I live in a democracy but I spend half my life in a tyranny. Go figure

Review of The Return of the Public by Dan Hind

Part Three 

In 1970 the US-based Czech economist Jaroslav Vanek said, “One of the main reasons why the western world is so schizophrenic is that we have political democracy and economic autocracy.”

As the ‘great recession’ which began in 2007 unfolds, the schizophrenia engendered by economic autocracy is not only producing strange hallucinations but endangering the life of the subject.

Hind unmistakably echoes US economist Richard Wolff in locating the germ of the crisis in the way corporations are organised. Corporations, the source of financial survival for most people, are run as autocracies. Corporate boards of directors receive the profits from the work of millions of people who rent their time and effort. A small elite decides what to do with this huge amount of money. In political terms, corporations are tyrannies.

And corporations - private tyrannies - were responsible for the downturn that began in 2007

In the US, where the crisis started, corporations were basking in a 30 year profits bonanza as the influence of trade unions, the only check on their power to do as they pleased, declined. The result was stagnating wages for the majority, while productivity raced ahead. The reaction to this change took the form of a huge increase in borrowing. People borrowed from the banks, the very organisations who received the increased profits, in the form of deposits, from corporations. The banks then tried to make more money by lending, as banks do.

Eventually, the circle could not be squared. The need for ever-increasing consumption could no longer be met by substituting historically unprecedented borrowing for stagnating demand. Reality – the reality of stagnating wages – eventually caught up with the prevailing delusions and crisis ensued.

It is a crisis fomented by the dominance of corporations. There is, in the words of Oscar Wilde, only one thing worse than not getting what you want, and that is getting it.

Not just the crisis, but many of the related ills besetting us today, would evaporate says Hind (with Wolff nodding in the background) if corporations were organised differently: If they were run, not by their boards of directors, but by the workforce as a whole.

“It is likely that they [the workers] will prevent managers from behaving in ways that jeopardize their own livelihoods,” says Hind. “Asset stripping, ill-considered mergers and takeovers, and financial engineering will all become less attractive in companies where the overriding preoccupation is with maintaining stable and rewarding conditions of employment.”

Worker-run companies would not seek tax havens abroad, says Hind, because their workers are also taxpayers in their own countries and have no desire to rip themselves off. These companies would not gleefully outsource functions overseas because they are not just interested in securing the cheapest price for labour, but the best working conditions for workforce: for themselves.

At its simplest level, the case for economic democracy is that you don’t normally shoot yourself in the foot. Unless you’re mad or a very bad shot. Or have read a lot of Milton Friedman.

The fundamental cause of the economic crisis was not that the fortunes of investment banking were inextricably linked with those of retail banking, but that the small elite running the economy have interests different from, and in conflict with, the interests of the vast majority of the population. Until that basic conflict at the heart of the economy is dealt with, crisis will always haunt us.

Imagine, says Richard Wolff, that for the last 40 years we had lived in an economic democracy. Worker self-directors would not have stopped real wages rising in the 1970s. It “made sense for capitalist boards of directors to enrich themselves and their shareholders [through stagnating wages and thus soaring profits] but it would not have made sense for worker self-directors,” he says.

A subterranean interest in economic democracy has developed that remains invisible to the political mainstream. Apart from Dan Hind and Richard Wolff, the authors of The Spirit Level, Kate Pickett and Richard Wilkinson, have embraced worker ownership as the only solution to mushrooming economic inequality. Human rights campaigner Peter Tatchell and occasional Labour party adviser Maurice Glasman, have both advocated the German model of co-determination, where all enterprises with 50 or more employees would have to share control between management and the workforce.

These thinkers, to their credit, accept that a real answer to the economic impasse we face has to delve far deeper than the cosmetic solutions offered by politicians. The needs of the 1 per cent can’t continue to override the needs of the 99 per cent. But they do, as this blog has suggested before, present half an argument.

Full employment is now a chimera, both in the sense of what society actually needs, and in the sense of the number of employees that enterprises, worker-controlled or otherwise, require. “No matter how hard we try, the current economic system needs fewer and fewer of us,” Hind says. Another economic system will have different aims, but it won’t magically create permanent paid employment for everyone.

It’s also the case that to turn enterprises into cooperatives, and that is essentially what we are talking about here, will not automatically ensure that the needs of society, of the public in general, are met. These cooperatives could well be just as competitive, seeking to benefit solely their own employees, as conventional capitalist businesses. The limits as well as the virtues (and there are many) of syndicalism, workers running their own enterprises, have been scrutinised before, in reflections going back as far as the drawbacks of worker control during the Spanish Civil War of the late 1930s. In contemporary society, a pertinent criticism of Conservative attempts to make public sector worker form cooperatives, aside from the jaw-dropping irony, is how would the needs of the users of public services, be represented?

Caveats to economic democracy have been expressed by another economist who has been reviewed in this blog, Harry Shutt. Hind echoes Shutt’s proposal on how to ensure that enterprises don’t stray from the public interest.

Shutt, too, wants a “more functional and publicly acceptable pattern of enterprise organisation”. But he does not advocate economic democracy. Instead he says that companies should only benefit from state-granted limited liability if the community is represented on their board or they are run on a non-profit basis.

Limited liability means that investors can lose only the amount they invest in a company, no matter what wrongdoing it is guilty of. This artificial limit, for free market aficionados granted by the state, does not apply in ordinary life.

“A man who causes harm in the course of his work can be sued for the full cost of that harm to the point of personal ruin,” Hind points out. “A man who own shares in a company that causes the same harm risks only his original investment.” Adam Smith, the 18th century Scottish thinker who inspires a lot of today’s free marketeers, was against limited liability.

Hind’s idea is that the privilege of limited liability should be reserved for companies controlled by their workforce. For all other companies, the behavioural check of unlimited liability would apply.

Without limited liability, for example, banks would not have been so keen to sell sub-prime mortgages, package those same mortgages into investments that they did not own, and then rely on the taxpayer to cough up £1.5 trillion to save them when everything went wrong. The externalising impulse of all corporations – we just want the profits and the subsidies, the problems we cause aren’t our responsibility – would be impossible without limited liability.

“There can be no principled objections to reforms that inculcate a proper prudence into the actions of large commercial concerns,” says Hind.

The adoption of unlimited liability, or in other words ethical responsibility, would make profit harder to contrive. It might lead in time to a more rational economic system.

In Hind’s system, the carrot of limited liability would still be on offer – as a way of inducing companies to change in ways which gave overall control to their workforce.

The reason is that without economic democracy, political democracy is denuded of meaning. The current system of corporate ownership means that senior managers have the resources to control the political process and the world of ideas. Recent UK and US history is inexplicable without understanding this dominance, and the concomitant political passivity of most people.

