chapters, etc

Liberalism and Human Flourishing

2. Liberal Ideas and their Consequences

2.1. Liberalism is implicated

There are many versions of liberalism or "liberal theories" as Nelson terms them (2002: 197), which range from socialist-flavoured liberalism to libertarianism. Indeed, as Nelson points out, there is a dispute as to what liberalism actually is, and some would exclude one end of the range or the other. What all liberal versions share is a focus on the individual and a concern to protect individual freedoms; an insistence on legal and political equality for all; a tolerance of different beliefs and values, so that individuals are left free to pursue their own conceptions of the good; an awareness of the oppressive potential of a too powerful state, leading to a wish to limit its activities to only those deemed necessary; a belief in the efficacy of markets; and, with the exception of libertarianism and versions near it, a concern to protect a basic level of economic welfare. The theories tend to be more deontological than teleological in character, because rights are prominent.

Liberalism emphasises the individual over society and freedom over need and obligation. Individuals are seen as acting primarily out of self-interest, rather than altruism. It defends the exclusive rights attached to private property ownership. Liberalism has faith in the efficacy of markets and distrusts state intervention. The effects are staggering inequality, power imbalances, corruption, exploitation, inadequate welfare, starvation, disease, economies characterised by boom and bust, monopoly and environmental destruction.

Even liberals concerned about inequality, are reluctant to go too far in tackling it. Suspicious of the state and its oppressive potential, many liberals are unwilling for the state to be active in pursuit of social justice or humanitarian ends, beyond (at most) a basic level of welfare. They worry that taxation might be oppressive: even Rawls prefers proportional to progressive taxation (1999: 246). Rawls, though, seeks genuine fairness of opportunity and, via the difference principle, assurance that the least well off benefit from extra income received by the more advantaged. This is in the right direction, but is not effective enough.

Other liberals towards the libertarian end of the spectrum may see poverty as unfortunate, but not as something which imposes an obligation on individuals or society. Libertarians like Nozick assert that legitimate private ownership confers an inviolable entitlement. People are free to use their property as they wish, so it would be a denial of individual freedom to force them to pay for the welfare of others less fortunate than themselves. Nozick contends that only a state, with minimal duties to protect individual rights, enforce contracts and defend the country, can be justified.

Liberal faith in market capitalism, where private enterprise is (almost) always preferred over its public counterpart, partly reflects a belief in its efficacy. In pursuing profit, private individuals and businesses are seen as more focussed and less bureaucratic than their public sector equivalents. Ultimately, perhaps, that faith derives from the idea that private economic activity is an expression of individual freedom So the state should be limited with respect to the market, maintaining the requisite legal framework, with neither tax nor regulation overly burdensome.

Libertarians want markets to be as free as possible. The argument is that as the market automatically adapts to changes in supply and demand, almost any intervention by the state would reduce its efficiency, as well as violating the freedom of participants to conduct their business as they wish. Yet most libertarians recognise that a state, albeit minimal, is necessary to the proper functioning of markets: for enforcing contracts, protecting property-ownership and recording patents.

Such precepts help explain the consequences below.

2.2. Extreme Inequality

Does it matter that "The richest 80 people in the world own as much as the poorest half of the world's population, all 3.5 billion of them" (Sayer, 2016: 7, quoting Oxfam) or that "Sixty-nine percent of Britain is owned by 0.6 percent of the population" (Large, 2010: 187)? Prima facie, the answer is “yes”.

Poverty shortens lives because of inadequate food, shelter, sanitation, disease prevention, health care and education. Those who survive beyond infancy are blighted by lack of education and opportunity, their potential unrealised. They are also prey to oppression from the unscrupulous. Sinclair (1986) gives a horrific account of the exploitation of immigrants in the Chicago stockyards of the early 1900s. Tressel (2005) relates the experience and abuses of casual working in Edwardian England. Poverty gives rise to conflict and mass migration, with their attendant horrors.

Great wealth brings power to usurp the democratic will through control of the media, lobbying and buying political influence, determining policy in favour of their elite; also to usurp justice by manipulating the law. Marx writes of the changes to legislation in England to expropriate common land through enclosure and eviction of agricultural workers. As more people were thrown off the land throughout Europe to become the urban destitute, they were perceived as a threat to social order, particularly to property owners. Braudel (1983: 516-9) tells of the summary justice meted out to thieves and troublemakers. New ideas on political economy led to harsher treatment of those seeking help. Waller's account (2006) of the suffering of workhouse children forced to work in cotton factories amplifies Marx's description. Concentrated wealth reduces economic efficiency: rentiers extract wealth that could finance innovation; only so much can be consumed, leaving huge surpluses hidden in tax havens.

