, not because of the miner's strike and the blackouts, or Watergate come to that - both moments when it was clear that something would have to change - but because, as far as I can remember, it was the year I heard three words for the first time:




It is strange to think that there was a period, in living memory, when we didn't eat two of them or sleep under the third.  The concept of yoghurt was particularly mind-boggling because I  could see that never, as long as I lived, would I be able to spell it.  But sure enough, we used to spend half the day in those days knitting spaghetti or practicing hospital corners on the sheets and blankets.

And we could have spent the time staying in with Monty Python.

I'm not saying that this was when they were introduced into the UK, just the first time these concepts floated into my consciousness.  Perhaps, in its own way, this was an important shift as Geoffrey Howe's ending of exchange controls after all.

The reason I've been thinking about it now was that, only yesterday, Sainsbury's claimed again to have introduced the avocado pear as early as 1962.  I'm prepared to accept their word for it, and I see there has been debate about this before.

But I wrote in my book Eminent Corporations that you could fix that elusive moment when our supermarkets suddenly started to pack their shelves with exotic French or Italian cheeses, and we started to learn some of those strange foreign words which have become so familiar as foodstuffs now, was down to the rule of Marcus Sieff over Marks & Spencer in the early 1970s.

As I understood it, one bemused M&S customer complained that avocado pears were not as nice as perhaps they should have been with custard.

I see that I may not have been quite right about the avocados after all.  But still something shifted in 1972, the year I turned fourteen. England opened up a little. We became a little less crusty. We were no less English, of course - see my book How to be English - but we let in the breezes from the south and felt a little more exotic as a result.

Perhaps it isn't a coincidence that the countdown had begun that year for us to join what was then the European Economic Community the following year.

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Tuesday, 29 September 2015

The next struggle over solar power - and who will win it

I find myself on the opposite side to the science writer Matt Ridley most of the time, because he takes his very sensible theses too far - in a rather too deterministic way. He gives a sense that whatever happens had to happen. Which is nonsense.

But I found myself warming to him on the BBC radio programme Start the Week yesterday morning, talking about his book The Evolution of Everything, for his emphasis on the clear historical drift towards complexity - where the power of change goes in a direction towards what bubbles up from below.

Put like that, there seems to me to be a broad drift towards independence and self-determination that you can see back for the past two centuries or more. There are hiccups, blind alleys and blips, of course. And turnings, like the one taken by Margaret Thatcher, which seemed to be about independence but was actually a new kind of tyranny.

It is a way of understanding the world. With me so far? Now what, then, are we to make of the emerging struggle over solar energy in the USA?

Because there is a battle under way there which goes to the heart of the future of energy, and barely a hint of it has yet reached the UK - though battle has already been joined in sunnier places like Spain.

It is one of those areas where the UK is sadly backward in its political discourse. But it is important who wins. It is the attempt by energy utilities to charge people extra for their solar panels.

It is also fascinating that the battle lines in this particular battle pits Greens and Liberals on one side and Conservatives and the Old Left on the other - with the Tea Party, perhaps the American equivalent of UKIP, bitterly split on the issue. Because it is, at heart, about independence and self-determination.

It is reaching a crescendo in the US because the California Public Utilities Commission is proposing, not just to halve the feed-in tariff to half what people generating electricity are paying - that much seems to be happening here - but to charge people with solar panels to connect to the grid so that they make no savings.

Perhaps it is the Tea Party who are most traumatised by the debate, divided as they are between those who follow the Koch brothers in supporting Big Oil in all its manifestations and those who value some measure of energy independence.

Why is the Old Left in favour? Because they regard people who can pay the upfront costs of solar panels as free-riding on the grid, which most people need to stay connected to because they are not generating enough in the evenings. It means that the costs of the grid are falling increasingly on the poor.

It is another way in which energy utilities, like banks, are becoming public services, and haven't adjusted to the role.

In places like Arizona, where similar regulations have been passed, the number of people installing solar panels have dropped to a handful.  The real argument - which you might hope will eventually be employed in the UK - is that solar panels increase capacity, bit by bit, and reduce the need for new power stations. And that helps everyone.

Except perhaps the energy utilities, which need to transform themselves into genuine public services in the face of this disruptive technology.

These arguments have not really erupted in the UK yet and, when they do, despite the sound and fury of the struggling corporate leviathans, it is pretty clear how the story will eventually end. The disruptive technologies will win - whether they are Uber, the Bristol pound, Airbnb or solar technology. They put power in people's hands. They provide a small measure of independence - and that seems to be the way the world is going.

The old structures will fight back, of course. They will complain and lobby. But, in the end, they will lose. And when you develop a technology that genuinely promotes independence, as solar energy does, it will remake the institutions around it.

