By Evan Jones
Right-wing governments splashing the cash in gay abandon – what gives?
Sydney Morning Herald journalist Matt Wade finished a recent article with: “In the shadow of a pandemic, we’ll have to get used to a bigger role for government in the economy”.
Quite, and not for the first time. Although perhaps what Wade meant is ‘a different role for government in the economy’. Residents of New South Wales are familiar with the over-arching activism of successive Liberal-National governments in this State since 2011 in plundering public property and in privileging developers, miners and rapacious elements of the rural sector. In Sydney, infrastructural monstrosities rule unhindered. More of this we don’t need.
Similarly, Americans are all too familiar with the leviathan that is the military-industrial-intelligence complex that not merely destabilises the globe but impoverishes the American millions who foot the bill.
The evolving imprint of the state
Behind Wade’s suggestion is an issue of historical import. Hark back two hundred years in Britain, experiencing industrialisation and urbanisation at a furious pace. What were the forces of ‘free enterprise’ doing at the time? Employing people under intolerable conditions and housing them in spec-built tenements in intolerable conditions.
From such conditions there arose dysentery, typhus, typhoid fever, smallpox, whooping cough, measles, diphtheria, scarlet fever, tuberculosis, and … (Asiatic!) cholera. Infant mortality raged. Herbert Spencer was hardly born, Darwinism a future creed, so time was not yet ripe for Social Darwinists to posit the inevitability and justice of the survival of the fittest, although the Rev Thomas Malthus was much quoted in support of that cause. Instead we got the consummate bureaucrat Edwin Chadwick’s 1842 Report on the Sanitary Conditions of the Labouring Classes.
Chadwick highlighted, predictably, that suffering differed across the classes, but he also highlighted that the privileged classes were not immune. Horrors. Meanwhile the denizens of ‘the private sector’ were in their counting houses and reposing on estates acquired from an impoverished gentry. Here was a problem of the collective, and the entity evolving to pursue the collective interest, the state, had to step into the breach. By default.
This was a period that some economic historians had designated ‘the age of laissez-faire’, but there never was such a period. The state was dismantling timeworn structures at the behest of an ascendant bourgeoisie. Yet before that task was completed the state was confronted with problems arising structurally from the new order.
In 1833 there was legislated the Factory Act, which restricted the use of child labour in textile mills. That in itself was the product of thirty years of manoeuvring, and a foretaste of more factory Acts to come.
Since that time, the state has never ceased to pick up the pieces, direct traffic of a wayward economy and society. Its bailiwick – economic development and infrastructure, economic crises, natural calamities, scams of every description, class conflict, social deprivation, war and the aftermath of war, etc.
For example, in the late nineteenth century some governments instituted compulsory primary education, beginning an edifice of significant long term expense and administration demands. The motivation was complex. Employers demanded rudimentary skills even of the lower echelons of their workforce. Moreover, with the onset of adult (male) franchise, reluctantly ceded, the lower orders had to be educated as to what was right and proper.
The establishment and maintenance of economic and social order thus proved to be jolly hard work, an enterprise in progress, with a global dimension involving a system of states.
Thus has ensued a quantitative increase in the state’s presence, in terms of expenditures, and perennial qualitative transformations in the nature and subjects of regulations – all of which are the object of political and social contestation.
The state is hydra-headed. At root is the natural prerogative of states to make war, and to promote its economic interests abroad. The state, as a matter of course, will privilege the powerful (Engels, 1884: ‘… the state arose from the need to hold class antagonisms in check, but as it arose, at the same time, in the midst of the conflict of these classes, it is, as a rule, the state of the most powerful, economically dominant class …). The state will also, less regularly, privilege the less powerful and the dispossessed. From this latter category came the building blocks of the modern ‘welfare state’.
The sources for Marx and Engel’s generalisation were self-evident – as in the brutal repression of agitation for worker rights and political reform, as in the barbaric 1834 Poor Law Amendment Act. Previously, the British state oversaw centuries of enclosure movements by which a working class was forcibly created. State-legitimised class rule was embodied in the carry over and enforcement of Master-Servant statutes which structured workplace subordination and incidentally formed the basis for modern employment law.
As to contrary tendencies with the state attending to the less powerful, some state personnel had altruistic motives, but the majority were strategically more visionary. It was necessary to give a little, make concessions to the pressure from below and its supporters to prevent social breakdown and to maintain the social order. This was ‘intelligent conservatism’ (in the true sense of the label) at work – a label now difficult to understand as the breed and the mentality have been utterly obliterated from within the Right by the forces of reaction.
