Tag Archives: markets
The Progressive Case Against Change
1. David Grant suggests that I take free trade and the globalized markets that it is generating to be inevitable processes. This is not the case. They are the result of economic policy decisions and international agreements. Like him, I see free trade as an engine of development that has the potential to produce the wealth necessary to improve living standards and eradicate poverty in the third world. However, precisely because global markets, like all markets, are social artefacts rather than forces of nature, their design reflects the interests of the forces that control them. If they are shaped entirely by private capital and the political agencies which represent it, then the wealth that they produce will be concentrated in the hands of a small business elite. In order to achieve an equitable distribution of this wealth that serves the interests of labour and consumers, as well as producers and investors global markets must be constrained and socialized by political interests that also represent the former. Private business alone cannot promote social or environmental rationality. Moving from the robber baron capitalism of the nineteenth and early twentieth century to the welfare state of the post war years involved such a social rationalization of the market within western countries. This achievement is now seriously threatened by the emergence of global markets that bypass the constraints and redistributative mechanisms of the traditional welfare state. Refashioning them for the global market place is the primary challenge of a renewed social democracy.
2. Grant asks about how I envisage the role of the state in a globalized social democracy. On the model that I am sketching nation states do not disappear, but they enter into federative structures that define open, socialized markets. The EU provides a precedent for this approach. However, to work on a genuinely global scale such a federation will have to include underdeveloped countries and provide for significant investment in them. The emergence of an integrated socialized market of international dimensions will require an extended and complex historical process, as did the transformation of the European Common Market into the European Union.
3. Grant requests that I clarify the grounds and extent of my opposition to the obsessive campaign of privatization that is the focus of much neo-liberal economic policy. Clearly I am not proposing nationalization of industry and finance on the Soviet model. My concern is with the destruction of the robust public domain of services, infrastructure, and utilities that have formed the backbone of the modern welfare state. These have been steadily eroded by the juggernaut of neo-liberalism that has dominated many western economies for the past twenty-five years. These policies have produced disasters like the privatization of British rail and the water companies, the steady decline in British higher education through underfunding, the undermining of the NHS by internal markets and cuts in primary care staff, and the widespread dissipation of municipal services. Neo-liberalism has promoted a massive shift in public policy away from social investment in order to achieve low taxes on business and capital. This has generated a sharp rise in social inequality and a significant reduction in economic mobility for the poor and the middle classes. Wealth is increasingly monopolized by a shrinking economic elite that represents a diminishing proportion of the population. The emergence of global markets has greatly facilitated these patterns. Mobile investment capital and production can maximize profit by moving to low wage countries that impose minimal burdens of corporate taxation and regulation. Neo-liberal trade negotiators seek to use the World Trade Organization as an instrument for undermining public services and social investment in the markets that free trade agreements open up to external competition. They construe these services as a form of government protection that prejudices the interests of private companies looking to enter the fields of heath, education, transportation, and energy. A social democratic approach to free trade will formulate trade agreements and regulatory mechanisms to protect public services, equitable taxation, fair labour practises, and environmental concerns as part of a socialized open market.
4. Celso Rocha points out problems with global unions. In fact, I indicated that such unions would emerge only after vigorous local unions were first established in the low wage economies of the new emerging industries. These will engage in protracted industrial struggles which, if successful, will contribute to a rise in the standard of living in those countries that will contribute to the convergence of economic conditions in the developing countries and in western economies. This process will require a considerable amount of time. On the approach that I am proposing it will also be facilitated by the social investment and regulatory constraints of the international free trade agencies designed to promote a socialized global market.
It should be clear that I am sketching a general approach for redefining the social democratic project, rather than a set of detailed policies. This sketch is intended to provide the basis for ongoing discussion through which the viability of this approach can be tested and clarified. I am grateful to Grant and Rocha for raising important issues as part of this discussion.
Shalom Lappin is Professor of Computational Linguistics in the Department of Philosophy, King’s College, London
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