An article I posted up here a while ago, 'The Tyranny of Intermediaries', has now been picked up like a vagrant, given a scrub, and generously published by Juncture, the ippr's journal. You can read it online here.
WashThe Free Dictionary: The Wash has a dredged ship channel that leads to King's Lynn. →
I've been reading quite a bit about the 'socialist calculation debate' over the last year. It's interesting how much it continues to shape present political dilemmas. The argument that Mises and Hayek put forward was devastatingly simple, and like all the most irresistable arguments, basically circular. This was that (I simplify further) even if a society did have a set of common needs, which the state or planning boards could efficiently satisfy, we would have no way of knowing what these would be, at least not in a complex, modern, industrial society. So the Rousseauian and Durkheimian idea of 'society', as a collective with a common interest, is left philosophically in tact, but technically unfeasible.
You can see shades of this argument in response to Ed Miliband's proposal to cap the retail price of energy. In a way, it's astonishing quite how much an outcry the policy provoked - but this is indicative of how deeply the Misean/Hayekian worldview has permeated elite policy thinking. Ultimately, Miliband was claiming an authority for the state that the vast majority of business leaders (and probably the public) no longer credit it with. As Philip Mirowski has repeatedly stressed in relation to neoliberalism, its core justification is epistemological in nature, hence the challenge to Miliband would be - 'who are you (or your regulators) to know what the correct price of energy is?'
This also relates to some of the most interesting analyses of financialisation and its limits. Greta Krippner'sCapitalizing on Crisis is a superb analysis of why financial markets were given a free reign from the late 1970s onwards. Her answer, simply put, is that US politicians and regulators were tired of becoming embroiled in normative questions of credit allocation, on the back of the culture wars. The beauty of the market, from a political point of view, is not that it is necessarily efficient or optimising, but that it relieves public figures and institutions from having to take moral positions on things. It is a way of absenting oneself from a thorny normative issue. This is effectively what Mises argued right back in 1920, drawing on Weber. Krippner goes on to show how policy-makers never dreamed that the supply of credit would expand to the extent that it did (largely because nobody foresaw the US becoming such a massive net importer of credit), hence there was nothing deliberate about how financialisation worked out.
Another fascinating sociological analysis which suggests this is Martha Poon's study of the rise of consumer credit-rating, which was a necessary (but not sufficient) condition of the explosion in consumer debt from the 1980s onwards. It was due to liberal legislation passed by Congress in the 1970s, aimed at reducing racism by lenders, that automated, statistical techniques for credit-rating were introduced. The 'social' nature of banking was thereby replaced by an 'instrumental' alternative, which was ultimately more conducive to an explosion in credit and securitisation.
One thing which occurs to me, which I've not seen discussed (though I'm probably missing something here) is the very unusual solution to the socialist calculation problem offered by Keynes, which is still available to policy-makers. This is, effectively, that politicians don't need to pursue goals that people actually want, they don't need to know what people want or value. It is perfectly OK for states to do things purely for the sake of it, regardless of whether there is a need for them. Hence the famous Keynes quote about paying people to dig holes and then fill them in again, as a plausible way of getting an economy moving. Equally, there are some policies (such as HS2) for which policy-makers do not seem so anxious about their popularity. For those who understand macroeconomics (or claim to), this makes good sense. But the public cannot grasp it, and the Misean challenge returns.
In terms of post-neoliberal political economy, it seems to me that there are two alternative modes of valuation emerging, which challenge the authority of markets to settle normative and epistemological disputes (because it is, after all, their ability to settle such disputes which grants them their untouchable political status even amidst crisis, and not their alleged efficiency).
Firstly, there is the rise of 'wellbeing' as a new unit of calculation, which draws on medical, neurological, cognitive and behavioural analyses. By returning to Bentham, this directly contradicts one core feature of the neoliberal argument, that only prices are capable of calculating utility. I discuss this a bit here. Although there is some emancipatory and transformative potential buried deep inside this agenda, its popularity with global elites (it was a major feature of the 2014 Davos World Economic Forum) makes me doubt that it can retain the ability to challenge economic power. The concern with this concept of value is that it will be increasingly medicalised, and administered via new networks of quasi-medical, quasi-managerial expertise.
