potlatch

inverted crises

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.

pigs might fly?

Inspired by the TUC's After Austerity conference, and more so by CRESC's recent report on industrial policy, I've posted a new article to the Uneconomics debate, on what type of expertise might be needed to move beyond the impasse of 'let the market sort it out'. As I conclude:

An industrial policy that wasn’t simply the outcome of corporate lobbying (e.g. copyright extensions) or an ultimatum (e.g. banking bailouts) or national nostalgia (e.g. rescuing cherished brands) would necessarily involve policymakers acquiring a new form of expertise, that was more sensitive to the organisational, historical and material elements of capitalism...

Too often, we assume that we need a new Keynes to come along and rescue us, or failing that, the old one. Somewhere, a very clever man must be working on a very complicated book that will produce a new and better economic policy template. We just need to wait for him to finish. What if this is misguided? What if all we can rely on is what the American political scientist Charles Lindblom characterised as ‘muddling through’? If this is the case, we might at least strive to muddle through in an informed and competent way.

Building up this information will take time. But, as US economist Dean Baker remarked grimly at After Austerity, “we have plenty of time” – this depression isn’t going anywhere. 

Thatcherism: a red herring?

I am impatient to know how history is going to judge the multiple institutional and moral collapses of the past five years. Specifically, the interesting question is: what exactly is coming to an end? It could, of course, be various things, operating with various historical rhythms, as I suggested here. But here's a brief thought: what if the entire idea of 'Thatcherism' turns out to be a red herring? Or, at any rate, what if we were so distracted by all the conservative rhetoric of markets and entrepreneurship, that we entirely failed to see what was really going on?

The unfolding Barclays scandal forces the left and the right to wake up to the reality of what's been going on. Specifically, when we thought we were placing our trust in 'markets', we were actually placing our trust in highly complex firms and exotic cultures of individual expression, that are largely opaque to the outside world. When the rhetoric was of 'market freedom', it actually meant an abnegation of public responsibility on the part of firms and individuals. The term 'market' did for banks what the term 'God' does for Catholic Priests, in keeping government and public at bay (for a while I've had an idea for a comparative sociological research project, looking at banks and psychoanalysts side by side, to identify common strategies for achieving non-regulation; not that I want to see the entire world regulated, far from it, but it is interesting to consider what rhetorical strategies are used to avoid formal accountability). Understanding what precisely we have been placing our faith in, and accepting it isn't quite what we thought we were placing our faith in (for better or worse), is the first step to removing our faith from it. This is more of a challenge for the Left than the Right, seeing as the former still have their opponents' word 'market' echoing in their ears, whereas the latter have realised their own error.

When did this now-crumbling era begin? We (and I'm as guilty of this as anyone) like to pinpoint the late 1970s as the moment when neoliberalism emerged. It was then that the crisis of Keynesianism was completed, and a new paradigm for economic policy-making began. But this may reveal something of the narcissism of liberal elites, who like to believe that intellectuals and ideas are central to historical and economic periodization. (One might also characterise it as bloody-minded Hegelianism or conservatism, which insists that reason drives history, and not vice versa). A more pragmatist approach would recognise that ideas simply help to stabilise and legitimise forms of behaviour that have already emerged.

If the Barclays scandal proves to be decisive and telling, then we will need to shift our periodisation, such that 1968-71 becomes the key transition point in the formation of neoliberalism (or whatever we might call it instead). Two things took place during these turbulent years.

Firstly, '68 and its aftermath generated a new ethos of anti-moralism, that might have appeared heroically Nietzschean or Freudian in its more explosive and exciting moments, but could only translate into a dull masturbational culture of pleasure-seeking and deceit, as it permeated beyond the intellectual world of Guy Debord et al. Rooseveltian liberals, such as Daniel Patrick Moynihan and Daniel Bell, spotted this immediately, leading to a form of Left Neo-conservatism (which Britain seems only now to be developing in the form of Blue Labour). By the late 1970s, even younger cultural critics, such as Richard Sennett, had cottoned on to what their generation had done. The 'great refusal', advocated by Marcuse, had its noble elements, but these have eventually be vastly out-numbered by its depressingly adolescent ones.

