Praising - not Burying

People writing books on social affairs will usually spend at least a couple of years on their book – only to see it dealt with in a 1,000 word review (if they are lucky) – even in professional journals. That’s why I’m a big fan of the Crooked Timber book seminars which produce at least 50 page overviews of selected books – made up of 6-7 contributions. The last (on Red Plenty) had 135 pages!

I am currently reading Will Hutton’s new book How Good We Can Be (not to be confused with As Good as it Gets!) – an update of the series of books Hutton has been writing on the DNA of Anglo-American capitalism since “The State We’re In” (1995) 

Hutton is that rare character – a British journalist who cares about ideas and shares his wide and deep reading in his books; someone who can and does try to build bridges between the worlds of academia and action which I have been blogging about recently.

But, as I’ve said before here, the trouble with bridges is that, in peacetime, horses shit on them and, in wartime, they are blown up!

A lot of people therefore “have it in” for Hutton - Frederic Mount is a good example. Someone who was at one time Head of Margaret Thatcher’s Policy Unit but reengineered himself a few years ago to write a devastating critique of the new British oligarchy. His review of Hutton’s latest book has a fairly typical tone

If a book’s worth writing once, it’s worth writing several times. This homely maxim has often proved a recipe for success. Will Hutton is a case in point. Twenty years ago, he had a runaway hit with The State We’re In. He followed that up with "The State to Come" (1997), then came "TheWorld We’re In "(2002). As Hutton moved from the editor’s chair at the Observer to the Work Foundation and now to the Principal’s lodge at Hertford College, Oxford, he has stayed heroically on his own message. The title’s tweaked, but the melody lingers on.

The continentals are enlightened, the Anglo-Saxons are deluded. Europe is the future and we would be crazy to stay out of the euro. John Maynard Keynes is good, Friedrich Hayek and Milton Friedman are no good. The state is the solution, not the problem. It already showers blessings on us and would shower many more if only we could overcome our misguided suspicions. Government regulation and high taxes are the way to make us happy.For painting in black and white there are few like Hutton. There is no hesitation or deviation, although there is quite a bit of repetition, …….. 

Yet, oddly enough, many of Hutton’s proposals will appeal to a wider audience than social liberals and socialists. In fact, they are pretty much the new consensus: the separation between high street banks and the casino banks; a stiffer stewardship code to deter looting in the boardroom; Treasury guarantees for big construction projects; restoring the insurance base of the welfare state; a return to the old sliding scale for capital gains tax, in order to encourage long-term holding of shares; an end to the tax advantages of debt over equity; reforming council tax and giving local authorities back their financial independence.

I warm to all this, and I also like Hutton’s proposals to reinvent the trade unions as co-partners with business, particularly the idea that they might set up mutually-owned service companies to sell their services to employers.

These days we are all in favour of diversifying patterns of ownership beyond the standard plc model, to include more co-operatives and also “public benefit companies,” which guarantee under charter to deliver certain public benefits and enjoy tax advantages in return. Free enterprise used to be more diverse and could be so again.

The awkward truth is, though, that these alluring alternatives are no more risk-free than the old limited company. It is an awkward thought that the best-known alternative corporations of this sort over the past few years have been the Co-op, Railtrack/Network Rail and the BBC—none of them exactly without problems of governance.

But it’s Hutton’s grand narrative that seems the more rickety. We are constantly told that the past 20 or 30 years have been a disaster for the United Kingdom. Yet at the same time we are also told that “Britain has more world-class universities per head of population than any other country,” that “The triangle bounded by the M3 in the south M40 to the north and with Heathrow at its centre boasts the highest concentration of high-tech start-ups outside California and Massachusetts,” that the BBC remains the finest broadcasting service in the world, that the National Health Service is “the cheapest system in the world producing the best health results across a range of key indicators” and “on measures of effectiveness, safety, patient-centredness, co-ordination, quality and access, Britain scores number one.”

