What's so scary about economic turmoil?

“The best indicator of the left’s lack of trust in itself today is its fear of crisis. A true left takes a crisis seriously, without illusions. Its basic insight is that, although crises are painful and dangerous, they are inevitable, and that they are the terrain on which battles have to be waged and won.”

It’s a bad habit to get into I know, quoting Slavoj Žižek, but the Žižek itch occasionally becomes irresistible. Especially when it is proclaimed, as it was in the Guardian newspaper last Saturday, that the left is dazed and confused by economic crisis.

“The right always knows what to do with economic turmoil – it blames foreigners, and from there, the trajectory is pretty straightforward,” wrote Zoe Williams. “The left does not know what to do”

Come again? It was, to put it mildly, not always thus. In previous eras, it was economic turmoil that gave the vital spark to the left. The economic depression of the 1870s provided the backdrop to the growth of unskilled trade unionism and the proliferation of social democratic, Marxist parties.

The turmoil, economic and otherwise, of the First World War led directly to the Russian Revolution and near revolution across Europe. The Great Depression of the 1930s saw the greatest union recruitment drive in US history.

So why now the blank minds in response to contemporary economic turmoil?

Sinister uneconomicus

It is because for more than thirty years the left has not been interested in economics. It has accepted that that battle has been lost and ceded that ground to the right. The focus has been on social inclusion. As Richard Wolff has elucidated here (last talk), the strategy has been to bring the marginalised – ethnic minorities, women, the poor, disabled people - into the system and treat them decently. To be sure the left was in favour of the catch-all “regulation” but the inner workings of the capitalist machine were taken to be unchallengeable, and thus ignored.

Now the machine is spluttering and no-one seems to know what to do about it.

This left strategy, though it has some undoubted successes, has now been revealed to be a historic error. It was unquestionably naïve to expect any kind of progressive outcome from a ‘private’ economy that generates immense inequality and instability and is founded on hierarchical, innately competitive, profoundly undemocratic institutions.

In the words of the US economist, Stan Bowles, “how we regulate our exchanges and coordinate our disparate economic activities influence what kind of people we become … The economy – its markets, workplaces and other sites – is a gigantic school. Its rewards encourage the development of particular skills and attitudes while other potentials lay fallow or atrophy.”

Even you may score some wins here and there, you will lose overall.

“Give my creation life!”

This economic abandonment has happened across the board, it’s not confined to the liberal left. The recent call for a new Left party from film director Ken Loach and others included a plea to “regenerate the economy” – a phrase that conjures an image of Oxbridge experts twiddling some knobs and pushing some buttons, approving a motorway or rail link here and there, and, hey presto! The economy is “regenerated”.

Merely because Keynesianism is not being practiced by the austerians in Whitehall and Frankfurt does not mean that Keynesianism works anymore or does not have fatal flaws. Austerity is awful. Keynesianism is not austerity. Therefore, Keynesianism is the answer is not a syllogism that should persuade anyone. Unfortunately, it seems to.

What a new left has to do is not just defend the welfare state and not just oppose austerity but start viewing intractable economic crisis as a road, a long and winding one admittedly, to a democratic economy.

Let the people, not the banks, decide

The seeds of this new approach can be glimpsed in plans for a people’s assembly against austerity and public consultations on how to reform the economy. The writer Dan Hind has argued that the destination of multi-billion stimulus measures should be determined, not by government ministers and civil servants, but by citizen assemblies in every Parliamentary constituency.

Not only could people discuss which council cuts they wished to reverse, but, in Hind’s words, “New houses could be built in collaboration with the people who would live in them. Transport projects could be devised that serve the interests of citizens rather those of wealthy investors and their many friends in government. We could have public buildings of unparalleled magnificence at a fraction of the cost that the unreformed private sector would expect to charge. New libraries and labs could make our universities and colleges a wonder of the world.”

In addition, a plethora of new co-operative, not capitalist, businesses could be funded.

What this kind of approach would do is make a first breach in the automatic assumption that decisions about investment are the unquestionable prerogative of private banks and the stock market. In David Schweickart’s vision of a post-capitalist future, new investment, funded by a tax on enterprises, is decided by citizen assemblies and funneled through public banks in each region. As new investment is a concern of all of society it is should be decided, as much as is possible, by all of society, not by the profit maximizing interests of Barclays or HSBC.

In Britain, there have already been the first stirrings of recognition on this issue, through the 2011 campaign that, as a bailed-out, state-owned, bank, RBS should not invest in tar sands mining. That original insight needs to be built on and expanded.

For a new left, the simple mantra, “austerity bad/public spending good” is nowhere near sufficient.