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Making the case for social democracy
on 14 November 2013
The central argument of Making Capitalism Fit for Society is that it is time for social democracy to promote its benefits more assertively in the face of what Crouch sees as the growing ascendancy of free-market neoliberalism.
Crouch has some interesting things to say about neoliberalism, the most interesting of which is that the reality of neoliberal politics (I think we can take it that Crouch has the USA particularly in mind) is not, actually, neo-liberalism.
Crouch identifies three kinds of neoliberalism. The first,'pure' neo-liberalism, seeks to establish perfect markets in all areas of life; the role of the state is limited but important, focussing on protecting property rights and ensuring that there is genuine competition in the markets which increasingly are relied on to deliver all of society's needs. The second form accepts that market forces in their pure form are not appropriate for delivering certain public goods or for dealing with 'externalities'(the unintended by-products of free market behaviour, such as pollution, for which the unregulated polluter may not pay the full 'social' cost). The third form is what, Crouch argues, currently passes for 'neoliberalism' in practice, but is in fact a kind of plutocracy, because huge amounts of wealth and power have been accrued by large corporations and a few individuals, the effect of which is to create 'a politicized economy very remote from what economists understand by a neoliberal economy.'
'Once it engages in politics,' Crouch argues a little later in the book, 'neoliberal economics loses its innocence.'
His argument against the ability of markets to run every aspect of our lives are, essentially and familiarly, that there is seldom sufficient competition or information to create the conditions necessary for a perfect market and, as mentioned earlier, that markets are bad at delivering public goods and at dealing with negative externalities.
Crouch is interesting on the subject of the growing tendency to outsource public services to private companies, by way of example. In fact, he argues, very few organisations are involved in tendering for these services, and the main field of expertise of the successful companies is their knowledge of how to win government contracts. Such contracts then typically run for a substantial period of time, since it would be disruptive to change providers too often. The result is an effective monopoly, and there is an inevitable tendency to re-appoint the established incumbent when the contract is up for renewal. Not very 'free market' at all, then. Private contractors are more able to pay very low wages than the state, for which this is politically difficult, allowing proponents to argue that the outsourcing has lowered costs to the benefit of the public. But the state often ends up subsidising these low wages through tax credits and other subsidies paid for by the tax payer. It is uncertain, argues Crouch, that such outsourced services are genuinely more cost-efficient than a state-run service.
Crouch is, of course, on especially strong ground when discussing the effects of limited or absent regulation on financial markets. We've all seen where that led, and we've all helped to pick up the tab for the bankers who made themselves extremely rich by taking excessive risks, threatening the global economy and requiring a publically funded bail-out. I also liked Crouch's highlighting of the fact that the conditions imposed by the European Union, the IMF and the OECD when bailing out failed economies - such as Greece - tend to insist on the kind of unregulated, free labour markets that do not actually exist in reality in other, non-failed economies.
Crouch suggests that neoliberalism is a 'one size fits all' solution, based in essence on the role of corporations and the maximisation of shareholder value, whereas social democracy can embrace and encourage a far healthier variety of solutions: mutualism, cooperatives and the funding of enterprises by (ideally small) banks rather than by the stock market, a form of funding that was common when the industrial revolution was catching hold in nineteenth-century Britain.
Crouch's philosophy is summed up by his call for 'widespread use of markets where possible and useful, but a willingness to check, regulate and offset their effects where they threaten to destroy some widely shared goals and values.' It hard to argue with that (unless, of course, you are a neoliberal of the first kind).
It is a little ironic that Crouch himself acknowledges that social democrats can be seen as fitting into the category of 'neoliberalism of the second kind', which leaves one wondering whether we are indeed 'all neoliberals now' after all, in which case Crouch's argument for the desperate need for `assertive social democracy' would seem a little Quixotic: social democracy is alive and well, and disguised as a form of neoliberalism. And I suspect, in fact, that many neoliberals (especially 'neoliberals of the third kind') would argue that we are, in fact (and unhappily so, as they would see it) actually 'all social democrats now.'
The book is not an easy read - not in the sense that the concepts are difficult to grasp, but in the sense that Crouch, perhaps inevitably, does tend to assume that the reader is just as enthralled by the detail of the argument as he himself is, and his writing style tends towards the academic. I did find my mind wandering on several occasions - to such interesting topics as `those windows are a bit dirty; I really should give them a good clean.'
Crouch is a heavyweight sociologist and political scientist, and this book will make an important contribution to the debate which will be mainly held, one imagines, between political scientists, economists, policy makers and people made of sterner political stuff than I.
One final comment: Crouch does tend to write about 'us' and 'them'; he implies that 'people' need to be defended, not just against unfettered market forces, but against business in general, which is implied to be rapacious, immoral and untrustworthy. It is not impossible to hope that corporations - which are led, managed and staffed by 'us' - will, as seems to be happening, become increasingly conscious of their social obligations and even a force for good. Crouch does talk about other, better forms of organisational structure, but it seems a little old-fashioned to argue that the classic shareholder-owned corporation is, in effect, inherently malicious. To give an example of Crouch's apparent stance: 'Of course general product advertising does much to give giant corporations a popular friendly image that they would not enjoy if the public saw them just as vast accumulations of wealth and power.'