Secondly, 1971 was when paper money was divorced from reality, following Nixon's decision to disconnect dollars from gold. Admittedly, faster telecommunications and offshore trading had been placing tremendous strains on the dollar since the late 1960s, so no doubt there is some telecoms satellite launched around this time that could claim to be even more decisive. From this point forward, the monetary system became a battle between rival symbolic codes, with the symbolic code of '$$' enforced upon the world through the alliance of Wall Street and Washington DC (see Peter Gowan's The Global Gamble). Disconnected from any tangible or material notion of value, the monetary system became a game of dictating perceptions and propping up linguistic rules.

In the broader sweep of history - as, for example, portrayed in Giovanni Arrighi's 700-year history of capitalism - it is unsurprising that a combination of these two occurences would end in political and economic disaster. The divorce of ethics from normativity ('68) combined with the divorce of money from material reality ('71) creates the conditions for a frictionless financial culture, in which critics conspired by coining the term 'postmodernism', and in which lying about the price of money is an entirely reasonable and legitimate thing to do. Taking a longer sociological view of the Barclays scandal, the question is not 'why did they do it?', but really, 'why wouldn't they do it?' On what basis, really, did any of us expect pleasure-seeking individuals, far from the disciplining reach of any market, trading paper whose value had nothing to do with utility or human need, to do anything other than manipulate perceptions of that paper's value? How else does paper attain any value, without perceptions being manipulated to some extent? And why, honestly, did anyone believe that individuals, high on the legacy of '68, would manipulate that value for the benefit of the public or mortgage-holders, and not for themselves?

Thatcherism was therefore a late-comer, providing post hoc rationalisation for a surge of egoism and monetary game-playing that was probably unstoppable by 1979 anyhow. Thatcherism provided a new paradigm for the state's role in this, to tackle inflation rather than unemployment and build sufficient prisons to make such a policy practicable, but in this it was reacting not proscribing. Perhaps Thatcherism's one stroke of courage was to dress this elite decadence up, quite preposterously, as a return to conservative Victorian England. For some reason, it is only now that Tories such as Peter Oborne and Ferdinand Mount appear to have spotted that this, like Libor, was another audacious fix. Bob Diamond, born 1951 and reaching adulthood as Nixon was sworn in, was less naive, and continues to exhibit his own 'great refusal' to accept any public judgement placed upon him.

the Barclays scandal: made in Chicago

The scandal of Barclays' manipulation of interest rates, which some suspect may end up spreading to other banks, looks set to provide us with this summer's drip-drip expose of British power elites. 2009 was the Summer of Duck Ponds, and 2011 was the Summer of Milly Dowler's Mobile Phone. And now we enter the Summer of Libor.

This one could be equally significant. It's not that the banks possess very much moral authority right now anyway, but then nor did The News of the World or MPs. As Zizek argued about wikileaks, what's distinctive about contemporary scandal is in making tacitly-assumed truths impossible to ignore. It matters greatly whether the banks were acting within the rules, but brought down by excessive exuberance, complexity and inadequate regulation, or whether they were attempting to rig the entire game in secret.

Or at least, we assume it matters, hence the moral outcry about interest-rate rigging. But what if the distinction is actually non-existent? What if rigging the game is the game? On one level, this is the end game of neoliberalism, in which the refusal to accept any notion of political-normative authority external to economic efficiency ends up undermining its very conditions of possibility. But a careful reading of Chicago School economics might suggest that this has been an integral feature of neoliberalism all along.

It's worth standing back, and remembering that there were always (roughly) two traditions of neoliberalism. From the 1930s onwards, there was a European one, which sought to inject strong legal norms into the free market system, to defend it from monopoly and the state; this was manifest in ordo-liberalism, the German 'social market' economy, Henry Simons in Chicago and the pre-Chicago Hayek. This elevated the price system to a quasi-sovereign authority, backed by law. Then,  from the 1950s onwards, there was the Chicago School one, which sought to use price theory to explain all forms of economic, social and political behaviour; Aaron Director and Ronald Coase play a key role in this tradition. This is what influenced US regulation from the 1970s onwards, and European regulation from the 1990s onwards.

