Left, Right and the Proper Role of the Modern State

There is a perennially unproductive political debate in the UK about the role of the state in owning and controlling infrastructure and the means of production. In general terms the political right espouses a minimisation of the role of the state, while the left has a bias towards maximising the role of the state. The distinction is not driven by economic argument (although economic arguments are frequently used to justify positions taken), but rather by ideological preferences emphasising issues like freedom and equality. Sometimes the lines become blurred, as, for example, when the Labour party took on board various neo-liberal tenets concerning the superior efficiency of markets: government-led PPI initiatives and outsourcing at national and local level were a consequence.

Underlying ideological assumptions about the proper role of the state were embedded in the right/left spectrum of views on public ownership and privatisation, but these assumptions were rarely subject to critical examination. Instead, discussion has focused on issues like tax reduction, cost, efficiency and competence. This has created an inevitable tension between ideological positions and the arguments deployed to justify them. A tension that leads to incoherent arguments. For example: the contention that shares in banks, acquired as part of the process of rescuing the financial system in 2008 and immediately afterwards, should be returned to private ownership because ‘politicians know nothing about running banks’. Of course they don’t, but this doesn’t stop them from hiring experts who do know about about running banks to run the Bank of England and the regulatory system with which banks have to comply. Similarly, politicians know nothing about running a host of other institutions (schools, prisons, universities, hospitals, broadcasters etc.) or infrastructural processes like transport. What they do is hire experts who do know about running these things and they then judge their performance on the basis of outcomes, whether in the form of objective ‘targets’ or PR with which politicians are comfortable.

So how can this kind of incoherence be avoided? A productive starting point might be the recognition and adoption of two particular axioms:

1. Nearly all economies are mixed economies and those that aren’t do not function at all well.

2. Some things work best when run collectively by the state, while others work best when run as private enterprise. These categories are inherently fluid, and it should be considered quite natural for activities and enterprises to move between public and private ownership from time to time.

Acceptance of these axioms should have clear implications for the role of the modern state. The issue of public vs private ownership is not an appropriate battleground between right/left ideological stances, but rather a more technical issue to be resolved on an evidential basis pro bono publico. In such a scenario the proper role of the state is to act as an interface between public and private sectors, managing that interface to maximise economic performance and welfare.

Is this a mere technocratic solution to an area of legitimate political dispute? Not as long as democratic accountability is preserved, and voters are given to understand the real nature of the choices before them. This comes back to a key role for my two axioms, and the role that their acceptance would play in transforming a dysfunctional political culture.

So what does this talk of ‘political culture’ amount to? To a great extent it is all about the stories we tell ourselves about political economy, the beliefs and values that underpin civil society and our way of making decisions and doing things. We need new, more accurate, welfare-promoting narratives, and to bring these narratives into play we need to expose and challenge those embedded ideological assumptions to which I have referred. Here are a few factually based ‘counter-narratives’ that do just this:

– The Economist Mariana Mazzucato’s book The Entrepreneurial State: debunking public vs. private sector myths is an exemplary corrective to the view of government as a bureaucratic machine that stands in the way of innovation. Her instantiation of the facts that challenge narratives of this type is, by implication, a justification of the role I am suggesting for the modern state. Inter alia her work shows how complex and sometimes counter-intuitive the relationship between public and private sectors can be in achieving economic success.

– Singapore is often adduced as an exemplar of the right-wing capitalist state. In many ways it is, certainly in terms of espousing free market economics. Yet, despite this, HDB, Singapore’s housing fund, has provided almost 80% of the city-state’s citizens with public housing.

– Prior to 1990 Switzerland and Hungary operated under diametrically opposed economic systems. However, during that period the majority of housing in Switzerland was rented, while the majority in Hungary was owner-occupied. This state of affairs is instructive to contrast with differing views on public housing in the UK during the same time-frame. Right wing politicians sought to convert public housing into private owner-occupation, while left wing politicians opposed this and wanted to expand the publicly owned rental sector. These positions were driven by unstated assumptions about how people might vote according to the ownership of their accommodation. Right wing governments during the 1980s actively prevented local councils from spending the proceeds from (legislatively enforced) council house sales on increasing the supply of council-owned rental accommodation.

– Market efficiency itself may be a myth. Academic studies have challenged the idea quite systematically, and here is one that addresses financial markets in particular.

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