Complex solutions are needed

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Several years ago the Washington Times used an editorial to accuse John Christensen and myself of being Fabian socialists. It was an interesting allegation, not least because it was, like most of what that paper writes, wrong. I had until a few weeks ago never been to a Fabian meeting, and have never been a member. Nor do I consider myself a socialist.

It's true I'm a social democrat. I'm proud to be so. I am committed to democracy. I believe that one of its achievements is the creation of the best environment in which markets can flourish, and I believe that an important contribution to human welfare. But I am adamant that however useful markets are there are limits on the contribution they can make to well being. In the supply of many goods and services, such as law and order, health and education there is, if we are to meet the needs of all in society, no chance that we can create sufficient viable excess capacity to provide choice within the constraints of geography and the need for consistency. This means the market cannot meet demand in these areas, and never will play more than a peripheral role in meeting these needs. That's why pretending that there is or can be a market in such services is just that, a delusional pretence.

So, whilst I am of the opinion that there is a choice in all things, I am equally sure that the best choice is not always the market model. Instead the optimal choice will, in many cases, be to use other mechanisms for the delivery of the services society needs. Indeed, that will usually be the case for the most important things people need, bar housing, which seems to be just about the only sector where state and privately owned delivery mechanisms co-exist without difficulty.

Consider for example the supply of clean air, water, a regulated supply of energy (and it must be regulated for exactly the reason I note above: there is little chance of creating real excess capacity in this sector as a whole to provide for choice in this market, whatever the free market proponents might claim), health, education, law and order, defence, transport (oh yes, this is regulated too - not many of us could get around without the infrastructure only the state can now supply). All these need to be supplied by effective forms of government owned enterprise. And there is no inconsistency in that description: enterprise is a trait of human nature, not of ownership. Food apart it's only the froth on top of these essential products and services that the market can effectively supply. When the proportion of the private sector activity dedicated to meeting the needs of the state owned sector is taken out of account, this froth is a surprisingly small amount of the economy.

Now, there's nothing wrong with froth. I know there are those who like cappuccino and swear by the stuff. My point though is simple: nice as froth is, it is the 'extra' in life. Of course it's also the fun bit, as a result. It's the bit where we like to believe we express our individualism, it's the place where we think we have autonomy. As a result it's the bit to which we dedicate much effort. We remember and even concentrate on the peaks in life, not the mundane bits. It just so happens it's the mundane that keeps us going.

What's the relevance of all this? Well I note a chap called Phil Collins (no, not the drummer) has warned Labour in Prospect magazine that it is 'treading a path to tragedy' if it places its faith in the 'deep poisoned well of the Fabian position', that he describes as left wing.

Of course that would be true if that faith were to mean that Labour went back to nationalising. 98% tax might not be too good an idea either. But let's be clear what this former speech write for Tony Blair really means. He says the choice is between liberal and authoritarian models now, not left and right.

I'm entirely willing to believe that old left and right divides are of little relevance. I rarely find them that useful, except when describing extremes of either dimension, neither of which I find attractive. But when the only organisations with any power committed to old style Stalinist command and control operations based on five year plans are the world's largest corporations, who almost without exception still use authoritarian top down command structures that stifle almost all creativity, then it is obvious that the old style categorisations of economic structuring are inappropriate now. However, to suggest that a contrast between liberal and authoritarian approaches is the new divide, and that all political parties must be on the liberal side is an extraordinary claim.

It's also wrong. What is not needed now is another round of knee jerk simplicity in the political posturings that are on offer. I genuinely believe that people know that the world is not simple. The evidence is all around them. I genuinely believe that what people want are leaders who can guide them through that complexity. They do not want leaders who patronise them with visions of simple solutions that seem like instant fixes but which lack credibility. We've had plenty of those during the drive for market based solutions that have, unfortunately, united left and right, liberal and authoritarian over the last couple of decades. Those simplistic solutions have been a disaster. Take PFI as a start point, and the disastrous imposition of a market model on the NHS, which has massively inflated its costs. But also take the failure to properly regulate financial markets, so allowing them to externalise their risk onto ordinary people through the likes of the Northern Rock debacle. The examples are legion. The costs of failure have been high for all but the wealthiest, who have won from the control of resources within the economy this structure has given them.

