One of the surest indicators that politics has gone
seriously wrong is when seemingly opposed means end up achieving the same ends.
Over the last thirty years, western governments of whatever stripe - right wing
or left - have effectively produced the same outcome: namely, oligarchy.
While the left has tended to embrace the state as the agent
of equality, the right invariably looks to the market as the agent of
prosperity. And yet the left has not solved the problem of poverty through
state redistribution, and the right has not delivered mass prosperity through
the market. Instead, both the left and the right have presided over rapid and
rising inequality and the seizure of wealth and opportunity by those at the
very top of society.
For example, in the United States the top 1% of families
owned just under 9% of GDP in 1974; by 2007 they owned 23.5%. As wealth grew at
the top, the returns to those at the bottom have lessened, and in some cases
dramatically dropped. The highest return to wage labour as a proportion of GDP
was in 1968, but ever since then waged labour has gotten a smaller and smaller
share of a bigger and bigger cake.
The best predictor of a person's life chances in the UK is
the postcode in which they are born, because the rewards to those who are
already ahead both multiply and self-reinforce. So much so that, in many parts
of the West, those at the bottom are best described in terms of caste rather
than class, for their poverty and
immobility are passed onto their children and their children's children. But
don't take my word for it: a 2010
survey by the OECD ranked the UK as the most socially immobile country,
with the United States in third place. Neither the right nor the left are able
to address, let alone reverse, this trend.
Why the right has
So why has the right failed? Simply because it has yet to
produce the win-win capitalism that Adam Smith so ably described. I agree with
those on the right who argue that poverty can only be solved by wealth and not
welfare. Why then do so many on the right argue for a form of capitalism that
shuts out so many from ownership and opportunity?
The growing poverty and proletarianisation of people in the
West is not the result of some Marxist extraction of surplus value; rising
wealth need not and should not engender rising poverty. It is rather that the
origins and sources of wealth are not being made available to more and more
people - the pathways to wealth have instead been captured by an ever shrinking
number of groups who leverage one advantage into another, such that any
marginal gain soon accelerates those so blessed above and beyond all others.
In terms of ownership, the right has simply failed to create
a mass stakeholder society. It has instead backed big business against small,
and market concentration against market participation. Where asset ownership is
encouraged, it is in only one form (residential housing) - a form of asset that
has proven particularly susceptible to becoming a liability.
Moreover, under the guise of free market rhetoric and a
competition law framework that favours monopoly, economic wealth has
drastically concentrated and barriers to market entry have been raised.
Everyone knows that starting a small business has gotten harder, but this is
not just because you can't raise capital or because of the crushing burden of
regulation. Rather, it has become almost impossible to acquire a sustainable
market share because big business - which tends not to pay taxes and benefits
from all manner of insider advantage - simply shuts small businesses out before
they even begin.
State regulation, which is introduced to control such
monopolistic entities, itself favours incumbency as it requires an inordinate
amount of resources to meet its requirements. It is little wonder, then, that
so many small traders remain small or simply give up altogether, preferring to
remain on wages whose purchasing value has so steadily declined.
The right, by way of contrast, wishes for a form of
capitalism that benefits all - a tide that raises all boats, a cake large
enough can feed all mouths and more still. But the reality achieved by the
right is very different. The hopes of Regan and Thatcher were admirable, but
ultimately undone by the means employed. Under the neo-liberal right,
capitalism has not become a force of plural progress and multiple centres of
wealth and opportunity; instead it has become, contra Hayek, the force for a
Why the left has
Why has the left failed? Simply put, wealth redistribution
can never catch up with wealth generation. In addition, redistribution over
time creates a free-rider problem in that it permanently separates a group of
people from production and therefore ownership. This group is then
progressively and aggressively cut off from the rewards and returns of the rest
Previously, with welfare functioning as a salve to
conscience, we could safely ignore the poor because they merely represented the
bottom 20%. But they have subsequently become the bottom third, and now with
changes in the nature of modern capitalism they threaten to encapsulate the
middle class itself.
By way of example, over 50% of American households are now
reliant on some form of government welfare, up from some 30% in the 1970s. It
is a reality that we cannot in the West maintain a middle class without welfare
support. With the tax rises required to support such a situation, it is hard to
see how a society so constructed can in the end either prosper or escape.
Welfare is simply an income supplement whose demand always
tends to rise; it can never change the rules of the game and traps those who
fall into it. One of the ways that it creates a situation of permanent
dependency is that the state gives too little to make a difference and converts
activity to passivity by penalising too quickly any initiative its recipients
might show. Furthermore, the state, with its advocacy of one-way rights
entitlement, creates a state of dependency that forces its supplicants to turn
away from society, and so cuts its clients off from sociality and productive and
mutually enhancing networks.
A renewed political
Both the collectivism of the left and the individualism of
the right are over. They are finished because they are the same; they represent
the same interests and have the same outcomes. Each empowers an elite and
disempowers the remainder. And, paradoxically, each produces the other. An
individualist economic culture is reliant on individuals competing, but this
leads to zero-sum capitalism where some win it all and everybody else loses.
This creates the necessity of the welfare state - if we have a society in which
most are impoverished, we will require some sort of safety net to stop them falling
into utter destitution.
Likewise, the legacy of the collectivist states was not
equality - just visit Russia or Ukraine, where self- serving individuals have
captured all shared goods and ensure that they keep them through state
authoritarianism and criminal organisation.
Curiously, of course, modern welfare requires the type of
capitalism that causes the problems we have, for as the needs of the poor
increases so does the tax demand to supplement and support them. This system
has no future, not least because it threatens the very class that is required
for political support. As Francis
Fukuyama recently put it, "the current form of globalized capitalism
is eroding the middle-class social base on which liberal democracy rests."
The real politics of the future will be anti-oligarchical - it will require a new right and a new left. For
increasingly, from the perspectives of those who are shut out, the elites of
authoritarian and democratic states will look remarkably similar. The West used
to produce self-sacrificing elites; now it has those who are assiduously
self-serving. Too many of our institutions are corrupt, and too many of their
leaders rest easy in the falsehood that their interests are ours. A revulsion
against oligarchy will soon define both eastern and western states, and it will
of necessity draw on new and unexpected resources to shape a new political
This new idealism will be romantic, ethical and quite
possibly religious. It will craft a new political economy that multiplies
ownership and maximises market entry. It will insist on life-long education and
it will replace representative with participative democracy. Its means will be
human association and its method will be relationship. Its foundation will be
trust and its transmission will be fun. Its resources will be global but its
response and concretion will be local. It will be the triumph of the micro and
the defeat of the macro. It will be the horizontal over the vertical and the
mainstreaming of the peer to peer. It will be periphery as the new centre. It
will be consumer becoming producer and the client becoming the advocate. It
will be ethical trade and moral market. It will be ends not means, and
teleology not anarchy. It will be virtue not utility, and it will be hierarchy
blended with democracy.
And it is coming sooner than you think.
See the original article here.