Blue Labour, Catholic social thought, and the 'civil economy' alternative

A Post-Liberal Political Economy for Labour*

Blue Labour, Catholic Social Thought and the ‘Civil Economy’ Alternative

 

Blue Labour Midlands Seminar, 5th July 2013, The University of Nottingham

 

Adrian Pabst[1]

 

Introduction

 

If the Labour Party currently does not look like an opposition ready to govern again, it is because so far it has failed to craft a genuinely alternative political economy. More than any other force within the wider Labour movement, Blue Labour has shown that the key problem of New Labour was its fusion of economic liberalism with social liberalism. Whatever the benefits (and there were few), this model has not only bequeathed a bubble cycle of boom, bust and bailouts. Worse, decades of socio-economic liberalisation have subordinated society to commercial commodification and bureaucratic control all at once.

 

Following its disastrous defeat in 2010 (the second worst electoral result in 70 years), Labour now has a unique opportunity to broker a new settlement. However, just as the Conservative-Liberal coalition government has banked its entire economic strategy on austerity, so Labour has so far been largely reactive. Indeed, two of the three elements that constitute Labour’s current economic strategy are ultimately part of the same logic of austerity that has reduced national output by as much as 3 per cent.[2]

 

New fiscal rules – the first element – may neutralise Tory-led attacks and buy the shadow cabinet some time but they will lock the Labour government into an economic straitjacket that risks preventing any systemic transformation from the outset. More capital expenditure – the second element – might partly offset the full impact of the draconian cuts which the new fiscal rules imply. But just as since 2010 the coalition has cut too far too fast, higher capital spending starting in 2015 will be too little too late in order to close the current output gap and raise living standards. Crucially, it won’t bring about the strong growth on which a proper policy of deficit- and debt-reduction and a sustained recovery depend.

 

Responsible capitalism – the third element – has been Ed Miliband’s most effective strategy to outflank both neo-Thatcherite monetarism and bastardised Keynesianism but it risks being drowned out by timid tactics and a lack of leadership. Yet at the same time, this is the most promising attempt to devise a post-liberal political economy. All the key post-liberal policy ideas – the ‘living wage’, regional banks, payday lenders and corporate governance reform – bear the imprint of Blue Labour, most notably the work of Maurice Glasman and London Citizens (now CitizensUK) that blends community organising with Catholic Social Thought as well as the research of economists such as Gavin Kelly (Resolution Foundation) or Duncan Weldon (TUC).

 

As the One Nation narrative struggles to gain traction with the electorate, only an overarching political economy – one that generates growth, reduces poverty and reverses the decline in living standards – can ensure Labour’s victory in the 2015 general election and help the country escape from the current cycle of debt and demoralisation.

 

1. The crisis of liberal capitalism

 

In an age of austerity, politicians and pundits on all sides of the political spectrum remain prisoners of outdated socio-economic orthodoxies. Since the late 1970s both left- and right-wing thinking has extended little beyond the monetarist doctrine of the Reagan-Thatcher period and the ‘privatised Keynesianism’ of the Clinton-Blair years.[3] Both bank bailouts and austerity in the aftermath of the 2008-9 economic crash are of a piece with the convergence of Thatcherite and Blairite ideas towards activist monetary policy and a growing focus on both credit and debt.

 

As we have seen over the last decade or so, the dominant policy regime since 1979 consists of three main elements. First of all, it privileges both public and private consumption over strategic investment. Second, it favours short-term financial gains over long-term productive growth, as the boom in financial services has neither stimulated overall economic production nor trickled down to other sectors (except perhaps corporate law, insurance and real estate). Third, it prefers redistributing income to distributing assets (except for isolated initiatives such as New Labour’s Child Trust Fund). All these elements involve putting pressure on pay and working hours (including the boom in zero-hour contracts) instead of raising wages in line with higher productivity. That, in turn, would require a long-term strategy of investing in innovation and proper skills – especially the much-neglected vocational skills that are needed not just in services (including law and banking) but also in high-tech manufacturing and industry.

 

Taken together, these three elements have produced a model that is economically inefficient and morally bankrupt. By promoting the collusive convergence of the central bureaucratic state with the globalised ‘free market’, ‘privatised Keynesianism’ and the monetarist doctrine helped fuel a bubble cycle of boom and bust that burst with devastating economic and social consequences in 2008. For example, perverse incentives (including cheap credit based on artificially low interest rates or tax exemptions on short-term corporate profits) led to the channelling of unprecedented amounts of capital into largely unproductive financial services. The evidence presented by Duncan Weldon is staggering:

£1.3 trillion of loans were extended to British residents by UK banks in the 10 years before 2007, around 100 per cent of GDP, and 84 per cent of this went into either property or to financial companies. The banking system’s focus on property and finance contributed to regional inequalities, to the UK’s low level of investment and to the asset price boom, which sowed the seeds of the crisis.[4]

 

So when the bubble finally burst in 2008, the ensuing recession left an output gap of over 4 per cent of GDP – not to mention much lower living standards and higher long-term unemployment. The dominant forms of monetarism and Keynesianism have engendered a low-wage, low-productivity, low-innovation and low-growth model that is now undergoing a ‘zero hours’ intensification.