 We are not really schizophrenic, as Jaroslav Vanek described us in the 1970. Now economic autocracy has hollowed out political democracy.

But, says Hind, if enterprises are democratised, they not only cease to be so toxic to the humans that inhabit them, they will also transform the remnants of political democracy. “Instead of providing funds with which owners and senior managers can intimidate their employees and dominate the political process, enterprises instead become schools for deliberation on matters of general concern.”

If the last 30 years have been dominated by the attempt to remake the public sector in the image of the private sector, now the political imagination has to turn around. In its sights will be banks, pharmaceutical companies, private equity funds, hedge funds, the basic architecture of the misnamed “private” sector. Now it’s your turn.

“He who wants bread is his servant that will feed him.” What does freedom really mean?

Review of The Return of the Public by Dan Hind

Part Two 

On the day of his execution during the English Civil War, King Charles I expressed his essential political philosophy. Freedom, he said, consists of the state protecting life and property. It is nothing to do with anything so presumptuous as everybody having a share in government.

Of course Charles was separated from his head a few hours later. But his idea of liberty has proved remarkably durable and explains the pseudo-democracies in which we live and which have delivered us into crisis – economic, ecological and political.

Absolute monarchy in England died with Charles I. After the restoration of the monarchy power was shared, but it was shared with a very small group of people. The aristocracy, property-owners and the rich had the right to participate in government. They attained “public” status. Everyone else just had to do what they were told. The eighteenth century novelist Henry Fielding said that everybody was a nobody in Great Britain, apart from 1,200 people.

The intervening centuries have seen the expansion of the right to vote to everyone. Theoretically we are all equal and have equal power. But public status and the right to real participation is still jealously guarded. In Britain and the US, “the investing classes” Hind notes, “usually described in abstract terms as ‘the market’ or ‘market forces’, constitute “the effectual public in both countries”. A group of just a few thousand people control $100 trillion, two-thirds of the world’s total assets. Almost everybody, as Henry Fielding said almost three centuries ago, is still a nobody politically, despite universal enfranchisement.

We should be a public, but we are still just an audience.

A concept of liberty forged in the mid-twentieth century has given its blessing to this situation and, more importantly, persuaded a lot of people that any deviation will lead to humanitarian disaster. And it is an idea of what freedom is that has a lot in common with what Charles I said before he was escorted to the scaffold.

It was the philosopher Isaiah Berlin who said there were two contrasting ideas of liberty, positive and negative. Positive liberty is the liberty of the French Revolution and the Bolsheviks. A group of people constituting a party or the state decide they know what freedom is and how humanity must get there. Because they know, other people can be ‘forced to be free’. And if they disagree, they can be guiltlessly exterminated, for the good of all. Positive freedom leads inexorably to the gulag.

Here is a description of the two ideas of liberty by the documentary maker Adam Curtis

Negative liberty, the kind of liberty Berlin believed in, was by contrast necessarily limited. Freedom was achieved when people or institutions were “left unmolested” to do what they chose to do. It is this idea of liberty – which traces its lineage back to Thomas Hobbes and the soon to be headless Charles I – that has proved incredibly influential in recent decades. The crimes of Communism have taught an unavoidable lesson and we will have to put up with injustice if we want to be free.

But this concept of negative liberty – leaving private institutions unmolested – has delivered us into seemingly unending economic crisis. And left us powerless to get out.

Berlin’s concept of negative liberty has been described as the classic English interpretation of liberty. But, as Hind shows, that is false in more than one way. The choice Berlin presented was false. We don’t have to decide between Joseph Stalin and Milton Friedman. And there was another English interpretation of liberty, created at the same time as Charles I was insisting we should always remain subjects, that was neither about positive or negative liberty.

During the English Civil War, an English republican, James Harrington wrote a book called The Commonwealth of Oceana. Freedom was only achieved, he argued, when citizens determined government policy. If citizens do not hold power they are not free. Any other form of government was a condition of dependence.

In words of another English republican of the time, Algernon Sidney: “Liberty solely consists in an independency upon the will of another”.

This belief that economic independence was the fountainhead of political liberty meant that Harrington supported “equality of estate”. He believed in widespread land ownership – England was an agrarian country then – that everyone should be their own landlord. As Harrington pithily summarised the situation. “He who wants bread is his servant that will feed him”.

Note that the belief that economic independence is a precondition of freedom and that freedom must mean participation has nothing to do with the positive liberty of Isaiah Berlin’s nightmares. It does not mean the abolition of power – that is impossible – but it does mean that power should be dispersed and not held by a political elite – a Communist party for example – who can coerce others into the utopia or dystopia they desire.

We all still want and need bread, and are thus, as English republicans like Harrington would see, in a state of economic dependence and unfreedom. We not only fear sudden dispossession – losing our jobs – but are captured by the hope of advancement. It is not just that we live in a state of constant precariousness and fear of poverty. We are driven, as Hind puts it, “to alter our conduct and speech, even our beliefs, in order to obtain advantage. Even our desire for independence drives us into an ever more slavishly dependent cast of mind.”

While this material dependence remains people cannot “assert themselves fearlessly as citizens” “A citizen who fears she may lose her livelihood if she speaks out is not meaningfully free,” says Hind, “unless she is a hero or a fool”.

There is a near perfect correlation between career advancement and acceptance of the status quo. Because most of us want career advancement, we don’t stray into areas that will upset our employers. As a result, says Hind, “the individual is left alone in a horribly uneven struggle”.

Hind is inspired by this English Republican notion – dating back to the 17^th century – that freedom means material independence. We shall examine in the third and final part of this review how Hind thinks this need should be expressed now, through economic democracy. But he thinks that material independence has to be buttressed by accurate information. The first step towards changing the world, is understanding it.

This where the idea of public commissioning, discussed in Part One, comes in. “It is difficult to get a man to understand something when his job depends on not understanding it,” said the American novelist Upton Sinclair in the 1920s. So we must start to understand the world outside our own jobs and the private institutions that mediate the information we receive. We must start to reason independently, in a Kantian sense. Enlightenment, said Kant, was only possible when we are able to reason and communicate outside of private institutions.

Currently the population is only audible when they echo governing assumptions. In the US, for example, 53 per cent of Republican voters are in favour of higher taxes on the rich. But Republican senators recently succeeded in voting down a $60 billion Democrat jobs programme because it involved a 0.7 per cent tax increase on people with incomes above $1 million.  On that issue, Republican voters are politically silent. Or just plain irrelevant.

In Britain the story is eerily similar. Conservatives and their friends in the City of London are aching to abolish the 50 per cent tax rate on people earning over £150,000. But Conservative voters – let alone everybody else – want to keep it.

Hind’s idea is that £80 million a year in Britain should be controlled by the population through a system of participatory commissioning. The population, on the way in Hind’s terms towards becoming a public, would decide what subjects to investigate and how they would be publicised. The money would be enough to employ 3,000 journalists and researchers, 250 full-time investigative journalists in each region or devolved nation.