As I argue in this paper (and to simplify somewhat) where the former privileged the price mechanism of the market, the latter privileged price theory of neo-classical economics. The former assumed that the state's job was to reinforce market institutions using law; the latter assumed that the state's job was to analyse existing institutions as they happen to exist, and analyse their behaviour on the psychological premise that each actor is behaving 'as if' in a market. The problem with this latter approach is that, if every individual in a highly complex institution is acting rationally in their own interest, and that this is most likely efficient given available information, there is scarcely any basis on which policy-making can insist on one institutional design over another. Efficiency is likely to emerge organically from the aggregate of individual decision-making, both in the marketplace and in the murkier world of firms (such as banks) and networks (such as elite relations and lobbying networks).

From a Chicago School perspective, faith is not being placed in the market (a position which would warrant the enforcement of market norms) but in individuals to act in a reasonable, market-like fashion. Foucault explains the transition to Chicago-style neoliberalism nicely:

it is no longer the analysis of the historical logic of processes; it is the analysis of the internal rationality, the strategic programming of individuals' activity.

A particular idiosyncratic psychology is presupposed (NB as a methodology, not an empirical anthropology!) in which individuals act in a calculated, self-interested fashion. But law and morality possess no distinctive quality within this worldview; they are simply additional forms of psychological incentive and disincentive. Hence, the very notion of 'cheating' becomes virtually meaningless. If behaviour can be proved as inefficient, then incentives need introducing to dissuade people from doing it. But constructing such proof is fiendishly difficult, especially in highly complex institutional environments. How is the regulator to demonstrate that their view on efficiency is superior to the banker's own view on what is going on? Falling into this trap is what Alan Greenspan recognised as his key mistake.

In his famous essay, The Methodology of Positive Economics, Milton Friedman introduced a neat metaphor, to defend economics from the charge of unrealism. He suggested that if capitalism were a game of billiards, that economists were like geometricians: the players could be expert at the game, without understanding anything about geometry, while economists could understand why the balls travelled at the angles they did, without being any good at the game. The key issue is that the 'outsider' and the 'insider' have radically different views on what is going on, and (what Friedman didn't say) radically different concepts of authority. As an observer, you have no right to tell me how the game 'should' be played; equally, I have no interest in how the game appears in the aggregate.

Staffed by economists, neoliberal regulators end up being like silent geometricians, watching in amazement as bankers move balls with great precision around the table towards the pockets. As long as the players are both trying to win the game and not (as per a cartel) seeking to co-operate on the outcome, then all must automatically be well. The geometrician has no view on the 'right' or 'wrong' way to hit the ball, and couldn't possibly insist that the billiard-player's hand might be in the wrong place or doing something suspicious.

This is very different from the early European neoliberal epistemology, in which the great virtue of prices was that they have an explicit, public quality that nobody can misunderstand, be they 'billiard players' or 'geometricians'. The competitor and the observer inhabit the same shared world. There is necessarily a limit to how much prices can be manipulated, if they are to sustain this political and epistemological role of social consensus-formation (it's often struck me that Ryanair's "£5 flights" which cost £85 are another example of the triumph of Chicago neoliberalism over European neoliberalism). Upholding the market requires not only a minimal level of transparency, but also of simplicity. By contrast, if 'price' is simply understood as a psychological metaphor, rather than a visible unambiguous public institution, then manipulation of actual prices becomes entirely legitimate within the overall game of wealth accumulation. And this is precisely what Barclays have been doing.

new paper: The Emerging Neo-communitarianism

I've had an article accepted by Political Quarterly (Andrew Gamble's last act as editor, no less; there's one for an incredibly niche and tedious pub quiz) entitled 'The Emerging Neo-Communitarianism'. It'll be published in October, but I've uploaded a pre-print here.