 

More specifically, the endemic problems of the British economy include the following features and structural developments. First of all, the continual deindustrialisation since 1979 and 1997 has reinforced a two-tier economy and labour market that are increasingly divided between high-skilled, high-income groups, on the one hand, and low-skilled, low- (or no-)income groups, on the other hand. For instance, many middle-skilled, middle-income groups have been left behind, with former machinists and tradesmen becoming cashiers and call-centre workers. Moreover, the low-skilled, low-income groups are part of a new underclass or ‘precariat’ for whom opportunity and flexibility is synonymous with insecure employment and pay – as exemplified by zero-hour contracts.

 

Second, along with house prices the cost of living continues to soar – especially energy, transport, food and especially rent in light of fast-growing demand and flat-lining supply. To this we must add the rising cost of childcare and other family-related expenses All this, coupled with stagnant or declining real wages, hits hardest the low- and middle-income families who struggle to make ends meet but do not qualify for welfare benefits following the coalition cuts.

 

Third, the incentives to maximise short-term profit have produced an economy that cuts wages while pushing up prices. Connected with this is the ever-increasing dependence on the service sector that discourages an effective industrial policy and drives out skilled jobs in the middle, as I have already indicated. It also puts a premium on immigration – whether cheaper high-skilled or very cheap low-skilled labour. The influx of migrants not only drives down wages and leads to the exploitation of foreign workers but most of all benefits the affluent in metropolitan areas, especially London.

 

Fourth, the growing precariousness and the increasing cost of living are fuelling the vicious cycle of debt and demoralisation. After three years of austerity and public retrenchment, UK households’ financial (non-mortgage) liabilities rose by over 10 per cent from about £86bn to nearly £95bn according to the Office of National Statistic – with only half of all households bearing this burden and the poorest 10 per cent owing four times as much as they owe in financial assets. With the retail banking sector desperate to reduce its exposure to unsecured loans and keen to reward institutional investors, people in dire need have had no choice but accept the usurious lending practices of payday loan companies such as Wonga, Ramsdens and the Money Shop. While George Osborne boasts about the recovery, the reality for most Britons is that the country is fast becoming an ‘Alice in Wongaland’ economy, as Ann Pettifor has rightly remarked.[5]

 

Fifth, the dominant model of globalisation has engendered a ‘great risk shift’, transferring risk and insecurity from government and business to families and individuals.[6] This has created more opportunities for the few while increasing the vulnerability of the many and plunging the lower middle classes into poverty. Paradoxically and perversely, the mantra of personalisation in both the public and the private sector (whether at work or receiving benefits or buying goods and services) has led to ever more impersonal, anonymous relations. Likewise, being free to choose is increasingly synonymous with being free to lose.

 

Just as the state is cutting back, the family and the workplace are under increasing pressures from the global race to the bottom. Bound up with this is the fact that privatisation, liberalisation and deregulation have led to the ‘great divestiture’.[7] Indeed, the transfer of previously public assets into private ownership has not had a lasting, positive effect on lower prices for consumers and higher productivity. Instead, it has significantly contributed to regressive redistribution, with levels of inequality and social immobility not seen since the 1920s.

 

Thus, the genuine alternative to the hitherto hegemonic neo-liberal settlement (which is variously more market-driven or more state-centric) is a political economy that promotes investment in productive activities, distributes assets and seeks to re-embed the global ‘market-state’ in the interpersonal relationships and the social bonds holding society together.[8] Such a political economy requires a fundamental rethink of the dominant orthodoxies. The right has been almost exclusively wedded to free-market economics, aided and abetted by the bureaucratic collectivisation of the strong central state. Similarly, the left has focused too much on statist politics, which has nonetheless opened up new areas of the public sector and the private sphere to market commodification. In so doing, both right and left have converged and colluded far more than they recognise.

 

The challenge now is not between either more state or more markets but primarily how to protect both community and society against the double-headed hydra of the global ‘market-state’ and how to nourish the interpersonal relationships and social ties on which a vibrant market economy and democracy rely. If the left wants to shape the next political paradigm, then it must uphold the primacy of the social over the economic and the political – the interpersonal relationships, social ties and civic bonds on which both trust and cooperation depend.

 

In turn, this means a turn away from the dominant models of mindless modernisation that rest on unrestrained economic and social liberalism. Both types of liberalism champion ‘negative liberty’, i.e. unfettered personal choice and freedom from constraint except the law and private conscience.[9] The trouble is that this conception of liberty privileges purely individual rights and abstract values such as private choice or personal desire at the expense of shared ends and the practice of virtue.

