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This is not a blog which expresses instant opinions on current events. It rather uses incidents, books (old and new), links and papers as jumping-off points for some reflections about our social endeavours.
So old posts are as good as new! And lots of useful links!

Saturday, July 22, 2017

The sovereign myth ....and the future of social democracy

For the past few years, the refrain of the MSM has been that there could be no returning to the heyday of social democracy But, since Corbyn, Trump and the recent British election, the talk is of little else…..The grip of neoliberal thinking seems at last to be broken. Globalisation is no more….

And yet…….The Crooked Timber blog alerted me to this piece on what the author calls “the sovereign myth 
One of the defining organizational facts about the state as we know it ….is that it is integrally connected with transnational finance. In part, but it’s an important part, the modern state is a creation of the bond market, and so is the modern democratic state.
Medieval mercantile cities had long been able to borrow money at better interest rates than other political units. In early modernity, states that were relatively representative and relatively commercial learned that they could do the same. First Holland, then England, gained crucial advantages in international competition from their ability to borrow cheaply; the credit market trusted representative governments that incorporated important parts of the commercial classes much more than they trusted absolute monarchs. And Britain’s ability to out-borrow France eventually contributed to the bankruptcy of the latter state and the onset of the Revolution. 
This is uncontroversial but, from many ideological perspectives, uncomfortable. It means that the growth, stability, and expansion of powerful states governed by representative democracy was in part a creation of the credit market, bondholders, and international finance. That’s not a world in which democratic decision makers ever had unconstrained sovereign decision-making authority over public finance, even in the powerful core states of the international system. It also means that the representative state emerged out of a kind of market competition for creditworthy providers of government.
The representation of those who would have to be taxed in the future to repay the debt was taken as much more credible than a king’s prediction that his son would probably find the money somewhere. Moreover, the innovative financial instruments that characterize modern financial markets were often created by, or around, public or quasi-public entities like the Bank of England and the Dutch East India Company.
And once these processes got underway, the validity of transnational debt in the nineteenth and twentieth centuries was often enforced at gunboat-point by powerful states.Thus, imagined histories of democratic sovereignty over the economy cannot survive contact with the actual history of the emergence of democratic states.

I was in the mood for this sombre message since I had just emerged from reading The Roch Winds - a treacherous guide to Scotland which is as thought-provoking a vignette on the state of one of Europe’s small countries as you can find. 
much of the book is dedicated to a forensic analysis of the nebulous cluster of hopes and dreams that constitute ‘Civic Nationalism’, the ideology that increasingly sets the parameters of Scottish political discourse. In the ongoing absence of any effective opposition to the SNP’s complete dominance at Holyrood and beyond, commentary of this quality is badly needed to puncture Scotland’s self-satisfied political consensus.…….its legislation moving at stately pace through its quiet committees, its doors open to trusted representatives of Scotland’s established civic institutions, the very design of its hemispherical parliamentary chamber facilitating respectful rational exchanges.

The Scottish nationalists who have been in government in devolved Scotland for more than ten years are very good in contrasting their consensual approach with the bitter antagonisms which are evident in the Westminster parliament. But an excellent, extended review makes the point that –
Westminster is a ‘tax-and-spend’ parliament, responsible for raising the money it distributes, whereas Holyrood is ‘grant-and-spend’ assembly, responsible only for distributing funds guaranteed by Westminster’s block grant.Holyrood is protected from the elemental political forces that buffet the British Government, which carries the burden of raising the money it spends in a competitive global economy.
Politics at this level is bound to be confrontational, the angry exchanges at the dispatch box reflecting the impossibility of reconciling the divergent interests of the extra-parliamentary constituencies that fight to determine how money is spent and raised. Westminster’s power to set tax rates and pull the fiscal and monetary levers that shape the environment in which business operates subject it to pressures exerted by powerful financial and corporate interests to which the Scottish Parliament is not subject.

