The End of (yet another) Illusion

David Brooks had a piece in the New York Times during the week analysing the structural problems in western democracies. The argument derives from Tocqueville's aristocratic liberalism; democracy only works when a well-designed constitution gives directing power to a wise elite who can balance the passions of the multitude, but are themselves constrained by divided government. The passions have been left unconstrained and the elites no longer committed to civic governance so the system is falling apart as elites try to buy power by pandering to the passions rather than controlling them. This position is shared in whole or part by a lot of clever people who developed their thinking in response to the crisis of liberal democracy in the seventies and the closure of one way thinking marked by the "halt of the forward march of labour". In certain corners of the academy and government this kind of thinking is taken very seriously. Tocquevillian liberalism  is coherent and one can reconstruct rationally how it became attractive to liberal intellectuals, but it is one more false god that leads us astray. It is of no use at all when trying to imagine a way through the present crisis in a way that could sustain and enhance the fabric of a free society.

A blog post is to short to develop a full critique of aristocratic liberalism and all I want to do is point out that is a bad guide to history and so likely to be a bad guide in politics. In really major structural crises free societies have not relied on the conservatism of Toqueville but the moral force of Jacobinism. Lincoln and Roosevelt both faced existential threats to the survival of the republic and appealed to justice and the people to mobilise its defense. Both faced real opposition from the bastion of restraint, the supreme court. It was their capacity to define a compelling account of justice and freedom, not their capacity to manipulate the elements of the system that made them successful. It might be worth looking at Roosevelt's four freedoms again too.

John Dunn's History of Democracy and the Crisis

In his brilliant book on Democracy John Dunn offers a gloomy prognosis for the fate of representative democracy in economic depression. For Dunn Madisonian representative democracy carries off the amazing trick of uniting political equality with the growth of "opulence and distinctions" but "could scarcely work for long anywhere where distinction must be sustained through stagnant or diminishing wealth, and has been widely and understandably abandoned, often with little hesitation, in circumstances of this kind" (128). In such crises, such as the one we are now suffering, various exits and options become attractive. The option that captures most of Dunn's attention is the antithesis to Madisonian representative democracy. Egalitarian democracy, whose origin is found in Babeuf's response to Thermidor, aims to eliminate opulence and distinctions. Dunn's reflections on the prospects for democracy are carried out in the space between these two poles.

There is logically a third option, a democracy that proposes opulence but is hostile to distinctions (there is also a modern regime that is hostile to opulence and seeks distinctions but I cannot imagine any way to call such a regime democratic). That is not just a space on a logical grid but is the ground occupied by both Social Democracy and Christian Democracy.  For the purposes of this reflection the many differences between these two political traditions are less important than the strategy they share. Both traditions manage the chaos generated by the growth, or decline, of opulence by insuring the citizen against the loss of access to various public goods, to their capacity to act as a citizen. The term used very often in French public debate as a norm against which public policy can be judged, "inclusion", captures well the trajectory of this mode of thought and governance. Distinctions, which from this ground are understood as privileges, threaten democratic inclusion, opulence is neutral.

I have written at length on the emergence of Social Democracy from the wreckage of Jacobinism, and the relationship between the French Revolution and the possibilities of democracy is a generally well-worked theme, most recently in the work of Pierre Rosanvallon. I don't know of a similar body of work on Christian Democracy. Obviously these traditions don't exhaust the repertoire of the Atlantic political imaginary, but if Dunn is right about Madison's brainchild, then they will have to bear a heavy load in the resolution to our current difficulties.

Caleb Garth's Guide to the Crisis

The French and Greek elections have given a new twist to Europe's path through the economic crisis. It is very hopeful that democratic structures are giving the citizenry a means of expressing their rejection of the strategy of retrenchment, though it is just funny to see in Francois Hollande anybody's idea of a socialist firebrand. The 7% vote for the Greek neo-fascists is worrying, as was Le Pen's showing in the first round, but, sadly, it is hardly surprising that a variety of soft or hard fascist exit is tempting to at least some European voters. Some sort of Keynesian expansion is more likely this morning than it was on Saturday, but that is only the beginning of getting us out of this mess. So far nobody has even begun to imagine what a better and more stable economic future would look like.

Much alternative thinking comes down to a rejection of economic modernity. That can have a pleasing purity to it, but the road to an ecologically balanced bucolic utopia remains unclear. The more pressing need is to disaggregate contemporary life to try to find some solid timbers to frame a more robust economic house. Debt mediated by sophisticated financial instruments has not proved to be a solid foundation.  The humanities can help us to explore latent contents in our culture and the English novels of the middle nineteenth century are a great source of thinking about a commercial order. Caleb Garth in Middlemarch is a particularly useful figure to think with. Garth is an estate agent (not a house seller but a land agent) and improver who has the most passionate attachment to business but no head for money; "the echoes of great hammer where roof or keel were a-making, the signal shouts of the workmen, the roar of the furnace, the thunder and plash of the engine, were a sublime music to him,..., but he could not manage finance: he knew values well, but he had no keenness of imagination for monetary results in the shape of profit and loss". Garth is a font of entrepreneurial energy, much of it directed to social ends such as his daughter's happiness, and by contrast the banker, Mr Bulstrode, who has a very clear grasp of profit and loss, is morally hollow. Garth is a figure from the technical Enlightenment, the kind of character Larry Stewart, Margaret Jacob and Jeff Horn write about and it is worthwhile to be reminded that the project of "improvement" and the project of capitalism were not originally imagined to be the same thing. 