I must confess that my eyes did begin to glaze over after the fifth or sixth of the series of injunctions Hutton gets started on later in the book. I longed for a lighter touch - and was therefore quite fascinated to discover this issue touched on in this detailed and very serious treatment of the sort calculated to warm the cockles of all writers - it's called Calling Capitalism to account by Steve New

Writers who want to engage seriously with economic and political reality face a problem. How to pitch the tone of what they say? Every simple story needs goodies and baddies; more complex stories need some sort of moral trajectory. But how explicitly should you tell the story? The vast bulk of serious academic work avoids offence by talking in the abstract, layering oblique evasion upon tactful qualification. Academics settle for the low temperature, formal modality of the learned journals; passion is excluded. Much is made of broad generalisations; no-one is criticised directly. ‘Firms’ and ‘Markets’ feature, as do ‘agents’, but mostly they don’t have names: authors can be pretty sure they’re not going to be sued by anyone, even in the rare event that a normative judgement is explicitly made.

Even academic work which reflects some kind of moral or political purpose (not all does) tends to be scrupulously anodyne, and keen not to offend. You’d really struggle to find explicit criticisms of particular firms or managers in the Academy of Management Review or the Journal of Finance or the Harvard Business Review2.

Politicians and activists can be more specific – we don’t like Shell, we don’t like Nike – but, often deliberately, tend to prioritize effect over accuracy or content3.

Journalists can be more direct, but mostly without the tedious necessity of consistency or depth. Will Hutton – over a prolific career operating in the relatively unpopulated overlap between journalist, academic and (perhaps) politician – has mastered a kind of middle ground. He writes about general ideas, but he also names names; he treads a line between rounded argument and polemical assertion; he tries to be critical

Writing about companies and business people and their ethics is tricky because it is easy to blunder into two equally stupid traps: you can declare them all horrible, beyond sympathy and empathy, or you can end up fawning and cooing in line with corporate propaganda. Nuanced and balanced treatment is hard: that’s part of why academics often stick to the abstract or typical case. If you get specific, you risk being a bombastic Spart or a corporate patsy.

Hutton navigates this carefully; he talks about particular firms, but from one particular angle at a time. So, in HGWCB, Apple is hailed as an example of innovation, with its ‘handsome, well-designed devices’ (26). But the working conditions in the supply chain are not discussed.
On the other hand, INEOS and Sports Direct are bad because of their employment practices; ARM is good because it’s successful and hasn’t been bought up by foreigners. Unilever has a declared purpose (of which more, later) and doesn’t do quarterly reporting (good). Virgin uses tax havens (bad). News International is beyond the pale because of its ‘purpose-free amoral culture’ (87).

Hutton uses specific examples of firms to point out particular virtues and vices, praising for X, damning for Y.

Back to Capitalism

The big issue when I was becoming politically aware in the 1950s was about company ownership. Managers, it was argued, were replacing owners as the key decision-makers – “corporation man” seemed to have replaced the “robber baron” as society’s concern. But they were a harmless breed – with, so it was argued, a more civilised set of objectives than the raw pursuit of profit and repression of labour which had characterised the latter. James Burnham was a key figure in the recognition of the role of managers; this 1946 essay by George Orwell played an important part in bringing Burnham's thesis to wider attention. 

And, with the scale of publicly-owned companies and the new confidence of post-war Keynesians, intellectuals started to argue that the left could live with what remained in private hands.

CAR Crosland’s The Future of Socialism, published in 1956, was the elegant expression of the new view that patterns of company ownership were no longer of interest to socialists. After fifty years, however, ownership is back as a political issue.  

Will Hutton has figured several times on this blog as the guy who has most closely mapped the DNA of European capitalism. Recently he has been chairing a British Commission on changes which are needed to this model and outlines the results in an article here  -