Secondly, more promisingly, there is the notion of 'life' as it is appearing in more critical policy discourses. This is as in 'living wage', 'cost of living' and 'livable cities'. Here it is the conditions of 'life' that are being demanded for all - energy, food, shelter, childcare and so on. Miliband is in fertile territory here, but is still largely stuck at the level of rhetorical attacks on predators. Interestingly, Oskar Lange (the leading opponent of Hayek and Mises in the debate) suggested that planning boards would collect information on 'life conditions', which would then be channelled into investment decisions and production. To my knowledge, and with the greatest respect to the New Economics Foundation who are typically excellent on this sort of thing, the Left of today has not yet set about building the valuation frameworks which would accompany the political rhetoric of 'life' and 'living'.
If I were Owen Jones, that would be where I would go next. Until measures, comparators and standards of valuation are available, which are not reducible to prices, then financial markets will continue to let rip, for the political reason that (aside from the Tories being effectively owned by the big banks) politicians lack the legitimacy to challenge their allocations. And where market mechanisms themselves manifestly seem to fail, elites have medicalised versions of the 'wellbeing' agenda ready at hand, to provide alternative forms of government. The challenge right now is to value life, but in ways that are neither price-based nor purely biological.
There is a new edition of the ippr's journal, Juncture, out, featuring various very interesting-looking pieces. I have an article in there, 'Recovering the Future: the reinvention of 'social law''. The proper link to the article is here, but I've uploaded a pre-print of the article here.
At a fairly high level of generality, what I'm trying to argue in this piece is that political progress has stalled, thanks largely to the forces that are now known as 'financialisation', whose effect is to tie individuals and societies to past obligations, while certain elites reside in a somewhat separate temporality. And developing the germ of an idea contained in this blog post, I muse as to whether something like a 'social law' movement might provide a basis for renewed hope, in a society that has lost the confidence to reinvent itself.
If 'financialisation' means extending the constrictive elements of productive capitalism into the 'social' realm (via logics of human capital, investment and leverage, especially with regard to housing and education) a counter project would mean extending the liberating elements of productive capitalism into the 'social' realm. This is partly what social entrepreneurship is about, it seems to me - but that remains limited by certain regulatory and legal tramlines that have already been laid down. The challenge is to perform society differently, lay out new routes and possibilities. And it is law that traditionally has the greatest influence over collective routines and rituals.
Earlier this year, I wrote an essay, initially for The New Statesman, but which was then never published. Given that it's unlikely to find a home anywhere else, I thought I'd stick it up online as is. I've called it The Tyranny of Intermediaries. (If anyone would like to re-publish it somewhere else, please let me know). It looks at the problem of intermediary power within capitalism, that is the accountants, lawyers, financiers and consultants who are critical to making capitalism possible at all, but also act in their own private interests.
Here's a chunk:
Capitalism relies on its ‘interpreters’ and its ‘judges’. Between, say, a manager overseeing a company and a pension-holder receiving dividends from that company there is a long chain of intermediaries, each of whom subtly translates information as it is passed along. And decision-making by investors, consumers or employers is constantly dependent on the expert judgement of accountants, regulators and lawyers. Just as in a parliament or a court of law, acts of translating and judging carry huge public responsibility. If they become determined by the private interests of the interpretor or judge, then everybody else is in serious trouble. This is what has happened.
The credit-rating agencies have been roundly criticized, for being so seduced by the rhetoric – and money - of the investment banks, that they gave glowing endorsements to financial products that they scarcely understood. And public outrage with (legal) corporate tax avoidance has belatedly turned to the big accountants, who translate ‘profit’ into less taxable categories. But the power of these intermediaries is undimmed, because they are the facilitators of contemporary capitalism, and not ordinary participants.
One might argue that finance itself falls into this category, or should do, and that the tendency of politicians to view financial services as one of Britain’s leading ‘industries’ is dangerously misguided. Kill the car industry, and Britain shifts mournfully towards a post-industrial capitalism of retail, coffee and tourism. But kill financial and business services, with their codes, measurements and audits, and contemporary capitalism simply cannot proceed. Those who we depend on to carry out economic evaluations are placed beyond evaluation, or else the system collapses into infinite regress or relativism.