This was a paper I initially presented in Delhi last year, in the Rising Powers symposium. It attempts to interpret and characterise emerging forms of government, in terms of micro-political departures from key tenets of neoliberalism. By abandoning the Hayekian and the neo-classical emphasis on an autonomous, choosing individual, to be governed through prices and incentives, in favour of a more social and habitual individual, policy-makers are moving towards a form of 'neo-communitarianism'. Neo-communitarianism is to communitarianism as neoliberalism is to liberalism, that is, it is a technocratic, economised derivative of a moral and political philosophy.

If you're still reading, this chart lays out a typology of the two rival styles or logics of government that the paper explores:

The paper is pretty speculative in its outlook. Clearly we do not have a grand new paradigmatic idea, such as Keynesian demand management. But perhaps scholars and policy-makers need to accept that crises do not always occasion grand paradigm shifts, but also occasion more subtle and organic changes, which enable governments to simply cope. The belief that an Idea, probably produced by some brilliant grey-haired man in a university, will rescue us, may be a comfort blanket we need to abandon.

CRESC conference on 'promises' and crises

The CRESC Annual Conference looks excellent this year:

Weds September 5 - Friday September 7, 2012, Manchester University

Keynote Speakers

• Barbara Adam (Social Sciences, Cardiff University)
• Robert Boyer (ENS, Paris)
• Aditya Chakrabortty (The Guardian) 
• Will Hutton (Hertford College, Oxford University)
• Paul Mason (BBC Newsnight)
• Elizabeth A. Povinelli (Anthropology, Columbia University)

Promises: Crises and Socio-Cultural Change

In the midst of global financial crisis and radical transformations in states, institutions and social relations, it has become urgent to explore the role promises play in effecting socio-cultural change. As particular plans, projects, policies, initiatives, dreams and visions, promises both open and close the possibility of different kinds of socio-cultural futures (and pasts). What promises are contained in the current political and socio-cultural moment?

Hopefully see you there!

what do banks and prisons have in common?

I've published an article at openDemocracy, as part of the Uneconomics debate, in which I attempt to stand back and take a wide-ranging look at the policy dilemmas posed by the banking system. There is, I suggest, a serious problem in that the state has become an under-writer for a wasteful and ineffective risk management system, on which it cannot now easily turn its back. In that respect, the financial system has become like the prison system: a poorly calculated strategy for reducing risk, which may have the exact opposite effect, but which the taxpayer has become entangled with. As I argue:

Nearly five years after the dawning of the financial crisis, we can now identify one of its possible long-term legacies: the implicit association between the modern state and large financial institutions has become an explicit one. It is no longer possible to specify exactly where the state ends and the banking system begins...

We are living with a situation in which billions of pounds of public money is still being effectively siphoned into the pockets of private individuals, via quantitative easing and other forms of support for the banking sector. The on-going hand-wringing over the 'fairness' of bankers' pay tends to ignore the graver public insult, that billions of pounds are being removed from the banking system in the form of bonuses, which the taxpayer will have to provide if the system collapses again. Gordon Brown cites figures ^↑ showing that if bankers had reduced their pay by a mere 10 per cent between 2000-2007, the banks would have had £50bn more of capital available to them when the crisis struck, which is the same amount that the government injected into RBS and Lloyds-TSB in October 2008.

There is a structural problem here that has still not been dealt with. If this situation is to change, the government will need to take risks with its modus operandi of risk management. While regulators and policy-makers view the future via traditional risk management techniques, they will effectively endorse traditional risk management institutions of the City of London. Only with an ethos of experimentation can anything genuinely new be anticipated and valued.

You can read the rest of the article here. Comments might be better placed underneath the article itself, rather than on this blog.

calm between the storms

I heartily recommend this piece in today's FT, though not on this occasion because it involves a sociologist putting the boot into neo-classical economics. Strangely, I was having a very similar thought only yesterday: whatever happened to the imminent collapse of the Euro, the inevitable Greek default and the doomed obstinacy of the European political classes? Has history been put on hold? Or have Newsnight researchers simply stopped paying attention? The talking heads from the financial world who explained where everything was inevitably heading - betraying a strange, crypto-Marxian historical materialism - have suddenly disappeared from our screens. At least for the time being. No doubt they'll be back.