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Monday, 28 September 2015

How the radical centre could win

A couple of years ago, I heard for the first time a hint of what I believe is both the past and the potent future of a Liberal message for business - enterprise, competition, the right of the underdog to challenge the conventional, the feather-bedded, the privileged and the monopolistic.

It was Leeds MP Greg Mulholland talking about the entrenched monopoly for the pub companies, which had allowed them to squeeze the licensees. Since then, I have begun to hear the same message with increasing frequency from Liberals - until I heard it definitively in Tim Farron's talk to the group Lib Dems in Business.

It was there also in his leader's speech. In fact, it was the first hint of a radical Lib Dem position on economics for some time, developed out of Vince Cable's and Danny Alexander's work in government, and I must say my heart did a little leap when I heard it.

Liberals are, for psychological reasons, semi-blind to economic issues. They just don't see them - just as socialists don't really get issues about centralised power. In fact, one leading Lib Dem blogger listed the policy issues in Farron's speech and left out economics entirely - I won't say who it was - as if they hadn't heard it.

As I have mentioned elsewhere, I can't see how a political party can aspire to power without putting forward a reasoned, cogent, powerful recipe for prosperity. If they don't - and neither main party of the left did so in 2015 - they can hardly be surprised when people assume the Conservatives are the safe pair of economic hands.

As things stand, challengers from the left omit economics and business - as if it somehow wasn't their business at all - and concentrate on welfare, just as Corbyn has done. Welfare is important, of course, but it isn't somehow the guts of the matter.

They are also usually too puritanical to attempt any other kind of policy appeal, as if discussing economics wasn't just dull - it was downright insulting to the poor. The result is the disastrous Fabian position: ignore business completely and concentrate on public administration.

Luckily, I have the answer. It isn't a complete answer. It doesn't yet tick all the boxes - a great deal more thinking is required to put flesh on the bone, but this is the position a radical centre will have to take to shove the Conservatives aside and take power.

1.  Pro-enterprise, pro-competition, pro-challenge to the status quo, and the promise to end the current semi-monopolies in so many areas of modern life, and to set entrepreneurs free to challenge from below - backed by a new generation of local banks and business mentoring and coaching. The Conservatives are already trashing the emerging green sector and a range of other sectors are held back by centralised banking and oligopoly power. We have to show, in much more detail, how privileging the big against the small is undermining the economy. But that is the basis of the new radical centre for economics.

2.  Public services that are both more effective and less expensive, based on co-production and system thinking, setting the inflexible public service system - encased in a concrete, authoritarian cage by Blair and Brown - free to prevent and to treat people individually, rather than tackling symptoms over and over again. This will require some up front investment and a great deal of thinking before we can set it out clearly. The old left will never compete on the same ground either.

3.  Regular dividends from national or local energy investments, as they have in Norway and Alaska, or - perhaps like the proposals for the ScotPound - a regular annual dividend paid in a non-inflationary parallel currency, as an alternative to the seriously inflationary qualitative easing (which mainly goes, via bankers' bonuses, into London house prices).

Gar Alperovitz, the American visionary thinker, argued recently - following Schumpeter - that the American left ought to have been looking more closely at spreading the benefits of public investment.

I don't know how these proposals would work precisely, but I can - and do - argue that they work in principle. There are years ahead for the Liberal thinktanks - if there are any - to work out the details. But this is where it starts.  You heard it here first!

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Thursday, 24 September 2015

Why should the Tories have all the best tunes?

There was a time when evangelists disapproved of singing. The along came William Booth of Salvation Army fame - or so it is said - and famously asked why the Devil should have all the best tunes.

I thought of that yesterday afternoon, as I listened to the new Lib Dem leader's first big speech.

I may have mentioned this before, but I find the Left deeply irritating these days. I don't say this because I am somehow part of the Right. But the rage, the conservatism, the symbolic language derived from the 1917 October revolution - slogans, banners, barricades - is all ferociously off-putting.

It is off-putting in other ways too, which kind of explain why the Left is on the back foot across Europe. They have nothing to say about economics, leaving the field clear for the forces of Conservatism.  They are always urging us to 'defend' institutions I know are flawed, sometimes hopelessly so - but so rarely urge us to build new ones.

And heavens, the disapproval. Don't get me started.

It is stultifying, controlling and inflexible. It disapproves of patriotism, so it never appeals to pride in the nation. It disapproves of economics, so it never appeals to the demand for prosperity.  Of course it loses and, the angrier it gets, the more it is going to lose.

So I have to say that, in these two respects, I thought Tim Farron's first conference speech as Liberal Democrat leader was not just tremendously well delivered, it was also ambitious. It was ambitious enough to demand to be heard. It was exciting because of that.

Because in both these areas, he broke the barely spoken, rather puritanical, rules of the Left. He accused David Cameron of failing to live up to the tolerant traditions of the nation. He accused the other parties of being unpatriotic in their approach to Europe. "It's pitiful and embarrassing and makes me so angry," he said about the response to the refugee crisis, "because I am proud to be British and I am proud of Britain's values."

