Tuesday, 29 April 2014

Republican Economics Twenty First Century Update (2014)

From The Philosopher, Volume 102 No. 1

Republican Economics

Twenty First Century Update

By Bryan Blears

I wish to argue here against what I see as a political drift towards plutocracy - the rule of the cliques - and in favour of an alternative political model in which the economy is directed to serve the welfare of the public. For this purpose I borrow the term republicanism, from the Latin res publica (which literally means, to serve the public).

The word thus captures a series of egalitarian revolutions that have been a part of our history for as long as there has been leadership. Indeed, the anthropologist Christopher Boehm describes humans of the late Pleistocene period 'ganging up on their alphas' to ensure fair food distribution within the group. It seems that for far longer than anyone can remember, people have rebelled against their masters for a fairer and more equitable distribution of the goods of society.

However there is one period of history that exemplifies this struggle best - the Enlightenment of the 18th and 19th Century. During this time, liberal writers including Jean-Jacques Rousseau, Thomas Paine and John Locke wrote about 'natural rights', key to them being the right to private property with an emphasis on individual and economic liberty. The Freemasonry movement helped to spread these ideas to the Thirteen Colonies of the now United States, where they blossomed into a revolution against the longstanding British monarchy. Shortly after this, the people of France stormed the Bastille and declared themselves the First French Republic. They drafted a document entitled The Declaration of the Rights of Man and of the Citizen', a work that was monumental in creating the modern idea of natural human rights.

The revolutions of the Enlightenment were opposed to several key principles; hereditary rule, in the form of the monarchy, and social disparity or aristocracy - economic imbalance which favoured a minority group. The feudal societies of Europe were unveiled plutocracies, societies in which a small elite group were prosperous at the expense of the public, and so, as generations had done for aeons of unrecorded history before them, the majority rebelled against the selfish and detrimental rule of the minority. The rest, as they say, is history.

Even if the monarchical system has largely been buried, there will always be new bases of power that threaten the welfare of the general public, and the resistance of this consolidation of power should be a priority for anyone with an interest in protecting their liberty and preserving the social order. At present, one of the main threats consists of the consolidation of wealth by economic entities such as corporations and the existence of economic alliances, by which I mean people with a mutual interest in their consolidation of wealth and assets. Both of these interfere with a fairer, more egalitarian distribution of wealth.

There are clear lessons to be learned from failed republican movements; movements which have sometimes failed to secure individual rights and have even resulted in the creation of new tyrannies. But the idea of an economy and state which serves the common good should not be a novel concept to political theorists of the modern world. If governments are formed and maintained for the good of each person within a society, it is nothing less than a breach of mandate to let down the people who depend upon that government to establish and preserve their economic rights. The true economic right of each person is the right to receive the fruits of the entire economical system in fair proportion.

In Das Kapital, Karl Marx wrote about placing the means of production back into the hands of the world's workers. There is no doubt that in this declaration, Marx had to some extent a republican agenda; rallying against the economic rule of a minority over the majority. In this respect, the Russian Revolution of 1917 resembled the previous revolutions of the Enlightenment which sought to reclaim economic and political power for the people.

But the left-wing ideology that emerged from the Russian Revolution was an ideology that undermined certain republican principles. Primarily, it destroyed individualism and sought to place the welfare of society as a whole above that of individual members of that society. Similarly to Napoleonic France, the production power seized from the Tsarist and Jacobin regimes was simply put to another use - nationalistic supremacy.

One only has to compare the prohibition of freedoms in both societies, and the millions of people who were forced into warfare for them to reflect that following these revolutions, workers were not freed and the ideal of 'liberty, egality, fraternity' was quickly abandoned.
In these societies, as in socialist Britain for a while, the concept of labour was promoted, even given a heroic quality. Miners continued to mine with hunched backs and blackened faces, railways continued to be laid and industrial capacity was increased - for the benefit of society perhaps, but not for the individual worker. George Orwell pointed out the hypocrisy of exemplifying labour for the good of a society at the detriment of that society's workers.

The alternative economic view presents itself in favour of individual economic liberty. This laissez-faire, free-market ideal of capitalism seeks to allow the market to flourish through less government interference: the market would regulate itself, according to proponents, by the principles of supply and demand. It was believed that if a company provided a product of inadequate quality or at excessive cost, shoppers would simply go elsewhere. This simplistic and sociologically naive concept contributed to the political drive to deregulate economies during the 1980s, a drive which continues to the present day (shrugging off the small road-bump of the collapsing financial institutions for example.)