 

In an age of socio-economic strife (e.g. the financial crisis and recent riots in London, Paris or Malmo), the two liberalisms have come under close scrutiny. With their shared emphasis on ‘negative liberty’, they have accentuated formal links over interpersonal ties, privileging individual rights and entitlements and also market relations over interpersonal relations of reciprocity. Thus both liberalisms have ignored the mutual dependence and reciprocal connections among citizens. They have taken for granted the glue that holds society together, preferring light-touch regulations and central targets to the institutions and practices that help shape character and virtuous behaviour.

 

Paradoxically, socio-economic liberalism engenders societies that are simultaneously more atomised and more interdependent. Indeed, decades of liberalisation have contributed to the erosion of the social bonds and civic ties on which vibrant societies depend. Arguably, Britain and parts of continental Europe are today characterised by greater interdependence and greater atomisation (defined in terms of falling social capital, trust and cooperation, as the work of Robert Putnam and others shows). In short, the current crisis of financial capitalism and representative democracy illustrates the many excesses and unintended consequences of socio-economic liberalism.

 

2. The post-liberal moment

 

Since the global financial crash of 2008-09, there has been a popular backlash against some of the key socio-economic consequences of neo-liberal globalisation – including the dominance of finance over other sectors, stagnating or declining real wages for workers (among other things linked to cheap foreign labour) and welfare cuts. Both the mainstream left and right seem wedded to the neo-liberalism that is now in question.

 

Two different kinds of responses can be distinguished. First, anti-liberal parties such as UKIP that reject economic liberalisation and immigration in favour of national sovereignty, closed borders as well as variants of nationalism and statism. Second, post-liberal movements like Blue Labour’ seek to combine greater economic justice with a renewed emphasis on social relations. For example, this involves promoting the ‘living wage’, with overtures of a ‘family wage’ that supports family loyalty without decreeing the nature of ‘real’ family. In short, on both left and the right, the debate is between neo- (or ultra-)liberalism and statism, on the one hand, and post-liberal pluralism, on the other hand.

 

For this reason, post-liberalism is not the same as anti- or pre-liberalism. Post-liberalism does not claim that liberalism is all wrong but it contends that liberalism has intrinsic problems and tends to abolish itself. Indeed, post-liberal thinkers such as Maurice Glasman acknowledge that liberalism can offer a certain political good by promoting various forms of equality and by guarding against some of the worst intrusions on the liberty of some by the liberty of others. But liberalism – like other political ideologies – tends to ignore the costs of its own benefits, such as the excessive atomisation and mutual suspicion that undermine the bonds of trust and cooperation on which a free and just society ultimately depends, as I have already mentioned.

 

Crucially, the liberal tradition tends to abolish itself because too much ‘negative liberty’ leads to un-freedom and too much equality promotion amounts to the imposition of sameness that denies the diversity of difference. Liberalism unwittingly brings about the very condition that was its own presupposition – whether the Hobbesian ‘war of all against’ or the Lockean ‘possessive individualism’ or the Rousseauian loss of original freedom within the social contract. Or indeed the  shared liberal pessimism of human nature – whether about the individual who is thought to be greedy, selfish and violent (as for Hobbes, Locke and Kant) or about human association that is believed to enslave us (as for Rousseau and, more recently, John Rawls).

 

Crucially, the clear failure of liberal policies has opened up the space for alternatives that do not reject universal principles (of freedom or equality) but put forward post-liberal policies that emphasise reciprocal rights, mutual obligations and realistic generosity – e.g. caps on interest rates, the ‘living wage’, breaking up cartels in banking and finance, radical devolution and community-organising to foster social cohesion, etc.

 

Before I can outline in some more detail a post-liberal political economy, a few more points need to be made. Far from being nostalgic and reactionary, post-liberalism appeals to perennial principles such as the common good, the good life, mutuality, reciprocity, participation, association, individual virtue and public honour. The task is to renew such notions and to craft institutions that can translate these principles into transformative practices of reciprocal giving, mutual assistance and cooperation across the public, the private and the ‘third’ (voluntary) sector. In short, a genuinely post-liberal political economy encompasses the state, the market and civil society and does not view them as separate or opposed.

 

Politically, post-liberalism advocates pluralising the state in the following three ways. First of all, by rebalancing the relations between government, parliament, the courts and the administration away from the dominance of the executive. This dominance betrays the spirit of Britain’s ‘mixed constitution’, which differs sharply from the US and continental European separation of powers in which either one branch of government always ends up ruling over the others (usually the executive) or there is permanent paralysis (as in the US system over the budget and fundamental reforms such as immigration). Linked to this is the need to honour the ethos and integrity of institutions such as the civil service, which endure the corrosive effects of the permanent bureaucratic-managerialist revolution imposed by successive governments.

