Civic Capitalism

Colin Hay, Anthony Payne

• Publisher: Polity
• Year: 2015
• ISBN:
  9780745692104
• Edition: 1
• Topic: Economics
• Subtopic: Economic Policy
• Index: Economics

As we struggle with the legacy of the crisis and with the prospect of accelerating environmental degradation, it is time to ask not what we can do for capitalism but what capitalism can do for us, as citizens of a democratic society. In Civic Capitalism, Colin Hay and Anthony Payne build on their influential analysis of the crisis of the Anglo-liberal growth model to set out a coherent account of the steps required to build an alternative that is more sustainable socially, economically and environmentally. They argue that it is time to move on from the Anglo-liberal model of capitalism whose failings were so cruelly exposed by the crisis. They outline a new model that will work better in advanced capitalist societies, showing how this might be acheived in Britain today. They call this civic capitalism the governance of the market, by the state, in the name of the people, to deliver collective public goods, equity and social justice. This reverses the long ascendant logic of Anglo-liberalism in which citizens have been made to answer to the perceived logics of the capitalism they have been made to serve. The crisis shows us that we can no longer be driven by the perceived imperatives of the old model and by those who have claimed for far too long and, as it turns out, falsely to be able to discern for us the imperatives of the market. It is now time to ask what capitalism can do for us and not what we can do for capitalism.

Part I
Civilizing Capitalism

Civic Capitalism

Colin Hay and Anthony Payne

As we struggle with the legacy of the crisis in which we are still mired and with the prospect of accelerating environmental degradation, it is time to ask not what we can do for capitalism but what capitalism can do for us, as citizens of a democratic society. In this short book, we seek to build on the analysis of the enduring crisis of what we will term the ‘Anglo-liberal growth model’ to set out a coherent account of the steps required to build an alternative that is more sustainable socially, economically and environmentally.

We argue that it is time to move on from the Anglo-liberal model of capitalism whose failings were so cruelly exposed by the crisis. In the process, we outline a new model that will work better in advanced capitalist societies, showing how this might be achieved in Britain today. This we term civic capitalism – the governance of the market, by the state, in the name of the people, to deliver collective public goods, equity and social justice. Its core and defining ethos reverses the long ascendant logic of Anglo-liberalism in which citizens have been made to answer to the perceived logics of the capitalism they have been required to serve. That reversal, we argue, is not only intensely desirable; it is also absolutely necessary.

The crisis shows us that we can no longer be driven by the perceived imperatives of the old model and by those who have claimed for far too long – as it turns out, quite falsely – to be able to discern for us the imperatives of the market. It is now time to ask what capitalism can do for us and not what we can do for capitalism.

Getting What Went Wrong Right

Crises, almost inevitably, prompt recriminations – the present crisis more than most, in part because of its severity, in part because of the context of pervasive political disaffection and distrust in which it has been played out. But, if we are genuinely to learn the lessons of the crisis, it is time to put recriminations behind us. And, if we are not just to learn from those lessons but actually to put that learning into practice, we must also move on from the mawkish (if necessary) analysis of the failings of the Anglo-liberal model of capitalism which took us to the edge of the precipice in the first place. The moment has come when we need to start to pin some colours to the proverbial mast, outlining a new model that will work better where the old model failed. This is a bold endeavour, fraught with difficulties, both intellectual and political. But, if we do not try to tackle it, we shall have no excuse if we look back in a decade's time and find that a reconstituted bastard version of the old model is still intact – and that the systemic weaknesses which the crisis exposed remain unresolved and threaten us still.

But what do we mean in this context by a model of capitalism? Nothing more, but also nothing less, than a coherent framework of societal and economic goals and priorities and a supporting set of complementary institutions that both reflect and give rise to a coherent and distinctive way of conducting the daily business of a capitalist economy such as our own. Thus understood, a model should possess a clear sense of the vision of the good society to which it aspires. In that sense, it will be a model of development as much as a model of growth, and it needs to reflect and build from a consistent and defensible conception of social justice. Lastly, such a model should be applicable to a range of advanced post-industrial economies – not just to Britain alone – as well as offering insight into the many problems which capitalist economies face together and for which coordinated collective action is required. Indeed, if specified at a national level, such a model needs to be compatible with such collective and transnational strategies of coordination.