And this is the strange condition of the present. There is an ongoing Marxist debate regarding neoliberalism's state of existential health, to which David Harvey replies "it depends what you mean by neoliberalism" and Neil Smith that "neoliberalism is dead but dominant". I have posted here previously to the effect that, judged according to its precise political ambitions, neoliberalism is already dead. But this is too simplistic.

The condition of the present, which could last for many years to come, is one of normality interspersed by emergency. The normality persists inspite of the emergency, a sort of pig-headed determination not to be de-railed by events. Under these circumstances, neoliberalism becomes a beligerent form of denial, a pretence that the same policies, regulators and ideas can continue as if everything were OK. An emergency briefly interrupts the calm, before passing once more.

At the same time, one can only be impressed by the emergency-management skills of European politicians, who seem to have put disaster on hold once more. Perhaps so much apocalyptic rhetoric regarding the Euro played into their hands, by increasing their room for political manoeuvre and raising the stakes. With Merkel's task represented as virtually impossible, the political capital at her disposal grew rapidly on the basis that it simply had to.

One way of interpreting this condition is melancholia, in the Freudian sense. The melancholic individual, for Freud, suffers from "constitutional ambivalence" regarding the past, enraged that it has gone, and so clinging on to the memory obstinately so as to avoid confronting the loss. It becomes a form of destructive narcissism, that ties the individual to the past, as an alternative to mourning. Paul Gilroy has applied this theory to Britain's relationship to empire. I wondered if you could adapt it to financial speculation and its aftermath.

Or there is the theory of exception, in the sense meant by Carl Schmitt and Giorgio Agamben, whereby the dependence of rules upon executive decision becomes plain, and the legal constitution or republic becomes subject to emergency political measures for its own benefit. Exception is also a form of ambivalence, in the sense that preservation of the status quo becomes so critical as to demand extraordinary and unprecedented measures.

I have a paper, that I'll hopefully be able to post in the coming weeks, analysing Europe's present economic situation as a state of neoliberal exception. Under such circumstances, political actors are neither inside nor outside the standard economic rules of government, but rescuing them by whatever means necessary. Persisting with 'business as usual' is feasible but only on the condition that entirely unusual measures can periodically be introduced. Hence, neoliberalism is 'alive' to the extent that various elites are still willing to vivify it, but 'dead' to the extent that they remain constantly on guard in order to take action to save it.

Five years after the dawning of the financial crisis, our situation is both critical and stable at the same time. It is stable, but only to the extent that various elites are occasionally willing to take critical action. Once actions are taken, then we return to a form of melancholic attachment to a world that, at some point or other, we will have to agree has disappeared. But in the meantime, I find myself marvelling at the capacity for things to calm down and return to normality, just as much as their capacity to heat up and create emergency.

For and against uncertainty

I listened to an excellent paper from Amos Witztum as part of this conference at Copenhagen Business School in January (where I also gave a paper), in which he described modern liberalism as a form of anti-tragedy. Greek tragedy, as any fan of The Wire also knows, involves characters straining in vain to resist their fate. They face dilemmas and choices, but ultimately these all result in the same outcome. Modern liberalism, especially in the form of Enlightenment, abandons this fatalism. But I think the point Witztum was making was that liberalism doesn't replace tragic fatalism with some form of heroic rationalism, as if we become masters of our own destiny. It replaces fatalism with uncertainty.

This interpretation of liberalism-as-uncertainty is shared by Friedrich Hayek, for whom freedom was found in ignorance regarding the future. Hayek's ambition for neoliberalism was to restore a form of government that made no predictions or guarantees regarding future economic outcomes. His opponent, of course, was not the Greek God but the socialist planner, who insisted that things turn out according to his bureaucratic dictat. Though as countless anecdotes about Soviet productivity rising by "20%" in a year or crops being planted only alongside the railway lines which Mao was due to travel down, socialism was less beset by the fatalism of tragedy, and more by the raised eyebrow of comedy. The person who is certain what's going to happen, and is almost certainly wrong, is another important figure when considering the politics of uncertainty.

