I am amazed that anyone listens to mainstream economists anymore. As John Stewart showed, in his own special way, the economists who occupy the centre of public debate have never got it so wrong. In the face of the current global crisis, those economic liberals who were until recently defenders of the status quo need to face two things: first, this a crisis of their own making; and secondly, they have little (if anything) left to offer.
But while one cohort has been discredited, economists with a more nuanced take on the role of governments and markets have been waiting to take their place.
Economist and CPD fellow John Quiggin’s recent essay for the Whitlam Institute is worth reading both for its analysis and its ideas. In ‘An Agenda for Social Democracy’, Quiggin begins by looking at what went wrong, emphasising that we are not witnessing a temporary aberration of market failure, but a systemic collapse of economic orthodoxy. Quiggin points out something that should be obvious to all by now: the global financial crisis will radically transform our social, political and economic architecture.
The crisis will force governments across the political spectrum – narrow spectrum that it is – to accept that the risk transfer inherent in economic liberalisation needs to be addressed. Risk has already been shifted from financial markets back to governments, with Quiggin noting that the markets that were ‘supposed to supplant the social democratic state are now calling on that same state for protection’. It is time for us to accept that in many cases, from education to health care and financial regulation, we are likely to get more efficient and just results by sharing risks collectively than by dealing with them at an individual level.
Quiggin therefore proposes that we revive a social democratic model. Importantly, he does not suggest that we go backwards, but offers a revitalised vision of social democracy with an appropriate balance between the public and private sectors: ‘The crucial social democratic idea here is that of the mixed economy, based on the observation that neither public nor private provision of goods and services is uniformly superior.’
In presenting solutions, Quiggin describes increased financial regulation at both the national and international levels (including the Tobin Tax), increased taxation, a discussion of human services and a more interventionist government that does not overplay its role.
Whatever your opinion of Quiggin’s paper, he reminds us that things are not going back to ‘normal’ — for the state of affairs that was recently considered to be normal got us into this mess in the first place.
James Arvanitakis was recently seconded to the Whitlam Institute to author a research report discussing young people and democracy. The report is due to be released in May 2009.