Few younger than their mid-forties remember the flaws with state monopolies. This is the standard line that is produced by free-marketeers whenever any young pipsqueak asks if there is an alternative to the profiteering cartels that control our energy, public transport and banking services. And this is not possible to argue with: we’ve seen what happens when the state dominates industry with no competition of any kind. Nobody wants a return to that. However, to assume that this is the end of the argument is wrong, for we are seeing how flawed the near religious imposition of free market principles on the entire economy is. But before discussing alternatives that would work for developed economies, let us examine the backlash against neo-liberal values that we are seeing in poorer nations.
Since the 1980s, Western nations have used their influence to place the greatest of pressure on the Third World to adopt our chosen economic model. The old protectionism and publicly owned industries which had provided a steady, if modest, rise in the prosperity of the general populations had to go. If a rogue left-wing government didn’t oblige then they could forget about the IMF loan that they’d need when they were slowly frozen out of trade. Their aid package might be revisited too… So elected (and too many unelected) representatives had little option but to dismantle the foundations for social democracy that had so painstakingly been established. Free education and healthcare programmes were curtailed, and varying levels of corruption in government and industry remained unaffected. Ramshackle utility services were sold-off and prices raised.
It wasn’t all bad news, though. Now that globalisation was in full swing, lower labour costs encouraged firms to close factories in Europe and North America and transfer them to these countries which had abandoned controls on foreign investment. But which country to choose? Not one which imposed a minimum wage, had burdensome trade unions and expensive pollution regulations. Lo and behold, job-thirsty countries took part in a horrific race to the bottom. So there was superficial economic growth, but with a small public sector wealth rose to the top and moved abroad. If workers got too big for their boots and started demanding wages a shade higher than $0.10 an hour, the threat of the firm leaving was often enough to pressure the government to quash any rebellion. The same applied with the multiplication of the cost of water under privatised authorities. The idea that the very water that falls from the sky is someone else’s property is hugely unsettling.
You will notice that I was writing in the past tense. That is because we have seen that growing numbers of people no longer accept that this is the way it has to be. We’re all familiar with Hugo Chavez and his awe-inspiring (but extreme) economic reforms. It is hard not to admire the people of Venezuela for electing an idealistic leader (a very rare creature), deflecting a ruthless US-backed coup, and then rejecting economic orthodoxy to deliver social justice- but I digress. The wave of economic democracy has spread to other countries, including Bolivia. The socialist president has just nationalised Iberdola’s operations, in addition to other companies (much in the style of Labour’s post war “commanding heights of the economy”). Iberdola, the owners of Scottish Power, angered the government by consistently overcharging rural customers to the tune of a 200% markup compared to urban areas. I sometimes wish the PM would have the guts to do similar.
The economies of countries like Bolivia and Venezuela are not crippled- far from it. The factories remain open, access to education is universal, and the general population enjoys rising living standards. Short term and long term economic growth are provided for. Just as we in the West are looking at these countries freeing themselves of economic oppression, other peoples are freeing themselves from political oppression. In this decade of economic gloom, is it not inevitable that alternative economic models will be examined?
If the Third World collectively rejects the neo-liberal experiment, will they be more successful at social democracy, given their limited resources, than we were? This will be a big question that many will puzzle over. I say it depends on their ability to learn from the past: the state monoliths of the 1970s do not need to be resurrected. But a socially responsible market in which the state raises standards as an active participant might be the solution.
Of course, there is a long way to go from a few countries doing something different to the global economic model shifting. Examining the possibilities, as I have done, is always useful.
In a couple of days, I shall discuss the effect this new social democracy would have on us in Europe and North America.