There's a bastardised (aka Policy Exchange) version of Austrian economics, which says that the UK government can restore growth by getting out of the way. But Hayek's lesson is not that small government will 'deliver' better outcomes; it's that government should abandon any scientific concern with outcomes altogether. That is scarcely an option available to a modern politician. As I argued here, George Osborne's policies have a comedic air about them, resting on bold claims about the future that nobody seriously believes, possibly not even him. The Office for Budgetary Responsibility is being dragged into this comedy, performing its 'independent objectivity' with a smirk forming around its lips. Martin Amis could write a sequel to his critique of socialist irony, subtitled Laughter and the 2011 Growth Forecast.

Whether or not anybody today is really a whole-hearted Hayekian, this nevertheless poses an interesting question: how much uncertainty do we want in our economy and society? The term 'uncertainty' is sometimes misunderstood, thanks to mis-readings of Frank Knight. Many people, including economists, are prone to say that there are two types of situation, those which involve risk (and can be subject to probabilistic calculation) and those which involve uncertainty (and can not be subject to such calculation). This is entirely wrong. Knight's argument was that all situations involve uncertainty, as an existential fact of human life. But we have various pragmatic responses to it, including the construction of risk models, which succeed to varying degrees. Other pragmatic responses to uncertainty involve seeking to actively reduce it, through forms of concerted action and co-operation. For instance, the nudgers have discovered that if you get an offender or truant to sign a piece of paper promising to improve their behaviour, they are more likely to do so; uncertainty has been reduced.

'Actually existing' neoliberalism of 1979-2008 was organised around two contradictory positions on uncertainty. On the one hand, competition was to be unleashed and manufactured, for the sound Hayekian reason that this would produce uncertain outcomes. This treated uncertainty as something that was valuable in and of itself. On the other hand, risk modelling, audit and managerial expertise was honed in order to reduce uncertainty, in the interests of corporations, finance and other elites. In between these two, at the conflicted heart of the neoliberal project, lay the problem of corporate governance elicited by the separation of ownership and control of firms. It is no surprise that the project eventually combusted thanks to 'agency' problems.

Social democrats, communitarians and Keynesians have often criticised neoliberalism for valorising uncertainty, making stable families and communities harder to sustain. The privatisation of pensions, for example, means that we have no confident knowledge of our retirement income. But it is surely wrong to argue that ordinary people necessarily want uncertainty to be reduced. Our obsession with sport, gambling, talent shows - admittedly all riffs on a Hayekian vision of competition - demonstrate how much we thirst for the unknown outcome. This is despite the fact that rapid and unexpected changes of income/status can be as disruptive on the way up as on the way down. I, for one, refuse to accept that we automatically want a society in which uncertainty is kept to a minimum. It seems sociologically and politically naive. It misses the significance of 1968. Worst of all, it shows scant understanding of cricket as a source of romanticism and politics.

What is far more significant to the current moral crisis of neoliberalism is not that ordinary lives are mired in uncertainty, but that elite lives and institutions are not. While elites and managers spoke of innovation, competitiveness and constant 'ever-faster change', it seems that they were partly doing so in order to exempt themselves from so much uncertainty. The rhetoric was Austrian and liberal, but the behaviour was quasi-socialist in its extreme effort to dictate outcomes. The significance of so many recent books about inequality in the West is not simply in the levels of inequality that they identify (though that clearly matters) but in the patterns, repetitions and rationales that they identify in how inequality comes about. The dice are loaded. It's not that life is unfair, which is something that most adults should be able to handle; it's that it's unfair in unfair ways. Liberalism, whether of a Rawlsian or a Hayekian variety, is something we might be able to stomach, if things really were left to chance (be it via the veil of ignorance or market spontaneity) but the dominant view, post-2008, is that they're not.

