The Lion’s Share: a New Deal for Government

Richard Murphy The Courageous StateISBN 978-1-907720-28-4. “The Courageous State: Rethinking Economics, Society and the Role of Government” by Richard Murphy was published by Searching Finance in 2011. We are familiar with Richard’s work via his Twitter feed @RichardJMurphy and his work at Tax Research UK where he has acted as a one man Think Tank counteracting the right wing dominance of the likes of the Taxpayer’s Alliance. He is one of life’s little heroes. This is a book with a distinctly “leftist” slant if you wish to divide the world up that way. However, apart from his work for some of the Trade Unions the term “socialism” never appears on the page. Richard is a man after our own heart: a pragmatist. It only concerns him that we should avoid what demonstrably has been shown not to work. He offers a vast menu of new choices. This is a work that comes from the same place as “The Entrepreneurial State” by Mariana Mazzucato and “The Spirit Level” by Richard Wilkinson & Kate Pickett.

Even if you have never heard of Richard there is a chance that you have heard of his work. He was the man who coined the term “state by state reporting” as a method of overcoming tax avoidance, tax havens and corporate transfer pricing arrangements. He is a man with a mission. He has put tax avoidance back on the political agenda and his research is a godsend to the political left whose bucket of ideas had dried up long ago. His proposals will be considered pretty radical by mainstream establishment standards. But that is the point. He is standing up for a BIG state when the received wisdom is that the State should whither away in favour of Big Society. His work is free of most of the usual clichés and, by the looks of it, the Green Party have taken a very big leaf out of his book. No doubt his work has heavily influenced their manifesto which is one of the reasons why I have felt increasing confidence in voting for them over the years. Back in the day (over ten years ago) when Michael Woodin and Caroline Lucas wrote “Green Alternatives to Globalisation – A Manifesto” I gave it a pretty lukewarm reception as it simply was warmed up left wing policy from the 1970’s. Armed with Richard’s work the left has a new weapon for first-world politics and the Green have embraced it.

The day I write these words there is a General Election in the UK and we shall see how effective this injection of policy has been for the Greens. Richard contributed to the Green New Deal policy group so his work has form and resonance for us already. His work on economics is integrated well into the need to build a sustainable economic basis for all nations. As it turned out the Neoliberal elite swept to power ousting all pretenders to their throne. The Turkeys voted for Christmas. Now there is talk of Labour moving even further to the right to capture the Conservative vote in the UK. No talk about a genuine alternative to the “mainstream economics” of the three major parties. Madness. So it really is time for the likes of Piketty, Mazzucato, Stiglitz, Keen and Murphy to rebuild a new economic consensus that rejects the many failures of the current neoliberal experiment… and replaces them with pragmatic solutions to what ails us all.

To be fair Murphy has not developed the language quite to speak truth unto power in the way Piketty has. His writing often looks like polemic and his work fires from the hip. His praise for Keynes make him sound like an old school economist writing love letters to a long dead lover. In part he struggles to be relevant or, indeed, scientific about topics he is passionate about. He is a little adrift in a academic world dominated by mathematical formulas that attempt to emulate the real world. His answer? The maths don’t work. He is right but his critique is not close to Prof Steve Keen’s annihilation of neoliberal doctrine in “Debunking Economics“. These criticisms (if they count as criticisms) aside, this is a work that you should sit back and soak up whilst putting aside everything you have accepted as economic orthodoxy over the last forty years.

Let’s kick off with a little polemic:

“This is a cowardly state: a state that see responsibility and runs away from it. This is a state that now exists solely to facilitate the looting of power to tax for the benefit of an elite [..] all so that a few can cream off from tax revenues a wholly undeserved and excessive risk-free return for being in the right place at the right time, somewhere near their old school friend who might now be in power in Westminster.

Ouch. Well, that truth hurts. It is the reason I turned away from Conservatism ten years ago. We unleashed the free market in the early 1980s to generate wealth that would trickle down and benefit everyone. The reforms of those times were probably for the best. Nobody on the Left of the spectrum is seriously advocating a return to the capital controls of the 1970s let alone Dog Licences. The economy did need a revolution and a bit of a dust-off to shed the baggage of the post-war recovery. But come 1990 it had run out of steam. The ten-year experiment came to a natural conclusion. In economic terms it reach the point of diminishing marginal returns. At that point the pragmatists would/should have consolidated the gains and mitigated the losses.