And at long last, he made economics - and the urgent need for a new Liberal economics - the centre of his policy pitch, alongside housing, promising "to develop a strong and clear Liberal vision of the British economy well into the future".

He took the fight to the Conservatives in this respect, so busily trashing a sector (renewables) which had been growing at seven per cent a year under Lib Dem rule.

Because I think he's right, and - listening to the speech - I could suddenly see that the battered Lib Dems could play a critical role, and sooner rather than later. If they can build up that vision of an economy that works, based on the power of entrepreneurs and challenging enterprise, rather than the desperate business of keeping a global basket case from teetering over into unrepayable debt every few years.

If they can demonstrate convincingly that the Conservatives are making us poorer - not because they are cutting welfare - but because their economic methods are seriously out-of-date. They are avoiding prosperity because, as Keynes put it, they are "the slaves of some defunct economist".

This new role requires the party to appeal to the enlightened patriotism of the voters.  It requires the Lib Dems to become the party - not just of economic competence (not such a good way of phrasing it) - but economic prosperity, rather than rising debt for most of us.

But, yes, it could be done. In fact, I'm not sure there is any other credible challenge coming from anywhere else any time soon. But I also agreed with Tony Greaves, interviewed all too briefly on the BBC PM programme - the Lib Dems can't wait around to get power before we make things happen.

I hope they break the other rule of the Left - don't just sloganise, don't just ask for votes, don't just demand change.  Do it, and do it with anyone prepared to help.

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Wednesday, 23 September 2015

Clawing Liberalism back from neoliberalism

It will no doubt come as an unpleasant surprise to my former New Economics Foundation colleagues, perhaps even a shock, but - as far as I can make out - green economics emerged, rather as neoliberal economics did, out of a resistance to conventional Keynesianism.

The early pioneers of sustainable economics, Ralph Borsodi in the USA or Fritz Schumacher in the UK, were in flight from Keynes. Borsodi even wrote a book about what he called the 'coming Keynesian catastrophe'. This resistance was, in some ways, the spark that lit the counter-culture, the resistance to the idea of state planning and conventional 'progress', which led to everything else - the voluntary sector, the hippies, the Liberal revival, Jane Jacobs, the green movement, the New Age and so on and so on.

I have been reading (thank you, Tomas) a fascinating academic study about the liberal resistance to Keynes which began in the 1940s, when Friedrich Hayek wrote his enormously influential book The Road to Serfdom. It is called The Road from Mont Pelerin.

What Hayek and Michel Polanyi, Karl Popper, Ludwig von Mises and their friends set out to do, when they met at a hotel in Mont Pelerin in 1947, was to revive liberal economics, to save the possibility of self-determination from the growing threat of totalitarian state planners - and to beat the Nazis, the democracies had borrowed some of the same assumptions about central planning and state power.

I mention this now because, it seems to me, the Lib Dem leader Tim Farron's rhetoric reveals an ambition to hammer out a new kind of Liberal economics.  If so, he is absolutely right - but we need a bit of history to see what went wrong before.

Hayek's book was praised by Keynes and Orwell. Yet somehow, Hayek's ideals - and his alliance with the doyen of American Liberalism Henry Simons at Chicago University - led, in a few short decades, to something known as neoliberalism. This is now the deadening orthodoxy of the world and, since it involves the captitulation to naked power, it isn't really Liberal at all.

What happened?  Well here, The Road from Mont Pelerin has something fascinating to say.

Simons had teamed up with Hayek to found the Chicago School of Economics, but committed suicide after serious in-fighting in 1946. The funding they had arranged was partly to write a version of The Road to Serfdom for American audience.  But neither of the two economists charged with writing it ever managed to do so.

It was eventually finished by Simons' great pupil Milton Friedman in 1962 and published as Capitalism and Freedom. It was in some ways the founding text of American neoliberalism, but it made two changes which seem barely important, but taken together have had a disastrous effect - and which also distanced neoliberalism from Liberalism.

Error #1. He argued that intellectual property was a kind of property, and must be defended as such, rather than - as it actually is - a temporary suspension of free trade to encourage innovation.  This has resulted in the disastrous concentration of power and resources, by allowing large corporations to dominate the ownership of intellectual creation so long after it was actually necessary for them to do so.

Error #2. He argued that monopoly didn't matter very much, and - if it did happen - it was the fault of the government for over-regulating.

The first error led to the great heresy of neoliberalism, that corporations should be like human beings in legal terms.  It has vested human rights in legal entities that have resources way beyond any human being. At one stroke, human beings had been disempowered.

The second error seems to me to be the critical moment which made neoliberalism deeply illiberal.  It was the rejection of the most fundamental element in Liberal economics, the defence against the over-concentration of market power, the very opposite of Liberal free trade.

