Reinventing the State Chapter 22: Communicating Social Liberalism

The "at least three brains" team of Steve Webb and Jo Holland has made a noble attempt to bring together this disparate collection of essays. As much as I would like to go with the flow I found much of the language and argument grating.

"Relying exclusively on unfettered market mechanisms to deliver a liberal and democratic society is doomed to failure."

This looks like a straw man to me. Markets do not deliver a society, they deliver goods and services. Relying on markets to deliver a cutthroat dog eat dog society would be doomed to failure because it is a society and not a product. Of course I know what Steve and Jo are getting at, that laissez faire is freedom only for the few. But then this is hardly a shocking statement or a distinctive position - even the Tories won't disagree with this, publicly at least.

"There are many areas in society - such as educational or health outcomes - where such inequalities [as arise from unfettered markets] would be totally unacceptable'"

And what about the inequalities we have already? How unacceptable are they? Personally it is not the inequalities I have a problem with. Health and education are good things and nobody deserves less of them, however much they have already. What is unacceptable is how little some people have of each. We all agree that we want more access to health and education, particularly for those who have the least access at the moment. But I am bemused by this emphasis on what seems to be an straw man position: instead we should look at where the country is and consider what direction to move it in.

Anyroad, this is the first part of Steve and Jo's argument: "the failures of unfettered markets".

Markets fail due to a lack of competition. Tim Farron's example of milk suppliers is referred to - although how agriculture can count as unfettered while subject to trade barriers and the CAP, is a mystery.

In part 2 of the argument, markets fail when the price of something does not reflect its true cost. This failure can be corrected by Pigouvian taxes and subsidies "in some cases". Now I am a big fan of Pigouvian taxes, particularly green taxes, yet I find myself disagreeing with the conclusion.

"Whether we are dealing with social costs or social benefits, both need to be fully reflected in market prices if the market is to deliver socially optimal outcomes, and only the state can ensure that this happens."

No... Social benefits are largely unmeasurable. You want to keep post offices open because they have a real social benefit, subsidise them, call it a Pigouvian subsidy if you like because that benefit is real. But it is a political judgement what that benefit is worth, not a matter of number crunching. And it should be a simple formula, not a "full reflection" of the value of a pensioner's opportunity to gossip while buying stamps.

In part 3 of the argument, markets fail because of inequalities in income and wealth. Markets, you see, are only geared up to providing things to people who can pay for them. At least that's how I would have put it, and it might be what the authors are getting at with that stuff about horse races and redistributive taxation, I'm not sure.

Again it is so uncontroversial as to be hardly worth saying that we would rather have a national health service than leave the sick dying in the streets. Why is the point so laboured? I don't know. A real dilemma is almost addressed at one point:

"However, the King's Fund recently found that the middle classes were likely to choose the best hospitals, while those who were less well-educated tended simply to go to the local hospital."

They are right that there is a danger of widening inequality here, but, at the same time, isn't it good that more people use better hospitals? Patients choosing a better hospital are increasing the size of the pie, not taking a larger slice of the same pie. This should be commended not bemoaned.

"While Liberals are instinctively in favour of 'choice' ... these examples clearly demonstrate that unfettered markets can simply lead to a beggar-my-neighbour form of choice, akin to the biggest and strongest barging past other people in the queue."

Er, no they don't. For one health and education are not examples of unfettered markets, they are examples of near state monopoly. There are beggar-my-neighbour forces at work in public services - selection of pupils by schools is one (it should be the other way round) - but this has nothing to do with markets.

"Unfettered markets" here seems to be used to mean so-called "market based reforms" of public services. By all means make that case, and I would probably agree with most of it, but do try to call things by recognisable names. "Unfettered markets" would probably also fail, I guess, but we don't seem to have been talking about that.

Moving on, Steve and Jo make a case for intervention when markets fail. This is the natural follow up to the previous section - anti-trust laws, pigouvian taxes and so on - but noting that such intervention should not be knee jerk: some failures are not as bad as the intervention that would be necessary to correct them. So far so good.

They refer to Duncan Brack's argument on inequality as persuasive. (Er, no).

"...that inequality of outcome in and of itself can undermine society to the detriment of all. This would seem to imply a greater amount of redistribution than we have sometimes advocated."

No, That implication is not sound. It may well be that more redistribution is justified, but saying "X is bad for society" only works as an argument in an all-else-being-equal kind of way, yet putting up taxes makes all else very unequal. Brack's argument would be equally applicable to a society with half as much or twice as much inequality as ours, and this is a sign that it is failing to address the nub of the issue.

Inequality may be bad, but I am pretty sure that poverty is worse. Perhaps I benefit from living in the north and not having swaggering bankers on my doorstep. Or perhaps I have taken the stoicism of Featherstone and Boyle to heart to the point of not being so bothered by other people's status - in which case why didn't I agree with them?

At this point Steve and Jo admit that the foregoing arguments "could also be espoused, to a greater or lesser extent, by a socialist." Or a Social Democrat I suppose. And they are right - socialists love attacking markets, especially straw man positions on markets.

The difference is that the state should do as little as possible, as locally as possible and as accountably as possible. While I agree that this is a difference I don't think it is quite good enough. Many socialists will support localism and democracy quite sincerely. Socialism may naturally tend to paternalism and centralism, often in ways I fear this anti-market so-called social liberalism may also do so. If social liberalism is just localist social democracy, why not call it localist social democracy and we can all understand each other better. I don't take the view that something must be called liberalism to be worth supporting, rather I will listen to arguments for any -ism, and be suspicious of anybody trying to shift the meaning of an existing -ism to include what they don't want to bother arguing for.

This is a little unfair of me because Steve and Jo do say that the state should only what needs to be done and no more, although that is the one point of the three they don't expand on. Personally, I support a few things the state does that don't strictly need to be done, so perhaps I am not so extreme a classical liberal as they are. Yet even this principle is empty if it is not proved by example: the state should stop doing this, or that.

Localism too, while I agree we could do with a great deal more of it, is an argument with problems. The same abstract arguments would apply in a country ten times as decentralised already which again suggests that the arguments are missing the nub of the issue. State intervention must be "as local as possible", we are told. But why? This is just dogma. It would be possible, but pointless, to set VAT rates street by street. Surely what we should be saying is that the optimal level for much if not most state activity is more local than the present level.

The chapter and book concludes with a section on communicating this idea of social liberalism. Having not really got the idea myself I have little to say on how to communicate it. But I will have a go at explaining what I mean by social liberalism and how I might communicate it in a later post.

Looking back on the whole book (or rather the Brack-Featherstone-Holmes-Farron-Webb-Holland thread within it) perhaps it works better as a vehicle for communicating liberalism to socialists and social democrats; for saying to them: we share your concerns, come admire our values. A noble project worth a few cheap pot shots at markets. Clearly it is an attempted response to the Orange Book, although it has many of the same authors. I might draw together some of this if I can remember how it started - I started this review in September.

Still, it has been fun. Buy the book, and read the chapters I have said are good. Or better still pass off my views on it as your own to seem better read than you are. Better again, continue the argument. We may yet reinvent the state.