It is important also to emphasize what a model of capitalism is not – what it does not and cannot do. Getting our model of capitalism right will not and cannot tell us exactly what policies to follow in detail in every, or indeed any, given situation. Thus, whilst it might well insist both on the need to consider in a broad and inclusive way the wider societal and environmental consequences (or externalities) of economic policy choices and on the need to hold such choices to account in terms of societal notions of civic justice, it is most unlikely to tell us whether interest rates should rise or fall at a given point or at what level to set the aggregate burden of taxation. Similarly, it might suggest that a workable industrial policy is needed, but it will not indicate precisely which winners to back or even if backing winners is the best approach.

In other words, the task of setting out a new model of capitalism is more like designing a new car than offering advice to the driver from the passenger seat – and arguably there has been rather a lot of that already. It is also, critically, about offering a plausible narrative that explains to the citizens of our model capitalism what they are part of, how they might fit in, what gives their productive lives some meaning (and how the meaning it already has might be better supported and sustained). Capitalism needs to be seen to have a moral purpose and we need to be as clear about that moral purpose as we can be; otherwise, as we have seen in recent years, it is in danger of degenerating into an ugly and brutal rat race in which social and economic outcomes bear no relationship to considerations of social and economic justice. We need to restore that link and to take responsibility for it – in short, to re-moralize capitalism. That may sound naively idealistic. But our argument is in fact that such a capitalism is likely to be more sustainable, socially, economically and environmentally, than the amoral capitalism we have endured for so long.

Where, then, to begin? Political economy as a field has previously engaged extensively in discussion of ‘models of capitalism’ and ‘models of development’. There is a vast literature out there (Albert 1993; Coates 2000; Crouch 2005; Hall and Soskice 2001; Schmidt 2002; Seldon 1990). But the truth is that it has rather run out of steam in the last few years and remains limited to the exposition of a small number of quite crude ‘ideal types’ (some of whose exemplars have revealed themselves to be far from ‘ideal’ when seen in the context of the crisis). The analysis has also tended to be static and has not coped well with the new realities of regional and global economic interdependence (Hay and Wincott 2012). Partly as a consequence (and, dominated, as it was, by equilibrium assumptions) it failed, quite profoundly and quite spectacularly, to see the crisis coming. As such, the existing literature does not provide a very useful starting point. Since it offered little insight into the pathologies of the old model, it is not well placed to lead us out of the crisis.

What we need instead, then, is to build an analysis of the old model from those more acutely aware, even during the benign tranquillity of the ‘great moderation’, of its inherent contradictions. We start with the nature of the old (Anglo-liberal) model itself. It has unquestionably failed us; but it is from that wreckage that we now need to build an alternative. In a previous publication (Hay 2013), one of us identified the following as the key features of this Anglo-liberal model:

• the hegemony of an assertive neoliberal ideology;
• an elite policy community increasingly trapped in its thinking within this narrow ideological framework;
• the wholesale deregulation of markets and the privatization of financial management;
• a high and increasing dependence on the supply of cheap hydrocarbons, with seriously damaging environmental consequences;
• the systemic accumulation of debt and the increasingly pathological dependence of consumption (and, in turn, growth) on such debt;
• an accumulation of risk within the economic system, with growth over time increasingly associated with accelerating exposure to that risk;
• the absence of a coherent theory of society, or social well-being, beyond the sum of individual, supposedly rational, goal-seeking;
• the consequent embedding of inequalities between and within countries; and
• a limited view of global governance as requiring little more than rules to manage competition between national economies.

A sensible and realistic next step in moving away from this model might therefore begin by simply adjusting, and of course in some cases redressing completely, each of these nine features. What sort of a model might then emerge? If we follow through the logic of the thought experiment we have just proposed, we proceed quickly to the broad outline of a new model of capitalism, characterized now by these rather different distinguishing features:

• the emergence of a more consciously held, open-ended and dynamic ideology that puts markets at the service of the public as citizens;
• a more interventionist role for the state animated by a sense of its civic duty;
• the coordinated re-regulation of markets and risk management, both as a collective public good and an antidote to unstable growth;
• the need for sustainability and serious engagement with alternative models of energy use and resource conservation;
• the promotion of sustainable development built upon investment, rather than debt-fuelled consumption;
• the development of an alternative currency of economic success (both domestically and globally), taking us beyond the crude measurement and slavish pursuit of economic output alone;
• the integration into this alternative model of development of a genuine social dimension that opens up different and more civic social policies and partnerships;
• a shared commitment to reducing prevailing levels of inequality between countries and peoples; and
• the creation of more intensive and sophisticated, flexible and deliberative, mechanisms of global governance capable of serving, and in part also reflecting, the guiding intelligence of the global economy.