changed fundamentally, since Hayek and Mises were attacking socialism, is that
new techniques for the measurement and representation of the ‘social’ have
emerged, which rebuff or accommodate a number of neoliberal critiques. Hayek
and Mises argued that the social world was only knowable in the aggregate (that
is, statistically) from the perspective of the social scientist or state. This,
they argued, meant that the internal dynamism and dispersed individual
preferences which occur within
society are utterly ignored.
media, and a range of techniques for analyzing it (such as ‘sentiment analysis’
and various types of ‘social analytics’), make networks, relationships,
communities and patterns visible, while working with the logic of individual
expression. Moreover, these techniques can operate in real-time, revealing
constant fluctuations in social activity, just as prices reveal constant
fluctuations in economic activity. In these respects, this is a form of
social-ism that overcomes the critique of socialism mounted by neoliberalism.
The day after our conference last month, 'Where do Neoliberals Go After the Market?', a couple of us sat down with the keynote speaker, Philip Mirowski, to interview him. We discussed various things, starting with his new book on the financial crisis, then covering other aspects of neoliberalism and its history, including whether the recent surge of interest in 'data' and 'open data' represents a continuation of neoliberal logic, or a departure from it. You can listen to the interview here.
Karl Marx believed, optimistically, that capitalism was creating the conditions of its own socialist successor, through bringing an emergent class together in cities and factories, where they would inevitably discover their shared interest and the superiority of common ownership. Optimistic Marxists, such as Hardt and Negri, continue to believe that something like this is true, on the basis that value is dematerialising, making it eventually impossible to privatise. There are even business gurus who preach something similar.
Wandering around Stratford Westfield the other day, I had a similar but more pessimistic thought: maybe capitalism is gradually morphing into the 'actually existing' state socialism of the old Eastern Bloc. (For international readers, Stratford Westfield is a vast shopping centre that was strategically located between the 2012 Olympic Park and the nearest train station, in the hope of rinsing unfortunate athletics fans for some cashen route to the games.) British capitalism already has many of the hallmarks of Brezhnev-era socialist decline: macroeconomic stagnation, a population as much too bored as scared to protest about very much, a state that performs tongue-in-cheek legitimacy, politicians playing with statistics to try and delay the moment of economic reckoning. But it was this glimpse of Bucharest-style architecture, while crossing one of the Westfield walkways, that really brought this home:
A whole area of Hackney and Newham, that used to be a wasteland of scrap metal and ex-industrial equipment, was bulldozed, concreted over and then built on at vast scale, as part of London's unnecessary Olympic modernisation project. Only a very carefully planned alliance of state and corporate actors could have made this happen, with the principle goals being 'security' and 'delivery'. But even these apparently neoliberal ideals were becoming mired in comedy by the time of the games themselves. The 'security' threat was so vaguely defined, that battleships were located in the Thames and rocket-launchers placed on top of people's homes, like those laughable Red Square muscle parades of yore. Meanwhile, the 'delivery' was spoken of as 'on budget', but on the comical principle that 'budget' meant whatever the spokespersons needed it to.
Travelling around the area, you get a very clear sense that you are no longer in an unplanned, emergent or liberal urban space. Both aesthetically and politically, this is the nightmare that everyone from Jane Jacobs to Friedrich Hayek was warning us against: the quest for complete control of an economy or a space will result in a uniformity that is at best very dull and at worst very frightening. Examples of 'actually existing' state socialism tended to sit at various points on a spectrum between the two. For a British example of something that is a tad scary and more than a tad depressing, here is another shot of post-Olympian London:
The absurd sculpture that nobody asked for, the CCTV, the barbed wire, the bland greyness; I was probably breaking the law by taking this photo, but the security guards had probably given up caring. In any case, I might have bought them off with the offer of a pack of Marlboro reds or an Eagles LP.
Earlier this week, I happened to hear an old NYLON friend, Suzi Hall, speaking about her work on the LSE Ordinary Streets project, which is carrying out a close ethnographic and economic analysis of the Peckham Rye Lane area of London, including interviews with hundreds of shopkeepers. The work sounds like a brilliant example of what an anthropological sensibility can bring to the understanding of urban economic life.
She compared Peckham Rye to Stratford Westfield, in terms of numbers of businesses and the employment generated. While Westfield was sold as a local regenerator and job creator, Peckham Rye Lane's economy of ethnically diverse small-holders is eyed suspiciously by policy-makers as an apparent blockage to economic development. Plans are afoot to help chains move into the street as a step towards 'regeneration'. Yet Suzi reported that, while Westfield Stratford had duly delivered its promised 8,000 jobs, Peckham Rye Lane's local market was already a source of 13,000, via a far greater number of businesses. This is aside from the webs of social networks that accompany an 'embedded' market economy, in contrast to identikit businesses that are taking over most highstreets.