 

Secondly, by devolving power to regional, local and communal levels as well as European and global level. This should occur in accordance with the principle of subsidiarity which stipulates action at the most appropriate level in order to safeguard human dignity and the flourishing of the person. For example, new forms of financial regulation or a serious crackdown on tax evasion require action at the supranational level (either the EU or the G20). The same is true for the fight against organised crime and against global warming. However, for a vast array of areas – from welfare via education to housing – devolution to the level of county, city or even parish councils would be preferable compared with existing arrangements. That is because it would help sure that the delivery of services is more personal, local and holistic than the homogenised standards and uniform target imposed by central government and the free market.

 

Thirdly, associating all the mediating institutions of civil society (professional associations, universities, manufacturing and trading guilds, etc.) to public policy and decision-making. Concretely, this would involve a greater role for assemblies, guilds and professional ethos in order to counterbalance the writ of the executive, political parties and the managerial bureaucracy of the central state (about which more later).

 

Economically, post-liberalism argues for the mutualisation of markets to shift the emphasis from short-term profits and pure price competition towards longer-term, sustainable profitability and competition centred on quality and their wider social impact (including the so-called environmental ‘externalities’). Connected with this are principles and practices of cooperation beyond pure self-interest and the distribution of assets (e.g. asset-based welfare, employee ownership and cooperatives, including in the public sector).

 

Crucially, mutualising markets involves abandoning the current separation of profit and risk between, investors and money-lenders on the one hand, and customers and employees on the other, in favour of alternative arrangements whereby debt is converted into equity and both profit and risk are shared more equitably rather than divorced from one another. Examples include, mortgages with long-term, fixed interest rates; debt equitisation schemes for over-leveraged banks and corporations; and the introduction of growth warrants in addition to ordinary national or corporate bonds.

 

Constitutionally, post-liberalism promotes the active association and participation of citizens – individually and in groups – in the governance of the public realm. Here the guiding principle is the ancient and medieval notion of ‘mixed government’ where the rule of the ‘one’ (the nation), ‘the few’ (virtuous elites in all professions and sections of society) and ‘the many’ (the populace) are blended in mutually balancing and augmenting ways. Whether Edmund Burke’s ‘little platoons’, or G.D.H. Cole’s guilds, ‘the few’ could mediate between families, households, communities, localities on the one hand, and national state and transnational markets, on the other hand. So configured, ‘the few’ would have a constitutional role that helps secure the autonomy of the mediating institutions that constitute civil society.

 

A renewed form of guilds and professional associations would help develop and protect standards of excellence and honourable practices – if necessary by means of punishment and exclusion based on an ethos of combining extensive rights with strict duties and moral codes. In the past when craft-guilds were frequently organised as confraternities, they participated in the life of the polity based on their own distinct ‘legal personality’. Some of the most successful economies in Europe – including Germany and Northern Italy – are based on strong intermediary institutions and new forms of guild-like professional associations that foster strong economic growth based on innovation and productivity.

 

As such, if the left truly believes in worker self-organisation, it must encourage the introduction of a constitutional status for professional and other associations. This, coupled with a pluralised state and mutualised markets, can help build a civil covenant that blends proper political representation with greater civic participation.

 

At the EU level, the UK and others could argue for a ‘European commonwealth’ as an alternative to the rival projects of a Franco-German federal super-state or an Anglo-Saxon glorified free-trade area. A European commonwealth based on a genuinely post-liberal political economy would form a new compound wherein communities, localities, cities, regions and nations are given a proper voice in the governance of the public realm.[10]

 

3. Catholic Social Thought and political economy

 

As I indicated briefly at the end of the introduction, Catholic Social Thought has indirectly shaped Ed Miliband’s thinking on predatory vs. productive capitalism and on how to bring about a responsible form of capitalism. Catholic Social Thought is uniquely positioned to renew the Labour movement and British politics as a whole because it combines political economy with moral philosophy, which goes against the separation of economics from ethics (and also from politics) since Mandeville and Malthus.[11] That is what Blue Labour has sought to develop.

 

The tradition of Catholic social teaching not only rejects their perverse theology but also avoids Adam Smith’s apparent alternative, notably his claim that only the pursuit of individual self-interest – without regard to the well-being of our butcher, brewer, and baker – can produce both prosperity and social benefit. Connected with this is Smith’s double distrust in the human ability to extend moral virtue beyond the ‘thick ties’ of family or friends and in human association for promoting the vice of corruption.[12] The pessimism about individuals and communities ends up subjecting the civic body to the joint rule by the invisible hand of the market and the visible hand of the state. And if individual self-interest is merely limited by other particular self-interest, then the economy is at best neutral and amoral – divorced from any pursuit of the common good. Of course this explains why Smith is admired by liberals on left and right alike.

 

On the contrary, Catholic Social Thought reconnects markets with morality by linking the notion of ‘civil economy’ with a substantive virtue ethics beyond the procedural formalism of liberal liberty and fairness. The tradition of ‘civil economy’ outwits in advance the neo-classical economics that underpins both monetarism and Keynesianism insofar as it replaces instrumental utility with the pursuit of the common good which secures both individual flourishing and wider social benefit. It also differs from the ‘social market economy’ model by rejecting the ordo-liberal version of state-dominated corporatism in favour of a more pluralist civic corporatism that rests on the primacy of intermediary institutions over both states and markets.