In the sections which follow, we explore further and in turn each of these potential characteristics of a new model of capitalism. We see such a model as being appropriate to Britain and other advanced post-industrial economies, though we concentrate here on the implications of our account for Britain specifically. In the process, we seek to piece together a picture of this new model frame by frame in a cumulative and, we hope, coherent fashion. At each stage, we seek to relate the broader analysis and account to the particular choices that Britain faces today at this critical juncture in terms of its future social and economic development.

A final initial question arises, however, even at this early stage: namely, what to call this new model? After all, labels matter. A new model has to be readily accessible, engaging, broad-based and capable of delivering palpable improvement in the quality of life and work for the vast majority of citizens – particularly, perhaps, those who have been so egregiously let down by the old model. But it needs to be more than just ‘populist’ in orientation, given that so much more is at stake here than the provision of more ‘bread’ and better ‘circuses’. In short, the new model of capitalism we need has to be productive and sustainable, as well as popular.

We think our model is best described as civic capitalism. Here we deploy the word ‘civic’ in its simplest and most straightforward sense – ‘pertaining to’ and ‘working for’ all of us in society, not just as consumers, or rational egotists, or even voters, but rather as citizens of a democratic polity. In the process of calling for and articulating such an alternative, we need to remind ourselves that capitalism can and must be made to work for us. We can no longer be driven by its perceived imperatives and by those who purport to be able to discern for us its needs. It is time to ask what capitalism can do for us and not what we can do for capitalism. If civic capitalism has a single mantra, then that is it.

Moving on from Old Ideological Certainties

Ideology, these days, is a dirty word – rarely if ever a term of self-description and invariably only ever something others have. Partly as a consequence, many like to think that in the pre-crisis world we were not governed by ideological thinking and that, having spent so long weaning ourselves off it in favour of technically proficient economic competence, the last thing that we need now is to rediscover its merits. Both claims are wrong.

For the crisis, we argue, is as much a product of an unacknowledged ideology as anything else. Indeed, it was only in the context of such an ideology that the laissez-faire policies of market liberalization favoured in the Anglo-liberal world could be seen as the very condition of good economic management. It is the crisis that reveals this as an illusion; and it is the crisis, and the lessons we draw from it, that requires us never to so mislead ourselves again. What this entails is not, however, ‘the end of ideology’, but rather the move from an unacknowledged, closed and static ideology to a more consciously held, open-ended and dynamic ideology – and, above all else, to one that puts the market in the service of the public, as citizens, rather than the citizens in the service of the market.

So what was the nature of the ideology that led us astray and how might the placing of citizens above the market and of civic values above market values start to put things right? There are many things to say here. First, the dominant ideology in the pre-crisis era was largely technical in character – whether manifest in the investment algorithms of financial market actors or the benign mood music generated by the credit-rating agencies or the light-touch regulatory dispositions of the institutions of depoliticized economic governance (Blyth 2013). It was this pervasive ‘technicism’ that made it more difficult to discern, less visible for what it was and all the more impregnable to contestation. Its formalism masked and hid from view its dubious economic premises and the benighted moral and political philosophy on which these typically rested (for an eloquent debunking of these premises, see Watson 2014).

Second, and more obviously, this background or sotto voce ideology was profoundly market-conforming in both its moral conviction as to the supremacy of purely market-based systems of allocation and its political timidity as to our capacity to regulate markets and to compensate for market failure. Mainstream economists, mainstream commentators and policy-makers alike convinced themselves that the market was synonymous with economic efficiency and was essentially self-regulating. As a consequence, there was little if anything that the state was capable of providing that was not better delivered through the free play of market mechanisms. This, of course, had consequences. Particularly insidious was the conviction (genuinely held, however misguided) that market-based systems of allocation were technically more efficient and that dynamic markets (particularly those characterized by financial innovation) were both so rapidly evolving as to be incapable of effective regulation and, more conveniently still, were self-equilibrating anyway. It was precisely this combination of assumptions that led so many on the centre-left, just as much as more natural enthusiasts...

Table of contents

• Cover
• Title page
• Copyright page
• Contributors
• Preface
• Part I: Civilizing Capitalism
• Part II: Engaging Civic Capitalism
• Part III: Building Civic Capitalism
• References
• Index
• End User License Agreement