Here is Hind taking about public commissioning

Publicity, how the world is understood, would no longer be in the sole discretion of professional editors and private owners.

It will immediately be objected that the population, given a chance to indulge its wishes in an undirected way, would choose reactionary subjects to investigate. Or, at best, an incoherent mess of reactionary and progressive policies. Capital punishment, for example, has long had wider support among the general public in Britain than among politicians. 125,000 Britons have recently signed an e-petition on the government’s Downing Street website calling for cheaper petrol and diesel. A 2010 e-petition advocating taking climate change seriously and investing in renewable energy, by contrast, attracted just 11 signatures. 

There is a sense in which a participatory Left now should echo Tyler Durden in Fight Club: “let the cards fall where they may”. Reality is bad and getting worse so something has to shift. But it’s also true that a real revelation of the way the world is, can only benefit the anti-capitalist Left. The current order of things depends, as Hind says, on “accepting the comforts of a hallucinatory system of descriptions”.

As an example consider the way disabled and ill people in Britain has are now often branded as “scroungers” and benefit “cheats”. According to polls there has been a substantial increase in the number of disabled people suffering abuse and aggression. Focus groups have uncovered the regular assertion that seven out of ten disabled claimants are faking it.

But these views, vindictive and horrible as they are, also come from somewhere. “Participants justified these claims by reference to articles they had read in newspapers”, says a Glasgow Media Group study of the focus group results. The same study discovered a near tripling of words such as cheats, skivers and scroungers in newspapers. But the fact is that levels of fraud for disability benefits are just 0.5 per cent.

If this subject were investigated through Hind’s system of public commissioning, these fact, as opposed to the distortions perpetuated by the Daily Express, couldn’t help but be exposed. It is a question of shining a light, and if the alternative media can never reach enough people to do so, an alternative has to be found.

Popular resentment of benefit “scroungers” and “cheats” is real enough as many people can testify. But it depends, in the absence of effective scrutiny, on believing that the main problem is the transfer of wealth from the working majority to the poor, rather than on siphoning wealth from most people to insider companies.

Hind quotes Thomas Jefferson – and it should be the motto of a participatory Left today - “there is not a truth existing which I fear, or would wish unknown to the whole world.”

Public commissioning, as Hind concedes, might appear a modest step, dwarfed by the scale of the challenges facing us. But a well-informed citizenry is a precondition for changing the world, a necessary though not sufficient condition as Marxists used to say. As Machiavelli said, without approval, “one change always leaves a toothing stone for the next”.

In Hind’s opinion, as publicity changes so too will general opinion. And when opinion changes, so does the scope of the political, and the idea of what is open to change.

What can this lead? You can’t prejudge democracy but just as the last three decades of neoliberalism have involved remaking the state in the image of business, Hind believes that as neoliberalism implodes, it is not the public but the private sector that needs reforming. And, as we shall see in the third and final part of this review, this involves ending the economic dictatorship in which we exist.

Why the world is not changing

 Review of The Return of the Public by Dan Hind

Part One

In the summer a book was published about something that didn’t happen. The Strange Non-Death of Neo-liberalism concerned an earthquake that never occurred.

Following the 2007-? economic crash, the fundamentals of an entire economic system should have been coldly reappraised. Instead, corporations still funded and lobbied political parties for favoured treatment, banks were showered with taxpayer billions which they then didn’t lend, and supply-side fantasies that lower corporate taxes could revive economic growth were clung to with an almost touching disregard for actual evidence.

But this adherence to the pieties of the past, while everything underneath had changed, was not restricted to boardrooms and ministerial office suites. There was no marked shift among the general population either. In November, The Guardian newspaper reported that, still the most popular explanation for the economic downturn was debt racked up by the last Labour government.

In the metaphor of one economist, blaming the government for the current capitalist economic depression is about as sensible as blaming your neighbour’s dog.

It’s as if a person whose entire family is killed in a car crash starts taking it out on traffic wardens.

Dan Hind’s book, The Return of the Public, is about why this urgent need to transform the world or even to reform it, isn’t happening. Its argument is similar to one put by Noam Chomsky. Before you can change the world, you have to understand it.

Here is Dan Hind speaking:

For the mass of people in Anglo-American society, the world is not understood. Hind does not lapse into the familiar shrugging lament that most people are only interested in celebrities and just can’t be persuaded to take an interest in more important things.

His argument is different and genuinely radical in its implications. There once was a time when a person could make sense of the world through conversations and the ordinary interactions of everyday life. That time is past. Now, in order to understand the world around them, people are dependent on others – other institutions – to report events and provide explanations for why they happen.

Public opinion is not the result of millions of people autonomously establishing how the world works. Public opinion is created. And the organisations that create public opinion, media organisations private and public, the sources that the public get their opinions from, uninform and misinform in equal measure. The result is that the pre-condition for changing the world, grasping what it is really like, is not there.

“Efforts are reform or transformation stand or fall on the basis of the picture that most people carry in their heads about what is possible, necessary and just,” says Hind.

We have been told, he says, a generation of fairy tales. And sleeping beauty has not woken up yet.

One example Hind gives, is the economic crisis, which gets more serious by the week. For most people, in the words of Bank of England governor Mervyn King, it “seemed to come out of a clear blue sky”.

Of course, it didn’t just fall out of the sky. The conditions were building for years, decades even. But in order to know this, you would have to have read, for example, the Marxist-inspired Monthly Review, where dissident economists, like Harry Shutt and Richard Wolff, were arguing that trouble was brewing, that growth rates had slowed, and that debt was filling in for the role that should have been played by rising incomes.

But the mainstream media, the media on which most people are reliant for the picture of the world that they carry in their heads, said nothing was wrong. For example, David Lereah, chief executive of the National Association of Realtors, and author of Why the Real Estate Boom will not Bust (2005) was cited 1,700 times in the American media in the two years before the housing bubble did actually burst, more than three times more often than any other source.

The media were ably assisted in their failure to carry out their ostensible social function of informing the population by policy-makers. In 2005 Timothy Geithner, now US Treasury Secretary, said there was “no sign of a large, macroeconomic shock on the horizon.”

“When the facts change, I change my mind,” John Maynard Keynes famously said. One reason for the spread of Occupy protests is that the media, and policy-makers, have proved incapable of changing their mind.

Harry Shutt and Richard Wolff are still marginal, still outside the bounds of acceptable opinion, despite having been proved right. While their voices are not heard in the media (Wolff is heard somewhat but only due to huge personal effort and the fact that the US is in worse shape than other economies) other economists who saw no problem with the credit markets, remain at the centre of decision-making.