 

Virtue ethics emphasises the importance of mediating virtuous practices such as courage and leadership that overcome the twin extremes of recklessness and cowardice – just like the simultaneous quest for self-interest and social benefit avoids the false opposition between altruism and egoism, which are in the end merely mirror images of each other. Virtues are at once aristocratic and democratic insofar as they involve a commitment to ethos and excellence under the guidance of a wise elite as well as proper popular participation and assent.

 

In this manner, virtuous practices overcome the dualism between abstract, general values and the naked pursuit of power and wealth. As the radical centre, the politics of virtue stands against the ‘market-state’ that polices the anarchy of semi-criminal global capitalism which it has otherwise imposed upon society.

 

Taken together, ‘civil economy’ and virtue ethics link economic growth with social purpose and promote institutions and patterns of behaviour that are both economically efficient and ethically virtuous. By re-embedding the economy in social ties and civic bonds, the ‘civil economy’ alternative seeks to combine greater economic justice with a new role for individual virtue and public honour. But how does it propose to overcome the apparent trade-off between efficiency and prosperity, on the one hand, and equity and justice, on the other hand? Before this can be pursued, a brief account of the ‘civil economy’ tradition is needed.

 

4. The ‘civil economy’ tradition

 

The principles underpinning the ‘civil economy’ model can be summarised as follows. First of all, the tradition of ‘civil economy’ builds on older notions of human beings as ‘political animals’ who are in search for mutual social recognition through the exercise of virtues that are embodied in practices and the exchange of gifts, as Karl Polanyi contended against Friedrich von Hayek.

 

Building on Marcel Mauss’ anthropology of the gift, a group of scholars led by Jacques Godbout and Alain Caillé have developed an anti-utilitarian economics of gift-exchange that shows how commercial contract and market exchange can only work efficiently and justly within a wider gift economy.[13] Such an approach rejects utility and commodification in favour of real worth that fuses material value with symbolic meaning – without which societies and cultures could not develop or flourish. Thus humans are both naturally and culturally ‘social animals’ with dispositions to cooperate in the quest for the common good and the good life.

 

Second, human beings are not ‘bare individuals’ but rather complex persons who are entangled in relationships such as family, community and associations. The social bonds and civic ties that bind people together are more primary than either individual rights or formal contracts.[14] Moreover, virtuous habits such as cooperative trust or mutual sympathy precede both the exercise of mere instrumental reason and the interplay of sheer sentimental emotions. As such, the ‘civil economy’ model breaks with Enlightenment rationalism and empiricism by recovering the notion that people are embedded in relationships and traditions.

 

Third, the ‘civil economy’ tradition (and its contemporary development by scholars such as Luigino Bruni, Stefano Zamagni, Pier Luigi Porta, Robert Sugden and Benedetto Gui) repudiates the modern, liberal separation of private from public goods in favour of ‘relational goods’ that are shared by people such as participation in joint activities that depend on continuous interaction, not one-off transactions.[15] Bound up with this is a renewed emphasis on notions of the common good, not utility or happiness: the latter merely denotes the felicity of people one by one, whereas the former captures the real relationships and the good of each and everyone in terms of their specific embeddedness in the complex webs of trust and reciprocity.[16] The common good exceeds the sum total of all individual goods and services precisely because it encompasses the mutually augmenting relationships whose reality is greater than the sum of its individual parts.

 

Fourth, the embedded model which the ‘civil economy’ tradition promotes means that elected governments create the civic space in which workers, businesses and communities can regulate economic activity and direct the free flow of globally mobile capital to productive activities that benefit the many, not the few. Politics and business serve the needs of society better when they allow worker representation in firms and public sector cooperatives as well as mutuals. All this involves free, democratically self-governing groups and associations in the governance of the polity and the economy. Contrary to the centralisation of power since the late 1960s, a more plural and participatory model corresponds much better to the spirit of Britain’s ‘mixed constitution’ because at all levels it re-balances power away from the executive and the administrative towards the legislature and the judiciary.

 

Fifth, the ‘civil economy’ tradition grew out of a particular strand of Italian and European legal and moral philosophy that defends political pluralism against both atomistic liberalism and totalitarian collectivism of either left or right. Today this favours a model of civic, associative democracy which strengthens the role of national parliaments, regional assemblies or city/town halls. This, coupled with a renewed participation of professional associations, can help renew the long-standing British tradition of guild halls that used to blend local government and administrative functions with civic, socio-economic, and cultural activities (see below). Instead of free-market fundamentalism or bureaucratic statism, it is individual and corporate members of civil society who collectively determine the norms and institutions governing production and exchange.