Such developments were not driven by ideas but facts on the grounds. Political processes in turn produced defensive philosophies and ideologies. Thus in late 19th Century Britain a dysfunctional classical liberalism was countered by a philosophical ‘social liberalism’ – as in the works of T. H. Green and, most accessibly, of Leonard Hobhouse. In Australia, we would later call this mentality ‘small-l liberalism’.
In the 20th Century, the pressure of events (crisis) and a social liberalist mindset operated dialectically to produce J. M. Keynes and his path-breaking analysis of an economic system behind the 1930s Depression. Ditto William Beveridge’s monumental overseeing of the creation of Britain’s National Health Service during World War II.
The state’s role through a glass darkly
The general public has been inadequately apprised of the nature of this long term evolution of the role of the state. Compounding the issue of gaps in general education has been persistent misrepresentation and deception.
The state in the economy is obtusely labelled ‘government intervention’, implicitly imparting an unnatural character to the state as actor.
Austrian economist and philosopher Frederick Hayek pushed the concept of ‘spontaneous order’. Rational autonomous individuals, acting out of self-interest with no bonds of formal cooperation, ‘collectively’ generate an ordered structure. The ‘market’ (always in the abstract) and the price mechanism are the impersonal means to this outcome. Don’t mess with it and all will be well. In the human domain, it is a concept both ahistorical and preposterous.
The much-feted Milton Friedman, in his (with wife Rose) much-feted 1980 Free to Choose, has it that the evolution of the role of the state in 20th Century US is due to the influence of the Socialist Party in the Century’s first decades. Friedman claims that although inconsequential electorally, “both major parties [henceforth] adopted the position of the Socialist party” (p.334). A proposition too ludicrous for words.
Down under, the key role of the state in the development of the 19th Century white settler economy is curiously labelled ‘colonial socialism’.
A sterling example of misrepresentation comes from the reconstruction of the economy in what became West Germany after 1949. According to the pundits, here was Exhibit A for the merits of financial orthodoxy coupled with a conscientious application of the homegrown ‘ordoliberalism’ (a Christian Democrat variation on a ‘free market’ theme). On the contrary. Andrew Shonfield’s 1965 Modern Capitalism, sadly neglected, sets the story right (p.274-5):
“… when the German Government intervened to accelerate the growth of certain sectors of the economy, it went to great lengths to present the matter … as if it derived from or supplemented some primary private initiative [unlike in France]. Indeed the German Government seemed at times almost to be trying to disguise what it was doing even from itself. …
“While the Ministry of Finance was busy keeping house, and conscientiously disregarding the effect that this frugal exercise might have on the rest of the economy, the Ministry of Economics was most actively intervening wherever opportunities for more production, aided by strategically placed subsidies or tax concessions, presented themselves. Rarely can a ministry so vociferously devoted to the virtues of economic liberalism and market forces have taken so vigorous a part in setting the direction and selecting the targets of economic development.”
This misrepresentation subsequently played a significant part in the terms of the construction of the European Union (under American suzerainty), ultimately under West German (later unified German) domination. The parlous effects of this gigantic sleight of hand are played out daily in the structured asymmetry of benefits from the Union.
Compounding the lack of understanding is the economics profession and its tentacled influence. The typical tertiary training in economics gives one no exposure whatsoever to the state. At best, the state exists as a deus ex machina handing down ‘macroeconomic policy’, perhaps the odd extra function exposed in an optional course that few take, but that’s it. It’s a monumental scandal, but internal dissent generally gets quashed, and the hallowed principle of academic freedom ensures that it the ‘profession’ is secure from outside forces. The sub-discipline of economic history previously offered some insight, even if over-populated by mainstream economic historians (c/f. ‘colonial socialism’). As economics departments were subsumed within business schools, the far-sighted new managerial class decided that economic history was dispensable. History is irrelevant.
More, said ill-tutored economics graduates staff, indeed stuff, key parts of the public service, especially the central agencies and the regulatory agencies. They become cogs in arms of the state of whose functions, history, capacity and limitations they are oblivious.
Beyond the perennial obfuscation is a larger project of denial.
If you want to bash the state you have two prominent, albeit divergent, schools to draw on (n.b. anarchism has been written out of history, so that doesn’t count). One is the US-based ‘Economic Theory of Politics’ school, for whom the late James Buchanan is a guru. The state is bloated and the source of this parlous situation is the unceasing demands of the masses on their governments. The problem is democracy itself, which will have to be dramatically straight-jacketed. Not unsurprisingly, Buchanan and fellow travellers have apoplexy over some activities of the state (welfare, affirmative action) and not others (the military, corporate welfare). Buchanan was instrumental in the counter-democratic refashioning of Chile’s constitution under Pinochet, against which the Chilean people are currently rebelling.