The unequal distribution of natural talents contributes to inequality and it would be a denial of self-fulfilment and a waste for society if people were prevented from making use of their abilities. Periodic deprivation accompanies natural disasters and conflict. But extreme inequality in the long-term is not inevitable, because it arises principally from social and economic arrangements: in the concentrated ownership of land and means of production, in the operation of markets and in the effect of supporting institutions.

The application of libertarian-inspired policy from the beginning of the 1980s was accompanied by an explosive growth in inequality.

2.3. Malfunctioning Markets

Markets work well where there are low barriers to entry and good information is available to producers and consumers alike. Here, there can be a high level of competition between producers. As more enter the market, prices fall, but so do profits. Low prices should attract more consumers, giving rise to a greater volume of sales, but if profits are too low, producers will leave the market, reducing the supply, so prices will rise and the number of consumers will fall. Thus, supply and demand automatically adjust: Adam Smith’s “invisible hand” in action. This responsiveness to consumer demand, supplying the right amounts, is better than central planning could achieve.

Yet, free markets have problems such as: a tendency to monopoly and, by squeezing out smaller businesses, stifling of competition; unpredictable cycles of boom and bust, which hurt smaller players most; and without adequate regulation, fraud and corruption. Marx enumerates nearly thirty periods of boom and bust from 1770 to mid-1800s. Nor is the market good with coordinating very large scale (public) infrastructure projects, especially if low profits are expected, for example in: building social housing, building and maintaining roads; building and running prisons, schools and hospitals (health care in the US is very expensive for what is provided); providing energy and water supplies, maintaining drains, treating sewage and preventing floods. Hostile takeovers, asset stripping, short-termism, demands for continual growth, damage to the environment cannot be prevented without intervention. There is a limit to the invisible hand.

A dogmatic preference for private "enterprise" has resulted across Europe in successive privatisations of state functions. Public assets, paid out of taxation, have been sold to the private sector at knock-down prices. In the UK, the Private Finance Initiative represents a massive transfer of public funds to the private sector (see Picketty (2014), Sayer (2016) and Large (2010)).

The 2007-8 crash was due in part to financial deregulation. Banks and mortgage lenders were free to engage in high-risk activity, securitising debt into bundles that were sold on, divided up, re-bundled and resold many times, so that their nature and risk became almost unknowable. Restrictions, in place since the 1930s, preventing banks from carrying out both investment and commercial activities were lifted in the 1980s by governments anxious to reduce regulation, so there was nothing to stop the collapse in investment operations spreading to the retail and commercial side, with potentially disastrous consequences for just about every person and business in the countries affected. The financial institutions had become too big to fail. Although state support prevented a 1930s-style depression, it was at enormous cost. To rescue the banks, governments lent to them at very low interest rates, which the banks used to lend back at higher interest by buying government bonds, “a massive transfer of debts from the private to the public sector” (Sayer, 2016: 230). The creation of money through “quantitive easing”, was intended to enable bank lending to the wider economy, but has instead fuelled asset inflation on the stock market and in the private housing sector. It should have been invested directly in public assets, infrastructure such as railways, hospitals and schools, or even public commercial banks, but that would have contravened the prevailing philosophy in favour of the private over the public.

Even if bailing out banks would meet with libertarian disapproval, the same would not be said for the aftermath. The consequent, huge increase in UK public debt could have been offset by profits, generated as recovery gathered momentum, from large government shareholdings in the rescued banks. However, most of the shareholdings were divested too soon, not least through discomfort at the continued involvement of the state in commerce. The debt could have been offset by increased taxes, but instead tax rates were reduced. The approach actually followed, very much according to libertarian thinking, was to shrink the state by reducing public spending on welfare, health, infrastructure and education. Regulations on employers were eased, allowing “flexible working practices” to gain ground, resulting in greater insecurity and lower real wages for employees. Such austerity measures have been highly regressive, impacting those on low and middle incomes while benefiting wealthy rentiers. The result is the burden for the financial crisis has fallen on those who did not cause it (Sayer, 2016: 16-7, 235-6).

The effects in the UK are a failure of the private sector to build enough affordable housing, increases in private rents, an increase in low-paid and casual employment, the necessity for food banks, the withdrawal of bus services (limiting job opportunities), higher transport fares and utility charges, the closing of Surestart centres and libraries, higher education made unaffordable, vocational training reduced, lack of social mobility, reduction in policing and increases in violent crime.