“It is, by way of analogy, as though physics remained dominated by papal patronage and career success depended on denouncing Newton and Einstein,” says Hind.

In order to be heard, you have to serve an identifiable constituency, most commonly through the job you are employed to do. Consider this article on what economists think will happen to inflation from the left-liberal Guardian newspaper. Barring the General-Secretary of the TUC, the economists all speak for businesses. IHS describes itself as global information company that shapes today’s business landscape. The British Chamber of Commerce aims to help “British business to thrive”. ING and Deutsche Bank are both, well, banks. The Centre for Economics and Business Research was set up to “bridge the gap between economics and business”.

It should be rather obvious that if you are employed to speak for IHS, the British Chamber of Commerce, ING, Deutsche Bank, or the Centre for Economics and Business Research, you don’t just say what you think, but you speak for interests of that organisation. You articulate their worldview or you don’t work for them.

But inflation, or unemployment or wages, is a subject that affects everyone. If inflation spikes massively upwards, many millions of people would struggle to buy basic necessities, or afford their rent or mortgage payments. What to do about inflation is something that the population at large, the public, has a huge interest in. But who speaks for the public? As the above discussion in The Guardian (a newspaper which presents a far more accurate view of the world than most) demonstrates, the experts who do speak, all speak on behalf of organisations with very specific, and limiting, interests. Unless, we still have faith in the old adage, “what’s good for General Motors, is good for America”, this is deeply troubling.

This is not to embrace the delusion that the public is “omnicompetent”. No-one person can be an expert on everything. But it is to recognise that something is very wrong when marginal economists who predicted the economic crisis, are still marginal. And those that thought everything was fine, are deciding what to do next.

The problem, says Hind, is that the public has no means to assign expert status to “social scientists whose work has predictive power”.

The reason is that expert status, and thus the right to have influence and speak to millions, is limited to those that work for organisations that already have power. The problem is so intrinsic and so fundamental, that attempt to reform the media and make it more representative, are doomed to failure. We have to, as philosophers were wont to do in the past, turn everything on its head.

Hind turns to the insights of a timid eighteenth century Prussian philosopher, Immanuel Kant. Kant did something deceptively simple, but amazingly enlightening (he was an Enlightenment philosopher). He said our concepts of private and public were the wrong way round.

We reflexively assume that a spokesperson for the British Chamber of Commerce is acting publicly when h/she speaks for them. When they go to the pub after work, and they can say what they please, they are speaking privately.

Kant said this was all mixed up. In truth, when we act in an institutional role, we are acting privately. But when we step outside this role, we are free to reason in an unrestrained way. Thus, we are acting publicly. Kant gives the example of a priest who has to believe in Catholic homilies as a priest. But if he steps outside of this role, he can consider if religious doctrines are in error.

“Experts who remain bound to institutional roles and interested constituencies cannot make public use of their reason,” says Hind. “They are not, in Kant’s sense of the word, enlightened.”

The times in which we live, says Hind, call on us to examine how we might reason publicly in the Kantian sense. “How we might reason as disinterested individuals and in ways that communicate successfully with others.”

His ambition has a lot in common with that of the American libertarian socialist Murray Bookchin, whose concept of libertarian municipalism is about disinterested citizens taking power, and not acting in an interested fashion as lawyers, teachers, marketeers or toilet brush salesmen.

Hind’s idea, his first step – public commissioning – is much less wide-ranging than Bookchin’s. The “field of general description” – the way the world is understood – can no longer be left to professional editors in the private or public media, and their use of experts, who act in Kantian sense privately, as the servants of institutions.

The public would be given the right and the resources to commission investigations, carried out by journalists or scientists, into subjects they choose and decided by a vote. This is not to assume that the general public knows everything, or can know everything, but the desire for impartial scrutiny, of knowing the truth about something, will prove decisive when people are free to act outside the constraints of their working lives.

Some subjects may be frivolous, or right-wing (like political correctness or liberal bias), but most wouldn’t. “Any issue where there might be doubt over the prevailing consensus,” says Hind, “for example the trade in illicit drugs, the struggle with terrorism, the global financial architecture, or the governing views on economic development, peace and war – could, in a system of public commissioning, be opened up to scrutiny.”

Public opinion would no longer be the creature of private interests.

In the second part of this review, we will look in detail at the idea of public commissioning. And the concept of liberty, forged in the English Civil War, that inspires it.

Interview with 'dissident economist' Harry Shutt

Harry Shutt is a rare specimen, a professional economist who’s also anti-capitalist. A consultant for international development agencies such as the UN and the World Bank, Shutt has also written a series of books such as The Trouble with Capitalism and The Decline of Capitalism exposing what he sees as the growing unsustainability of capitalism since the 1970s. He is influenced by thinkers such as Karl Marx, JK Galbraith and Andre Gorz. He warned in 2005 of “an unavoidable financial crisis” on a greater scale than any before. Since the 2007 economic crisis hit, he has argued that a return to enduring economic growth is not desirable or possible, and that western societies have to “grasp the nettle” of a “post-capitalist” economic future. His ideas are encapsulated in his latest book, Beyond the Profits System published in 2010, and reviewed here.

We are not the Beautiful talked to Shutt just after he addressed the Occupy London camp in St Paul’s.

We are not the Beautiful: Sovereign debt in Europe has become the issue threatening to cause a new banking meltdown and plunge Europe back into recession. But why has debt loomed so large now when no-one even considered it problem little more than three years ago?

Harry Shutt: The real question is why it did not loom larger earlier, to which the answer is that it's been systematically ignored ever since the ‘70s, when the first big post-war bust in the financial system occurred (1974). The immediate cause of that was over-risky lending and speculation. This should have led to a fundamental reappraisal of the whole capitalist model, but of course that didn't suit the global establishment any more than it does now, since it would have required huge losses through capital destruction and a permanent shift towards a more collectivist economic model in which their power and wealth would have been curtailed.

Against a background of already rising indebtedness before the crash the cost of the bank bailouts undertaken in response to the 2008 meltdown added a huge extra burden, while the sudden collapse of economic activity following the 2003-07 boom led to a sudden big drop in government revenue. Hence ballooning state debt.

How was the problem of debt able to be ignored for so long?

Through ever greater false accounting and criminal fraud - pretending that assets were worth far more than they were, in fact. The ultimate expression of this was the sub-prime mortgage fraud here and in the US, which was based on the premise that people with little or no income could service loans. The authorities were turning a blind eye to mortgage fraud back in 2003-04 and earlier. It all results from a desire to pretend that then capitalist business cycle of boom and bust is no longer a problem - as we were brought up to believe in the ‘60s -  whereas the Marxist view that it's an inescapable feature of the system has been comprehensively validated over the last 35 years. That ultimately required them to make-believe that you could have expanding markets without consumers.