There is a worldwide debate trying to define what 21st-century capitalism could be. Some countries, such as Singapore and Israel, have developed small state entrepreneurial capitalism as their answer. Then there is Germany and the Nordic countries' stakeholder capitalism; the democratic development capitalism of Brazil and India; China's self-described "socialist market" capitalism; and government activism even works in the US – witness the revival of the car industry. Nowhere can you find a modicum of economic and social success without some form of public and private partnership, directed financial systems, corporate ownership structures driving engagement and stewardship and effective social safety nets.
This reality is now being increasingly recognised, not least because of the financial crisis whose origins in excessive faith in market forces was caused by the Anglo-Saxon right's ideas. Last week, I launched the conclusions of the Ownership Commission which I have chaired for the last two years. A group of us, including the president of the CBI, and the chairman of the John Lewis Partnership, concluded that an indispensable precondition for a sustained British recovery was a new and more systematic attempt to secure better ownership of British business assets.
We must have more plural and diverse ownership structures, in particular more medium-sized family firms, co-operatives and employee-owned companies, and the public limited company needs to become less fixated with short-term profit goals. We need to ensure the tax, legal and regulatory system triggers the maximum amount of ownership engagement and stewardship and, where it falls short, to devise new means of filling the gaps.
Plc shareholders, we advocate, should, as far as possible, pool their voting rights in new not-for-profit mutuals better to engage with the companies they own. We think company directors should be better enfranchised to think of the sustainable, long-term entirety of their business rather than the next hour's share price. We want the absurdities of the tax and regulatory system that hold back co-operatives and employee-owned companies to be swept away. We want medium-sized firms to be able to build more quickly their capital and their balance sheets – to create the equivalent in Britain of the German Mittelstand, the amazing cluster of largely family-owned companies that drive Germany's innovation and export success. We propose a dramatic and fast scaling-up of existing support along with new measures, such as banks being able to get Treasury indemnities for new lending.
Ownership policy driving plurality, engagement and better stewardship should be one of the anchors of any framework for recovery, in effect the creation of a British variant of north European stakeholder capitalism, as business secretary Vince Cable, speaking at our launch, recognised and endorsed. But it is only a precondition. Britain has to reshape its financial system so that it backs business. The state has to become an active economic player, constructing the system of institutions and direct support that will drive particular industrial and business sectors forward. We have to spend hard cash on infrastructure and R&D. And Britain's fraying social safety net needs repair, not further destruction.
We need a better capitalism and this budget should have decisively begun its creation. Instead, it will be a fudge, betting all on lowering the deficit. A missed chance for Britain and the first notes of the requiem for this coalition.

The discussion thread is interesting and one of the discussants posed a series of excellent questions -

1) How is capital going to be regulated when capital is free to roam though wires, to evade taxes, entice governments with corruption and blackmail governments with disinvestment to reduce wages, taxes and err … regulation? Waves of capital move around the world to where conditions are better for accumulation leaving joblessness and devastation. Global wages and taxes drop in relation to economic output and this damages demand, capacity, employment and the health of the global economy.

2) How are gigantic corporations going to be regulated? The Forbes 2000 had revenues of $32 trillion in 2010 (global GDP is $60 trillion). Their profits rose by 67% since 2009!! How many people do they employ? – only 80 million or 1% of the global population. How much do they return back to society for what they turnover? – not much. How many small businesses disappear annually as the process of oligopolisation relentlessly continues in capitalism? How can we have a global economy where decent wages – unsupported by private debt and government spending - can sustain a level of capacity that can provide decent levels of employment in this world with this hideous type of economy? How is this destructive process of oligopoly going to be reversed?

3) How will bank failures be avoided in the future? How will the risk taken by banks be minimised with regulation without thwarting investment and damaging the real economy in a system where hundreds of trillions of capital must be *constantly reinvested* by these banks that must inevitably take risks in these investments. If this investment halts for a second we will all starve.
Credit bubbles like the one burst in 2008 are not a peculiarity; they are the norm in capitalism. Every panic of the 19th century and every crisis of the 20th century was a result of overextension of credit. And curbing credit bubbles is not a solution. It simply causes permanent stagnation unless a dynamic economy is sustained by healthy demand. Once more this is the real issue. The recent bubble did nothing but to mask the real failure of the economy which we are now facing when we contemplate restricting unsustainable credit. Without this bubble we would have had much less economic activity and much higher unemployment.