This didn’t happen. Something curious did. All opposition to the neoliberal experiment collapsed and dogma came the dominant thread of political life – long after it reached its sell-by date. Why? Because it became self-serving. The winners in the new game liked winning and they didn’t feel any moral need to continue with the pretence of those old-fashioned trickle-down fairy tales any longer. It was economic Darwinism – every man for himself. The rich got richer and the poor got the picture. The very purpose of economics became lost in a game of smoke and mirrors where ‘efficient market theory’ pretended that everyone gains with “free markets”. That might be true, but our markets are not free… As Murphy rightly calls out – out markets are rigged for the benefit of a minority who are close to the seat of Government. This tiny few can now direct the rents that belong to the people into their own pockets.

Thus the State was been looted with the full compliance of the State. And when we mean the “State” we really mean everyone. All the people who vote for the Government in a Democratic pretence that a Government is there to serve THEM. It no longer does. It could, but it won’t, and the “free market” no longer has anything to do with it:

“The result is that private industry has discovered that rather than trying to innovate new products in an uncertain consumer marketplace it is much easier to make profits from the certain commodities that people are always going to need, such as health, education, local government services, the utilities and so on that were once the preserve of Government.”

It calls to mind the work in “Private Island: why Britain now belongs to someone else” by James Meek. Let’s admit it, this was one hell of a trick. Just how do you get the turkeys to vote for Christmas? Well you invoke the language of “freedom” and then pull the trick the Nazis were good at: make out that anyone can enjoy the fruits of this system. The truth is that the elite (who benefit) have no intention of sharing their wealth with anyone. That is not how it works. It is much like the way people play the Lottery in the hope they might win. The chances are stacked against them. The odds incredible. If the odds were not so high then the reward would have to be split between more and more winners. Then you realise THAT is the central point: in order for there to be winners there MUST be losers. In order for the winners to keep winning more and more then the population of losers has to keep growing. This is the road to serfdom where out land is dominated by a handful of warlords. A land without Government is something like Afghanistan. Welcome to Britainistan. Just bring money.

So, how to re-cut the pie without destroying the pie? Well that is the trick isn’t it? But it seems to us that even if the pie was to shrink a little that it would still be of benefit if it was shared out more equally. What does this sum look like? Give 1000 desperately poor people and extra £1 a day by taking it from a dozen billionaires who would barely miss it. Only the faulty mathematics of neoliberal economics can suggest that EVERYONE is worse off under this circumstance. This isn’t communism and barely qualifies as socialism. It is the answer to the question: why have billionaires? What are they for? It is certainly a moral question and one of increasing urgency. But the elite will not give up without a fight:

“…this elite do not intend to maintain their position by keeping control of government but intend to do so instead by dismantling the mechanisms of government and rebuilding them in organisations that they control for their own benefit..”

And as we have seen the state can so often provide so many services far more cheaply than the private sector can. That is not to say that the market needs to be excluded. Invite it in – if it can compete. If it cannot then what is its purpose? Yet we continue to endure having private sector rent seekers pushed upon us because that is the result of the “economic consensus” – the “myth” as Murphy describes it. It perpetuates because it was the system selected by the “biggest winners from the system they proposed”. The poachers became gamekeepers. The operation was slick with an air of pseudo-science about it:

“One of the objectives, or so it seems, of neoliberal economics is to prove that its market-based ordering of society is as natural as are the findings of the physical sciences.”

Quite. This is a highly seductive model and, to a certain respect, correct – when applied to small markets working under the conditions that the classical economists declared were necessary, ie, “perfect knowledge” being one of them. Yet such perfect markets do not self-create. They have to be forged by society. If society does not have the power or the tools then this is the role of the State. To make markets work. When the State stops oiling the wheels, the wheels come off. Not in all cases, there must be balance, but we have that balance wrong. Murphy likens it to making a cappuccino – a less than perfect analogy that he milks (no pun intended) for all it is worth. But the point is well made.  You cannot just throw coffee beans, water and milk in a cup and hope to have something drinkable. Without it there is no growth.

