red tories, competitive federalism, etc.

I’d like to follow up a bit on my post from yesterday which was pretty critical of Phillip Blond and his latest piece on liberalism.  First off, let me just say that I do have a soft spot for the Red Tories.  I think they represent an important ethical voice within conservatism, much as many paleos or crunchies do in America.

It’s true, the free market is a system sans morality, a system of personal choices and determinations, and our political leaders should do their utmost to make sure that all the players within it are playing by the rules.  But the notion that markets are “amoral” and thus not to be trusted is nonsense.  Blond’s distrust of markets is entirely misplaced, and would be better served by a distrust of the state’s distortion of those markets.

Blond’s critique of the free market is born out of its failures, and namely the failure of competition and the rise of monopoly.  This may be a true assessment of some markets (and certainly has its place when thinking about financial firms classified as ‘too-big-to-fail’), but I think Blond let’s his personal preference for all things local color his assessment a little too much.  And he almost entirely ignores the state’s role in creating or sustaining monopolies (let alone the state monopolies themselves, like the UK’s health system)  He laments the rise of multi-national grocery stores and Wal*Mart:

In Britain, four supermarkets control more than 70 per cent of food retailing, while in the US, Wal-Mart has eviscerated competition. Local businesses from pubs to post offices are eroded by conglomerates that benefit from hidden subsidies and whose costs to society are not priced in. They out-compete everything else on economies of scale.

But as the apparently uncredited writer at the IEA blog points out:

Blond seems to want local provision to replace multinational monopolies (he cites Wal-Mart frequently). This really is bizarre. Wal-Mart is a product of competition and it would disappear as quickly as it has grown if it started to exploit consumers. In fact, Blond misses an elementary point. Wal-Mart is a multi-national company that does not have a monopoly. If we have local provision we may have millions of firms throughout the world but each could be a local monopoly. Some of us remember going shopping with our parents in the early 1970s, trudging from one over-priced, inefficient, unimaginative local monopoly to another over-priced, inefficient, unimaginative local monopoly. Indeed, before I went to school, I have the impression that this tedious activity took up almost every morning.

Now I will say that when it comes to subsidies, Blond is spot-on.  We should not be subsidizing Wal*Mart.  However, Blond would replace subsidies for big multinational firms with subsidies for small local firms, and he’d do his best to use protectionism to bust up economies of scale.  Indeed, the Red Tory movement seems hell bent on institutionalizing all sorts of protections in its quest to rid Great Britain of all things Thatcher.  As anther post at IEA mockingly points out:

So why not state the case like this: “Most people’s willingness to pay a mark-up at a store with a specific ‘local’ image is not high enough to offset Tesco’s price advantage. Therefore, Tesco’s prices must be artificially raised by depriving the company of economies of scale, to push consumers back on the high street, and bring their buying behaviour in line with Phillip Blond’s personal preferences.”

Blond’s Progressive Conservative Project states its goals as follows:

  • Democracy, Community, Neighbourhoods & Power; arguing that the best way to kick start democracy is to drive control down to town halls, neighbourhoods, and individuals.
  • Family, Childhood, & Society; recognising the importance of the quality of relationships, not family structure. We are driven by the conviction that only by intervening early, intelligently, and decisively can we give everyone a fair chance in life.
  • Markets, Ownership, Poverty, Opportunity, and Wages; developing bold approaches to tackling poverty and inequality in all its forms: poverty of income, assets, aspiration, and networks.
  • Austerity, Innovation, Bureaucracy, and the Shape of the State; investigating progressive and conservative new models of government for a period of austerity.

These are noble, if vague, goals.  And I think in political terms, the notion of drawing down power to the local level makes a great deal of sense.  Some would call this subsidiarity, and for a really interesting and effective look at subsidiarity in politics (and a possible alternative to Blond’s idealized “localism”) check out the Swiss “competitive federalism” model.  In this model the federal government has very little taxation power, and Swiss cantons compete for citizens by offering various tax rates, public services, etc.  Mark has written about the Swiss “libertopia” at his old blog.

