open Democracy News Analysis - An end and a beginning, Godfrey Hodgson - Comments

Not logged in Lawrence Efana on "An end and a beginning"

Not logged in Lawrence Efana — Sun, 11 Jan 2009 13:43:35 +0000

Bravo Cadabra, open democracy surely has to live on!

"Laissez-faire" once the main platform, many say was the "thing" reborn, called "neo-liberalism". Puzzle-bits of its experiences are the issues.

We scattered the bits and it would appear so far that you organized them relatively reasonably as dialogue theme. We could be on the way to a "new" beginning. "This is uncharted[?] territory. We don't even have an ideology" - I and others seem to understand that and like the way you sensitize its problem.

You make Obama's dilemma clear, still it is time to now to seriously search for a "way-out" amidst our imperfections in effort to tame 'raw' capitalism. As you point out, 'short-sightedness and indifference' pose a problem. The model lacking, which you also lament has to be forthcoming - a sustainable "middle of the road type", sufficiently democratic in value and praxis to see over the challenges of sizing the state.

Who tells thinkers to stop dreaming might be doing harm to prospects of the model and processes.

cadabra on "An end and a beginning"

cadabra — Sun, 11 Jan 2009 01:35:07 +0000

The problem is how do we redefine capitalism and the reltionship between government, business, the marketplace, and the public. We have no successful models. This is unchartered territory. We don't even have an ideology.

The problem with a financial bubble is that real value is lost. Nobody knows what anything is "really" worth. It is wiser to not buy today because tomorrow it may be worth less. The stimulus package that Obama is building assumes that other countries will loan us the money. Will they?

How does government create jobs that are self-sustaining? It can subsidize emplloyment, but once the subsidy ends, so do the jobs. What then?

Some think that we should allow markets to collapse and "real" market value become reestablished. But the consequence of that is massive unemployment, homelessness and starvation for an unlimited number of years into the future. I heard last week that as a result of the declinein the cost of oil, the sale of SUVs have increased. People are so short-sighted and indifferent to the massive global problems we face.

So, what do we do? Nobody really knows. We are jumping off a diving board hoping that there is water in the pool.

Lawrence Efana on "An end and a beginning"

Lawrence Efana — Thu, 08 Jan 2009 19:47:05 +0000

Tony and Peter take your co-commentator kindly!

Everything is possible indeed, even I also agree!

Still be patient if I raise the point: to at least be a little more credible or explicit, what would constitute the pieces should "we" embark on sizing the state?
If one is not misunderstood, the problem is definitely not size of the state per-se, but challenges of "raw" capitalism. Isn't that what most of us want tamed?
Various personalities have left foot marks on sands of time. That we know, allows the chance to boldly say we have learned, if not much, enough. No one disagrees but if it has to be a matter of proportion, how do we make for the "value" consensus in real (party) political sense? Britain has election soon, there we shall see how far value and consensus thesis is subjected to test.

opendemocracy on "An end and a beginning"

opendemocracy — Thu, 08 Jan 2009 14:12:14 +0000

I very much agree with your post, Peter. The parallel ascendancy of market populism with faith in the charismatic leader at all levels of society is very intriguing. The "return of the institution" will need to be made to sound a bit more enticing before it sets hearts racing in the way Hollywood needs.

Tony

Peter Johnson on "An end and a beginning"

Peter Johnson — Thu, 08 Jan 2009 13:44:38 +0000

Peter Johnson, London

I enjoyed this article, but the account of the denigration of the public interest and public service doesn't seem complete. It's certainly true, and as we look back on it now, rather odd, that the 'market fetish' became deeply rooted. But this was surely not because we had forgotten the public interest, but because we came to believe that the market was a better servant of the public interest than government. That view may have been justified by the late 70s: rampant inflation, endless public-sector labour disputes, crumbling infrastructure, balance of payment crises, and excessive national debt are not good advertisements for the state. So it is not that 'public services' - at least in the UK - dropped off the political agenda, rather that privatisation, choice, and management became the preferred and perhaps then the only way to improvement. The belief was not that market players had socially desirable intentions, but that open markets would lead to more socially desirable outcomes than action by a well-intentioned government that was either incompetent or impotent. For a while it seemed that this was true: we really did not need a decent (in both senses) civil service.