The notion that in an age of shrinking social security, policy-makers might view such a street as anything other than an irreplaceable socio-economic benefit is just bizarre. Why such government suspicion of the market? In contrast to the known quantity of WH Smiths, it probably appears dangerously opaque to the local council, but only because of the myopic tools of transparency and surveillance that are in use. A different gaze, such as that practiced by Suzi and her colleagues, would reveal things differently. The blind fear of the migrant (or even second or third generation migrant) converts economic liberty from the asset that Adam Smith portrayed it as, to a risk that requires costly management. And when it comes to mitigting the risks associated with individual freedom, the Chinese political model will always 'out-perform' ours...
In his recent On Critique, Luc Boltanski argues that repetition becomes the key trope of political actors who seek to avoid moments of critical or objective judgement. Words are recited, truths are repeatedly affirmed, routines are performed repeatedly, for fear that otherwise questions might be asked. This is different from, say, a company audit or an evaluation, in which there is a ritualistic element to it, but the outcome is unknown, unless it has become corrupted in some way. My feeling is (and I discuss this in a book I'm just finishing) that neoliberalism has entered a post-critical, repetitive phase, in which certain things have to be spoken - delivery, efficiency, security, competitiveness - but in order to hold the edifice together, rather than to reveal anything as objectively 'delivered', 'efficient', 'secure' or 'competitive. Political systems which do not create space for critique encounter this need for mandatory repetition immediately, as occurred to state socialism.
Neoliberalism was a political system in which the world was put to the test in some way, it was simply that the tests employed were those which privileged price and entrepreneurial energy. I don't want to defend this form of testing, which is often cynical, bullying and depressingly unsympathetic to other valuation systems. But there was often some consistency about it and the capacity for an unexpected outcome (for instance, that local economic diversity might be revealed to be more fiscally efficient). Look at Westfield today, however, and you see an economic culture being repeated, without any sincere sense that this represents 'choice', 'efficiency' or 'regeneration', nor any sense that things might have turned out differently even if this had been known. The point becomes to name this as 'efficient' and that (e.g. Peckham Rye Lane) as 'inefficient', and try and avoid or suppress evidence to the contrary. The fear arises that provable efficiency might involve abandoning one set of power structures in favour of another. And so economics becomes a naming ceremony, not a test.
Eastern bloc socialism had to keep going through the 1970s and 80s, inspite of lagging growth and failed ideological hegemony, because nobody knew what else to do. This is the stage neoliberal policy-making has now reached. The difference is that there is still one area of our economy that is still moving and changing, namely the money economy, with corporate profits high and financial innovation ongoing. What seems to have changed, post-2008, is that the price paid for this monetary dynamism is that the rest of us all have to stand completely still. In order that 'they' in the banks can cling on to their modernity of liquidity and ultra-fast turnover, 'we' outside have to relinquish our modernity, of a future that is any different from the present. Finance is to our stagnant societies what the space race and the Cold War were to the Eastern Bloc countries of the 1970s and 80s - a huge cost that the state imposes on its public, with the result that cities and economies start to become tedious processions of the same.
Just as I was leaving my previous job, at the Centre for Mutual and Employee-owned Business, I was involved in three different pieces of writing, a couple of which have now been published (the third will follow in the next couple of months).
Firstly, the Blueprint for a Co-operative Decade has been published by the International Co-operative Alliance. This was something that Cliff Mills and I worked on over last summer, and was discussed first at a discussion of the ICA board in Cape Town in June, then at the ICA annual conference in Manchester in October. So in fine co-operative style, it's the result of much dialogue, and a careful effort to forge consensus. In that sense, Cliff and I are 'anti-gurus'.
Secondly, Measuring Mutuality: Indicators for Financial Mutuals [pdf] has been published by the Association of Financial Mutuals. This is an attempt by Jonathan Michie and I to think through how to evaluate performance of risk-managing institutions, other than in terms of profit. Given how much culpability 'shareholder value' in banking holds for our current malaises, this is an issue whose pertinence must extend beyond the mutuals sector, I'd have thought.
