The lowest politics

Just Capital: the liberal economy

Adair Turner <em>Macmillan, 406pp, £20</em>

ISBN 0333900715

It will be a long time before the conditions return in which socialism can flourish. No current version of socialist economics is able to address human misery on a long-term basis; the collapse of the socialist state, in any form, has been too complete. Those who seek to do so must choose between competing versions of capitalism. This has been the explicit position of new Labour, and such explicitness has been one of its great merits.

Now arrives Just Capital, which more than any other book published in English helps to discriminate between versions of the market economy. Ralf Dahrendorf, in an admiring introduction, writes that Adair Turner "provides us with the political economy of liberty". Rather, he provides us with the political economy of new Labour, or even the Third Way (which Dahrendorf and Turner unite in despising). The merit of this study - which overrides and partly excuses its tendency to repeat itself - is its central truth, often denied by the neoliberal right and the left, that neither globalisation in its many definitions, nor capitalism, nor the European Union, deprives politics of the ability and the responsibility of choice. We can, through the ballot box, choose between quite different kinds of polity, with quite different outcomes for citizens.

The main choice Turner identifies is between a "neoliberal" form of capitalism and a "social market" one. What is fresh is the precision with which he defines the latter. It is not a refuge from a cruel world in which technological and market change visit constant turmoil and demand a stock of victims, disproportionately among the low-paid and low-skilled. Indeed, it requires such change in order to have an economy successful enough to produce a surplus adequate for social tasks. Rather, its strength lies in recognising that modernisation and high living standards are now dependent on a revolutionary form of capitalism driven by the fickle taste of the consumer, and that this is inimical to settled corporate states. But this does not necessarily result in relentless downward pressure on working-class wages, social provision and public health and education systems, as Turner's book reminds us.

Politics is the necessity to choose. What many influential commentators, on both the left and right, neglect is that economies with high tax rates can be as dynamic, modern, democratic and liberal as low-tax economies. So politics, including a politics of the reformist left, has not died with socialism. The high-income-tax Scandinavian states of Sweden, Finland and Norway occupy the top three slots as the most "connected" countries in the world. As to their public opinions, they, with Denmark, show an astonishing range on the burning issue in Europe - the European Union - running the gamut from Finnish enthusiasm, through mild Swedish scepticism and harder Danish distrust, to Norwegian rejection. Their comprehensive welfare states - Sweden is, or was, the model - have not produced sickly dependence: on the contrary, bilingual or trilingual citizenries cope better than most with economic and technological change, and with rapidly rising immigration.

No model is absolute - not American, nor European, nor Swedish, nor German. Those models that were taken as such - the stakeholding model that was a blend of the German or "Rhine" approach and that of the south-east Asian economies - have proven dysfunctional or relatively unsuccessful in the latter part of the 1990s. This is especially so in the case of Japan's economy, which for most of the 1980s and early 1990s was both the model and the nemesis of the west, but which is now ailing. Japan is still the world's second-largest economy, yet it remains unable to do the relatively simple things required to move out of a slump - mainly hindered, according to Turner, by its frozen, buck-passing politics.

The US, at least until recently, has been much more successful in using technologies and in building successful corporations: for this reason, Turner writes, there will continue to be a drift of business practice towards some elements of the "Anglo-Saxon" corporate model, including in France and Germany.

But this is no more a timeless template than was Japan for business or Sweden for social democrats. In the end, once more, there is choice. If the US chooses a politics of low tax and high insecurity, it is free to do so; and it has done so for decades, during which time it has been seen - most of all by its own economists and commentators - as deeply unsuccessful, with high unemployment and a deeply divided society. Europeans can choose a high(er) tax, high(er) security and - at least, in recent years - higher unemployment model, and remain in the game. It is not, as Turner constantly repeats (with a certain embarrassment, given that he was constrained to say the reverse when he served as director general of the Confederation of British Industry from 1995-99), a matter of "national competitivity", a phrase with no real meaning. It is a matter of how far we wish there to be trade-offs between leisure, employment, wages, tax and productivity. It is not the business of politicians and commentators to insist there is "no alternative". It is their responsibility to show the costs, as well as the benefits, of the alternatives chosen.

All good books are timely, but the timeliness of this one is enhanced for two reasons. First, there will be an election soon, during which new Labour will be examined and will need to examine itself. Just Capital will help in this process, providing it with some security that its own brand of the social market has meaning and purpose, and reminding us that the battle for it is far from won.

That battle is the second, larger reason. A tax-cutting president is installed in the White House. The American model, ever more devoutly embraced by a flailing Conservative Party, will be more insistently put before us: low tax, lower immigration and lowest politics is the emerging mix. The Third Way, which Turner claims is simply liberalism (he has a point, but a very partial one), has been to a large extent about stimulating a global response to the neoliberal consensus. It needs strengthening, not dismantling. Turner's book is a total workout for the coming, more bitter, battle.

This article first appeared in the 14 May 2001 issue of the New Statesman, We Tories must change, or face eternal oblivion