Boris Johnson, addressing the Centre for Policy Studies in London recently, defended greed and inequality as essentially good things. His brash reassertion of 1980s neoliberal dogma caused uproar. He lives the dogma: he truly lives the dream that it will soon be ‘business as usual’ for finance capitalism. So he wants to occupy the space he sees opening up for him as David Cameron languishes in a still bleaker variant of neoliberal dogma: ‘perma-austerity’.
But Boris and Dave, like the emperor with no clothes, only have their dogmas left to hide the failures of their economic model. So now One Nation Labour has a choice. Either it can dismiss all this as internecine war among Tory dinosaurs. Or it can take on those dogmas.
The Financial Times has reported shadow Cabinet Office minister Stewart Wood as saying that before the 2008 crisis the centre-left ‘felt there were certain fundamentals about the market economy that you couldn’t question’ but that now ‘the rules of the game have changed’. Is this, then, the right time to attack the dogma? Isn’t it better for now simply to flesh out policies based on our themes of the ‘squeezed middle’, ‘producers not predators’, ‘responsible capitalism’ and ‘One Nation Labour’?
Will promoting our values of cooperation, social justice and equality suffice? The answer has to be ‘no’ if those values continue to be presented simply as moral values, as beliefs not open to question – as dogma: you can’t fight dogma with dogma. You have to do it with logic and facts.
After the 1929 crash, the grip of liberal free market ideology was weakened by JM Keynes’ exposition of its logical inconsistency: its ‘fallacy of composition’. This is the fallacy that the whole is no more than the sum of its parts: the market is no more than the sum of its transactions. But there is another failing in neoclassical economics: dealing with innovation. Nobel neoliberal economics prize-winner Robert Solow confessed he could only explain innovation as ‘manna from heaven’.
Innovation is not, however, a miracle. It is the output of a social system of good education and training, of hard experimental and observational research and of high quality infrastructure that may result eventually in a new thing or process that people need. Much of this system is funded by the public. Those parts that seem to be privately funded are, in practice, also funded through tax breaks and grants and protected by the laws we choose to make to diminish competition (eg on intellectual property). So innovation does not arise and is not sustained through the operation of a free market. The best the market can do in practice is to get actors to switch from one thing or process to another.
Yet, only by innovating can our society hope to maintain – let alone improve – our standard of living. The alternatives will impoverish us. We can see that unregulated finance capital has achieved that. We can see that the UK as a nation of shoppers ends in excess debt. A reliance on UK as a call centre – on service industries – will push down living standards as part of a race to the bottom.
Without sustained innovation, we know the UK faces economic and social decline. So innovation is the central problem of our economy. It can’t be left in the lap of the gods. It should not be a matter that is tucked away within the Department for Business, Innovation & Skills.
The argument around innovation goes to the heart of the ideological confrontation we need to dispose of Johnson’s greed and inequality and of Cameron’s perma-austerity.
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Martin Yuille is a member of Withington constituency Labour party
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