Hope these are of some interest. Happy to discuss them further.
A great deal has
been said and written about how the present economic crisis has (or should
have) undermined the validity of orthodox economic methods. Part of the purpose
of the Uneconomics debate has been to develop this challenge, as demonstrated
Mirowski’s polemical contribution. But less has been said about how this
crisis represents an overwhelming endorsement for the emergence of more
culturally-conscious forms of economic and political analysis.
Can you really
hope to understand why bankers would risk their entire banks, without also
understanding something of the destructive exuberance of finance culture since
the 1980s? When core pillars of financial governance, such as ‘shareholder
value’ and central bank inflation-targeting, start to backfire, surely it is
important to understand how certain numerical indicators come to attain
symbolic authority in the first place. What is going on when regulators and
credit-raters place their faith in statistical risk models?
Dealing with these
issues requires an anthropological sensibility, which is attuned to questions
of symbolic representation and organizational norms. So much of the financial
crisis comes down to a single problem, of allowing models of reality to be
mistaken for reality itself. The paradoxical result was that the quest for
transparency began to generate its own opacity. Accounting reports obscured the
messiness of organisations. Simple credit ratings hid the intrinsic complexity
of the firms, mortgages and products that were being evaluated.
I'm currently reading Andy Beckett's excellent When the Lights Went Out: What really happened to Britain in the seventies, and have just got to the economic woes of Harold Wilson's government. Although the story of stagflation is a familiar one, and neoliberalism is often interpreted as a deliberate strategy to restore profitability at the expense of labour, it is striking quite how differently that crisis was experienced, compared to our present one. In fact, politically, the two are direct inverses of each other, making a class-based analysis almost impossible to resist, even for non-Marxists. Consider the following:
Very significantly for the direction of British politics during the rest of the seventies and beyond, some Britons were affected by the bad times more quickly, and with more sense of shock, than others. Between 1974 and 1976, it was the comfortably off who suffered. High inflation ate their savings. The low pound spoiled their holidays. A property crash - house prices fell 13 per cent in 1974, 16 per cent in 1975 and 8 per cent in 1976 - devalued their homes. The stock-market slump did the same for their shareholdings. Share dividends shrank or were not paid at all. During these years, disposable income fell considerably faster for the richest tenth of British households than for everyone else, and by larger and larger amounts the further you were up the financial scale. Even in severe recession, this was not a familiar situation...
This sense of a world being turned upside down was sharpened by the fact that other categories of Britons, traditionally not as well-off or secure, were, at least at first, less affected by the crisis. Trade unionists' wages were protected from inflation by their readiness to strike and by the political leverage of their leaders. The jobs of public sector workers were protected by the continuing increase in government spending.
Of course we know where this all ended, and it was a Labour government that first experimented with monetarism, and effectively started reversing these trends. But reading this passage, one thing that struck me was that these symptoms of crisis now appear remarkably attractive to us, in a crisis that is having the very opposite effect on class stratification. In fact, many mainstream economists would love to see companies hording less cash or distributing it as dividends, and putting it into employees pockets. The once-monetarist Bank of England has stood by and allowed the pound to fall by an astonishing 30%, while inflation may now be George Osborne's only hope of retaining any macro-economic credibility whatsoever. Many in the political centre-ground are desparately looking for ways of mitigating the extreme effects of financialisation, whereby the rich appear unscathed by this crisis. And if that meant house prices falling to a level where a new generation of 'hard-working families' could afford homes, then that might be a thoroughly democratic outcome. But by and large, if policy-makers decided that the seventies really weren't so bad after all, the strange truth is that there's no plausible way that the course of the current crisis could be diverted towards a more egalitarian path (at least not without some sort of implausibly radical reinvention of regulation, such as imposing capital controls).
Such is the extraordinary power of capitalism to remake both itself and society. In the space of half a lifetime, the experience of capitalist crisis has been entirely stood upside down, from being something that the great unwashed visit upon the wealthy, to vice versa. In our current financialised period of capitalism, we assume that the wealthy will always benefit from upheaval, but how short our memories are. Who is to say that the crisis of the 2030s - or sooner - won't be far more fearsome for elites than for everyone else? Unless one buys into the headier forms of world systems theory, it is entirely impossible to say.