 

Sixth, by contrast with the ordo-liberalism that underpins the German social market economy, the ‘civil economy’ approach views the market not merely as compatible with the primacy of society over the economy and the polity or the priority of cooperation over conflict. This is to take a predominantly functionalist approach that reduces the market to a largely instrumental function – and produces cars that may be more reliable but are deficient in style!

 

Rather, from the ‘civil economy’ point of view, markets are part of a wider moral economy that promotes the practice of civic and moral virtue in the shared pursuit of the common good – the good of each and everyone in their concrete place and specific relationships. Bound up with this is the notion of civil life (vita civile) and the greater emphasis in Italy on civic institutions (starting in the 11th century with hospices, orphanages, alms houses, places of sanctuary and refuge from criminals, diaconates for the systematic distribution of alms) as well as on the beauty of civic architecture. All this has translated into a much richer civic culture than either the Anglo-Saxon or the Germanic versions of modernity. Far from being archaic or obsolete, this has favoured the emergence of very powerful and productive local and regional economies across Northern Italy, whether in Lombardia, Veneto or parts of Emilia-Romagna.

 

Seventh, the ‘civil economy’ tradition translates into the fusion of gift with contract and a commitment to substantive (not just procedural) justice – just prices, just wages and just rates of interest that restrict usury (again see below). Linked to this is a vocational economy that fosters ethos not just based on apprenticeships and professional associations or guilds but also on the sharing of risk and profit through mutualised banking, finance and cooperative arrangements that are constitutionally recognised.

 

Finally, whereas the ‘social market economy’ tends to restrict the role of the state to providing a legal framework for competition, the ‘civil economy’ alternative views the state as encouraging and rewarding virtuous behaviour: first, by rewriting company law in such a way as to foster the internal ethos of firms and professional associations and, second, by putting in place rewards for businesses that deliver both social benefit and a reasonable profit. This approach departs from the liberal myth of value neutrality and the ordo-liberal myth of impartiality that are wrongly ascribed to modern government. As such, models of ‘civil economy’ have a much more positive vision of the state as upholding the common good and popular participation in the polity in ways that involve democratic co-determination of the economy.

 

Thus the genuine alternative to both capitalist commodification and statist collectivisation (or their contemporary monetarist/Keynesian variants) is a ‘civil economy’ model that re-embeds transactions in relationships and directs them to the common good in which all can share.

 

5. Some ‘civil economy’ principles and policy ideas

 

First of all, the ‘civil economy’ alternative refuses the logic of debt that characterises monetarist and Keynesian approaches, which merely differ on the relative balance of private vs. public debts. The phenomenon of ‘privatised Keynesianism’ that became the dominant policy regime in the 1990s and 2000s marked the transfer of debt from the public sector to private households.[17] This, coupled with new credit expansion underwritten by the state, produced the unprecedented financial bubble that burst so spectacularly in 2008-9, saddling households with unsustainable debt. During the boom in late 1990s and 2000s, the public sector shifted the debt burden onto private household by keeping wages stagnant and forcing workers to take out ever-more debt to make ends meet. Indeed, the real costs of living have consistently outstripped official inflation, plunging more people into poverty and putting a squeeze on low- and middle-income groups.

 

Austerity may reduce the budget deficit but it undermines the productive economy by slashing capital spending and failing to diversify away from finance – all of which actually depresses growth and thereby increases both public and private debt over time. Crucially, this treats debt as absolute and in some sense primary vis-à-vis assets, and it also privileges the interests of creditors over those of debtors. In this manner, the logic of austerity is of a piece with the separation of profit and risk between institutional investors and managers, on the one hand, and customers and employees, on the other hand.

 

By contrast, the ‘civil economy’ alternative views debt in more relational terms and argues for models whereby unsustainable debt is converted into equity and both profit and risk are shared more equitably among all the stakeholders: lenders and borrowers, investors and owners, shareholders and managers as well as employers and employees, producers and consumers and suppliers and sellers. Key to this is to create a genuine value chain with a virtuous circle of competition in both excellence and efficiency. That, in turn, also requires regional investment banks and a whole transformation of corporate governance. If implemented, we would begin to shift the economy away from an obsession with short-term results towards the securing of long-term interests.

 

Second, the ‘civil economy’ alternative would address deficient demand not simply by either printing money (to offer cash handouts to the population) or by financing massive infrastructure projects from the centre. Instead, the economically more sustainable and ethically more effective option is to promote fair wages and just prices. That would include not only creating ‘living wage’ cities and regions but also establishing a link between salary increases and productivity growth.

 

In turn, this requires investment in vocational training and innovation, including Will Hutton’s idea of a new public ‘trust’ for the pooling of technological knowledge to replace the current patenting system.[18] For the present model favours large private corporations over small- and medium-sized businesses and social enterprise. The argument that globalisation requires a cost-centred ‘race to the bottom’ is economically and ethically nonsense, as developed economies will never be able to compete with low-wage countries such as Vietnam and Cambodia. On the contrary, the only route towards sustainable, high growth is to compete in both excellence (quality) and ethos.