Beyond these simple facts Murphy takes his economic argument one stage further. He argues that the role of the State goes beyond simply making markets work. He contends that they must be made to work in order to ensure people “flourish”. Afterall, this is the point of society and markets: make the most of people. Otherwise there is no point and we are adrift in a moral vacuum. The market cannot price every transaction, if it can if often prices transactions incorrectly. As Murphy clearly explains with some good examples: “markets are inefficient in practice” and its the “in practice” that is the important caveat here. It is the sole distinction now between the growing breed of reality-based economists and the dying breed of dogmatists they must eventually replace.

Like the Meeks reference we made earlier Murphy relishes the opportunity to use NHS statistics to prove his point. Healthcare is proving to be a dreadful place to experiment with the free market. Indeed there are suspicious number of Government ministers pushing such privatisation who would personally benefit though their involvement in private healthcare companies. This can be the only explanation given the statistics:

“The cost of healthcare in the US is approximately US$7,290 a year [..] the comparative cost in the UK is $2,992 a year with the US being considered [..] to supply much worse healthcare despite the price differential”

After having made his case so well the middle section of the book somewhat drifts off into various diatribes against advertising. The point is persuasively made but hardly seems to be the top priority for some of us. It would seem to be a very hard thing to control. What is “good” and “bad” advertising? We can have a crack at it but I would argue that the State is probably not a very good tool for controlling this. It would probably be better off curbing monopoly control of the media that so distorts the way people understand the world in favour of neoliberal values.

The vast majority of the book through the middle section concerns Murphy’s grand new theory of economics which he explains diagrammatically with circles. These are maps of human and community flourishing which serve to illustrate the many dimensions of life and how we enjoy it. These illustrate how expanded consumption cannot be fulfilling and, indeed, can constrain our ability to flourish. This is an attempt to show how reality-based economics is constrained by our environment and human nature. It also suggests that material benefits cannot all substitute for spiritual ones. This is exciting work even if it is probably all as theoretical as the neoliberal dogma it wishes to replace. But it does make its point well. If diagrams and such like bore you then you may wish to fast forward to chapter 11 where Murphy starts to write about delivering the courageous State.

 “A totally free market economy [..] is incompatible with social democracy”

Murphy boldly states. I might argue with his definition of ‘free market’ but if he is referring to the reality of what we have then we will need to be this bold too. Just as long as we do not identify free markets as being directly the problem. They are a tool. You can open a tin of paint with a screwdriver but you shouldn’t blame the screwdriver for your choice of paint. Murphy moves rapidly on to consolidate his point by stating that “extremes of wealth and democracy are incompatible”. Certainly extreme inequality can hardly be supportive of long term sustainable and healthy democracies. This leads us to ask the sort of question that rarely gets asked in the orthodox version of economics: what is the goal of social democratic government? Using one of his circle diagrams Murphy argues something that is utter heresy these days: the role of the State is to decrease material consumption to within boundaries that are sustainable to the planet in the long term. Material consumption will be substituted with non-material source of flourishing.

It all sound so arty-farty. Indeed this is going to be a tough idea to explain to a cynical public and politicians alike. All we need is the right language. Certainly there is nothing here that Murphy is wrong about. It is so revolutionary that it is off the page of acceptable conversation. Being right is not enough. It has to be understood and compelling. Everyone has to know how it is in their interests. If there is to be true change then the elite must understand how it is in their interest too.

In his section on delivering the courageous State Murphy makes a point that we have written about on this blog many times before: we desperately need more choices, more plurality in economic options. There is enormous irony in the neoliberal revolution sweeping to power with “freedom to choose” as its logo. That revolution removed economic choices from the electorate. We lack genuine diversity in debate and out economics suffers. There is no such thing as science that is settled hence why do we pretend that economics, which barely qualifies as anything like a science, has reached some perfect end conclusion?