It explains why the dead hand of neoliberal orthodoxy has ignored monopoly as a problem as the monopolies grow in power over our lives, as we fall into the tyrannical clutches of the likes of Google or Amazon.

If we are going to rediscover Liberal economics, and it is important that we should, then we are going to have to unravel these three gigantic mistakes. It may be that we also need to dust down our view of Hayek's original objectives.

Nobody (except perhaps Jeremy Corbyn) wants to return to the days of central state planning, but - let's face it - monopoly is, in its own way, a pretty certain road to serfdom too.

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Monday, 21 September 2015

Three places not to position the Lib Dems

I took one of my children to the opening of the Lib Dem conference in Bournemouth on Saturday (we also spent some time on the beach). He is eleven and not keen for me to engage in any conversation beyond about two and a half minutes. But he really followed Baroness Brinton’s opening address.

“Come on,” I kept saying, half way through the party president’s address. “We’ve got to catch a train.”

But no. “Wait; I’m enjoying this,” he said.

I’m not saying I was surprised that Sal Brinton gripped his attention – it was a very good speech – but I was pleasantly surprised that it could have gripped the attention of an eleven-year-old. It wasn’t as if it was studded with jokes or slapstick humour.

It was sunny, a balmy day and I was ready to be inspired. And I’m now back in Bournemouth in the usual heady atmosphere, a peculiarly Liberal combination of hope and mild despair.

But I also found myself mildly exasperated by some of the party’s narrative in the media, and in particular its response to the unexpected elevation of Jeremy Corbyn. There are three big mistakes the Lib Dems appear to be making, and I’m writing this – not to criticise Tim Farron, who is finding a tone of voice – but in the hope that someone thinks a bit more deeply about what a radical centre might mean.

Mistake #1. “Fantasy economics”. That was the phrase which Tim Farron and other Liberals have been using about Corbyn’s economic positions. This is not helpful. Some of Corbyn’s rather vague economic platform is clearly based on fantasy: is it really practical to renationalise the railways? How about we just hold them to their contracts first? 

But if this refers to Corbyn's public money supply, then – within some conditions – the idea is backed by Adair Turner and Martin Wolf and the Icelandic government. I suspect that some version of it represents the future. Corbyn’s fantasy is that it can solve all his budgeting problems. 

So I hope that the Lib Dems won’t approach the new world, where a new kind of economic orthodoxy is struggling to emerge – by describing every new idea as “fantasy”.

Mistake #2. “Heads and hearts”. No, we haven’t had a repeat of the general election rhetoric, but we also haven’t managed to claw out of its basic dualistic structure – on the one hand, on the other hand. 

We need a plausible, moderate economic policy if anyone is going to believe our social policy, or so Tim Farron told Andrew Marr yesterday. That’s true, of course, but it is too close to the old head and heart dualism – we have Osborne’s economics but Corbyn’s ambition. 

It doesn’t stack up. It begs all the wrong questions.

Mistake #3. “Moderate vision”. Behind all this is the basic problem. Tim Farron’s Guardian article gargled with both words without closing the gap between then.

It is possible to have a moderate vision, of course, but it isn’t terribly interesting. In fact, I have a horrible feeling that politicians normally use the word ‘vision’ in inverse proportion to the clarity of theirs. 

Again, this kind of rhetoric begs the question: what are you NOT moderate about? How are you going to get there? Or is it really your vision to change everything, as Adrian Slade once ribbed Roy Jenkins, “just a little bit”?

I have a feeling that the whole idea of a moderate vision falls foul of the dictum from Revelation Chapter 3 that “if you are neither cold nor hot, I will spew you out of my mouth”.

Luckily, there was an answer – or the very first glimmerings of an answer – in Tim Farron’s rally speech on Saturday night. It is to rethink business, enterprise and entrepreneurialism, as the foundation of a renewed Liberalism.

Not business as stolid bureaucratic privatised providers. Or business as rampaging monopolies or monoliths, but business as an entrepreneurial force to make things happen – “if you have a dream you should be celebrated and supported”, he said.

Quite right. This is an echo of the late, great Anita Roddick, who used to define entrepreneurs as people who could imagine the world differently. It implies the fundamental difference between Farron and Corbyn: between people power and centralised state power.

But for goodness sake, don’t let’s swing the Lib Dems behind a defence of an economic orthodoxy that is now in its final few years.  The Financial Times today carries an article on Europe;s centre left which sums up the problem:

"Ultimate crisis of global capitalism was delivered on a plate and they did not know what to do."

Too right. And until they do know what to do, the centre left is going to remain stuck.  Corbyn almost certainly won't provide that way out. He may actually get in the way, but don't let's condemn him for the attempt - because, when he fails, the Lib Dems will have to do it instead.

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