Another trend - perhaps paradoxically - became an inseparable companion to the market fetish and intensified the pressure on bureaucracies: the 'leader fetish.' We started to believe that individuals can do almost anything. This is evident in all sorts of fields, as in the case of the Australian exam marker Mr Hodgson mentions. A successful businessman can save the environment or even make a competent regulator; a new CEO can save a failing company; a pop star can save the poor; Mr Brown can save the world. Some of this is the celebrity obsession, but I suspect it also reflects a deeper fixation: the idea that individuals can transcend (or often, especially in Hollywood, defeat) institutions to get things done.

It seems to me the need is not bigger government as such; and anyway, what are we sizing, its payroll, the statute book, the power of its police...? More importantly (and whilst this may be led by government, I wouldn't count on it), we have to try to reassemble and re-motivate a whole range of institutions - public and commercial, market and non-market - and their staff to accomplish more, better, for longer, and for more people. We must resist the temptation to anoint the state as our new super-hero, ready to blaze into town and put everything to rights.

Lawrence Efana on "An end and a beginning"

Lawrence Efana — Wed, 07 Jan 2009 19:37:30 +0000

G.H. nice, you said it all as usual!

The problems to worry about: just to state a few might include a) multiplicity of values; b) nature of evidence present or lacking and risk of factoring into calculations made: estimates of effects] hence what might be missing or present from individual vantage point of either adjusting faith or judgement downward or upward; and c) in overdriven "sentimental world", the type of education people receive to equip them with depth to understand what you outline as a problem for them also and not only for the others!

You began analogically with the problem as screen-play object. Have we not had a near similar screen show from works of the famous writer Oskar Wild: "..End of the World.."? Whatever we call these - whether imaginations or not, indeed you mean to pronounce the pandoramas of 'fictive' dramas: analogic handouts likely to enrich what could be useful should we care to learn.

In this thesis of "an end and a beginning", what I am worried about is: whether and or how far we actually learn, or want to?

This paper gathers much momentum after coming over "the force of folly", especially onto "the market fetish" and "the world turns". The clarity with which the analysis is presented across is why it pleases me to say above "you said it all as usual".

In the preoccupation with developing neo-liberal political and economic values, and overdimensioning a newly won concept of economic and political freedoms, overzealousness with privatisation betrayed government's institutional harmony grounds, eating-off balance between state - public and private sector interests. Of-course at a time our notion of capitalism rushed us into the "end of work" theory, that sounded the only way to innovatively create employment chances. Nevertheless the question still is: where are we now?

Its proponents went wild with idea of "Third Sector". Rightly, you said it all, in "less hash" and "more mundane" government institutional samples, we saw signals here and there more or less down-playing idea of "big government" and writing-off its era to replace with market populism, political democracy and democratisation - both of which were necessary but turned dramatised and over-played.

Many countries suffering onging down-turn, however made a difference in their approach and enthusiasm. Though they are hard-hit also, they could show that privatisation and the regulation of financial systems to benefit of their citizens' interests could be well matched. Well grounded and less greedy mortgage systems and economc values geared at making money and wealth, have to be pursued with respect for all others in the system, not driven by raw instincts of capitalism - a part of what now cripples! In many such economies the built-in values, investments in housing, national infra-structures and consumptions might fluctuate, yet find equilibrium points: manage volitility hence disruptive continuity.

Talks about lending to people with less chances to repay the installments are carefully reasoned in such systems by 'morally' defined considerations. The manner some definitions of "moderates" are driven classifies people and their financial chances, making the powerful ones get what they want, when they want or even steal and get bailed out. A combination of "mal-haps" inducing lessons now learned includes: greed and profit-hunts in unholy ways capped by corrupt practices, etc., not because financial houses extend hands to struggling citizens or the working class.

Balancing economic values and the challenges of every "living" person in our national and global systems, must be the focus of transformation and reform. Re-education will be very important, especially for regions like Africa. Before the financial melt-down, many of those who criticised selective neo-liberal values, partly because of its reborn and relatively faceless approach to financial and economic management were branded radicals, statists, and anti-liberalisation.

