Tuesday 25 May 2010

The coming battle for liberalism?

The Osborne-Laws pact to axe the Child Trust Fund prompts me to write on a topic I have been musing on for a while: the future of liberalism.

As Sunder has noted, the formation of the Coalition raises the prospect of the Lib Dems shifting from a centre-left party to one of the centre-right. This has a clear attraction for the Orange Book tendency in the Liberal Democrats. Their aim has always been to reassert the credentials of 'economic liberalism' against 'social liberalism' - without, they would say, wishing to deny the truths of social liberalism. In essence, this means: a greater willingness to use markets and to tolerate their outcomes.

One striking feature of Orange Book liberalism is its disciplinary basis. It is to a considerable extent a movement grounded in conventional economics. Key protagonists such as David Laws and Paul Marshall have backgrounds as economic analysts. This is obviously Vince Cable's area of expertise. And Nick Clegg is on familiar ground here too. CentreForum, a think-tank linked to Orange Book liberalism, frequently produces work that is impressively informed by this intellectual discipline.

Orange Book liberalism has much less of a grounding in political philosophy. When Vince Cable wrote a chapter on 'Liberal economics and social justice' in the original Orange Book, he felt no need - so far as I can see - even to define 'social justice', let alone discuss what it might be in terms of rival theories put forward by various liberal philosophers.

And that, I think, is fairly typical. I have looked at every chapter in the two key works of Orange Book liberalism (The Orange Book and Britain After Blair), some 25 chapters in all. Not one of them contains in their bibliographies a single reference to any of the great three works of contemporary liberal political thought: John Rawls' A Theory of Justice; Ronald Dworkin's essays on equality, canonically gathered in his Sovereign Virtue; and Bruce Ackerman's Social Justice in the Liberal State. (Nor, by the way, can I find any reference to the work of Friedrich Hayek or Robert Nozick.)

This does not mean that the Orange Book liberals lack a political philosophy. Their thinking rests on some definite, strong - albeit rather unexamined - philosophical assumptions. Reading someone like David Laws, for example, there is at times a clear sense that the free market produces a distribution of income and wealth which is a kind of natural or moral baseline. It is departures from the baseline that have to be justified. Laws and other Orange Bookers are of course not libertarians, so they are prepared to allow that some departures - some tax-transfers/tax-service arrangements - can be justified. (This is the sense in which they remain social liberals, albeit not egalitarian ones.) But the presumption, for Laws, is clearly for leaving money in people's pockets. [Note of clarification added May 28: I have removed the quote marks from the phrase 'leaving money in people's pockets' at the end of this sentence as misleading. The quote marks were intended to indicate my own distance from/scepticism towards the classical liberal ideological position which I think is conveyed in the phrase, and with which I think Laws is in sympathy - but the phrase is not - repeat not - a quote from Laws's writings.]

This presumption runs completely counter to one of the basic claims of contemporary liberalism as developed in the work of such as Rawls, Dworkin and Ackerman.

For these thinkers, the 'free market' is simply one possible 'basic structure' for society along with an indefinite range of other possibilities. It has no morally privileged position. So how do we choose which 'basic structure' to have? Their answer is that we try to identify principles of social justice and then design a basic structure - including, if necessary, appropriate tax-transfer arrangements - to achieve justice so understood. On this view, taxation and 'redistribution' are not invasions into people's pockets, a taking of what is presumptively already, primevally 'theirs'. Tax-transfers are a way of ensuring that people do not pocket, through the market, more (or less) than they are genuinely entitled to. Tax-transfer schemes define entitlement; they do not invade it.

Simplifying a little, one might say that for these liberal thinkers, it is not the free market that is the appropriate, morally relevant baseline, but equality: it is movement away from equality that has to be justified, not movement away from a free market distribution.

The debate over the Child Trust Fund offers a prime example of the way in which the two liberalisms can come apart.

In the view of the egalitarian liberals, justice requires that all citizens start their adult life with reasonably equal endowments of wealth (again, I simplify, but the nuances one needs to add to this statement are not important here). Policies like the CTF look like a way of trying to secure this. A policy like the CTF comes thus to be seen, by liberals of this type, as an integral part of the 'basic structure' of a just society, an important institution that, by helping to equalise initial asset endowments, frames and constrains the way 'the market' operates. Abolition of the CTF is, therefore, an assault on a genuine moral entitlement - an act of unjust disinheritance towards future citizens.

But for a classical liberal, or an Orange Booker with leanings that way, the CTF is more likely to look like just another government spending program that has been arbitrarily tacked on to the market economy. The working presumption is that income and wealth should stay where the market places them. This presumption can be overriden: but only if the policy in question is really essential: for example, say, if it is needed to relieve poverty. Since the CTF apparently isn't essential in this way, the money it costs should really be returned to the pockets whence it came. I suspect that something like this view underpins the profoundly dismissive attitude that George Osborne and David Laws showed to the CTF.