It’s worth pointing out that often where localists see libertarianism as anathema to their vision of limits and place, it is actually the more competitive models of politics and economics that create the most robust and vital communities.

Chris has an interesting follow-up to my post as well.  He’s absolutely correct that Blond takes his case too far, and that other more moderate visions of what Blond is over-stating may have more merit.  I’ve already printed Millbank’s “Politics of Paradox” to read this evening.  I also think that the link between faux-individualism and statism is important and needs more fleshing out.

One thing Chris writes confuses me, though:

Market economics and liberalism are both the greatest political and economic achievement in human history to date and simultaneously the very thing that is preventing the further evolution of human social and political relations.  And worse is taking us careening towards some very dark and potentially catastrophic futures.

This is often a claim made by environmentalists or others who predict some certain impending doom based on our over-consumption, our use of the world’s natural resources for our own good and so forth.  I suppose in this regard I’m more of an optimist.  I see diminishing resources leading to higher prices, and the self-limiting constraints of those prices forcing innovation or re-imagination of our current systems.  High transportation costs may lead us toward more localized production of goods, toward micro-manufacturing, and toward greener transportation options like electric cars and light rail.  I have no problem with anticipating some of these futures by laying the rails earlier than needed, or by investing in green technology research, or by working to rewrite zoning restrictions so that the supply of dense, walkable neighborhoods can be increased.

Still, I think the free market is the best vessel for our creativity.  The green revolution will require free markets – something I hope to write about more in the near future.  Likewise, capitalization of the poor has occurred under the dread neoliberal regime.  Income inequality has increased, but overall standard of living has increased as well, along with a general decrease in cost of goods and services.  This is real progress.  Breaking up Wal*Mart and relegating its customers back to the aisles of local monopolies is not the answer – certainly not for the poor.   Things aren’t perfect, and we need to work to create more sustainable, efficient safety nets, but we are not living in some capitalistic dystopia either.

Blond and the Red Tories should focus more on competitive government and political subsidiarity and let markets take care of themselves.

(For a more comprehensive look at competitive federalism see this paper [pdf] by Richard E. Wagner.  For more on the Swiss system, see this article at The American.)

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21 thoughts on “red tories, competitive federalism, etc.

  1. “I suppose in this regard I’m more of an optimist. I see diminishing resources leading to higher prices, and the self-limiting constraints of those prices forcing innovation or re-imagination of our current systems. ”

    This is so very correct. I saw a poster up one day showing a post apocalyptic world that would come about because one day the consumer will pick up the nozzle at their local gas station and suddenly there will be no gas. The economic illiteracy is hysterical.

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  2. Blond’s criticism of the Walmart, or similar big-box, business model doesn’t really only on the local monopoly and public goods subsidies argument it also relates to Barge Economics whereby monopolization of capital and globalization ideally seeks to put all manufacturing plant on a barge and tow it around to the country that can deliver the lower costs. This means countries like China that according to a recent US Labor Department report makes extensive use of child and slave labor, has low external costs (ie, high environmental pollution and greenhouse gas contribution to global warming) and deliberately distorts the market (comparative advantage) and breaks trade agreements by deliberately suppressing the value of its currency through government recycling of US dollars back into US government bonds.

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  3. Wal-Mart is a product of competition and it would disappear as quickly as it has grown if it started to exploit consumers.

    The point is not that Wal-Mart, or most other multinational corporations, exploit their consumers; it’s that they exploit and underpay their employees and are able to greatly affect the actions of government due to their great wealth.

    In addition, one thing people tend to value is independence. When the market is dominated by large, multinational companies, there is less opportunity for economic independence (people running their own business) as opposed to dependence (people working for a large corporation).

    I suppose in this regard I’m more of an optimist. I see diminishing resources leading to higher prices, and the self-limiting constraints of those prices forcing innovation or re-imagination of our current systems.

    You certainly are an optimist. I see it leading to greater use of existing resources, with the resultant decline of preserved natural areas, and eventual rising prices leading to greater wealth concentration in the hands of those who control the resources, and increasing poverty for the rest.