At some institutions of higher learning many such critiques also suffered undue denials. Some research institutes and their so-called directors that, for example, proclaimed studying and diagnosing problems of weaker world regions, including Africa, routed out and manipulatively locked doors for others, to at the end as things turn out find themselves surprisingly out the more things unfold. With neo-liberal values seen as worthy to undergo radical changes, the blackmail of critiques hopefully will be reduced if not questioned. If we fail to correct and stem our institutions, socio-economic, political and cultural values, we will be finding ourselves sinking more and more into depths of problems, now that we cannot afford manipulating anymore with environmental problems showing that our cup is getting fearfully full in spite of our technological abilities.

BigC on "An end and a beginning"

BigC — Wed, 07 Jan 2009 12:49:00 +0000

The writer has oversimplified the reasons for the current crisis. Reckless lending is the catalyst which has ignited the credit crunch but a robust economic model would have been able to weather this. Unfortunately we have adopted a model based on asset price inflation and it is imploding under the pressure. It is like watching a badly built bridge collapsing - the supporting structure has fallen away and the superstructure stands ready to warp and break at the first sign of a storm.

He is quite right about the denigration and undermining of public service though.

david hayes on "An end and a beginning"

david hayes — Wed, 07 Jan 2009 11:16:17 +0000

Hanks_1 - Thank you very much for the correction which is greatly appreciated. The text has been amended.

hanks_1 on "An end and a beginning"

hanks_1 — Wed, 07 Jan 2009 08:50:59 +0000

Correction: the film you're thinking of was The Day the Earth Caught Fire (the html link does get it right).

An end and a beginning, Godfrey Hodgson

Mon, 05 Jan 2009 17:24:27 +0000

In 1961 a British studio produced a sci-fi film that sticks in the memory for a single line of dialogue.

It was called The Day the Earth Caught Fire. The plot-line - involving simultaneous nuclear-test explosions by the Soviet Union and the United States which knock the earth off its course - is absurd but in its way gripping. openDemocracy writers analyse 2008's financial turmoil:

Ann Pettifor, "The week that changed everything" (22 September 2008)

Fred Halliday, "The revenge of ideas: Karl Polanyi and Susan Strange" (24 September 2008)

Tony Curzon Price, "Unprincipled madness" (1 October 2008)

Grahame Thompson, "Deglobalising the crisis" (3 October 2008)

Will Hutton, "Wanted: a fairer capitalism" (6 October 2008)

Avinash Persaud, "Europe's financial crisis: the integration lesson" (7 October 2008)

Paul Rogers, "A world in flux: crisis to agency" (16 October 2008)

Andrew Dobson & David Hayes, "A politics of crisis: low-energy cosmopolitanism" (22 October 2008)

Paul Rogers,"A crisis opportunity moment" (23 October 2008)

Ann Pettifor, "Beyond the triple crisis: a green new deal" (27 October 2008)

Mike Hulme, "Amid the financial storm: redirecting climate change" (30 October 2008)

Simon Maxwell & Dirk Messner, "A new global order: Bretton Woods II...and San Francisco II" (11 November 2008)

Andre Wilkens, "The global financial crisis: opportunities for change" (10 November 2008)

Paul Rogers, "A world in the balance" (13 November 2008)

Krzysztof Rybinski, "A new world order" (4 December 2008)

For much of the action, it looks as though the earth will be burned to a cinder by the sun. In the end, providentially, the world's nations unite to launch four megaton bombs which succeed - just - in kicking the earth back into orbit. A world-saving denoument ensures that life can go on.

The action was set in the newsroom of the London Daily Express, then owned by the Canadian tycoon Lord Beaverbrook and the last word in The Front Page-style journalism.

As the earth careers away on its doomed trajectory towards the sun, the paper prepares two headlines for its possibly final edition: "World Doomed" and "World Saved". The hardbitten editor Arthur Christiansen calls the Moscow correspondent Chris Dobson (both men playing themselves).

"Look after yourself, boy", says Christiansen, "but first give us 800 words. And, Chris, keep the tone reasonably optimistic".

A chill wind

It is an equally hard injunction for a world that, after the epic financial crash of 2008, seems to have lost its moorings as it enters 2009.

The slow meltdown saw some of the shining towers of American capitalism collapsing, being taken over, or forced into humbling reinvention: Bear Stearns, Fannie Mae and Freddie Mac, Merrill Lynch, AIG (the world's biggest insurance company) Citibank, JP Morgan, Goldman Sachs, General Motors, Ford and Chrysler. Many other household names are on the brink of extinction.

