Michael Roberts – Joseph Stiglitz and ‘progressive capitalism’

Is ‘progressive capitalism’ an oxymoron in the 21st century?

Michael Roberts is an Economist in the City of London and a prolific blogger.

Cross-posted from Michael Roberts’ blog

Picture by Andrew Newton

The liberal leftist economist and Nobel (Riksbank) prize winner Joseph Stiglitz has another book out to proclaim the benefits of what he calls ‘progressive capitalism’.  The Road to Freedom is a play on the title of Friedrich Hayek’s infamous book, The Road to Serfdom, published in 1944, which claimed that government intervention into the ‘freedom of markets’ would cause shortages and misallocations of resources and eventually to the end of democracy and freedom in a dictatorship a la Stalinist Soviet Union.  John Maynard Keynes expressed his agreement with Hayek after reading his book. He wrote to Hayek that: “morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.” 

But Stiglitz certainly does not.  For him, Hayek’s claim that ‘free markets’ mean freedom for the individual really means ‘freedom for the wolves and death to the sheep’ (Isaiah Berlin). Free markets are designed to make profits not to meet the social needs of the many. “Externalities are everywhere,” Stiglitz writes. “The biggest and most famous negative externalities are air pollution and climate change, which derive from the freedom of businesses and individuals to take actions that create harmful emissions.” The argument for restricting this freedom, Stiglitz points out, is that doing so will “expand the freedom of people in later generations to exist on a livable planet without having to spend a huge amount of money to adapt to massive changes in climate and sea levels.”

For Stiglitz, the enemy of human freedom is not capitalism as such, but ‘neoliberalism’ which has bred soaring inequality, environmental degradation, the entrenchment of corporate monopolies, the 2008 financial crisis, and the rise of dangerous right-wing populists like Donald Trump. These baleful outcomes weren’t ordained by any laws of nature or laws of economics, he says. Rather, they were “a matter of choice, a result of the rules and regulations that had governed our economy. They had been shaped by decades of neoliberalism, and it was neoliberalism that was at fault.”

Stiglitz has argued before in previous books that it is not capitalism that is at fault but the decisions of governments and their corporate backers to ‘change the rules of the game’ that had existed in the post-war period of managed capitalism.  The rules were changed to deregulate; to privatise; to crush labour unions etc.  But Stiglitz never explains why the ruling elite felt it necessary to change the rules of the game.  What happened to swing the post-war rules into the neoliberal ones?

Anyway, Stigliz reiterates his call for the creation of a “progressive capitalism”.  Under the rules of this form of capitalism, the government would employ a full range of tax, spending, and regulatory policies to reduce inequality, rein in corporate power,and develop the sorts of capital for social needs not profits like ‘human capital’ (education), ‘social capital’ (cooperatives), and ‘natural capital’ (environmental resources).

Stiglitz does not want to get rid of capitalism but to regulate it, so it works for the many (sheep) over the few (wolves). “We need environmental regulations, traffic regulations, zoning regulation, financial regulations, we need regulations in all the constituents of our economy,” he writes. But Stiglitz is either naïve or applying sophistry here.  The history of regulation is a history of failure in controlling capitalism or making banks and corporations apply policies and investment in the interests of people over profit.

How can anyone not see that, after the global financial crash of 2008, or the subsequent financial scandals galore; or the failure to stop or regulate fossil fuel production and finance?  Regulation has not stopped regular and recurring crises of production under capitalism, whether in the imagined ‘progressive era’ of 1945-75 or in the neoliberal era since.  Stiglitz has nothing to say on this.

Indeed, he almost recognizes that his policy proposals of taxing the rich, regulating finance and the environment and increasing public spending to achieve progressive capitalism are not likely to be adopted by governments and big business.  But when asked that, maybe, the only real alternative to achieve human freedom is a revolutionary transformation of the economy and society, he replied at a LSE presentation of his book, that revolutions are violent and risky and so should be avoided in favour of gradualist change.

His answer reminds me of John Mann’s comment in his excellent book, In the Long Run We are all Dead,  “the Left wants democracy without populism, it wants transformational politics without the risks of transformation; it wants revolution without revolutionaries”. (p21).  Stiglitz really echoes Keynes who once said, “For the most part, I think that Capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable. Our problem is to work out a social organisation which shall be as efficient as possible without offending our notions of a satisfactory way of life.”

How would regulation and more equality deal with the impending disaster that is global warming as capitalism accumulates rapaciously without any regard for the planet’s resources and viability?  Programmes of redistribution will do little for this.  And if an economy is made more equal, would it stop future slumps under capitalism or future Great Recessions?  More equal economies in the past did not avoid these slumps. Progressive capitalism is an oxymoron in the 21st century.  And even Stiglitz doubts that it is possible to achieve.

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