Wednesday, 2 June 2010

What would Rawlsian budget cuts look like? Kind of like what we have now.

A few days before David Laws’ exposure and resignation over his housing expenses, classical small-government liberalism seemed to be enjoying a surprising ascendancy, as a shared doctrine among the ‘dries’ of the Conservative Party and the Orange Bookers within the Liberal Democrats. Combined with the rolling back of ID cards and the promise of a Freedom (Great Repeal) Bill, democratic politics in the UK seems (or at least seemed) suddenly to be pointing in a libertarian direction. Who could have imagined that the LibDems could supply some much needed economic sanity during the current crisis?

Stuart White challenges this Orange Book ideology over at Next Left. Due to their background in economic theory and competence, Stuart diagnoses a paucity of contemporary political philosophy. Their economic liberalism seems to demand that more money, where possible, should be left in people’s pockets; that people have a presumptive (if not absolute) entitlement to their incomes. In other words, the proper baseline from which to consider the distribution of wealth is the one produced by voluntary market interactions.

As a liberal egalitarian, Stuart rejects this baseline and is disappointed that a liberal-left consensus based on the political philosophies of John Rawls and Ronald Dworkin hasn’t yet developed between Labour and LibDem activists. This sort of liberalism treats equality of wealth as the correct baseline to have between fellow citizens. It is deviations from this distribution that need to be justified on policy terms; not people’s earned incomes, which are considered to be too closely tied to the overall system of social co-operation as to be considered deserved by individuals. For example, Rawls, according to his difference principle, considers inequalities to be justified only when they are part of an economic scheme that improves the position of the least well off in society.

I have three points about why this Rawlsian liberal egalitarian approach might prove difficult to get off the ground in current circumstances and significantly into the future.

1. It is not clear how different a Rawlsian policy would be from what LibCon coalition is doing right now. During fat years, it is easy to talk about more egalitarian distributions of goods. We are going through lean times right now, and it is the distribution of pain (through budget cuts), which are on the agenda. One can apply a sort of Rawlsian policy to this situation, and concentrate cuts on services to the better well off.

In fact, this seems to be more or less what the coalition Government is trying to achieve. Healthcare, primary and secondary education all seem to be fairly well insulated from cuts for now. But in a year or so, subsidies for University student fees are likely to be significantly reduced. As well, they should. Government funding of University places is one of the most obvious transfers of wealth from the less well off to the (children of the) relatively wealthy. Stuart criticises the abandonment of Child Trust Funds. However, while one can see the value of such a policy in Rawlsian terms, the current scheme does not seem especially well targeted at the least well-off nor significant enough to make a large difference to social outcomes. In a context of a fiscal crisis, it doesn’t seem unreasonable (even from a Rawlsian perspective) to cut it, assuming one accepts that the cuts have to come fairly thick and fast sooner or later. Put simply, the justification to save a non-essential service right now (like a boon to 18 year olds) needs to be extraordinarily high in present circumstances.

2. Related to this is the problem of a bloated public sector. Say what you like about Child Trust Funds, at least their eventual recipients don’t vote yet, and the entitlements aren’t bound up in complex employment contracts that are costly to terminate. That probably made them a viable target for the initial cut more than anything else. Around half of the UK’s GDP is currently spent by the state, and beyond a certain point, it is not enough simply to demand more resources for the state to distribute. You actually need to work out more effective ways of delivering these resources to the least well off in society. As even the strongly left Chris Dillow is apt to repeat, a large state does not equal a larger share of resources going to the poor. In fact, a large state could just as easily be an additional source of rent extracted from the poor.

Right now, respecting the essential services that are provided through state funding, there are an awful of rent-seekers in the public sector. And they don’t come from the least well off elements of society either. This puts labour and social democratic wing of the LibDems on a sticky wicket, who count public sector workers amongst their client voters. Truly pursuing the needs of the least well off would involve the prudent pruning of public sector jobs and perks. As Hayek was always keen to point out, guaranteed pay and conditions for public workers may look affordable when an economy is growing but suddenly become crippling during a down turn. Essentially, a budget that increases and diminishes in line with the successes and downturns of the productive economy has to contend with a series of absolute and unchanging demands from a protected public sector. In this context, these job protections and perks harm all those who labour without them.