The second school draws its intellectual lineage heavily from the post-World War I Austrian School (Ludwig von Mises). This school boasts a phalanx of foot soldiers of purist libertarian persuasion, many of whom are curiously comfortably employed in corporate-funded ‘think tanks’ (c.f The Institute of Public Affairs, Hoover Institution, etc.) and press themselves regularly into the mainstream media with their homilies. For this mob, the significant role of the state in modern capitalism has all been a huge mistake and unnecessary.
One of the better informed of this latter mob is the much-published Richard Higgs. His 1987 book Crisis and Leviathan captures its substance in the title. Higgs argues that, at key junctures, crises that are ‘manageable’ are either overblown or non-existent crises manufactured so that the state apparatus can be dramatically and permanently expanded. Higgs’ argument is not without merit, drawing empirical support at this very moment as governments (France, Hungary, Israel) cynically use the Covid-19 emergency to develop nascent authoritarian tendencies into a fully blown police state. Indeed, Higgs’ argument provides substance for why those who postulate the possibility of ‘false flag’ operations by government operatives, universally denigrated as deranged ‘conspiracy theorists’, might occasionally have just cause.
But there is something essentially pathological about the libertarian set, with its vision of the ideal state illusory. The evolution of the role of the state in the West over the last two hundred years, in general rather than in particulars, has been inevitable. A strong state, for both good and bad, has been essential to the functioning of the capitalist economy. Finding an acknowledgement of that fact anywhere outside of select academic literature is a near impossibility.
The age of neoliberalism
Hawke/Keating Labor ushered in the neoliberal era in Australia, and John Howard determinedly cemented it. On the Liberal side, Howard tenaciously cleared out the small-l liberals in their midst. In Labor ranks, nobody had the courage to question the Hawke/Keating legacy (even with Hawke’s death, but Keating is still there to kick heads). Advisory staff to both major Parties would have been born the day before yesterday and have been suckled in the neoliberal age. Public servants, especially the newly fragilised Senior Executive Service, adopted the correct line to save their jobs and pay their mortgages.
This is ground zero. The past is irrelevant. An age of stunning intellectual vacuity. Exemplary for the age is the opening stanza of the fat 1981 Campbell Report into the Australian Financial System: ‘The Committee starts from the view that the most efficient way to organise economic activity is through a competitive market system which is subject to a minimum of regulation and government intervention’. Brilliant!
There ushered in through the front door an army of vested interests, hiding behind a front of ignorant but zealous ideologues. The arguments were all bullshit, floating on thin air. Neoliberalist tenets, unlike those of classical liberalism, had no organic relation with existing conditions. It was a vehicle for plundering public assets, exploiting small business, undermining hard-won workforce conditions and dismantling the hard-won welfare state.
Whitlam Labor created the Industries Assistance Commission to deal with a specific issue needing reform but entrenched an ideological coven. Hawke/Keating Labor reprieved it, gave it a universal brief as the renamed Industry Commission, and Howard had only to tweak the beast into the Productivity Commission. No other country has ever granted so much responsibility for ‘intelligence’ to a single unreconstructed think tank. Couple that with the massive out-sourcing of ‘intelligence’ to private consultants (now especially the Big Four ex-accounting firms) and one has an environment in which policy options are systematically truncated, alternatives still-born.
The neoliberal era was not a move to ‘the small state’. Rather, it involved a reorientation of a strong state to significantly different priorities – essentially catering to the wishlist of corporate capital. In the process political personnel and bureaucratic personnel have decapacitated the state apparatus to effect robust management of any crisis, leave alone to effect progressive change.
Representative was the Coalition’s belligerent indifference to the impact of climate change and to expert pressure on the need to prepare for impending bushfire devastation. Other reflections of this mentality are the Coalition’s attempted discrediting of Rudd Labor’s modest post-GFC stimulus, the deeply imbalanced economic relationship with China, the impoverishment of public infrastructure, workplace conditions and welfare, and the governing Coalition’s absurd mid-2019 tax cuts while tolerating widespread corporate tax evasion.
It is welcome then that this federal government, intrinsically reactionary, prone to lassitude, ignorant, arrogant in its ignorance, has turned on the sluice gates. For lack of grounding, it is forced into the ultimate in pragmatism, dependent on a federal Treasury out of its depth.
But will it change its ways after this crisis relents? There’s no evidence, as there is no evidence of such to date in any other country. With a nasty budget black hole, that ‘bigger role’ will, in all likelihood, not be turned to permanently enhancing Newstart or abolishing Robodebt siphoning but to further tightening the screws.
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Evan Jones, now retired, lectured in political economy at the University of Sydney for 34 years.
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