4) In the short term, how is the debt crisis going to be resolved? Where is growth going to come from when the debt stimulus *still* being pumped is removed from the already anemic economy. What levels of unemployment one needs to expect if deleveraging the local debt or the global total debt (in the order of 300% of global GDP) is seriously attempted.

5) How will capitalism deal with the fundamental problem of "growth". The system "needs" an exponential growth rate that matches the rate with which the productivity of labour naturally increases thanks to competition that forces streamlining and automation in order to .... keep employment stable. This is simply ridiculous.
Regarding the glossing over German, Swedish, Danish, Finnish and Northern Yeti welfare Capitalism: it is declining together with the decline of capitalism: benefits and wages drop, poverty and inequality increase in these places. Welfare was funded by trade surpluses, natural resources, high productivity plus quite a lot of local debt in many cases. And also by the debt and trade deficits incurred by other countries,but the party is over!
I am afraid, this is a truly intractable problem of a system that meets its own contradictions. And such vague articles do not even start to address the problem.

Here’s a fascinating interview with a sharp Greek economist on the background to the Eurocrisis.
And also a good piece on another localist Greek initiative

And the painting (a gouache) is one of three of Vasil Vulev I bought on Thursday - when I was also fortunate enough to meet the painter himself.

Four basic questions

The glorious weather of the last few weeks here in the mountains seems at last to be changing. And I shall be heading down to the plains tomorrow – slightly ashamed at not having the fortitude to share the rigours of winter with my old neighbours. But my better half calls – and, now that the car is equipped for the winter (I spent most of yesterday at the garage as they rectified a few faults the car had developed as a result of the 10,000 kilometre battering I gave it in the early summer) we may well head to Sofia soon. The paintings and friends beckon.
In my recent (and rather long) lament about political impotence, I mentioned Will Hutton (and his latest book Them and Us – Changing Britain – why we need a fair society) as one of the people who has the wide inter-disciplinary reading necessary for anyone to have anything useful to say to us about how we might edge societies away from the abyss we all seem to be heading toward. I’ve used the verb „edge” because the calls for revolution which come from the old leftists are unrealistic (if not self-indulgent) but mainly because, historically, significant change has rarely come from deliberate social interventions. It has come from a more chaotic process. More and more disciplines are applying chaos theory in recognition of this – even management which is less a discipline than a parasite! So the call these days is for paradigm shift to help us in the direction of the systemic change the world needs to make in its move away from neo-liberalism. And close readers of the blog may recollect that I suggested that any convincing argument for systemic reform need to tackle four questions -
• Why do we need major change in our systems?
• Who or what is the culprit?
• What programme might start a significant change process?
• What mechanisms (process or institutions) do we need to implement such programmes?

Most books in this field focus more on the first two questions – and are much lighter on the last two questions. The first two questions require pretty demanding analytical skills – of an interdisciplinary sort which, as I’ve argued, the very structure of universities actively discourages. Hence the limited choice of authors – perhaps the two best known being Immanual Wallerstein and Manuel Castells. Both offer complex systemic views and, given the nature of their study, the writing style is not very accessible. Susan Strange made a great contribution to our practical understanding of Casino Capitalism as she called it - until her very sad death a decade ago.
Sadly, two other well-known names with a much more accessible writing style – Noam Chomsky and Naomi Klein – tend to focus a lot of their energy on rogue states such as the USA.
William Hutton’s The World We’re In (2002) was as powerful and accessible of the limitations of the anglo-saxon model as you will ever read – and, with his stakeholder concept, carried with it a more optimistic view of the possibilities of reform. David Korten’s various books also offer good analysis – although his focus on the American corporation does not easily carry to Europe (See William Davies' recent Reinventing the Firm for a recent attempt). You can read Korten’s review of a Soros book here. Archdruid offers a contrary view here - although I’m not quite sure what to make of this particular blog – archdruid indeed!!
Most commentary on the recent global financial crisis has identified banks as the culprit – and those governments who made the move in recent decades to free banks from the regulation to which they have been subject. Marxists such as David Harvey have reminded us that government and banking behaviour is simply a reflection of a deeper issue – of surplus capital.
Hutton’s latest book (which I had abandoned a few weeks ago for its rather abstract opening treatment of fairness but dragged from the bookshelf at 04.30 this morning) does gives fairly good treatment to the first 3 questions but does not really even begin to answer the final question. And this is particularly pertinent for Hutton since the stakeholder analysis he brought with his 1995 book The State we’re In chimed with the times; did persuade a lot of people; and seemed at one stage to have got the Prime Minister's ear and commitment. It did not happen, however, and Hutton surely owes us an explanation of why it did not happen. The Management of Change has developed in the past 2 decades into an intellectual discipline of its own - and Hutton might perhaps use some it in a future edition of the book to explore this question. He might find Change the World: How Ordinary People Can Achieve Extraordinary Results particularly stimulating (I certainly did)
I would also have wished him to give us some comment on other takes" on our global problems eg the work of David Korten (above); Bill McKibben's Deep Economy: Economics as if the World Mattered; Olin Wright's Envisioning Real Utopias (which instances the amazing Mondragon cooperatives); and David Harvey's The Enigma of Capital: And the Crises of Capitalism. Although he is very generous in his attributions of research work, Hutton is perhaps less so in his recognition of the work of others who are trying to answer what I’ve suggested are the four big questions. There are more and more people trying to understand the mess we are in - and how do get out of it - and more and more books each with its own underlying set of ideological assumption. Will Hutton is one of the few people able to help us make sense of it all.
Finally a site with superb photographs which capture many aspects of Bucharest and Romania.

