This is partially inspired by a conversation on Labour List, the premier British Left of Centre blog, where a version of the Political Compass Test was taken by several diverse commenters.
Now most people who visit the political blogosphere know the parameters of that test: authoritarian/libertarian, socially interventionist/economically interventionist. Like Myers-Briggs, these are static and almost self fulfilling quadrants which test how much you believe in individual freedom versus social responsibility, whether in crime, foreign affairs, the economy, gun ownership or reproductive rights. We all know the tests, and probably where we come out in them.
I think that the events of the last three years make that compass profoundly irrelevant, an old paradigm which can only provide a direction in an outdated map. Follow me below the fold while I suggest that the old metrics no longer apply and we are in a new world looking for new bearings.
Our compasses rely on the electromagnetic field of the earth. North is north, and south is south, but every quarter of million years or so, the electromagnetic field of the earth reverses, placing north to the south, and the south to the north. And even those polarities aren’t absolute because you get declinations which place the magnetic poles thousands of miles away from the astronomical poles around which the earth rotates.
So my hunch is: we’re going through a paradigm shift, a once-in-a-generation shift of the old polarities.
To put it in a nutshell: the metrics of the political compass make complete sense from about 1979 till 2008. It was in the 70s that the conservative right, thanks to several Austrian thinkers who had experienced the failure of democratic politics in the 30s, became the ‘liberal’ party, of anti state liberty.
For thirty five years previously, the social democratic left had ruled the roost in both Europe and the US, creating the welfare state, the Great Society, and building institutions of economic and political governance, from Bretton Woods to the UN, which essentially said the untrammelled individual and national pursuit of liberty and self interest had to be reined in.
But then came the calamities of the 70s, and the rise of Friedman and Hayek, Thatcher and Reagan. Suddenly the right took the mantle of liberty (having been associated with reactionary and backward thinking before). Their great achievements were privatisation, globalisation, and capturing the language of individual liberty.
Three years ago, during the first credit crunch, I sensed a profound economic shift. That Anglo Saxon model, which seemed to have delivered so much wealth, was now in such a parlous state that it was too big to fail. In a massive transfer of wealth, both sides of the Atlantic, trillions of dollars (in real terms enough to have paid for the Manhattan Project, the Apollo Missions, the Great Society and the New Deal, and the Korean, Vietnam and Iraq Wars) were transferred by the tax payer to bond holders and private debt holders.
Like the 1930s, the state had stepped in to save Capitalism. Twenty years after the fall of the Berlin Wall and the collapse of ‘actually existing’ state socialism, we had a new socialism:
Socialism for the Rich.
Now this solved no problems. If the banks were ‘too big to fail in 2008’, the mergers and government support had made not only fewer bigger banks, but also increased the moral hazard of private investors taking inordinate risks because they know their losses will be mitigated by the taxpayer.
So three years on from the credit crunch, things have just become worse.
There are a plethora of other much more knowledgeable diarists and economists who have been saying this for years. However, what I’ve noticed in the last few months is that this message is sinking in with the general population.
Maybe they’ve just seen nothing change. Maybe they’ve seen the fantastic documentary movie Inside Job . Or maybe it’s more brutal – they just lack the ‘inside jobs’ and having waited for two years for ‘normal service’ to resume, realise it will never come back
That means a paradigm shift has happened. The old model no longer delivers.
In such a situation, the old politics of market research, lobbying, triangulation and playing off of interests no longer works. In such a situation, things happen catastrophically. Modal monopolies such as Newscorp or the investment banks in Wall Street, suddenly collapse or lose credibility. In such a situation, the polarities change and our compasses must constantly be recalibrated.
In such a situation there is no middle ground anymore. Not because moderation doesn’t matter, but the notion of the middle has been turned on its head.
Now I’m no opponent of entrepreneurs. I believe markets can be much more efficient at delivering services than centralised governments. I believe in individual liberty, competition, and striving to create new products which make people’s lives better. This would probably make me some kind of capitalist – along with the vast majority in both our nations.
But when the massive transfers of wealth go from tax payers to those who are trying to protect their wealth from the vagaries of the market; when the banking system, which should just be a vehicle for transferring money from the investors to creators, becomes an end in itself; when the high finance capitalist system ceases to produce wealth, or jobs, or rising living standards, or an equitable and sustainable society: then the paradigm shifts and must be radically revised.
Tony Judt, friend and mentor, wrote one last book before he died, Ill Fares the Land, where he described how (having been an opponent of communist rule and friend and supporter of many dissidents) he found the language of markets, globalisation, deregulation and laissez faire, as dogmatic, illiberal and mendacious in the West at the beginning of the 21st Century as the Communist cant about equality and fairness was in the Soviet Union in the 50s.
So this is a paradigm shift. I spoke to a Bosnian friend of mine who is a bond trader the other day. He says the market is f**ked, because it doesn’t know what it wants.
The market wants the Greek Austerity plan to succeed so they can reduce their debt. It also wants it to fail because it knows that you can’t shrink the debt without growth. It’s socially and financially unfeasible. He said the one thing that gives any of the market any direction is the promise of government intervention
Thatcher said you can’t buck the market. She was wrong. Markets need to be bucked. They need to be reined in and controlled for the good of their electorates.
The problem is though we can’t nationalise any markets an ymore. Corportations outsource overseas. Bankers transfer to the Cayman Islands in a blink of an eye.
We can’t nationalise anything. We have to internationalise it.
So we’re back to 1945, when all the institutions of the post World War II era of peace and growth were built: the UN, EU, NATO, Bretton Woods.
But the compass has shifted. My prediction
For the last thirty years, discussions of political economy were dominated by the economists.
For the next few years it will be politics that triumphs over economics in the political economy: and conversations like this will be all important.
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