James Meade Redux

Well, that was fun. A rebellion has swept away the establishment. I never thought I would say that the rebellion would be manifested within the GOP and that the establishment would be within the Democrats, but that’s what we just witnessed. We on the left must accept that whatever we were saying just didn’t resonate with enough people. The Democrat’s obsession with identity politics that allowed it to ignore the consequences of its embrace of neoliberal economics has led to its separation from its foundational support. The GOP is not the party of the working class, far from it, but its dysfunction and rupture in recent years has allowed it to be co-opted by a demagogue who saw a route to power by using its base to vault himself to the top. Both parties bear equal blame for the morass and malaise. Both parties need reconstructing. Else the rebellion will continue.

For those of you of a left-of-center bent let me quote from James Meade’s wonderful little book “The Intelligent Radical’s Guide to Economic Policy”. It dates from 1975, but still has relevance as we think about how to ditch neoliberalism:

“The intelligent radical is at heart an incurable egalitarian and is appalled by the gross inequalities she observes in modern society. But she desires to cope with them by methods which are compatible with maintenance of a free and efficient system.”

That was written, of course, before inequality really exploded as neoliberalism took hold.

Some of you will object to the inclusion of the idea of a free and efficient system in any radical economic design, but I don’t. I might wonder whether the use of the word “efficient” is appropriate given the incurable uncertainty that prevents finding any pure solution to efficiency, but I think we ought use the word more loosely as a kind of placeholder for a general ability to adapt freely to circumstances.

More importantly, I think any true radical will allow plenty of space for the people who comprise the economy to pursue their own individual goals freely. This suggests an economy not socialized but socially responsive. There’s a big difference between those two concepts. A socialized economy remains the pipe dream of the old guard on the left. It has been rejected by its own failures. It is not radical. It is repressive. Socially responsive is, however, a sound basis on which to construct an active role for society in any future economic system.

Let me go back to Meade, later in his book he says this:

“We have now discussed the general principles on which governmental policies might be devised for three basic purposes: the control of inflation, the promotion of a a competitive market mechanism to combine economics freedom with economic efficiency, and the redistribution of income and property.”

We could modernize the wording of that trilogy of purposes to make it more relevant to our current problems, but even Meade’s wording sets out our goal. The purpose of economic policy is to maintain stable money so that transacting can continue securely; and then it is to balance the tension between capitalism and democracy such that we benefit from enterprise, yet mitigate its obvious anti-social by-product of inequality and unequal political power.

Yes: any radical economic policy has a redistributive political goal. It is unavoidable. It is what distinguishes it from neoliberalism. Redistribution is a core principle of democracy. It is a tenet of all democrats that we seek equal citizenship and equal rights within society. Since capitalism naturally, and within its own logic, seeks to unbalance equality and exploit such inequality as it can create for profit, all democrats are committed to a constant re-balancing. A re-balancing, crucially, that does not destroy enterprise, but encourages it within strictly enforced guidelines.

I think this is what Meade is telling us, and I agree. It is both intelligent and radical to see policy through Meade’s lens.

His three purposes ought be elevated into our own three principles to govern our way forward.

Perhaps I would go further: in this highly changeable and uncertain economy, where technological change clearly benefits some but hurts others there might be a fourth principle beyond redistribution. This would be protection or the mitigation of risk.

We already have government supplied safety nets and pension programs. They are both risk mitigation systems. But we need a more updated version: it isn’t just retirement that is tenuous in a rapidly changing environment, it is within-working-life risks that need better attention too. The so-called gig economy has fractured the old association of employment with reliable benefits. Here in America heath care is an obvious example of the risk increasingly exclusively shouldered by the employee. Unemployment, under-employment, and periodic employment all add to the separation of risk protection from the old employment ‘contract’ [such as it existed].

What this implies, to me, is that as we see the private sector getting more fragmented, less reliable, and thus more risky for the individual, it is only natural that the public sector balances that rise in risk through the provision of more flexible services.

We need to re-fit the public sector to the newly developing private sector instead of complaining about that private sector. Government’s role is increasing, not decreasing, as individuals are presumed to manage their lives more directly instead of relying on the paternalism of their old employer. In other words: as capitalism evolves to be a more cost conscious and less socially aware system, we need to re-up our commitment to the democratic ideals that undergird a strong role for government. As business gets more “at will” so government gets more robust to compensate.

This is the mirror image of the heyday economic years of the 1950’s and 1960’s when business was more benign, more restrained by union pressures, and less vicious than its is now. In those paternalistic years government could be less involved because the risks were more managed in the private sector. There was a balance. Nowadays to get back to that balance we need to offset vicious capitalism with more robust democracy.

In any case: Meade is worth reading, if only to remind us of what we all lost when both our political parties went rogue and became mouthpieces for neoliberalism.