Romania's stark realities - and what is to be done?

British insularity is such that, over the past century, there have been only a handful of academics with an interest in Romania. In the first two decades of the 20th century it was Robert Seton-Watson – whose contribution to the very existence of Czechoslovakia (as it then became) overshadowed the role he played in Romania’s development. Twenty years or so ago, Dennis Deletant and his wife were important for their contributions to our understanding of the Romanian language and of its infamous security systems. Since then Tom Gallagher has taken up the baton – although with a more aggressive stance toward his subject matter (which he has also adopted to his more recent focus on Scotland)
On a visit last week to Bucharest’s English bookshop, I noticed that Gallagher produced last year a new book about about Romania and its access to the EU. Amazon can generally offer cheaper versions – but my visit to its website gave me the astonishing price of 57 pounds. There was however a very extensive review by a former British Council Lecturer (Christopher Lawson) in Romania during the Communist era (1976-1978) who returned to Iasi at the end of 2003 and now works as a writer-editor. With his kind permission (15 October) I offer the following excerpt from his review - since it gives such a good overview of the country's recent development.

And what impression of the country might a tourist take away in 2010? Western sales engineers descend from planes and gather for breakfast in Romania's international hotels. Shiny high-rise buildings rise in city centres. Well-fed Romanian businessmen attend backslapping Rotary meetings and travel from the provinces by train to the capital in comfortable sleeping compartments, or in sleek new cars which clog the overcrowded roads. The wares on sale in the supermarkets compare with those they are used to in the West. Fresh fish from the Atlantic and the Mediterranean is delivered daily to the French hypermarket chain Carrefour. Young people clad in the latest fashions patronize chic restaurants and cafes, leaving in glossy cars or on Kawasaki motorbikes. Top names come to give concerts in the capital. The nouveaux riches flock to the stadiums and concert halls. Ambitious students seeking their fortunes opt for business or law, and graduate with a good knowledge of English and the Internet. A ruthless win-lose attitude prevails in business.
Meanwhile tens of thousands of peasants live in grinding poverty, with no electricity or running water, while employees of the State, notably teachers and doctors, struggle from month to month. The same kleptocrats, generally Securitate officers who once informed on their fellow-citizens, inheritors of the Stalinist system which once prevailed, sabotage numerous projects to improve the villages. I live on the university hill in Romania's second city. Nearly every time I visit my rubbish dump, I meet poorer residents picking through plastic bottles and discarded clothes. Corruption holds sway, especially in justice, education, medicine and tenders for road construction.
Whatever a "normal" post-Communist country may be, Romania does not count as one, despite appearances to the contrary. Tom Gallagher tells us why.
His new book analyzes those 20 years, especially the more recent ones. Meticulously researched, written with the pace of a thriller, and in the final analysis endlessly depressing, Romania and the European Union confirms Gallagher's position in the front rank of historians of, and commentators on, post-Communist Romania.
The book, Gallagher's third on Romania, documents how old-guard, predatory kleptocrats have continued to enrich themselves, trousering millions, much of it cash from EU funds, while consistently blocking substantial reforms in key ministries. Meanwhile EU officials at all levels, alternatively complacent, deluded, indecisive or just plain feckless and lacking willpower, have, with a few praiseworthy exceptions, allowed Romania into the world's most successful economic and political grouping without having made these vitally necessary reforms. Brussels was deceived.
