The slow death of neoliberalism

Would Hayek like minimum pricing for alcohol? No.

Consider the following developments in UK policy. Last year, Britain’s Office for National Statistics published its first ever set of ‘national wellbeing’ indicators, which were based on surveys of how satisfied people felt with their lives. Next year, it will be illegal to sell a bottle of wine in Scotland for less than £4.69. Meanwhile, in the face of prolonged economic stagnation, welfare claimants and young people are being urged or forced to work for free in order to develop the mindset and motivation to render them employable in the future. 

None of these examples alone seems especially significant. Taking them together, however, we can begin to trace the outline of a subtly new way of conceiving of economic activity, one that is exerting a growing influence among policy-makers in Britain. Crucially, for good and for ill, the authority of monetary prices as authorititative indicators of value is diminishing. Formerly, society’s progress was measured in terms of GDP, a bottle of wine was worth whatever the market would allow and work was remunerated in wages. Now, the rise of psychological perspectives on the economy is providing a new framework. As the sciences of wellbeing and economic behaviour grow more sophisticated, the potential arises for a new way of understanding value. And as we witness this framework on the rise, so we may be witnessing the slow death of the paradigm known as neoliberalism. . .

The prolonged economic slow-down of the 1970s created a thirst for new policy ideas, which the neoliberals cleverly satisfied. Although the purity of Hayek’s vision was inevitably polluted by the messy reality of politics, the new era ushered in by Margaret Thatcher and Ronald Reagan treated free markets, governed by the magic of price, as the basis for the moral and economic logic of state and society. At the heart of the neoliberal era were two fundamental assumptions. Firstly, individuals were the best judge of their own tastes and welfare, not experts. Secondly, the price mechanism of the market could be trusted to adjudicate between the competing ideas, values and preferences that exist in modern societies. The state, by contrast, could not.

By this definition, a society in which it is illegal to sell a bottle of wine for £4.50, no matter how profitable it is to do so nor how much demand there is for it, is no longer a neoliberal society. A different set of assumptions is built into such a policy. Evidently it is no longer assumed that individuals are necessarily the best judge of their own welfare. And although a price still exists, it is no longer set only by the magical forces of supply and demand. Expert decree now has a place. To put this another way, policy-makers are recognising that there is a limit to how much consumer freedom we can cope with.

This is an extract from a piece published today in Aeon Magazine. Read the whole piece online.

Friedrich Hayek. Photograph: Getty Images
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.