The point is that the capitalist model depends on perpetual expansion of markets but that this is not possible because there are always limits to the growth of purchasing power - something we've known since the days of Malthus 200 years ago.

Reducing government debt is the justification given for crippling austerity in countries like Greece, Italy, Ireland and Spain. Fear of bank collapse has necessitated a permanent 1 trillion euro taxpayer bailout fund for banks. We are assured by politicians this is pill that has to swallowed even though there is no end in sight. The alternative, we are told, would be economic collapse, whole industries going the wall and millions being thrown out of work. But is that right? Is there an alternative that doesn’t involve economic Armageddon?

We've now reached the point where there is probably no alternative to Armageddon at least in the short and medium term - whether they try and bail out the banks again or not. Once it starts the logical immediate response would be emergency state intervention along the lines spelt out in my books, which would mean turning the whole ideology of liberalisation and globalisation on its head.

Note that the banks, especially in Europe, have apparently been refusing, at least until the midnight Brussels agreement of 26 October, to accept any write-down on sovereign debt on the basis that taxpayers are liable for issuing debt they couldn't afford to service - and thus denying that the banks themselves have any responsibility for ensuring their own investment decisions were based on sound assessment of their viability - surely the ultimate expression of “moral hazard”.

But if governments were to buy that it would mean fleecing taxpayers and/or forcing Greece and others into destitution to pay for it, which is clearly not a realistic option. Hence default would be inevitable, not just in Greece. In summary, of the three options for resolving the sovereign debt crisis - intensified budget austerity, sovereign default or big bank write-downs and losses - all lead to comprehensive market meltdown.

Budget austerity just leads - in the absence of some "miracle" counter-cyclical source of growth such as a huge oil discovery - to a downward spiral of lower output and still bigger deficits, as already in Greece; sovereign default will precipitate global contagion of bank collapse; big bank write-downs will mean drying up of credit and spill over into general market paralysis and meltdown.

It may be said there is a fourth option – inflation, whereby debts are effectively devalued in a kind of covert default which simply spreads the losses from the creditors to the public at large – but this is highly dangerous socially and has no more chance of avoiding ultimate meltdown than the other approaches.

What do you think of the 50 per cent write-down of the Greek debt? Is this merely a temporary respite?

It's very much a short-term fix designed to avoid a more extensive default - if it went above 50 per cent it would seemingly be classified as a “credit event”, which would activate the credit default swaps on which banks have unwisely gambled, thereby exposing them as insolvent sooner rather than later. In any case it will not enable Greece itself to escape from its basic insolvency, which will intensify as continued austerity leaves it mired in economic contraction.

 What do you mean by emergency intervention?

Whatever is needed to bring a degree of stability and sustain the minimum level of economic activity. It includes exchange controls, which means restricting movements of money across borders and between currencies - we had them in the UK up to 1979. It also means re-regulation at both national and international level, ending - or at least suspending - globalisation as we know it. An example of re-regulation would be renewed separation of retail banking from investment / casino banking. At the limit, emergency intervention could even include price and income controls, state requisition of corporate assets and direction of capital.

It's important to stress this is not an alternative to market meltdown but would be designed to prevent this turning into full-scale economic and social disaster and conflict (Armageddon).

Are you concerned that these emergency interventions could lead to too much state power?

Hardly. If anything I'm more concerned that our institutions have become so corrupted and subverted by laissez faire ideology and private sector lobbying that they won't be able to resist the pressure to bend the rules or succumb to conflicts of interest, such as the recent scandal over Goldman Sachs & HMRC in the UK, rather than uphold the public interest with integrity.

Do you think that Occupy protests, which have spread to 951 cities in 82 countries offers the beginning of real resistance. Where can it lead?

It's too early to tell. I'd say obviously the establishment can't violently disperse peaceful demonstrators as long as the bankers are left at large to commit more crimes and governments remain without a credible strategy for dealing with the economic crisis. With luck their continued presence on the streets will serve to concentrate the minds of political leaders on finding an alternative approach which extends beyond satisfying the financial and corporate establishment. But I doubt the resolution will be any quicker than it's proving in Egypt.

The Occupy the London Stock Exchange protesters have issued a statement saying they refuse to pay for the banks' crisis, say the cuts aren't inevitable or necessary, want genuinely independent regulators, and are calling for structural change towards global equality. What do you think of these demands and what more would you add?

The OLSE statement is fine as far as it goes. Incidentally, Occupy Wall Street are rightly very strong on the political corruption issue. But given it is impossible for them to start with a coherent set of demands, as with any ad hoc revolutionary movement, it is nevertheless  important to try to state certain priorities which would be essential features of a more democratic, "post-capitalist" new order.

In line with the analysis set out in my book Beyond the Profits System these priorities should begin with banning private contributions to political party funds other than flat-rate individual member subscriptions, the amount of which would attract pro-rata state funding according to a common formula.

GDP growth and full employment, which is unattainable, should be rejected as economic policy priorities in favour of guaranteeing all individual citizens an unconditional, flat-rate, basic subsistence income, to be paid out of taxation. This could be financed not only by higher rates of direct tax, personal and corporate, but by big savings on administration, no more means-testing of claimants, and from ending subsidies to investment, employment and wasteful "development" projects such as the London Olympic park. It is undeniable that the idea of guaranteeing everyone a basic income from the state regardless of their employment status will be a hard sell for most people who reasonably regard themselves as the hard-working, responsible majority. But as more and more grasp the futility and high cost of trying to push people into increasingly scarce, low-paid and pointless jobs, this attitude is bound to change.

In future extending state protection, guarantees and subsidies to enterprises will only be justified on the basis that enterprises in receipt of such protection, including limited liability, will be far more accountable to the public than hitherto and subject to publicly determined approval of their decisions – such as on investment, pricing, profit margins. Given the absence of economic growth - which will in any case limit the scope for profitable reinvestment of surpluses - such restrictions will tend to inhibit traditional private investment and require more collective and community enterprise, local as well as national, to fill the gap.

Immediately, as indicated, emergency interventions will be needed just to enable the economy to function at all at a minimum tolerable level. This will obviously involve a dominant role for the state as it moves to stabilise the situation and clear up the mess. The difference from 2008 must be that it will no longer be assumed that the private sector must be bailed out so it can resume "business as usual". Hence we must have a vision of the type of alternative model we collectively wish to arrive at once the crisis has been brought under control.

Economic growth is seen as the Holy Grail that all government avidly pursue. But what causes economic growth or its absence?

The short answer is that, in a market economy, growth is only possible where there are sufficient economic actors with both the desire and the capability to purchase extra goods and services from among those available, what Keynes called effective demand. While it is possible to use policy to restrain demand, or consumption, growth, contrary to the belief of some Keynesians it cannot be stimulated artificially; attempts to do so – for example by extending loans to those who manifestly cannot repay them or by subsidising excessive investment – inevitably end in tears. Put another way, you cannot eliminate the business cycle.