In considering a future and better economic policy paradigm, we need to consider the political status of uncertainty. Possibly we need to find appropriate spheres for liberal, tragic and comic perspectives on the future, and not confuse the three. Uncertainty won't disappear, but it will be distributed in certain ways. The ability to calculate the future is unevenly distributed, as Koray Caliskan's Market Threads illuminates. And the ability to control the future is also unevenly distributed. Some people would dearly love more uncertainty in their lives; others would dearly love less. Maybe a good life is one in which the individual takes some responsibility for the outcome, but not complete responsibility. Equally, an honest politician is one who claims some responsibility for policy successes and failures, but not all.

capitalism as a policy problem

The current British policy and media vogue for debating 'capitalism' may well be unprecedented. There have long been rolling public debates about specific institutions and practices, such as banks, markets, debt, financial markets and trade. But to focus on capitalism implies a more political-economic perspective, which is alert to questions of hierachy, ownership, power and institutional evolution. At least it should do. Historically, the question of 'capitalism' has been more often debated by its critics (from Marx onwards), or else by those such as Milton Friedman who have used it to attack socialism. Even then, neoliberals have preferred to refer to 'markets', 'enterprise' and 'entrepreneurship' when providing the gloss to their economic argument.

The new debate is to be welcomed, but it is inevitably throwing up misunderstandings and strange representations. The Financial Times has been running a sophisticated series of op-eds on the crisis of capitalism, which only really hit the intellectual rocks with a piece published yesterday, entitled 'It's a crisis of confidence, not of capitalism' (the stupidity of the article's headline turned out to be well-matched to the identity of its author, the Chancellor of the Exchequer).

The first thing to note, as if it needed saying, is that of course capitalism is in crisis. The denial of this fact seems to go hand in hand with two intellectual errors. Firstly, it misunderstands the meaning of the word 'crisis', which it hears as equivalent to 'end' or 'death'. Nobody has yet plausibly suggested that capitalism is coming to an end. But quite clearly there is a crisis, in the literal sense of a judgement, turning point or critique. Capitalism is in a critical condition, which will determine what sort of future it has. This is what 'crisis' refers to. For evidence that it is in crisis, one need only point to the fact that policies which once alleviated its shortcomings, now appear only to exacerbate them. To his credit, Gordon Brown appears in this piece to grasp the historic importance of the current period that we're living through, and the vast scale of any potentially adequate political response.

Second, the crisis deniers get lost in is/ought distinctions. They seem to believe that announcing a 'crisis of capitalism' means advocating socialism. They then very swiftly fall into making abstract and irrelevant moral-psychological claims about how competition and self-interest are 'still' the only plausible bases for organising the economy. Take this Newsnight debate from last week for example. The inevitability of capitalism, in roughly its current form, is asserted on the back of a philosophical anthropology, which is derived from... well, the think tanks and ideologues whose job it is to defend the freedom of capital. Typically this freedom is also erroneously dressed up as the freedom of markets, with endless mis-readings (and more likely, non-readings) of Adam Smith to buttress it.

Yet the ideologues are partly responding to the way in which the question of 'capitalism' has been posed by politicians and pundits alike, which is in heavily moralistic terms. Nick Clegg, David Cameron and Ed Miliband are competing to find ways to attack the morally noxious bits of capitalism, and not merely the useless bits, though Miliband's notion of 'predatory capitalism' suggested that the two go hand in hand. I've heard it suggested that politicians' sudden obsession with the 'c' word may be a strategy to avoid talking about immoral 'business', which swiftly invites questions of which businesses in particular, the same questions which floored the entire shadow cabinet after Miliband's conference speech.

It seems that the main reason 'capitalism' has been put on the table as a policy problem is that this distinguishes the problem as a moral one of principles, not a utilitarian one of economics. British politics is suddenly experiencing a classically ordo-liberal moment, in the sense that economic 'right' and 'wrong' no longer map cleanly on to 'efficient' and 'inefficient'. This partly explains why the collapse of economic growth is having so little impact on the Conservative Party's poll-ratings: for the time being, debates have shifted on to liberal questions of form and structure, away from utilitarian questions of output. Other bizarrely non-utilitarian behaviours abound, such as governments and firms seeking to pay off debt at a time of negative real interest rates, producing a 'balance sheet recession'.