Money is supposed to work as a means of co-ordination. It is supposed to allow new kinds of work, to channel resources to encourage new ideas to take material form. The criticism of money has always been that whoever controlled it had monopoly control over every other kind of activity and its defense that every other kind of co-ordination contained even more oppressive possibilities. What is new in America and Europe is that the asset values that give money meaning, since they are what money controls and deploys, have become so inflated that most work is now directed toward sustaining existing value, not making new ideas material or finding new patterns of communication and co-ordination. Money is getting in the way. Inequality is a terrible problem that wears through the fabric of democratic societies, but that could be addressed by obvious kinds of tax policy. More insidious is the implication of a majority in asset values through home ownership and pension funds. We are trapped in a vicious circle where profit margins are maintained by cutting labour costs, which drive down wages and lower aggregate demand. This should be politically impossible, but the electorate are more frightened of losing the value of their pensions or the capital in their house, than they are of their income being depressed. And in any case there are winners in this kind of spiral. Just how to get out this spiral, and reapportion wealth to work and not money, is the political challenge of the time. Can we imagine a market-based economy that does not use money as a means of conducting transactions? Can we make the world safe for Garth and dangerous for Bulstrode?

Secularisation, Athena and all her family

Earlier today standing in front of the wonderful altar frieze in the Pergamon Museum in Berlin Joanna asked if the ambition to find an analogue to the kind of integrated aesthetic, moral and political qualities expressed in the altar had even been achieved in German culture. The traditional response to this is to look at Nietszche's Birth of Tragedy so we ended up chatting about that. Just today my own thinking about this book was framed by the debates on the previous day at the really great conference that Mark Somos had organised on secularisation and particularly on a remark made by Pascalis Kitromilides that one of the tragedies of modern politics was the manner in which the nation had, in some cases, become an object of religious energy in the aftermath of the French Revolution. Monotheistic nationalism has been one of the curses of the modern world. The idea that the nation offers a means of saving the individual, giving him or her a cast-iron set of values which meet all the exigencies of modern life, while guaranteeing justice and welfare for the community and the individual, has been a disasterous notion. As the nation has not fulfilled this set of expectations some national communities have taken flight into a fantasy that the problem has been pollution of the nation by heresy and heretics which could and should be eliminated, rather than a recognition that redemption cannot be a political event.

That thought in that place led me to have a better understanding of how poor Nietszche could have been so misunderstood, but also a suggestion for why his project, a this-worldly sufficient worldview, simply could not succeed. A man who was trying to move experience beyond what he saw as the wreckage left behind by the death of God suffered complete misunderstanding by monotheistic nationalists as yet another religious thinker. My suspicion though is that this fate, though unfortunate, was no accident and that such a thorough-going secularisation is impossible. Without religion to offer a rational locus for the hope of redemption of the broken world, that hope finds much less rational places to attach itself to.

To a mind or a community that can conceive of justice, it is intolerable that justice not be done. The village Hampdens cannot be unrecognised, the sparrow that falls must be accounted for. However, such a regime of totality would be unbearable, and the liberal demand that the individual confrontation with their own resolution of these impossible problems be absolutely respected is the core inheritance we take from the Enlightenment. This is the engine that drives secularisation of experience, but this resolution is insufficient. Everyday life without a framing idea of justice is impossible.

This is why my view is that the response to the problem of nationalism, even fundamentalist nationalisms that use religious dogmas as their content, cannot be secularism or total secularisation. The intuition that all is redeemed is fundamentally a religious intuition, and when expressed in that register enables a liberal politics and does not compete with it. Not everyone has to live in the two cities, but both have to be inhabited; we can never feel completely at home in the world and reconciled to it.

The Hamiltonian Moment

In January 1790 Alexander Hamilton presented the First Report on Public Credit to the House of Representatives. His plan called for the federal government to assume the war debts of the states and to meet them by issuing a 4% bond. The plan succeeded and so proper national politics was born, soon represented by the opposition between Federalists and Democratic-Republicans. It had taken from 1783 for debt and a new politics to find their definitive point of equilibrium (not necessarily the optimal one); from the crash of 2008 to December 2011 may be a shorter period of time, but the deal proposed by Merkel and Sarkozy creates the ground for a real European politics in the way Hamilton's plan created the ground on which American politics were conducted for decades.