Is economic growth something society can do without? How?

Since it is increasingly unattainable, however much market forces are distorted in pursuit of it, leaving aside any environmental constraints, we shall have to do without it. This will require effective redistribution of income on the basis of much greater equality than exists in virtually all countries. In addition to the introduction of a basic or citizen's income and other redistributive measures acceptance of limits to economic expansion will entail restricting access for both individuals and enterprises to employment and market opportunities – both within and between countries. This will call for an ideology explicitly emphasising cooperation rather than competition and limitations on market access across borders.

What do you think of Tim Jackson’s ideas for Prosperity without Growth? Are they feasible?

The remarkable thing about this 2009 work is perhaps that it was sponsored by a UK government quango - the Sustainable Development Commission, subsequently abolished by the Tories. Thus it has given official respectability to the idea -hitherto considered heresy - that in order to have a sustainable future for humanity we shall need to abandon growth as the supreme objective of economic policy. What Jackson fails to confront, however, is the stark reality that a low or no-growth economy would be death to capitalism, for which growth is the very oxygen essential for its survival. Hence he doesn't come near identifying the radical implications of doing without growth in the design of a new order.

To boast when we should be ashamed. The mind binding of capitalism in Catch 22

“Can’t you see it from my point of view?” pleads Milo Minderbinder, the irrepressible capitalist, in the novel Catch 22.

He is hurt that Yossarian, the Second World War airman who has this insane desire not to be killed, can’t appreciate the intricacies of capitalism. Milo’s M & M Enterprises has a contract with the Americans to bomb a bridge from the air and a contract with Germans to shoot down the aircraft.

Contracts have to be honoured even if people get killed.  Like the dead man, whose belongings lie untouched in Yossarian’s tent, shot down over the bridge the day he arrived.

I didn’t kill him, insists Milo adamantly. I wasn’t even there. Can’t you see it from my point of view?

“ ‘No,’ Yossarian rebuffed him harshly”

Catch 22, the blackly comic story of an American bomber squadron on the Italian island of Pianosa in 1944, has entered everyday consciousness. In the novel, Yossarian fakes insanity to get out of combat, but his desire to avoid combat is taken as proof of his sanity. Catch 22 is being trapped in an inescapable paradox. At the end of the novel, it is revealed that Catch 22 does not really exist, but everyone acts as though it does, so its non-existence doesn’t make any difference.

Published in 1962, and written during the 1950s, Catch 22 was seen as a wonderful satire of inhuman bureaucracy. But like all great novels, different features stand out depending on the age in which it is read. Now what shines through is Joseph Heller’s treatment of the contortions of capitalism, and its seductive accomplice, public relations. Heller worked in advertising while he was writing the novel and it shows.

Colonel Cathcart and Colonel Korn, who run the squadron and keep raising the number of missions the men have to fly, are obsessed, above all, with how they will be perceived. They congratulate themselves on dealing with the embarrassment of Yossarian missing the target on one mission, by awarding him a medal and making him a captain.

“You know that might be the answer – to act boastfully about something we ought to be ashamed of. That’s a trick that never seems to fail,” Korn says.

The trick is still not failing. Alastair Campbell storms into a news studio to register his outrage of the BBC’s exposure of the government’s sexed-up dossier on non-existent Iraqi WMD. The Conservatives resolutely pledge to fix a “broken society” with tougher prison sentences demands that the unemployed look for work 23 hours a day to get £60 a week. Society is indeed broke, and we know who broke it.

The figure of Milo Minderbinder and his wounded bemusement that his beneficence is not understood, embodies today’s capitalists’ shameless refusal to see the terrible consequences of what they do. Milo boasts when he should be ashamed. Worse, he simply cannot see why he should be ashamed.

Milo becomes the mess officer for the squadron and forms a syndicate to buy fresh food through the black market. But M & M Enterprises grows and grows until Milo signs a contract with the Germans to bomb his own sides’ planes and men.

At first, the public in the US in outraged but they are turned around when they realise just how profitable M & M Enterprises is. “Everybody has a share,” is Milo’s constant refrain about the syndicate, a metaphor for how post-World War Two capitalism justified itself. Forget about how wealth is produced, just look at the money.

But “everybody has a share” no longer works as a trump card, a way to silence misgivings. Everybody plainly doesn’t have a share. The American middle class, for example, is rapidly disappearing

John Yossarian is the “hero” of Catch 22, the reluctant subversive, who finally refuses to fly any more missions. Yossarian doesn’t understand Milo, but his refusal is not heroic, simply human. While figures like Milo and Colonel Cathcart embrace malignant social roles and others like Major Danby know better but don't resist, Yossarian follows his instincts into eventual rebellion.

Late in the novel he is psycho- analysed by an army doctor, Major Sanderson. “You don’t like bigots, bullies, snobs or hypocrites,” concludes Sanderson. “You’re antagonistic to the idea of being robbed, exploited, humiliated or deceived ... Don’t try to deny it.”

“I’m not denying it, sir”, says Yossarian. “I agree with all you’ve said.”

That’s why Yossarian doesn’t understand Milo, because he retains human reactions and is not indoctrinated.

“Can’t you see it from my point of view?” plead banksters, hedge fund managers, private equity investors and food speculators.

No.

Build us lots and lots and lots. How to stop the countryside turning into a giant chicken

Dead folk singer Phil Ochs once acidly suggested that liberals “were ten degrees to the left of centre in good times, and ten degrees to the right of centre when it affects them personally.” 

The Daily Telegraph’s “Hands off our Land” campaign against Tory plans for a planning free for all, suggests that the opposite is true of rural conservatives.

But the campaign also shows that political schizophrenia is not an answer to society’s ever more urgent problems. One eye is one too few.

The UK government’s Draft National Planning Policy Framework says that “decision-makers at every level” need to “assume that the default answer to the development proposal is ‘yes’”. The Torygraph and its rural readers fear the countryside, protected since the 1940s, will be submerged in new houses.

For the Conservatives, it’s all about the need to reinvigorate economic growth. The government “can’t be ambivalent about growth” says the misnamed “planning” minister Greg Clark, while growth rates linger in the doldrums of 0.2 per cent

But the trouble with economic growth is that it’s a zero sum game, when you are both participants. When you win, you lose too.

Economic growth is not the result of passive consumers or greedy entrepreneurs. Entrepreneurs may well be greedy, but everyone who is not independently wealthy, has an interest in economic growth happening in this society.

Suppose the Tories are right and ripping up planning laws gives a spurt to economic growth. Millions of people whose livelihood depends on the building industry will breathe a sigh of relief. Architects, plasterers, roofers get jobs. There will be a ripple effect for everyone connected with the housing industry – those who provide furniture, decoration etc. If you work for B&Q you have an “interest” in more homes being built.