To this, some nuance could be added, by recognising that all capitalist crises are also moral crises, but in a very particular sense. From the 18th century onwards, liberalism has functioned on the basis of an illusory split (famously criticised by in Polanyi's Great Transformation) between the amoral realm of the 'economic' and the moral realm of the 'social', also represented as a dichotomy between the sphere of value and the sphere of values. This illusion is propped up by an associated split between economics (the study of rational choice) and sociology (the study of association and rules).

Ultimately this split is a useful fabrication or fantasy that serves policy-making, rather than one emanating from institutions or agents themselves. 'Economic' institutions (such as banks) are awash with moral judgements, rituals and norms; 'social' institutions (such as families) are equally awash with rational and monetary calculation. But the split does some work, in preventing us from subjecting everything to constant moral judgement, which would be hugely time-consuming and inefficient. Neoliberalism has frequently committed the opposite error of seeking to subject everything to rationalist audit, which turns out to be equally time-consuming and inefficient, though when the target is lefty professions and academics, that may be its underlying purpose.

Every stable era of capitalist development rests on its own distinctive way of separating economics from moral judgement (or 'efficiency' from 'equity', as welfare economists like to put it). The critique of capitalism involves challenging this split (for example, through arguing that labour markets are unjust regardless of their efficiency, or that GDP measures bad things) but these critics can typically be rebuffed for decades at a time. However, a crisis of capitalism, like the one we're living through, brings about a collapse in the liberal divide, from both sides at once, as it becomes unclear what is worth measuring and valuing in the first place. Once economics and economic institutions cease to work in a utilitarian sense, their supposed insulation from sociology, moral judgement and political economy fails too.

This is why crises are so exciting and frightening at the same time. They involve a fundamental uncertainty as to what is going on, how long it will take and what types of technologies, institutions and policies will bring it to an end. As I argued in this New Statesman piece, one feature of our current predicament is that we don't yet know what we've come to the end of precisely. A new fluidity opens up, between moral problems of values and economic ones of value, and we confront the strange truth that the entire realm of 'the economy' as a separate thing is really a fiction. This uncomfortable realism only be suppressed again once a new settlement is established, in which a new form of socio-economic division is established, which is both economically effective and morally acceptable.

If current questions of 'responsible' and 'popular' capitalism are to be posed seriously, then we need to be clear about how far moral critique can (and must) currently penetrate. During times of stability, businesses and politicians raise moral questions of values, almost as matters of consumer preference.* This is the function of corporate social responsibility, which is a form of self-regulation at best, and green-washing at worst. During times of crisis, things are far more profound. It is no long a question of what moral values are to be added to utilitarian economic structures, but what moral values are to constitute a future definition of economic value.

This is what I was trying to communicate in my recent paper on employee ownership. In arguing that 'wellbeing' and 'patience' must be central business 'values' of any post-crisis capitalism, I was not intending that these are somehow nice things, which we really ought to think about a bit more. More fundamentally, the fact that the previous model had failed to account adequately for human psychology on the one hand, and for long-term outcomes on the other, was actually at the heart of how and why the crisis occurred. It follows that any resolution of the crisis will necessarily rest on a new notion of economic value, which somehow factors in these moral values.

If the new public debates about capitalism are to be more than rhetorical, they will need to move beyond obviously moral issues, such as inequality and who 'deserves' what. The term 'fairness', like 'equity', keeps morality safely confined to certain classically moral issues, from where it is unlikely to interfere in the distribution of political power (as I argued in this openDemocracy piece. I was delighted to discover amongst The Browser's quotations yesterday Scott Adams' "fairness is a concept so dumb people could participate in arguments"). Instead, it needs to take on economic institutions of ownership, governance, democracy, valuation, audit and performance measurement. There are some encouraging signs that this might be beginning to happen.

 

* I once worked at a research consultancy which was in the process of re-branding itself, and wanted to engage its staff in identifying its core 'values'. This resulted in a hilarious, Python-esque all-staff meeting in which one individual would opine "I think 'trust' should be one of them", which would then be met with a response from elsewhere "'trust' is rubbish! 'Integrity' is far better!", which in turn would be shot down by "nonsense! 'Leadership' is clearly the best". And so on, depressingly confirming Milton Friedman's famous dictum that "over values, men can only fight".