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    • Katherine,E.D. was referring I think to the eco position that one day we’ll wake up and scarce resources like oil will simply be gone. That is just not the case. Diminishing oil will cause the cost of oil to go up long long before it runs out. Oil is used as an energy source primarily because of its’ comparative cheapness. Long before we run out of oil the increasing scarcity will make it no longer of any value as a fuel (too expensive) and it shall be phased out. It’ll be phased out in favor of other fuels, in favor perhaps of less driving, of more compact urbanized communities mayhaps and in favor of mass transit one can hope. We’ve seen concrete signs of these very changes occurring at the peaks of price spikes caused by mere market fluctuations and global politics.

      I don’t like Wal-Mart myself, but then I’m not the demographic they cater to. I have never read an explanation yet, however, of how their exploited workers (or the exploited workers of other large companies) are marched in at gunpoint to be forced to work these jobs. For some reason their employees seem to choose to work there. Nor, for that matter, is Wal-Mart even remotely a monopoly.

      Also, addressing your last post. No seriously it hasn’t? I’m sorry but I’m going to have to protest. Now, certainly there’s much progress to be done yet but are you saying that in South Korea, Singapore, Taiwan and even tyrannical old China people were better off starving en masse like they were in the 60’s, 70’s and 80’s than they are now laboring in factories and other jobs? I’m sorry but I am not aware of any time in our history when so many human beings were as well off as they are now. Perhaps there’s been backsliding in the middle east or poor poor conflict torn Africa but the Pacific rim countries and Eastern Europe have risen out of grinding poverty and made huge strides in both economy, governance and general well being. Even in the west services and goods are generally cheaper and more available despite stagnant wages.

      Goodness knows that there’s much more to be done. But yes, seriously, the world has gotten better for humanity as a whole. It is perfectly reasonable to decry the problems that markets and liberalism have wrought but to try and ignore the massive advancements that we have made on whole is unfair to those who have worked so hard to achieve so much and savagely unfair to us as a species.

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      • I was viewing “neoliberalism” as a more narrow term than you are: the economic philosophy of less government, more free trade, privatization, deregulation, and reduction of taxes on the wealthy that took hold during the 1980s-1990s. In much of the developed world median wages and incomes have flatlined; in the third world the effect was much worse, causing declines living standards in Latin America and the post-communist states (in the latter GDP actually declined substantially) and even causing the east Asian countries, which had been doing fairly well, to take a hit.

        If you measure from the nadir of the mid-to-late 1800s when most people worked in sweatshop-style factories and company towns, yes, things have improved, but there were times before the late 1800 when quality of life for a lot of people was better: progress isn’t a straight line.

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        • That is fair enough Katherine, though I submit that while it jigs and jags up and down the general trend has been upward. Even in Latin America and East Europe. Though I will conceed that Africa may actually have been in general decline. I’m rather neoliberal myself and I would object to strenously to Reganism or cutting taxes on the wealthy being characterized as inherent to neoliberalism.

          Neoliberalism, as far as I have experienced it, mainly runs in line with its’ leftward cousins socially except that unlike the far left neoliberals recognize that there is value in markets, that there is such thing as excessive or counterproductive government (while embracing it’s presence in many more areas than libertarians). We’re hippies too, we just want to make sure the bills get paid.

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  4. Likewise, capitalization of the poor has occurred under the dread neoliberal regime. Income inequality has increased, but overall standard of living has increased as well, along with a general decrease in cost of goods and services.

    No, it seriously hasn’t. In the Western world, wages haven’t gone up for most of the population but have skyrocketed for the already wealthy; in the developing world (and eastern Europe, and Russia) neoliberal economic changes of the 1980s and 1990s produced a sharp decline in the general economic situation as well as in the standard of living for most of the population. Free trade destroyed the livelihood of farmers (much of America’s illegal immigration problem can, I think, be traced back to NAFTA), forced shrinkage of government raised the costs of necessities such as water and electricity, investment in health and education fell, currency speculation destroyed the economy of whole nations, and even in nations with lucrative natural resources the population lost the ability to benefit from them as they were sold off to multinationals.