 

As Genovesi showed in his seminal Lectures on Commerce, or on Civil Economy (1765-67; 2nd ed. 1768), what matters is not the absolute cost of labour or the relation between foreign and domestic production of goods. Rather, what matters is who you share your labour market with. Paying higher prices for locally produced goods not only encourages domestic manufacturing, industry and a greater division of labour within one’s polity. And since traders are interconnected, it also raises real wages in all trades from agriculture and manufacturing upwards, promoting both higher productivity and greater justice. In this manner, we can realign fair wages with just prices and defend the interests of all stakeholders, including workers, suppliers and consumers (not just managers, shareholders and lenders) – as argued by the Catholic priest John Ryan who coined the term ‘living wage’.[19]

 

Third, the ‘civil economy’ alternative would break the over-reliance on unproductive finance by lining a national network of investment banks (constrained to lend within cities, regions and sectors, as Glasman has suggested) to a corresponding structure of professional associations that can offer vocational training and guarantee minimum standards of quality and ethos. Membership in a sector-wide ‘meta-guild’ would be a necessary condition for getting a professional license but employers and employees would be free to choose from among the various associations that make up the guild (to avoid a situation of monopoly).

 

This would also diversify the range and kind of employers’ associations and trade unions (both of which currently suffer from self-serving bosses and barons who neglect the views and interests of their ordinary members). The natural institution to bring together local councils, regional/sectoral banks and professional associations is the guild hall, which would represent democracy vocational at the local level in every city and every county – just like the city and the county hall would represent democracy locational (to extend Glasman’s account of the two houses of Parliament).

 

Fourth, the ‘civil economy’ alternative promotes virtuous businesses by rewriting company to make social purpose and profit-sharing conditions for company license (as John Milbank has suggested) and also by replacing the current incentive structure with a new system of awards and rewards. At present, we have a system that incentivises the privatisation of profit, the nationalisation of losses and the socialisation of risk. A ‘virtue economy’ can mutualise profit, loss and risk by fostering greater regard for shared interest, value and relational goods and also by providing proper reward for virtuous behaviour.

 

Our current model is based on two elements: first, individual incentives that influence ex ante motivation – whether in the form of private sector performance-related pay and bonuses or in the form of public sector policies ‘nudging’ our behaviour towards greater efficiency and happiness; second, public prizes to acknowledge a specific contribution to society (including military medals and civilian awards for achievements in the arts, sciences, sport and public affairs).

 

The problem of the underlying logic is fivefold: first, it sunders ex ante motivation from ex post outcomes, which leads to the perverse situation of rewarding failure (bonus payments and golden handshakes even in case of bankruptcy). Second, it privileges private self-interest and views social benefit merely in terms of indirect, unintended outcomes. Third, it designs incentives purely in extrinsic ways and reduces the question of reward to a principal-agent relation. Fourth, it separates monetary from and non-monetary rewards, which divorces material value from symbolic worth. Finally, it privileges the individual and the collective over association, which perpetuates the primacy of states and markets over intermediary institutions.

 

To reward virtuous behaviour and promote an economy of both honour and regard, we need a system that breaks with the logic of private profit, national loss and socialised risk.[20] Here the crucial point is that virtue is pursued for an intrinsic reason, and not for the sake of personal reward. Yet at the same time, virtuous behaviour may yield pleasure or even profit while also making a contribution to the common good. Thus there are good ethical and economic reasons for practising virtues. In turn, this means that virtue – the promotion of excellence and ethos – is part of a properly functioning market economy that produces prosperity for all. Here we need to rewrite legislation and contracts to promote virtuous behaviour by means of both awards and rewards. Awards refer to a public recognition of virtuous practices, i.e. an acknowledgement of intrinsically good activities that are not an expected (though hoped-for) counter-action within a contractual exchange where recompenses have been fixed beforehand.

 

By contrast, rewards denote a public recompense for virtuous behaviour that blends self-interest with social benefit, including the possibility of a monetary recompense (e.g. tax breaks, preferential treatment in terms of government procurement or public service tenders, etc.). Crucially, virtuous businesses could be given membership in certain professional associations that uphold more stringent standards, which could in the long term give a market advantage – thereby encouraging membership based on a competition in quality, excellence and ethos (as John Milbank has argued). Such a form of recognition combines immaterial awards with material rewards and overcomes the false separation of contract from gift that gave rise to the predatory economy of modern capitalism.

 

Conclusion

 

Blue Labour draws on Catholic social teaching for its critique of capitalism and communism and also for the plural search for real alternatives to the liberalism of both left and right. Glasman has articulated the relevance of Catholic Social Thought for the Labour movement in terms of a triple triad. First, virtue, value and vocation. Second, relationships, responsibility and reciprocity. Third, status, solidarity and subsidiarity.