Of course I know that the ruthless face of finance capitalism has been evident for several years in the whole tragic saga of Greek debt but The Roch Winds is particularly powerful in its description of how, for the few days immediately before the Scottish referendum of 2014, that ruthless face presented itself when a poll was released suggesting a possible victory for the yes campaign. One of the book’s authors wrote an Open Democracy piece which tells this wonderful story –
Between 1929 and 1931, a minority Labour government tore itself to shreds in a desperate attempt to keep Britain in the Gold Standard international monetary system. Winston Churchill – then Chancellor of the Exchequer – re-established Sterling at the centre of a revived Gold Standard in 1925, revaluing it at pre-war levels despite the devastation which the First World War had inflicted on the British economy. Labour, seeking to reform rather than overthrow British capitalism, offered little in the way of an alternative.
Within the party’s social democratic orthodoxy, the stability of the international economic architecture and high finance had to be secured before Labour could focus on its own supporters amongst the industrial working class.
 Industrial areas experienced great hardship as Britain struggled on maintaining relatively liberalised trade and a highly uncompetitive currency valuation. The fiscal situation was also hindered, and the Labour government ultimately fell due to an internal feud over further cuts to unemployment benefit.
 Yet the rules of the game were dramatically changed just days and weeks after this collapse. The incoming (largely Tory) National Government took Britain off the hallowed Gold Standard, raised tariffs, subsidised industry and set about arranging preferential Commonwealth trading.Sidney Webb, the leading Fabian intellectual who had served as the Secretary of State for Dominions and Colonies in the Labour administration, responded to the situation with the exasperated cry of: “they didn’t tell us we could do that!”    

The review continues by reminding us of how 
Scottish Labour’s uninspiring defence of the Union throughout the referendum – which has cost them a Scottish working class vote that no longer has faith in the status quo – was rooted in the belief that Scotland’s public services can only be maintained within the context of British capitalism.During the Blair and Brown years Labour maintained public spending – and Scotland’s block grant – by means of a Faustian pact with finance capital: the City was allowed to let rip in return for the tax revenues it generated.
New Labour’s perceived impurities continue to be exploited ruthlessly by the SNP and the wider Yes movement, for whom ‘any effort to sustain the welfare state in the cesspit of British capitalism [is] like conducting surgery in a sewer.’The SNP have sought to claim the mantle of a purer social democracy once proudly championed by a more virtuous ‘Old Labour’, but for Gallagher et al this is just another illusion: the compromises of the New Labour era were the most recent manifestation of Labour’s continual battle to broker some form of social democratic state in the teeth of the private sector’s hostility. 
During the post-war golden era ‘Old Labour’ might indeed have had it easier: reliable economic growth generated the tax revenues necessary to fund public services, and strong unions were able to force decent wages. But it soon morphed into a messy business of incomes policies, ‘beer and sandwiches at No 10’ and currency devalutions: social democracy is always necessarily compromised, a fractious struggle to broker a truce between capital and labour.
And it has only got harder in more recent decades, the globalisation and financialisation of the world economy limiting the capacity of nation states to draw tax revenues from business, and weakened labour movements forcing governments such as those of Blair and Brown to supplement low wages with tax breaks, minimum wage legislation and easy credit. 
The 2008 crash pitched social democracy into full-blown crisis, forcing states to borrow heavily to prevent wholesale collapse of the banks, and to run up debts that must be repaid on terms dictated by finance capital, including tight controls on public spending and the maintenance of cheap, flexible labour markets.For the authors, austerity is a permanent condition enforced by vast corporate and financial interests that nation states are no longer able to control.
Any social democratic government prepared to work within the terms set by global capital will be subject to the same pressures:Labour’s inability to respond to austerity was due to the fact that under its social democratic principles it could [not] challenge it, since it was not prepared to operate outside conditions which were profitable for capital. A Scottish state governed by the SNP would have to face up to the same challenges that social democratic parties everywhere, not just Labour, are struggling to see beyond. 

A future post will try to explore the implications for social democracy......

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