So when the new Coalition and its supporters, like Julian Glover, argue that something called 'liberalism' is the guiding thread of the new government, we need to pause and recall that they mean by this a very specific kind of liberalism.

Meanwhile those of us who are liberals in the Rawlsian or related sense suffer at present a lack of representation by the mainstream parties.

The Lib Dems have many virtues, but Orange Bookery is a philosophical step backwards from our point of view, and it is this tendency which is now calling the shots in social and economic policy.

Labour, on social and economic policy, has many virtues. But it also has a very poor record on civil liberties and related issues about the quality of state power (e.g., the database state), things which also matter to egalitarian liberals as liberals.

So, far from representing a great Richard Reevsian 'liberal moment', the present political conjecture seems to me to represent a moment in which liberalism - of the egalitarian, Rawlsian kind - has been driven to the margins of British politics. No mainstream party now speaks for liberalism in this sense.

How are those of us who support this kind of liberalism going to rectify this? Will left liberals in the Lib Dems take on their ideological opponents within the party? Will Labour's egalitarian liberals take on their party's authoritarians and anti-pluralists?

How can the two groups work together, across the party divide, to advance the great cause that is (egalitarian) liberalism?


Big Fez said...

Philosophically, I think Lib Dems as a whole are still pretty close to your notion of egalitarian liberalism. It is true that the change from the last GE to this has been marked - from being the advocates of a 50p rate of income tax to raising the threshold to 10k is a big shift. I would suggest though that this is more the product of changing times and a change in emphasis than a wholesale shift in the party's outlook.

The decade from 1997 saw such great increases in public spending, and the last couple of years saw the realisation that it is not sustaniable. In this context it is only to be expected that a consistent centrist would shift from advocating higher taxes and spending (sounding more like a social democrat) to advocating spending restraint and a smaller state (foregrounding the liberal tendancy).

The change in leadership obviously makes this very visible, and coalition government necessitates finding common policy ground, but I am not sure the philosophy of the party has as much as appearances might suggest.

Anonymous said...

This explains a lot. Thank you.

Big Fez, you say the last couple of years saw the realisation that the large increase in public spending was not sustainable. But abolishing the CTF was part of the Lib Dem manifesto in 2005 - and at the time the money was going to go to cutting primary school class sizes, not reducing public spending. It's fairly clear that some form of liberalism has something against CTFs beyond the cost, and only the justifications have changed.

Big Fez said...

CS Clark: Cheers, I hadn't realised that. Although it sort-of reinforces my main point - that we probably shouldn't read the scrapping of CTFs as signalling a substantial lurch to the right by the Lib Dems.

Unknown said...

What has been ignored is that the policy of abolishing the CTF was justified on the grounds that it would (partially) fund the 'pupil premium', a policy to provide considerable extra funding to schools for each pupil they take from a 'disadvantaged' background (not sure how that is defined, but I imagine it was in the manifesto). This was intended to a) ensure these kids get the extra resources they need to compensate for lack of parental investment, b) incentivise schools to take more poor kids in and c) ensure that those schools which have a high proportion of poor kids get proportionally more funding.

The logic behind this (as I remember it from one of Clegg's speeches) was that by the time the child reaches 18 years old, a lump-sum windfall may deliver a short-term benefit but will be of little use in the long-run if they had a poor education. Good education is worth more - in pure cash terms - over a lifetime than the CTF is, and that's ignoring the other benefits of education.

I'm not sure what this has to do with the guff about interference in free markets. The pupil premium is estimated to cost £2.5bn per year, and the CTF would have costed £580m. The PP is therefore a bigger, not small, 'distortion' of the free market, since it gives a far greater quantity of money to poorer kids, albeit hypothecated for educational purposes. I think you've misinterpreted what has happened, then applied a handy, comfortable but ultimately wrong-headed interpretation of why.

Unknown said...

A good and interesting anaysis of the parties' philosophies.

But what you call a lack of concern for political philosophy, I (and perhaps the OBers), call pragmatism.

Luis Enrique said...

"there is at times a clear sense that the free market produces a distribution of income and wealth which is a kind of natural or moral baseline"

I don't know what that is, but it isn't mainstream economics. You go on to write about endowments: of course undergraduate economics teaches that market outcomes are functions of initial endowments, so if initial endowments are "unjust" so will be outcomes.

A fantasist libertarian-anarchist "free market" is a very silly baseline, but ... and this is a very obvious point, and of course those political philosophers you mention must have dealt with it ... but I don't see how equality can be a "baseline" either, not while we live in world where some people work hard and save their pennies, while others don't. Do you really think, for example, cowboy builders ought to earn the same as conscientious highly skilled builders?