As everywhere in capitalism, there is a choice. Get work and watch while England’s green and pleasant land is covered in concrete and asphalt. Or live with the alternative of declining growth, as poverty and homelessness spreads, and society gets nastier and nastier.

Which would you prefer, asphyxiation or drowning?

The trouble with the George Osborne growth logic is that it will only become more desperate to prove it works, even as it conspicuously fails. All the evidence suggests we are in the middle of an economic depression, that economic growth might have temporary positive blips, but won’t return to the black durably.

But that won’t stop the Tories trying. It won’t end with ripping up planning laws and building on the green belt. Once that experiment doesn’t provide enough satisfaction, then other “restrictions” and regulations will begin to look tastier and tastier like the man who turns into a giant chicken in the Charlie Chaplin’s The Gold Rush. Expect exemptions to the minimum wage. And if that doesn’t work, we can always send children up chimneys.

Under the present rules of the game, we can’t do anything but lose one way or the other. “Notice the trap in which we’re placed,” the social ecologist Murray Bookchin once said.

“We are told that we must have jobs. If we must have jobs we have must economic growth. Now why are the two co-related except for the fact that we live in a world based on private property, organized around corporations, which, in turn, have to grow or die? At that point, by playing according to these insane rules, we are always going to be the losers, because there can’t be enough growth to supply enough jobs to supply enough means of life within the framework of this kind of set-up.”

The first step is to recognise the double bind. Most of us need paid jobs to physically survive. But even without the recession, jobs are becoming more scarce as the technological need for them declines. Computerisation has increased productivity, and thus corporate profits, whilst at the same time reducing employment. Last year, the economic advisor to Barack Obama, Laurence Summers, said US unemployment was “structural”, not just “cyclical”. Translated, this means a lot of unemployment will endure after the economic downturn is over.

But you still need a job to survive. While this frantic need remains ripping up planning laws and tarmacing all over the countryside is a solution of sorts. The default answer is yes. But for the Conservatives to claim it’s “sustainable” is a supreme example of doublespeak. It couldn’t be more unsustainable. It can’t go on forever.

The only sustainable solution is to break the current, to severe the connection between the unavoidable need for income and its sating in paid employment. Economist Harry Shutt talks about “dethroning the god of growth”.

“Working – in the sense of having or seeking a job – should no longer be seen as an essential precondition of the right to exist in human society,” he says, “and that alternatively all should be entitled to as basic income as of right.” Enterprises would have to serve a public purpose and not exist to make a profit for shareholders.

While we’re “starving” for jobs, the countryside will always have a tendency to turn into a giant chicken.

Here, for no good reason, is a trailer for a documentary about Phil Ochs. It's not about houses but it does feature Billy Bragg

The end of blind improvement, Karl Polanyi and today, part two

Whatever other illuminations The Great Transformation furnishes, it also provides probably the funniest paragraph in economics. Admittedly this is not the hardest competition in the world to win, but still.

Polanyi, as explained in Part One, demonstrates that one crucial assumption of free market capitalism is a colossal invention. Human beings are assumed to be commodities, just like a can of Pepsi or a pair of shoes. But they aren’t commodities. They don’t fit the definition of a commodity in that they aren’t produced for sale. They are, in Polanyi’s words, fictitious commodities.

But just as an afterthought Polanyi says ok let’s assume for the sake of argument that human beings or labour are just commodities. How should a commodity behave?

Under the theory of the free market, anybody selling a commodity should get the highest price for it they possibly can. They should get highest price the buyer is prepared to pay. That way there will be “price equilibrium” across the economy. In medieval times, there was a lot of complicated nonsense about the ‘just price’ because Christianity was supposed to mean something then. But the whole point about markets is that they are an innovation that is outside of human inclinations. So labour – being a commodity like everything else – should get the highest price for its sale.

“Consistently followed up,” says Polanyi, “this means that the chief obligation of labour is to be almost continually on strike.”

“It is remarkable that this consideration is very rarely, if ever, mentioned in the discussion of the strike issue on the part of liberal economists [the old name for free market economists],” writes Polanyi, grinning away as he types.

 If this question was rarely mentioned in the 1930s, now it is fervently repressed. It’s another example of The Great Transformation exposing an issue over which a veil is carefully drawn today.

Of course, labour is not permanently on strike. For one reason, it can’t be, it wouldn’t be allowed to happen. People would be sacked en masse. This fact illustrates the flaw in the theory of free market capitalism, the reality of powerlessness on which it relies.

But there is another reason, a sense of obligation, a desire to see society function - on the part of human beings selling their labour commodity – that stops such complete disruption happening.

Friedrich Hayek, the uber-free marketeer who inspired Margaret Thatcher, said in a TV interview in 1980, that society would prosper if everyone was motivated by gain. “Where does altruism come in?” asks the interviewer. “It doesn’t come in”, Hayek replies.

But it does come in. It’s absolutely essential. Without it, conflict over wages and conditions would come perennially to the surface, and make a stable social life untenable. Polanyi says that in the 1930s, the strike, the “normal bargaining weapon of industrial action, was more and more frequently felt to be a wanton interruption of socially useful work”.

It has been established that a work to rule, workers doing exactly what is prescribed by their contracts, reduces output by 30 to 50 per cent. Doing more than is officially expected, doing something extra, is indispensable. But why should a commodity do more than is required by its contract?

In Britain in the 1970s, that question was very real. Labour, as a commodity, did flex its muscles. There were work to rules, frequent strikes. Rubbish piled up in the street became an archetypal image, one that has subsequently become a propaganda staple of the Conservative party, a tangible example of a system in breakdown.

The swelling of support for Margaret Thatcher in the 1970s was partly due to a conviction that, whatever else, the system had to function, the open conflict between capital and labour had to be resolved. One side had to win. Even the famously left-wing playwright Harold Pinter voted Conservative in 1979.

The side that won was the employers. One of Thatcher’s advisers, the Communist turned neoliberal Alfred Sherman, made the revealing point, in a memo to Thatcher is 1978, that new laws against strike action were about workers voluntarily giving away the power they had accrued because it was harming society at large.

“It is in all of your interests, therefore, to give up some of these powers if all the others can be obliged to do so,” he wrote.

Labour did, or was forced to, become powerless, a move that had substantial public support. What we are experiencing now flows from that powerlessness. But the ostensible reason no longer applies. The system is not functioning so why accept the powerlessness anymore? As one economist has said, capitalism used to deliver the goods, now its delivering the bads. The deal is breaking down.