Of course, it is true that there are plenty of privately funded actors who also engage in very successful rent-seeking (most of the activity in the City of London is probably an example of that). A Rawlsian approach to political economy would demand tackling all areas where the better off and better connected are capable of extracting more wealth than is absolutely necessary in order to provide for the goods and services they are meant to provide to society. However, I am far from convinced that the Liberal left possess either the incentives to tackle the cosseted rent seekers in the public sector, nor the competence to root out socially destructive practices from the banks and other independent bastions of middle class wealth augmentation. Which is not to say that the LibCon coalition is necessarily going to fare much better, but at least the direction of travel seems to be towards some sort of sanity and reckoning with economic reality.

3. A more general and perhaps more fundamental point of cleavage on the Left is how to deal with immigration and globalisation. What do we owe citizens of other countries that travel or trade with the UK? Rawlsian liberalism has two equally troublesome approaches. The first is essentially to deny the existence of immigration! Individuals all live and die in one nation-state with no possibility of exit. As Will Wilkinson has argued, what use is a political theory that won’t tell you what duties you owe the people who built your house?

The new flavour is cosmopolitan. Duties of social justice flow freely from one state to another and, essentially, we are all citizens of the world. But what would this mean in terms of practical policy? Should immigration be restricted and on what grounds could it? Do new arrivals in the UK instantly gain access to public services, like free health, housing and social insurance, or do they have to work harder to show their commitment to British institutions? In a cosmopolitan theory of social justice, such requirements would easily appear arbitrary.

This pokes at a weak spot on the left. Regardless of the economic optimality of immigration (more skills, greater division of labour, vastly more opportunities to produce wealth for new arrivals) the existing working class in the UK discerns (correctly, in some cases) that immigration increases competition for jobs in some sectors, driving down some native incomes. From a cosmopolitan Rawlsian perspective, these complaints don’t really amount to all that much. The lowest earners in the UK are phenomenally well-off by world standards, and it is mostly by world standards that a cosmopolitan egalitarian theory would find and support the least well-off. Hence, another traditional supporter of the left, the existing working classes, risks being sidelined by the rigorous demands of a non-arbitrarily interpreted liberal egalitarian moral theory.

For these reasons, liberal egalitarianism as a fighting creed on the left might prove to be more divisive than unifying. It does not look all that different in practice to what the LibCons will implement anyway (in the short term). It brings into sharp relief the separate interests of the existing working classes in the UK, the global working classes, and the more protected and wealthy public sector workers. Moreover, the basic unit of political community in Rawls’ original theory, the nation state, seems terribly dated in today’s more connected world where primary identities are as likely to be trans-national or sub-national.

In this context, a more minimalist neo-liberal attitude to the state seems more tenable. It is a provider of public goods and services that encourage trade and co-operation between individuals who might otherwise have remarkably different concerns, pursuits, origins and identities. The state, on this account, is not a locus of moral obligations, a political community, or demands of social justice. It is a service provider. And service providers don’t last long by re-distributing wealth from valued customers to others. Instead, they can demand some taxes in return for effective service provision.

Is there anything for libertarians to do?

On a closing tactical note, the LibCon coalition (should it survive any length of time) is likely to sap the strength of the social democratic wing of the Liberal Democrats significantly. Social democrats will be uncomfortable at how easily the Orange Book liberals are able to co-operate with the Conservatives. For libertarians, by contrast, this coalition might turn out to be the best form of Government one could hope for in democratic politics. It is a coalition of two parties where their only common ground are their truly liberal elements. This means that now might be the time for libertarians to join Jock Coats amongst the Liberal Democrats, in order to strengthen their Orange flank. With luck, they could provide an enduring check on the social conservatism and, doubtless, soon to re-emerge cronyism of the Tories.