I don't understand all this talk about "basic structures" either. If you have a mixed economy, with lots of regulation, taxation and redistribution (like we do), is that "basic structure" a free market or something else?

And what of this range of other possible basic structures? Can you list a few? One alternative I can think of is state socialism, and speaking personally my objections to that are not philosophical but pragmatic. So what's the "basic structure" for the economy for one of your egalitarian liberals? I hope it's not state socialism, but if not, what?

Luis Enrique said...

I think I am being dim in public again, and most of the former comment is missing your point.

so if I understand you better, you're saying that one way to look at the world is to start with the presumption that free market outcomes are the default notion of just outcomes, hence any deviations from the free market need justifying. And the alternative is to start with equality being the default, hence any deviations from there need justifying.

So ... I hope some more intelligent questions.

First, it's very easy to justify deviations from a pure free market on all sorts of grounds (morality, efficiency) and there is room for huge variation in how you think the world works hence what any given intervention in the market is going to achieve, and one could start from the "free market" baseline and reach some very left-wing positions or some very right-wing ones. Conversely, one could start from a egalitarian baseline and find it very easy to justify deviations from that, and again depending on how you think the world works, arrive at either right or left wing sets of policies. I could very well start from a free market baseline of justice, but view (some forms of) equality as a desirable outcome and justify interventions in the free market on that basis. So if I told you what my policies were, how could you tell which baseline I started at to arrive at them?

The second question is related to the above: a "free market" baseline of justice is about procedure - how outcomes are arrived at, who is involved in making decisions, has rights over their own actions, how actions are agreed by parties etc. (or something like that) whereas equality is an outcome, that may or may not be achieved under various procedural arrangements, and may or may not be viewed as desirable by people who hold different views about what forms of society - specifications over who has what rights to do what to who. Does it make sense to oppose one baseline against the other? It seems like mixing types to me.

Big Fez said...

@ Luis Enrique
(and a bit @ Thomas):

A conception of what political philosophy does might be something like: attempts to systematize political structures, in order both to provide as coherent an explanation as possible of our current intuitions, and extrapolate from them to prescriptions for how they might be improved/made more consistent.

I think the talk of baselines and basic structures is just shorthand for this process. Stuart W seems to be seeking to analyse the LDs position, starting from the assumption that a centrist philosophy must just be an extremely hedged version of one extreme or the other.

Uncle Petie said...

As a bit of an Orange Booker myself, and following on from Luis Enrique, I find the opposition between Rawlsian fairness and "free markets" a little bit disingenuous.

As I read Cable and Laws, I get the sense that they want to reform markets so that the base line produced by the market is something much more egalitarian - and fair - than what we actually have at the moment.

That's not quite the same as direct redistribution, but it's also not the defence of the status quo that you're implying.

Sunder Katwala said...

Uncle Petie

I hope LibDems (especially those with an instinct for either social democratic or LibDem traditions) would not take the view that "more egalitarian reformed (liberal) market outcomes" will make redistribution unnecessary. That does seem to me a largely centre-right idea, which Cameron gestures towards when he argues that the big state is the cause of poverty, for which there does not seem to be much empirical evidence.

So could we have any information about any existing democratic societies which have got close to that "more egalitarian liberal market" approach?

If they don't exist, is it because nobody has tried it? If so, what is the evidence base for it generating greater equality?

Unknown said...

The Scandinavian economies are generally regarded as egalitarian liberal market economies, aren't they? Highly open to free trade, relatively few subsidies to businesses, but a high social safety net ensuring that economic efficiency doesn't mean poverty for those caught on the wrong side of technological and social change. I can't claim any expertise in this area though, so others might know better.

Sunder, I think what Uncle Petie was driving at was that rather than after-the-fact redistribution of wealth distributed via an inegalitarian market configuration, it would be better to tackle other inequalities that give rise to the inegalitarian distribution in the first place. Surely you don't disagree? An example might be the pupil premium approach which ensures that young kids from poor backgrounds get much higher funding (at around fee-paying school levels) thus ensuring that they keep up with their wealthier peers at school. This results in a more egalitarian result by changing the inputs into the market calculation, rather than shuffling around the outputs afterwards.

Sunder Katwala said...


Thanks. Yes, I was also thinking of Scandinavia in making that challenge. But while there are important ways in which a Scandinavian commitment to social equality permits a social consensus for global openness, you may be much overstating the extent to which these social democratic and liberal settlements have moved away from redistribution. All of the international evidence is against the idea that the "big state" causes poverty: there are effective and ineffective ways for states to intervene, but the generic claim is simply bogus.