On the seventeenth floor of the Lipstick Building in mid-town Manhattan, Bernard L Madoff- a quiet man and devoted supporter of several charitable foundations - calmly admitted to a detective that his immense and envied financial business worth $50 billion was a Ponzi-style fraud. The new customers' money was paid out as dividends to the old. There was actually no real business at all to go on paying the dividends that had sailed serenely along at 10%-12%.

The fallout from reckless, deregulated markets in New York is global. From Shanghai to Toronto, from Tokyo to London by way of Sydney, Frankfurt, and Paris, from New York to Chicago, stock exchanges have seen values more or less halved. China and Russia have been no more immune than Germany or France.

Now the damage is coming down to the human scale: bankrupt factories, laid- off workers, unsold inventory, repossessed homes. Fear, and for some destitution. Aspirations wiped out. Children's futures transformed.

It's difficult, indeed, to keep the tone even reasonably optimistic.

The force of folly

The best minds in economics and politics don't know what to do. Unimaginable sums have been poured into the effort to recapitalise the banks. But that has only created a market in the toxic securities that caused the trouble.

How wise is it to twist the banks' arms to start lending again, when it was their reckless and indiscriminate lending that caused the trouble in the first place? How wise is it to borrow, if those debts will have to be repaid out of shrinking economic activity and devalued currencies? If hundreds of billions of dollars go to the banks and the financial sector, what about the manufacturing enterprises that will also be crashing around us?

Why did it all happen? It happened because mortgage-lenders lent to people who had no hope of repaying, on terms that virtually guaranteed that many of them would stop paying within a couple of years. Then the kind of people who give cleverness a bad name wrapped worthless paper up in fancy-sounding derivatives and unloaded them on the kind of bankers who will follow any fashion. As with Madoff's clients, the trendiest punters were the worst hit.

The contributing factors included mindless over-optimism, intellectual conceit, and plain old-fashioned fraud. All these have long been part of the Wall Street and the City of London worlds. An additional element in virtually every example of large-scale commercial deceit is greed, and of the victims as well as the fraudsman.

But more is involved. It was institutions and individuals in search of a no-questions-asked interest-rate boost that poured money into Icelandic banks, which in a transformed financial climate that melted down with startling rapidity. Mere folly? Not necessarily: sometimes it was a fiduciary duty to earn the highest rates available that led trustees, local government and charities to invest in Icelandic banks or Bernard Madoff's funds.

The market fetish

A further ingredient of the catastrophe has been at the heart of the business climate and the markets since the dawn of the neo-liberal era in the late 1970s: contempt for government. Ronald Reagan's inaugural apophthegm - that government is not the solution to our problem; government is the problem - was, after all, immensely popular among many constituencies.

Taxpayers, especially new, working-class taxpayers who found themselves in the 1970s for the first time paying income or property taxes - thanks to inflation and "bracket creep" - blamed government for their tax bills. Politicians, too, liked privatisation and the bigger role of the market that accompanied it because it saved them from hard choices that inflation was making intolerably difficult.

Businessmen liked privatisation. They saw opportunities for profit in businesses that had not been well run by bureaucrats, not necessarily because the bureaucrats were incompetent, but because they were charged with universal provision and with long-term responsibilities: pension-funds, infrastructure, training, investment in plant and machinery. Privatisers were happy to cherry-pick the bits they could make money on.

Godfrey Hodgson was director of the Reuters' Foundation Programme at Oxford University, and before that the Observer's correspondent in the United States and foreign editor of the Independent. His books include:

The World Turned Right Side Up: a history of the conservative ascendancy in America (Houghton Mifflin, 1996);

The Gentleman from New York: Senator Daniel Patrick Moynihan(Houghton Mifflin, 2000)

More Equal Than Others: America from Nixon to the New Century (Princeton University Press, 2006),

and A Great and Godly Adventure: The Pilgrims and the Myth of the First Thanksgiving (PublicAffairs, 2007)

Among Godfrey Hodgson's openDemocracy articles:

"Barack Obama: at the crossroads of victory" (11 June 2008)

"A game of two halves" (15 July 2008)

"Welcome to the party: American convention follies" (18 August 2008)

"America's foreign-policy election" (28 August 2008)

"America's economy election" (17 October 2008)

"Yes he can!" (6 November 2008)

"Change?" (2 December 2008)
Businessmen also loved deregulation. The immediate cause of the Wall Street disaster was financial deregulation, and in particular the repeal of the Depression-era legislation (the Glass-Steagall Act) that prevented investment banks merging with commercial banks. Once that protection was gone, all the money in the world was available for speculation.