Around this point of Murphy’s powerful argument set he focusses on the role of Financial Services & advertising in the economy. He is writing about the UK of course but his point is general and closely related to his passionate work on Tax Havens. He argues that speculative finance is crowding out other sectors and is leading to a suppression of growth. The economy is kept alive in an environment of suppressed wages through borrowing for demand fueled by unnecessary advertising. It is not an original point, it has been made before – but this time Murphy delivers it with graphs! Of course his graphs are speculative. He pulls no statistics out to prove his point, even if it is a good one. Although the collapse of GDP is speculative the fall in wellbeing discussed here is real and measurable.

Pushing this point further Murphy argues that when speculative finance reaches a certain size it captures policy-making. The Government overly-identifies the needs of finance with the needs of the nation as a whole. It would be hard to argue with that! Worse than this the Finance sector, unregulated, leads to market volatility. Boom and crash crisis follows leading to the apocalyptic outcomes seen in 2008. Again, few would argue with this point. It is a central truism of our times, yet our policymakers seem utterly unable to do anything about it. This illustrates Murphy’s point precisely. What we need is a courageous State. One that can stand up for all sectors of the economy. One that bring balance back.

In comparison to the modern, feral, neoliberal State Murphy contends that the “Courageous State” has three objectives:

  1. Be democratic
  2. Cooperate internationally
  3. Provide freedom to people so they can flourish

The five necessary core policies will be thus:

  • Constrain finance
  • Rebuild the role of the State
  • Build a balanced, sustainable economy
  • Support families, communities and society
  • Cooperate to build courageous States abroad

Murphy follows this up with a whole bundle of suggested policy measures designed to achieve precisely this. Some of these are pretty speculative and read like a wish list to Santa at points, but, heck, let’s get them on the table and let more people engage in organising the practicalities. His suggestions are too many to cover in detail here but we can pluck one out as being of relevance to the core values of this blog: creation of a Green Investment Bank

“It will develop new sources of energy, whether from wind, wave, sun or other sources and make the necessary technology and equipment here in the UK. It will deliver energy sustainability for the households and offices and factories of the UK, so providing us with a long term future, reduced energy consumption and greater financial security from external supply sources with unknown long-term prices.”

He goes on to recommend the rebuilding of local economies & local democracy with a re-localised manufacturing base. There is nothing here the Transition movement would disagree with.

So there you have it. A long book written in quite a hurry by a man who has a lot to say. It could have benefitted from a bit of proof-reading here and there as several sentences were utter gibberish. This doesn’t always make it an easy read. I would argue that it is more important that this book exists in the first place. It represents yet another brick in the wall of modern reality-based economics that has largely cut-itself loose from the old leftist doctrines of the past. People like Murphy are starting from scratch to build the economic case for the return of the State to our lives. He makes a good job of it but this is but one small step.

What we really need NOW are political parties to start embracing this new economics. We know the Greens already do but what about the rest? Can they set themselves loose from their old affiliations with socialism or neoliberalism to start the fight back? Indeed, does politics have ANY courage at all these days? Who will stand up for the State? For when you stand up for the State, there is a chance, with the right policy, that you will be making the best of people. And that could unleash the greatest wealth this nation has ever know. It is a wealth quite beyond the miserable scraps of fracked gas and oil underneath our nation. It is the collective talents of a people currently hamstrung by a State sector determined to suppress their rights in order to embolden the monetary fortunes of a tiny minority.

In short: when will we return to Democracy in this nation?

About post-carbon-man

A passionate advocate of a peaceful transition to a sustainable political-economy, Mark hails from a working class farming background. Today he is a Company Director and Chairman of the Low Carbon Chilterns Co-operative. Whilst at University (Engineering Masters) he was active in Conservative Student politics but has had no affiliation since. He has travelled widely on business covering the USA, Europe, Middle East and Central Asian Republics. In 2007 Mark founded Post-Carbon-Living and a year later co-founded Transition Town High Wycombe. He lives with is wife & daughter in a home they retrofitted to be carbon-neutral. Today he blogs about surviving politics on a shrinking planet and is passionate in his rejection of Nationalism.

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