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    • Maybe wages have flattened, and surely there’s a reason for this. But has cost of living generally gone down? How much are groceries now compared to the 1970’s? How much does a computer cost compared to the 1980’s? How much of our paychecks go to necessities?

      Again, it’s not perfect, and certainly I agree that more emphasis should be placed one education and so forth, but the picture is hardly complete when all you focus on is inequality and not overall standards of living.

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    • We’re talking about the planet here Bruce. Though I’ll conceed that I was thinking in terms of decades rather than years so it’s possible there’s been a general retreat from the global recession but I don’t think that cyclical fluctuations necessarily would count against my original point.

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  5. “Cyclical Fluctuation” is a great euphemism for what recently happened on Wall Street and why! What we should really be interested in are ideas that combine incentive with fairness and both with sustainability. For example, I’ve just read that there is a 7000 square mile dead zone in the Gulf of Mexico where nothing can survive. The cause is unregulated use of nitrates. Claiming that the current system delivers well on all three of these objectives I find complacent and there we must agree to differ.

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    • We’re looking at humanity Bruce. You’re looking at the externalities. The bald simple truth is that humans as a people globally have never enjoyed the quality of life they do in the modern era in terms of starvation, disease and access to more comfortable life styles. (My reference to cyclical fluctuations are an acknowledgement that it bobbles up and down along the upward curve, it is in no way an attempt to excuse the madness of the most recent bust). Now there is no argument that there are not big problems. Neither E.D. nor myself claim that we’ve attained Elysium but one cannot just point in fury at income inequality or ecological damage or parts of the globe still suffering without acknowledging the vast strides we’ve made in lifting people away from lives that were nasty brutal and short and we’re talking world wide here, not just in the US.

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  6. The complacency I complain about is to perceive that the social and technological systems we have used so far in human survival on this planet should be lauded as a very successful adaption to increased complexity as far as our species is concerned. The “Fairness” to the species we’ve put out of existence, for example, not to mention the human beings killed in wars suggests otherwise. Recent dysfunction statistics for the United States also suggests differently:- http://www.equalitytrust.org.uk/

    I don’t buy into the Robert Wright “Nonzero” argument that history has a direction. I just think there is adaption to complexity. Full stop. Our argument is a perception of whether the glass is half full or empty which is getting us nowhere. I prefer to tilt at injustices. Well that’s not entirely true. I prefer to try to resolve problems which I’m sure you do to. That I guess is where the “Incentive” part comes in relationship to “Fairness” and “Sustainability.”

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  7. Perhaps re-reading my last comment I ought to make myself a little clearer. I do not completely subscribe to the notion that an increase in materialism so fervently pursued in the United States is the be-all and end-all of the pursuit of happiness. Sure it has its importance, but usually hidden from thought and discussion is the condition of the human psyche. So what I also subscribe too is the argument made by the Brits, Richard Wilkinson and Kate Pickett, in their book “The Spirit Level.” (published in the US December 22nd 2009) :- http://www.amazon.com/Spirit-Level-Equality-Societies-Stronger/dp/1608190366/ref=sr_1_1?ie=UTF8&s=books&qid=1254074406&sr=8-1

    Their argument in a nutshell is that you have to pay attention to both materialism and psyche because inequality has enormous psychosocial effects. Accordingly, in a country with a high level of inequality of income and wealth (because control of wealth is by a few) a large percentage of the population feel “dissed” (disrespected and distressed) and this is not good for their mental well-being by reinforcing stress and low self-esteem which leads on to a whole raft of other problems. It’s no good the wealthy “glibertarians” shouting “get a grip.” It just doesn’t work like that. It works when this elite is encouraged to relax its “grip” on capital!

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  8. It’s nothing to do with coddling, or envy induction, its about the reasonable notion that democracy in human affairs should be introduced to prevent capital unfairly dictating lives.

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