So-called European Social Democrat leaders share the blame. Many praised Romanian leaders whose corrupt behaviour shrieked to the skies. In particular, it is clear that the acceptance of the PSD, the former Communists, into the international centre-left family of the Socialist International was a catastrophic error.
The Romanian ex-Communist elite deployed the full panoply of Balkan wiles to outwit the European negotiators. They bestowed honorary doctorates on visiting or resident Eurocrats. Following ancient Phanariot tradition, they even provided bedmates for high-level EU representatives. They prevaricated, protected their own and pretended to implement reforms while preventing them from biting.
From the pages heroes, heroines and villains arise. The villains, all of whom are well-known, outnumber the heroes and heroines. Not a single corrupt politician has been successfully prosecuted or served a full custodial sentence. The EU's wish to have a number of heads on a plate, dripping with blood, has not been granted. Experts say the real progress in the fight against corruption and organized crime is measured not by the number of arrests, but by simple indicators: convictions by a court in a fair trial, the amount of dirty money confiscated, or the number of illegally acquired properties taken away. And such efforts have not yet been seen.

To all of which I can only – but very sadly – say "hear! Hear!” And it is particularly good to see the role of western agencies being properly emphasised. It does indeed take two to tango.
The question, hoever, to which I constantly return is what might a relevant reform strategy look like for kleptocracies such as this? For the past decade, in various papers available on my website (number 1 gathers it all together), I have been bemoaning the failure of Western agencies and programmes of Technical Assistance to recognise that the fashionable mantra about „good governance” their experts were peddling was sheer snake-oil in these conditions and countries. Grindle’s “Good Enough Governance Revisited”was one of the few papers which gave my stance any backing then. For some time I have been consumed by two simple questions a what and a where.
First – what approach should I advise genuine reformers in the machinery of government in countries such as Azerbaijan, Bulgaria, Georgia, Kazakhstan or Romania (let alone middle eastern countries such as Jordan) to take? The public sector of course of each of these countries is at a particular stage – and each faces its own unique configuration of constraints and opportunities – so the approach has to start from that unique combination of forces. But what would the generic elements of the approach contain? Varous papers on my website paper contain some elements - not only the one I have already mentioned but also a couple of papers on Azerbaijan. But these were drafted some years ago (for very particular audiences)and do need some considerable revision to provide something more generalisable.
The second question is where do you find the reformers who are likely to have some staying power – both in positions of influence and as reformers? Sadly there does seem to be an „ïron law of oligarchy” (as Robert Michels put it 100 years ago) - which quickly sucks the originality and commitment out of reformers. This then leads onto a third question. I was very struck in a thread of discussion about Tom Gallagher’s latest critique of Scottish national politics by someone’s comment that such criticism is unfair since all governments quickly succumb to global capitalism. This stance is a real challenge – Margaret Thatcher put it very simply – TINA – there is no alternative. So why should we bother voting or engaging in activism of any sort? Why not take Voltaire’s advice – and just cultivate our gardens? To answer that question, people like me have to identify - and properly disseminate - the examples of sustained, positive, social change.
I’ve just started to dip into two books which I hope will help me with this - Will Hutton’s latest book Them and Us – and David Dorlings Injustice. Clearly these authors are very good on critiques and explaining the mechanisms which sustain inequity and injustice. But do they address the third question? Nous y verrons!