Tim Horton in a journal piece for the ippr produced a table of comparative data from Moller at al (2003) Determinants of relative poverty in advanced capitalist democracies American Sociological Review 68 (p22-51). These figures are averages from the mid-70s to the mid-90s using a consistent poverty definition across all countries.

The pre-tax and transfer poverty rates in Sweden (14.8%) Norway (12.4%) Denmark (17.2%) and Finland (12.1%) were really not so much higher in the social democratic welfare states than the liberal welfare states of Australia (16.2%), Canada (17.1%), UK (16.4%) and USA (17.2%).

What was different was the post-tax and transfer poverty rates: Sweden (4.8%, so 64.5% reduction in poverty due to redistribution); Norway (4%, 67% reduction), Denmark 4.8% (down 71.5%) and Finland 3.4%, down 69%.

This contrasted with Australia 9.2% (down 42%), Canada 11.9% (down 30%), UK 8.2% (down 48.7) and USA 15.1% (a reduction of only 12%).

Note that the aggregate difference between Denmark and the USA (both starting at 17.2%) was *all* about redistribution, ending with 5% or 15% poverty.

What really mattered was a broader, more universal, less targetted welfare provision which was seen as part of citizenship. The liberal welfare states sought to target poverty, and the paradox was that they proved less successful in poverty reducation as a result. Crucially, the redistribution is broadly seen as embedded in a contributory idea of shared citizenship, not the state "shuffling around the outputs afterwards" despite the scale of redistribution.

This data speaks to the social democratic (and social liberal) case that one can have large states and competitive liberal markets. It rather rebuts the Coalition's argument that the "big state" causes poverty or that relatively higher taxes and incompatible with open, liberal economies. (The usual example of the egalitarian/smaller state combination is Japan, but that is a product neither of liberal society nor liberal economics, but rather a combination of a communitarian society and an interventionist political economy).

If those economies seem to strongly make the social democratic case, the question remains as to whether there are any strong examples which make the more market liberal case being advocated, of high pre-tax and transfer egalitarianism through a more equitable liberal capitalism?

Sunder Katwala said...

Correction: those figures are for welfare state performance from the early 1970s to the late 1990s from Moller et all (2003), given in Horton (2010), 'Whose Middle is it anyway' public policy review.

I said mid-70s to mid-90s earlier.

Unknown said...

Switzerland? 4.8% below the poverty line, about the same as Sweden, but with considerably less redistribution. I'm afraid I'm having to work this out backwards as I don't know where to go to find the equivalent statistics to those you quote, but it seems that they do have much lower pre-tax levels of inequality than most other places.

To be honest, I suspect that Switzerland is pretty close to the ideal for that kind of centre-right liberalism that you describe. I think Switzerland is what John Redwood would want England to be.

On another point, I think you're missing something when you equate the attacks on the "big state" with attacks on redistribution. When I hear attacks on the big state from conservatives, I hear attacks on redistribution; when I hear them from liberals, I hear something much more like this. The distinction is crucial. I agree that the redistributive settlement needs to be embedded within society's concept of how things work rather than seen as after-the-fact "meddling" in outcomes, but I think this is incompatible with a government that very clearly is meddling in all kinds of things, as New Labour did. For me, a good government would pass a small number of very progressive pieces of legislation and generally keep out of the way the rest of the time. The Lib Dems are closer to my ideal than Labour have been in my lifetime.

Uncle Petie said...


Sorry for not replying sooner. No, I'm not suggesting the market can replace redistribution. Rob did summarise what I was trying to say very well, although I'd probably have gone for something like financial reform, rather than pupil premiums.

The Chris Dillow link is very good, and I'd venture to say that when OB liberals rail against the state, it's that managerialist aspect, rather than simple size, that upsets them. The state, from this point of view, is allowed to spend, it's just not allowed to micro-manage.

Which is why, getting back to Stuart's original post, I find that saying you can either be a Rawlsian redistributionist or an econowonk free marketeer is a really unhelpful way of framing the question. As soon as you make a distinction between spending and micro-management, it doesn't really make sense.

This looks like something you you're implicitly endorsing when you say that "a broader, more universal, less targeted welfare provision which was seen as part of citizenship", is where we should be aiming. Trying to micro-manage your benefits system is intrusive in exactly the sort of way that upsets Dillow. It's divisive in a way that upsets Horton and you. But it's also illiberal in a way that should upset Orange Bookers, because paying people to meet targets distorts their behaviour in unhelpful ways (making housing benefit conditional on unemployment would be a good example here). A more universal benefit system keeps the state out of the business of picking winners, which is both socially and economically more liberal. So it's a more free market proposal - in the sense I'm looking to hold the OBers to - even though it involves more public spending.

For what it's worth, I'd agree that scrapping the child trust fund was a step backwards in this regard. I just don't think that it's a sign of some deep-seated liberal contempt for redistribtuion.