If the point of thinking is make what is unconscious, conscious, to bring unspoken assumptions to the front of the mind, then Polanyi does just that. Labour is treated as a commodity, as he says. Sign a contract and follow the instructions of your employer. They give you money and you can do what you want in your spare time, but in your working hours, you follow orders. But human qualities, professional pride, a desire to make things work, are integral. If people really acted as automatons, were really selfish, everything would grind a halt. But it doesn’t.

Under this capitalist system, people are treated as commodities, but expected to be much more than commodities.

The question that Polanyi raises is what do people get for behaving in a human way? The answer, certainly in Anglo-Saxon economies, is nothing. But why should employers get something for nothing? Why should a commodity give power away? Corporations don’t, they assiduously try to avoid paying tax, often paying no tax at all. So why shouldn’t labour be just as “selfish”?

There is a reason, of course, but only if you apply a very limited definition of “reason”. It’s in the employee’s self-interest (in fact carrying out whatever duties are demanded by the employer is now usually written into employment contracts), in the same way that there is a good reason for giving away your money and mobile phone if someone places the blade of a knife across your throat.

But there isn’t a good reason in the sense of an objective justification. In lieu of that type of reason, there is a gaping logical hole. Spelt 'neoliberalism'.

Polanyi’s concentration on the unspoken assumptions behind wage labour is profoundly unfashionable, which is just what makes him interesting. The boundaries of the debate now are about whether higher tax rates disincentivise the pursuit of the holy grail of economic growth. Workers – humans – are taken to be another piece in the jigsaw, who should just play the role allotted to them without complaint.

To go further and ask questions about their role in the process of making profit, is to venture onto ground marked, for at least three decades, with huge “No Trespassing” signs and barbed wire.

But once these questions were “mainstream”. To take one example, Abraham Lincoln, in debating with proslavery apologists in the 19^th century, was compelled to say why wage labour – selling your labour to an employer to survive – was any better than slavery. Those in favour of slavery – called mud-sill theorists - argued that wage labour was more cruel because slave owners had to clothe and give shelter to their slaves (just as they might give stable a horse they owned) But employers had so such responsibility to “free labourers”. Such labourers were “free” to starve.

It might seem from our 21^st century perspective, that the mud-sill theorists were so profoundly mistaken that it is not worth opening your mouth to rebut them.

But, according to the American historian Christopher Lasch, “Lincoln did not quarrel with his opponents’ disparaging view of wage labor”. He didn’t claim that “capital” (his word, in fact he sounds a lot like Karl Marx) hiring labourers by consent was, by definition, superior to capital buying them as slaves. What he said was that wage labourers were not “fatally fixed” in that condition. They could go on to own land or run their own businesses and become economically independent. So the reason why wage slavery was superior to chattel slavery, according to Abraham Lincoln, was that wage slavery did not have to be a permanent condition.

The exceptional circumstances of the US in the nineteenth century, with its open frontier of land, no longer apply, in the US or anywhere else. Social mobility is on a steady decline. Wage labourers are “fatally fixed” in their condition now. And labour remains the “fictitious commodity” that Polanyi labelled it. But to “decommodify” labour is the same thing as freeing wage labour from the dependence on another’s will that is an inescapable consequence of needing to be hired. This liberation requires two things. Firstly, economic security achieved through an unconditional income. And second, economic democracy, so that, in work, a small elite does not instruct and give orders to a much larger majority of people, for the purpose of exploiting them. We will see later how Polanyi addresses this problem.

But first, let’s return to The Great Transformation and Polanyi’s description of what happened after the Wall Street Crash of 1929 and the beginning of the Great Depression. The Depression highlighted the rigid determinism of the free market. Under a “self-regulating market” the economics of society had to be kept separate from the interference of politics. “Whether wages or social services had to be cut,” writes Polanyi  “the consequences of not cutting them were inescapably set by the mechanism of the market.”

We are in an uncannily similar situation today. Governments apply swingeing cuts to public spending and announce huge privatisations to arrest falls in the markets. They say they have no choice but to reduce deficits into to calm stock exchanges. If they don’t, they claim, the consequences of economic collapse would be worse.

In the 1930s, according to Polanyi, Fascism and Stalinism (also known as ‘socialism in one country’) were ways of escaping this deathly determinism. Economic self-sufficiency became the aim, as countries cut themselves off from world trade. There was state intervention to reduce unemployment, through, for example, the construction of autobahns in Germany and the massive expansion of the military. They were ways to escape the straitjacket of the free market but they produced terrible suffering and, in Polanyi’s words, “sickness unto death”.

The Great Transformation, which was written during the Second World War, ends with an ominous question. Is the only alternative to the lethal determinism of the free market, the nightmare of totalitarianism?

Polanyi's answer is that there is an alternative and it’s called socialism. The free market and the freedom of the rich do as they please are consciously rejected. But civil liberties, and voluntary associations like trade unions, are cherished, not destroyed.

In this society, labour and the natural world aren’t commodities anymore.

“To take labor out of the market means a transformation as radical as was the establishment of a competitive labor market,” writes Polanyi. “Not only conditions in the factory, hours of work, and the modalities of contract, but the basic wage itself, are determined outside the market; what role accrues thereby to trade unions, state and other public bodies depends not only on the character of these institutions but also on the actual organization of the management of production.”

Land, says Polanyi, should be owned by the cooperative, the factory, the town, schools, parks and wildlife preserves.

Property, says Polanyi, undergoes a deep change. There is no longer any need to allow income stemming from property to “grow without bounds” in order to ensure employment and the use of resources.

It would be fruitless to see in Polanyi, who was writing in the 1940s, a blueprint for the way society should go. In particular the “actual organization of the management of production” seems vital to ascertain, and not something that should be vaguely left to unions and “the state”.

How enterprises exist while not growing “without bounds” is a crucial question. On the answer rests the future ecology of the planet and how a post-capitalist economy provides necessary goods, whilst acknowledging that scarcity is no longer an issue, and “the problem of production” has been solved. Although the fact that Polanyi could pose the question of the redundancy of growth in the 1940s, shows how long it has been haunting society.

But the principle of taking labour and nature out of the market is one that any sane society should adopt.

If Polanyi is to be any kind of guide, then a final principle of his should be taken into account. He characterises the market economy as the harbinger of “blind improvement”. It creates an endless cornucopia of goods and changes society to make it more productive and efficient. But this blind improvement brings in its train environmental destruction and the lethal destabilisation of the conditions that make life liveable. It is based on a mystical belief in the virtues of, in Polanyi’s words, “unconscious growth”. Improvement believes that all human problems can be solved “given an unlimited amount of material commodities.”

Against this, Polanyi says, there has always been an opposite impulse – habitation. The drive to protect and enhance the conditions of life in the here and now. Habitation is sceptical of progress, in favour of stability and protective of the human and natural environment.

“After century of blind ‘improvement’ man is restoring his ‘habitation’”, Polanyi wrote in 1944. That is still a hope and not a description.