Many consumers liked privatisation, too, at first. It offered, or seemed to offer, brighter products, lower costs, glitz and glamour, the illusion of choice.

So government - and that wider notion it embodies, the public interest - suffered a bad press, and worse. There was a systematic assault with all the powerful weapons of modern public relations and political propaganda. The whole concept of public service was derided.

No wonder governments found it harder and harder to attract the brightest and the best. Their ranks were demoralised. In the United States, the permanent government was subordinated to at least two tiers of political appointees who descended like summer visitors, worked at the more glamorous jobs for a couple of years and returned to the private sector with enhanced status.

In Britain, and to a lesser extent in other European countries, the permanent civil service was harassed and subordinated by droves of higher-paid consultants and advisers.

The man given responsibility for overseeing the marking of exams for 11-year-olds was paid £328,000 a year, far more than any permanent under-secretary with a lifetime's training and experience. More than that: he negotiated membership in a posh yacht-club in his native Sydney - at the British taxpayers' expense. Nothing could demonstrate more clearly how little commitment he and so many other carpetbaggers had to the future of British schools or other public services.

Several in this army of functionaries of limited ability were brought into Britain from elsewhere in the Anglophone world to make fortunes at public expense in information technology, management consultancy, private-finance initiatives and other invasions of the integrity and self-esteem of government.

But this is only part of the story of how, in Britain and the United States in particular, so many government tasks have been performed for so long with striking inefficiency. American bridges have collapsed and highways have been left unmended. The regulation of banks and airlines has been a tragi-comedy. In Britain the introduction of computers into government has been a joke. The security of government records has been a farce. The standards of public hygiene from hospitals to animal-research stations have been a scandal. A principal reason has been that no one expects government to work. Therefore no one does what would be necessary to make it work.

The world turns

What, after all, is government? In member-countries of the Organisation for Economic Cooperation and Development (OECD), the couple of dozen most successful societies in the world, it is not an intrusive conspiracy against entrepreneurial business. Is it tyranny? Is it African kleptocracy or the failed states of the middle east? You might think so from reading British newspapers or watching American television.

Democratic government is the expression of the will and aspirations of the people. Its mechanisms are not perfect. But then nor are the mechanisms of corporate business, as is now painfully clear to all.

The idea that has been fashionable for a generation, that bureaucracy is a characteristic only of government and not of shareholder-owned corporate business, was always an absurdity. Ask anyone who has had to deal with an insurance company, an airline or a commercial bank whether those institutions are free from bureaucracy.

As more and more citizens, on both sides of the Atlantic and further afield, find themselves having to renew mortgages, acquire new jobs, borrow money, sell houses or businesses - all in a climate of recession and perhaps full-blown depression - what will become of what Thomas Frank described as "market populism"?

That was the doctrine beloved of the followers of Margaret Thatcher and Ronald Reagan, not to mention Alan Greenspan of the Federal Reserve, that tried to persuade people that "the market" always works perfectly. The project required spinning the line that corporate managers, and salesmen on commission and bonuses, have the welfare of ordinary people, their customers, employees and shareholders, more reliably at heart than democratically elected politicians.

Politicians are not perfect. They have human failings. Perhaps - as a group - they even have rather more of those failings than most. But voters did choose them. They can get rid of them. That is more than is possible with the chairmen of banks, insurance companies or airlines, even if voters are able to scrape together the savings to buy a few shares in their enterprises.

If corporate business worked as the diminishing number of champions of the "free market" contend, how many of the multi-million dollar bonuses that have become a feature of the era of excess would be paid?

The denigration of government has been a disaster, one motivated by self-interest, intellectual error and often mindless, jeering spite. It is time to rehabilitate the only institution that has any hope of digging us out of the hole corporate business has dropped us in. It is time to set about proving Bill Clinton wrong when he betrayed the best traditions of democracy by saying (in January 1996) that "the era of big government is over".

Only then will it be possible to be "reasonably optimistic". In 2009, as in 1933, only government can make the earth regain its balance.

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