There are many different and important aspects to this initiative. The technical details will no doubt be haggled over for months, the role of the ECB in issuing bonds is still not clear, the mechanisms for integrating the states' budgets have nowhere been specified, and all of this detail will deeply matter. But if we grant that the parallel to the founding of the United States has some merit to it, then it is probable that this initiative will open a period of political contestation, not close it. The debate will not be between Federalists and Democratic-Republicans, though there will be parallels. As Philip Coggan argues, in his new book Paper Promises, the politics of the next period will pitch debtors against creditors. I suspect, at least in Europe, that we are beginning to see the creation of the political institutions in which such a politics will be played out. When, rather than if, the sentiments that animate the occupy movement break out of the constraints of national politics, they will find expression at the European level, because at that level a resolution/default can be credibly imposed on creditors. How creditors will politically express themselves is not clear. Just where this will leave Britain, which has nailed its future to the City of London and financial services, is anybody's guess. This is where our current circumstance starts to get even more interesting.

Brief encounter

I was traveling up to Cambridge last Wednesday and as I got on the train I noticed the woman on the seat in front of mine crying, not in terrible distress or fear, but crying nevertheless. As we were all traveling through the Downs I couldn't help overhearing her conversation with her companion, who was clearly a colleague as well as a friend. It turned out she was a primary teacher (on strike that day) and had been given the year six class this year. In the UK system this makes you very visible to the headteacher, the governors and the parents as in that year (age 10/11) all children take a national test and schools are ranked by the results. So this was a cause of some considerable stress to her. What was actually making her cry with frustration though were her unsuccessful efforts to get her children to get a grip on the denotative and connotative aspects of words. She described her efforts to get the children to give her examples of words that made them go "wow" and how incredibly difficult she found it when instead they gave her words that meant "wow", (flabbergasted and gobsmacked were the two she her most often).

Two things struck me about this brief encounter. The care and energy this public sector teacher was putting into her profession, and the children for which she was responsible, was really inspiring. To spend your strike day talking about the more recondite elements of your teaching technique, with a companion who was just as focused, though less engaged, than her, speaks to real commitment.  On the other hand the punitive system that she works in is clearly unsurvivable. The terrible ratchets created by the techniques of the new public management rely on the commitment of people like her, but crush it out of them. Our social systems are running in the red and that cannot be sustained. Underneath the crisis of the financial system is a hidden crisis of social capital.

How many crises?

RTE structured its Sunday morning report on the Spanish elections around a young women studying for an MA in Psychology in Madrid who speaks four languages and can't find a job. I've had her on my mind as just one example of what is happening to millions of people across Europe and America.

Of course if you are a particular kind of economist the idea that she "can't" find a job is wrong. Rather she won't accept work at the price it would be available and she, and the rest of us, have to traverse a difficult adjustment until a new equilibrium is found. I think this a profoundly mistaken understanding of what is going on. Embedded in that young woman, and everyone like her, is up to four generations of investment in her capacities. As the Atlantic and European economies have matured asset prices have been driven up, capturing too much of the value of productivity gains, but what hasn't been captured in this way has been used to build social capacity, a lot of it embedded in people like my Madrilena. If someone suggested digging up the railway system for the metal in the rails, or burning the books in the British Library for fuel we'd recognise both suggestions as vandalism. Using someone like this as cheap undifferentiated labour is  also vandalism and totally unnecessary.

The financial crisis that has made her prospects so insecure is an event, but the globalised world she and I have to make our way in is a process. All we have going for us is the flexibility, creativity and capacity for collaboration we learn in our wonderfully complex societies. No matter how cheap we make our labour someone else will be cheaper and if we go this way we will end up burning the furniture. So the crisis she and I share is that of systematic underinvestment in the industries and activities we could flourish in.

There is no mystery about what kinds of social organisations foster successful, high value enterprises in mature economies. The SMEs clustered around the Marche, the Rhineland and that used to be the backbone of places like Sheffield, assign human and financial capital in wonderfully creative ways and reproduce themselves through real apprenticeships, proper colleges and financial institutions committed to long-term results. Similar complex social systems are the backbone of university towns, or the cities that house the fashion industries. The core strategy of the developed world in the last thirty years of using financial services, backed up by political hegemony,  has been to claim as much as possible of the growth in the developing world through rents. The financial crisis is, in my view, epiphenomenal to the emerging limit on that strategy. The Atlantic littoral may be in the situation of the Asian core in the late eighteenth century: still dominant but becalmed.

The creativity and capacity of my iconic Madrilena, and all her brothers and sisters, offer the best possible route out of our current situation. But to unleash those capacities we are going to have to have a jubilee, not a default. A set of defaults might have worked a few years ago but now we re too deeply in. We will have to discount every asset against labour, to reassign the productivity gains away from capital. If she is used up rebuilding the value of assets we will stop the process of social investment that makes the complex, subtle daily miracle of society possible, let alone the economy that feeds off it. My suspicion that an inchoate sense of this demand is already latent in the Occupy protests.

So many crises and that is without even looking to Cairo