What political change will flow from the new capitalism? Larry Elliott reviews two new books on the subject
The anniversary of the Russian Revolution is not what it was. Last Friday, 40000 communists marked the storming of the Winter Palace in St Petersburg with a march along Nevsky Prospekt, but the days when Leningrad was a sea of red flags on November 7 are long gone.
Russia, like every other country in the world, now accepts the iron logic of market forces and the dictates of global capitalism. Marx and Lenin have been banished to the history books.
That, at least, is the theory. In truth, Marxist analysis, if not Marxist economics, is alive and well inside the temple of laissez-faire.
How can that be? Well, listen to the way the supporters of untrammelled capitalism argue their case. The language is that of Marxist determinism: the spread of globalisation, the single currency, the scaling down of the welfare state – all these are inevitable, conditioned by social and economic forces.
We can all benefit from this process. It is no longer a question of class against class or one side of industry against the other. We are now all on the same side. Marx would have said this was utter rot, because sooner or later new fault-lines would appear and class conflicts develop.
There are already signs that this is happening and that new divisions are appearing. On one side are those who feel that everything is basically hunky-dory with post-communist capitalism – or at least can be made so, provided a technocratic elite takes out its toolbag and makes some adjustments.
On the other, there are those with an apocalyptic vision of the environmental and social disaster the world is heading for unless we quickly change course.
The first of these two models was on display this week at the annual conference of the Confederation of British Industry. There were five sessions based around the five ”Es” – Europe, the environment, the economy, education and employment. It does not take Adam Smith or John Maynard Keynes to work out what the confederation is after: a commitment to a single currency sooner rather than later, a bit less pollution – providing, of course, it does not damage competitiveness – a steady-as- she-goes macro-economic policy, lots more pupils prepacked and ready for business use, and a more flexible labour market. In other words, pretty much what the British government wants.
Labour likes this. It enjoys being the party of business, boasts about it, taunts the Conservatives with it.
A few years ago, it might have seemed a bit rum for a Labour government to ask a banker whose staff are striking over enforced pay- cuts to chair an official study into the way the tax and benefits system can be reformed to solve the problem of the poverty trap. No longer. Step forward Martin Taylor of Barclays Bank. Eyebrows might once have been raised, too, at the decision to allow the boss of a company deeply implicated in pensions mis-selling to front the welfare to work task force. Again, no bother. Welcome aboard, Sir Peter Davis of the Prudential.
Similarly, it is only right and proper that the expert technocrats at the Bank of England should be left in charge of setting interest rates. Here, an apology is in order. I may have given the impression that the Bank should be given the benefit of the doubt because it cared deeply about the real economy. I now realise that this was misguided on my part; normal service will be resumed forthwith.
The government’s argument is that we are now living in a different world in which technology is changing rapidly, the old allegiances no longer apply and politicians have to go with the grain of global forces.
This is broadly the view of Diane Coyle in her book, The Weightless World. Coyle argues that digital technology is transforming economics and politics. It is not merely that goods are getting smaller and lighter, but also that as a result of the growth of the service sector, some cannot be seen at all. This is changing the way we live, like it or not.
Coyle likes it. With refreshing candour, she says: ”For people like me, a well- educated and well-paid economist and journalist with a degree of entrepreneurial spirit, the new flexibility of the United Kingdom labour market has provided wonderful opportunities.”
But as she admits on the next page, not everybody is so fortunate. ”For people without suitable qualifications, adequate family resources or enough savings, increased flexibility boils down to being exploited more thoroughly by employers who are either entirely ruthless or under enormous commercial pressure themselves.”
Where The Weightless World is right is in its assessment that the West is on the cusp of a new economic paradigm. The computer and digital highway represent the basis for a new industrial revolution to match those built on steam, the railway and the internal combustion engine.
Naturally, she says, this will cause dislocation, just as previous periods of dramatic industrial change did. But the West has to roll with the punches. It is no use being a Luddite, a protectionist or an interventionist.
Those such as the American economist Lester Thurow or Robert Reich, Bill Clinton’s former labour secretary, who warn of the dangers of a social chasm opening up between a rich lite holed up in guarded compounds and a workless impoverished majority, are either too pessimistic or just plain wrong.
The problem is that The Weightless World then goes on to suggest that perhaps there is something in what Thurow and Reich are saying, after all. Coyle accepts that in the long run employment shifts from the high to low productivity sectors of the economy, and it is difficult to see where the low-tech, inefficient, labour-intensive sectors will be in the future.
Two possible solutions are proferred. Personal services will expand, because as people get more prosperous they will employ more ”gardeners, cleaners, and who knows, personal trainers and aromatherapists”. The second engine of jobs expansion will be the so-called ”third sector” – long-term healthcare, housing, education and training and charities. All very interesting, but hard to square with the book’s assertion that we are witnessing the death of the state and the death of taxation. Who exactly is going to pay for these teachers, nurses and care-workers?
A rather different perspective comes from The Global Trap, written by two journalists on the German weekly Der Spiegel, Hans- Peter Martin and Harald Schumann. They argue that on current trends, 20% of the world’s workforce will eventually suffice to keep the economy going, and that the other 80% will be surplus to requirements.
Martin and Schumann favour an interventionist approach – their 10-point programme, including currency transaction taxes, Europe-wide taxation to prevent companies holding states to ransom, and measures to protect the global environment – the degradation of which warrants but one brief mention in The Weightless World.
Each previous technological shift since the Industrial Revolution has been accompanied by a new policy – be it the spread of democracy, factory acts, the growth of trade unions, the welfare states – because raw capitalism is simply too dangerous.
Whether the modern variant requires some tweaking or full-scale surgery remains to be seen. Next time my aromatherapist pops round we can discuss it.