We need regulation of the economy in the collective or public interest as a matter of routine, rather than waiting until a crisis makes us act in desperation
If we are to have a new capitalism worthy of the name, it must be a different capitalism to the one we have. As we argued in our previous post, this necessitates a different, and a more extensive and interventionist, role for the state. There are two obvious reasons for this.
First, it is not possible to make the transition from one model of capitalism to another without the guiding hand of the state. Capitalism – as we now know but should really have known all along – does not correct its own biases. It does not auto-correct and to think otherwise is to delude ourselves. But, second, the capitalism we have had is one in which the market has been in the ascendancy. We have both conspired to produce, and subsequently come to suffer from, a capitalism unregulated, a capitalism unqualified, a capitalism left to its own devices, and one in which good outcomes could arise only serendipitously through benign neglect.
This will no longer do; we need to bring capitalism to account and that means building a new capitalism – a capitalism with an adjective, and one that we specify. And the reality is that the addition of an adjective, almost regardless of which adjective, entails state coordination – not just regulation, but regulation for a societal purpose. Our chosen adjective is ‘civic’ – we argue, as we have made clear, for a Civic Capitalism, a capitalism rebuilt to answer to the collective needs of the citizens it properly should serve (and should be made to serve).
The initial case, at least, for state intervention is easily made in the context of the crisis. For when banks go under we recognise that we have a collective public interest in ensuring that the logic of the market does not prevail – the logic by which the innocent become victims, losing all of their savings in the process. It is in moments like this that we rediscover an implicit political logic that for too long we have preferred to ignore – that the state is the collective or public good provider of last resort. When the market fails, when the bank goes under, it is the only authority to which we can turn. If there is to be any kind of justice in such moments it can only arise through the interventions of the state; markets, quite simply, do not care.
The implications of this, when we start to think about them, are profound. For belated intervention in this way – bailing out the banks and underwriting them with government funds (nationalising private debt) at the point of collapse – is very much the worst case scenario. If the state had previously been trusted to engage in effective regulation of the market, and been competent in such regulation, there would have been no need for bailouts. And that is the point. A Civic Capitalism regulates the economy – and not just the banking sector – in the collective or public interest; it does not wait until a crisis strikes to intervene.
But the argument here necessarily goes much further. This is not just about regulation to prevent unnecessary and dangerous risks being taken in the market which might compromise the life-chances of those reliant on market actors. It is also about acknowledging that, at root, the market is both un-coordinated and un-coordinating – and, as such, incapable of delivering collective public goods (for which read ‘what we want as a society’) in the absence of strong governance.
One such public good, now increasingly widely acknowledged (and not just in Britain), is the need for an economy that is in some sense properly ‘balanced’ between different sectors and sources of growth. In Britain, of course, the debate has become especially focused on the urgent need for ‘rebalancing’, precisely because of the massive structural asymmetry between finance on the one hand and the productive economy on the other. Yet markets do not rebalance themselves, as the story of the British economy since the crisis manifestly shows. With the help of a targeted stimulus package (a palliative injected directly into the veins of the housing market), the unstable growth that characterised the pre-crisis bubble is back, however temporarily. Put differently, the growth we have today in Britain does not arise from ‘rebalancing’. ‘Rebalancing’ needs intervention, and we just have not had that type of intervention.
But, in order for the state to take on that role, we need a different politics – one that can be trusted both to discern the public good and to act upon it – a politics that is more visible and more deliberative, and indeed more visibly deliberative, a politics that is more open to the wishes of those in whose name it intervenes. That is a very tall order in most advanced capitalist democracies today. Political reform needs to accompany economic reform; indeed, the former may well be a condition of the latter. The basic point is that we need to be able to trust the government, if not to do the right thing all of the time (which is impossible), then at least to do what it does for the right reasons and with genuine and defensible motives. And that, too, is a long way from where we are now.
This, in turn, suggests the need to articulate a clear set of principles capable of guiding government intervention in, and regulation of, the market in the managed transition to a more genuinely Civic Capitalism. We insist, in other words, that we must find ways to articulate a strong conception of the ‘civic’ in Civic Capitalism – a sense of social justice and injustice against which government interventions might be assessed, combined with much greater visibility of the decision-making process, precisely so that we can all see, if we want to, that justice is, indeed, being done.
Specifying the content of such a conception of social justice is no easy task. From our perspective there are two elements to this. The first is to outline a minimum set of values we see as integral to the civic model of capitalism that we propose. The second is to generate the kind of societal debate about the model of capitalism we wish to build that the very notion of Civic Capitalism implies. For a Civic Capitalism worthy of the name entails a polity more open to the views of its citizens – a bringing of citizens into a more open political community. In terms of the former (the specification of core values), we would identify: equity, growth whose dividends are more fairly and evenly shared, redistribution to correct market failure, economic and environmental sustainability, and a simple principle of international reciprocity (that we would not suffer if others did as we did). In terms of the latter, we need public deliberation, debate and consultation to draw out a set of societal or civic values that could guide the managed regulation of the capitalism we wish to build. This is a collective (and thus a civic) task – and one that is long overdue.
To sum up for the moment: the severity of the crisis we have witnessed means that we have to build a new capitalism. That is likely to prove a demanding and possibly painful process and the transition will be long and difficult; but it gives us a rare opportunity, a rare choice and the responsibility which comes with that choice. The argument applies widely, but to nowhere more forcefully than Britain. We need in this country especially to devise together a design brief for such a Civic Capitalism. The legacy will last for generations; at stake in our choice is the economic, institutional and environmental sustainability of our society. It is imperative that we get it right.