The simple fact is that liberal, unregulated activity is a threat to well being in many cases. Those cases include all the situations, noted above, where the market cannot operate, and in some where it can. The latter is the case because the market is highly imperfect in the way it operates and completely fails to price externalities as a result. Most of those externalities, be they the deaths of innocent members of the the work force, or damage to the environment, can only be prevented by regulation.

Is it authoritarian to say so? I don't think so. I believe that it is only regulation that can protect people from the unforeseen, that can provide them with redress when things go wrong, and that can provide the underlying guarantee to those who take risk in the market that if all else fails they will not lose everything. This is, of course, what happens in social democracies when the welfare state also provides that assurance to those who take the risk of working in the market. This is fact known, implicitly, by all under-capitalised employers who rely on this assurance as a form of unpaid for capital that protects the staff who work for them.

What's the case right now is that people have lost that faith in the quality of that assurance. They have lost their faith that the NHS will deliver because it is bound up in a market model that seems to have endless capacity to create beauracrcy. They have lost faith in education because teachers have been told that the only thing that matters is the ability to deliver pupils as fodder for the workplace, when instinctively those pupils, their parents and those teachers all know that education is something quite different from that. They have lost faith in the financial support mechanism of the state that is delivered in too complex form for them to understand how it works, or for them to know to what they are entitled, so leaving them in perpetual doubt as to whether they have received what is their due. They have lost faith in a government that has not regulated big business, and yet runs afraid of it.

Does this mean we need a more liberal approach? It seems only too obvious to me that such an approach cannot provide the solution. That way lies the route to more social disparity, more division in society, more stress, more violence, poorer eduction outcomes as the reason for the young to commit to the education process becomes ever harder to find, and especially for young men for whom there is no obvious future in work. Worse the liberal way guarantees there will be losers in the system. This means some know they will never earn respect within society, and that is the basis for their rejection of it, and all it stands for. That is the cause of our social malaise.

Of course pure authoritarianism is not the answer either. Nobody could believe that. That solution will not work either. But a society which sets out to establish greater equality of wealth and income, more opportunity for all and a structure which places the emphasis on outcomes and not on process (which is what the current market obsession does) will require regulation to achieve that goal. I can live with that regulation. I believe people will as well if the result is that the outcomes I suggest desirable are delivered. I think that possible. The reason far saying this is simple: it happens in other countries, including the Nordic states. People there are willing to pay more in tax than we do to achieve it, have higher standards of living and happiness as a result. None of that can be sustained for long on a liberal model, as they're finding when they risk liberal governments.

This means that the last thing Labour needs to do now is continue the liberal approach that has failed it. What is needed is belief in the complex reality called society. If the Fabians have in their time represented that value, so be it. Phil Collins has this horribly wrong. Unless Labour leaves behind its liberal guise it is rightly doomed. It has to be the party that shows real commitment to the solutions social democracy can deliver, and that nothing else can. Because this is the one model that recognises the complexity of people and their aspirations, of economics, of the inter-action between state and private sectors. And in all this it is the assurance that proper regulation can provide the necessary underpinning for the risk that we humans need to take to live life adventurously that is essential.

It is this assurance that social democracy can offer. It is a complex prescription for a complex problem. It seeks to empower people to achieve their potential. It protects ordinary people, and not just big business, from the ultimate risks of failure.

I am looking for politicians brave enough to deliver that complexity. And they could, as they have in the past, come from any of the main political parties. That's why old notions of left and right are wrong. It's why a simple liberal / authoritarian divide is naive and wrong. And that's why these are existing political times.