The flaws of both of laissez-faire and socialism are already well known, even if, in the present day, we often find the exaggeration of the latter. In Britain, America and much of the rest of the developed world too, some areas of the free market (particularly those of privatised public services) have been conquered by a handful of large corporations - a state of monopoly that can cause severely detrimental effects to prices and the quality of services provided from a consumer point of view.

The problem for laissez-faire economics is that there is a point at which a corporation becomes so powerful that it can control the decisions of consumers and thus undermine the principle of competition. During the process of growth, companies gain the capital to ensure dominance of their sector of the market - earning not only economic power in the form of money to invest in advertising and in buying out the competition, but brand power and in the case of public utilities, power to control the market through necessity.

According to textbook theory, people are free agents capable of making economic decisions which the market is supposed to adhere to. But the concept of supply and demand falls apart when, in the case of public services like transport and energy, demand is a fixed constant and therefore customers have no choice but to accept the level of service and the prices that they are given. If cheaper competition arises, larger companies are able to buy out or outbid them for key contracts, and they have the economic capacity to influence policy through pressure groups and scientific research in their favour. We saw this economic coercion in the tobacco industry of the early 1900s, and it often may lie to the detriment of the public, as is the case with the use of corn syrup in foods under the guise of a 'low-fat' health craze which has swept across Britain, convincing office workers to seek foods which contain sugar instead of fat.

Another problem with a market that emphasises profit, rather than public benefit, is the wastefulness of having to rely upon demand to keep the economy running. Companies are perfectly capable of saturating the market with new inventions or produce thanks to the ease of modern manufacturing and logistics, which would cause their profits to fall.

One solution is to hold back some of their produce from the market, a tactic which was shown in the film Blood Diamond as a way for companies to keep the price of conflict diamonds high by storing them for release into the market at a later date. The other method is to create more demand. This is done by manufacturing new products, often differing only slightly from their original counterparts. The iPod was quickly remarketed into the iPod Nano, iPod Shuffle and so forth; products which in reality perform the same tasks and are diversified only in shapes, varieties and colours. This creates a demand to buy new products where in reality new products do not exist, fuelling the economy through consumption for consumption's sake. Although this may increase GDP, it is ultimately an economy based on sand; however profitable in the short term, ultimately it becomes a black hole which swallows up resources.

I think that the bubble of free-market capitalism has grown to a bursting point. An ideological principle more suited to the pioneer trading outposts, in which each person could form a prosperous small business, has now become a dangerous orthodoxy of both economists and politicians. The stark reality of that system presents itself today in stagnation and monopolisation. While economists of the early 20th century envisioned a world full of new markets and new resources, and thus promoted economic freedom as the proviso to economic growth, modern academics recognise the existence of a post-growth crisis in which resource limitations and the consolidation of economic power stand in the way of equality, progress and a fair deal.

It therefore seems as though both the system of socialism and that of laissez-faire have serious flaws, one of which is that they infringe the rights of the individual. The former infringes individual rights intentionally, for the benefit of society as a single entity, and the latter system infringes them surreptitiously - it allows non-human entities such as corporations to possess the economic capital that makes them, rather than consumers, the holders of economic market power.

The principles of a government which serves the public interest must be to prevent these two infringements of individual economic liberty. Republicanism, and the concept of personal liberty, challenges the inevitable monopolisation of an unregulated market - consumers should have the ability to choose between competitive suppliers and to possess the economic liberty to hold the companies that provide their products or service accountable.

The use of regulation in the market is not incompatible with the economic liberty that we recognise in the capability to start a business and make money. It simply asserts the responsibility of prosperous businesses to use their profits for the welfare of the public rather than, for example, to fund higher bonuses packages and dividends to support the lifestyles of a modern-day aristocracy. A policy of overt regulation of the market also guarantees the emergence of new enterprise, invention and innovation, by limiting the ability of companies to conquer the market and prevent competition.

The principle of republican economics is therefore to ensure economic freedom by placing restrictions upon economic freedom. This is not as contradictory as it sounds, as long as governments perform their function of protecting the public from the appearance and consolidation of power, a function which too many administrations today neglect in favour of letting the market do as it pleases.

Contact details:
Bryan Blears
Email: <bryanblears [at] live.co.uk>

No comments:

Post a Comment