 

One way to summarise this essay is in terms of the following, partially overlapping triads. First, anti-utilitarianism, assets and awards. Second, ethos, excellence and esteem. Third, relationality, regard and reward. To help us craft a good politics, economy and society, what we need above all is yet another triad – love, loyalty and leadership.



* This paper is part of a book co-written with John Milbank and entitled The Politics of Virtue. Britain and the post-liberal future.

[1] Senior Lecturer in Politics, School of Politics and International Relations, University of Kent; Email: A.Pabst@kent.ac.uk

[2] For the most up-to-date evidence that the impact of austerity on growth has been underestimated, see Òscard Jordà and Alan M. Taylor, ‘The Time for Austerity: Estimating the Average Treatment Effect of Fiscal Policy’, NBER Working Paper No. 19414 (September 2013), available online at http://www.nber.org/papers/w19414

[3] Colin Crouch, ‘Privatised Keynesianism: An Unacknowledged Policy Regime’, The British Journal of Politics & International Relations, Vol. 11, no. 3 (August 2009): 382-399.

[4] Duncan Weldon, ‘A Diverse Banking System’, in The Great Rebalancing: how to fix the broken economy, edited by Andrew Harrop (London: The Fabian Society and Foundation for European Progressive Studies, 2013), pp. 35-41(quote at 36), available online at http://marianamazzucato.com/file_upload/000000000074.pdf

[5] Ann Pettifor, ‘No, this is not the road to recovery. It’s the road to Wongaland’, The Guardian Comment is Free, 16 August 2013, available online at http://www.theguardian.com/commentisfree/2013/aug/16/not-road-to-recovery-but-wongaland

[6] Jacob S. Hacker, The Great Risk Shift: the New Economic Insecurity and the Decline of the American Dream, rev. ed. (New York: Oxford University Press, 2008); Mario Flori,

[7] Massimo Florio, The Great Divestiture: Evaluating the Welfare Impact of the British Privatizations 1979-1997 (Cambridge, MA: MIT Press, 2006).

[8] Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, 2001 [orig. pub. 1944]).

[9] Isaiah Berlin, ‘Two Concepts of Liberty,’ in Four Essays on Liberty (Oxford: Oxford University Press, 1969), pp. 118-72.

[10] See John Milbank, ‘The Blue Labour Dream’, paper presented at the Blue Labour Midlands seminar, 5 July 2013. See also Milbank and Pabst, The Politics of Virtue, chap. 7 and 8.

[11] See Ernesto Screpanti and Stefano Zamagni, An Outline of the History of Economic Thought, 2nd ed. (New York: Oxford University Press, 2005), pp. 43-51 and 65-86; Adrian Pabst, ‘The Crisis of Capitalism and the 'Civil Economy' Alternative’, in Catherine Cowley and Anna Rowlands (eds.), The Crisis of Capitalism and Catholic Social Teaching (Cambridge: Cambridge University Press, 2014), forthcoming.

[12] See Adrian Pabst, ‘From Civil to Political Economy: Adam Smith’s Theological Debt’, in Paul Oslington (ed.), Adam Smith as Theologian (London: Routledge, 2011), pp. 106-124.

[13] Jacques T. Godbout (with Alain Caillé), The World of the Gift, tr. D. Winkler (Montreal: McGill University Press, 2000); Jacques T. Godbout, Ce qui circule entre nous. Donner, recevoir, rendre (Paris: Seuil 2007).

[14] Luigino Bruni and Stefano Zamagni, Civil Economy: Efficiency, Equity, Public Happiness (Bern: Peter Lang, 2007).

[15] See, for example, Luigino Bruni, The Wound and the Blessing: Economics, Relationships and Happiness, trans. N. Michael Brennan (New York: New City Press, 2007).

[16] Stefano Zamagni, ‘Catholic Social Teaching, Civil Economy, and the Spirit of Capitalism’, in Daniel K. Finn (ed.), The True Wealth of Nations. Catholic Social Thought and Economic Life (Oxford: Oxford University Press, 2010), pp. 63-93.

[17] Crouch, ‘Privatised Keynesianism’, pp. 382-399.

[18] Will Hutton, ‘Britain’s future lies in a culture of open and vigorous innovation’, The Observer 14 October 2012, http://www.theguardian.com/commentisfree/2012/oct/14/will-hutton-britain-innovation-hub

[19] John A. Ryan, A Living Wage: Its Ethical and Economic Aspects, rev. ed. (New York: Macmillan, 1914 [orig. pub. 1906]); and Distributive Justice: The Right and Wrong of Our Present Distribution of Wealth, rev. ed. (New York: Macmillan, 1927 [orig. pub. 1916]).

[20] See Avner Offer, ‘Between the Gift and the Market: The Economy of Regard’, Economic History Review Vol. 50, no. 3 (1997): 450-476; Geoffrey Brennan and Philip Pettit, The Economy of Esteem (Oxford: Oxford University Press, 2004).

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