Frank Hoffer
Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.
These are actually not my words but a quote from Milton Freedman’s book Capitalism and Freedom, a book published in 1962 when he was a lonely Monetarist in a Keynesian World. Friedman, Hayek and their followers did not miss the crisis of Keynesianism in the 1970s, nor the crisis in Latin America in the 1980s nor the collapse of the Soviet Bloc in the 1990s. They provided the intellectual ammunition for regime change by promising a more efficient and more dynamic economy.
Today, despite its failures, the free market narrative was not buried by the crisis. Until 2007 we could have had the illusion that it was not the lack of ideas but the lack of crisis that stopped the left to turn the tide against the rule of neoliberalism. But when the crisis hit, it turned out that the left had very little to say and, instead of decapitating neoliberalism, the Hydra raised its head in Greece, Spain and Portugal to swallow up the European welfare state.
Beheading this Hydra is indeed a Heraclean task. It requires new ideas, new methods, new techniques, new policies and new alliances to win public support for creative and liberating alternatives. And these alternatives cannot start with words like re-building, re-gaining or even re-vitalizing. The future does not start with re-animation.
Times have changed and the new labour movement cannot be the reincarnation of the old one. A movement with a great history, but also with a narrow male and macho tradition. To build a unifying movement in a complex and diverse world with a multifaceted civil society requires a plurality of initiatives identifying themselves autonomously with a common vision. Or in simpler language we need a rainbow coalition for a post-neoliberal globalisation. And this alternative or common agenda needs to be more specific than ‘another world is possible’ or ‘yes we can.’
Post-neoliberal Globalisation And Public Policy
There is an opportunity for new policies as the crisis and the unfair and unsuccessful crisis responses have disillusioned people about the current regime and created strong demands to put an end to skyrocketing inequality. Combating inequality has the potential for such a unifying common vision.
Reducing inequality should not be misrepresented as a policy to make people equal. Actually the purpose is the exact opposite. People are not equal. They have different views, appearances, abilities, characters, senses of humour and different desires and ambitions. It is economic polarisation that replaces human richness by purchasing power. Money tends to transform the multitude of individual personalities into a hierarchy of bank accounts. Today, the country of birth, skin-colour, gender, family fortune and class, as well as talent, beauty and many other factors beyond individual control or merit are major determinants of position and income in society.
Most rich people are not deserving rich. They cannot claim their income is exclusively deserved because they have worked so much harder than others. Progressive taxation is therefore also not about taxing disproportionately the hard work of the rich but about sharing the accidental windfall gains of inheritance, upbringing and beauty in an equitable way.
By the way, this will not even create any substantial welfare losses for the rich. High incomes are largely not about consumption but about status. If one hedge-fund manager makes 50 million a year the other is only satisfied if he makes 60 million. But if, through taxation, the first is only making 5 million, 6 million will give his competitor the same pleasure as 60 million before, because status-wise he has still 20% more. Also the incentive to work hard does not change as the prime motivation stays the same: earning more than the others. Taxing the rich is actually the only tax that benefits everybody and does not create real harm to anyone.
Inequality And Fairness
Having people believe that massive inequality is the fair outcome of a competitive process that is ultimately good for all is the ideological foundation of the current regime. The crisis has put an end to this fairy tale as free competition in financial markets created financial weapons of mass destruction instead of shared prosperity.
Neoclassical theory said the crisis couldn’t happen as financial markets were governed by rational expectations. When the crisis – despite its impossibility – happened, policy-makers ignored neoclassical wisdom to avoid an economic meltdown and where they still apply neoclassical recipes, it does not solve but deepens the crisis.
Unfortunately too many policies are still guided by the old orthodoxies; ordinary people still suffer but many people don’t believe in it anymore. Therefore we can be sure there will be an alternative to neoliberalism. It is up to the left to use this opportunity to establish rules and regulations for inclusive societies or to see a further rise of right-wing populisms as the wrong answer to a dysfunctional system.
Who could have expected that a book of a left-wing French Professor on inequality called “Le Capital” becomes a bestseller in the US. Professor Piketty not only provides the empirical evidence that wealth accumulation has in itself the inevitable tendency of growing inequality with all its disastrous consequences for democracy, equity and opportunity; he also provides a straight-forward answer: tax the rich: 20% on wealth and 80% on high income. Sure, taxing the rich on its own is not the solution, but there is certainly no solution without taxing them.
For individual diversity to flourish and for democratic societies to function, economic inequality has to be limited and private capital’s controlling power over media, political parties, academic expertise and research must be broken. Freedom and democracy cannot survive where plutocratic power abuse is rampant. Closing tax havens, setting minimum tax floors, taxing wealth, inheritance and windfall profits from rising real estate prices or other asset bubbles are policy option fully in the range of the possible. Taxing the rich is necessary not only for funding inclusive societies, but also for defending democracy.
Talking about freedom; it is one of the greatest successes of Friedman and co. that they occupied the term freedom by claiming that the dictatorship of money is freedom. The rich have an exclusive concept of freedom: they want the freedom to buy themselves all kinds of privileges. In Switzerland, for example, where I am living, the rich of the world have privatised most of the beautiful landscape around Lake Geneva. The access of 99 per cent of the population is limited to tiny public beaches while the rest of the shores of the lake have been transformed into gated communities of the very rich. And this expropriation is called freedom.
Real freedom means, as the most famous German social democratic intellectual, Karl Marx, put it, to change all circumstances were human beings are oppressed. Combating inequality is about development as freedom, it is about real democracy, it is about opening up the world for everybody and it is about help and solidarity for all in need.
Frank Hoffer is non-executive director of the Global Labour University Online Academy.