Little intellectual elites in a far-distant capital

From Janet Albrechtsen:

Beware socialist snake-oil vendors

THOSE on the Left have a new spring in their step. Right across the spectrum of left-wing politics, from Michael Moore to Kevin Rudd, they are determined to build momentum for a new social democratic project. On these pages others have spent the past week bouncing around their ideas about progressive economics and the need to resuscitate the moral impulse behind social democracy. Determined not to waste a crisis, the language of the Left is, as always, clever, tapping our emotions with talk of rebuilding a better society. Yet, under new disguises, the same old frauds are being peddled. What is being sold as progressive is regressive if genuine progress is our aim. As the global Left rises up to claim its ideology will prevail, there has never been a more critical time to be reminded that economic freedom sits at the heart of liberty and human advancement.

Most sensible people won’t fall for the far Left’s new anti-capitalist racket. Moore, who is filling his pockets by denouncing capitalism in his latest shock-doc, Capitalism: A Love Story, is preaching to the converted. Ditto economics professor Richard Wolff, star of another documentary, Capitalism Hits the Fan. Delighted that the global recession “creates space for people like me”, Wolff is riding high on the international speaking circuit as a critic of capitalism. Good luck to them.

Most people, however, realise that free markets have lifted people from poverty in numbers never before seen: those subsisting on less than $US3 a day dropped from half the world’s population in 1970 to 17 per cent by 2000. Yet, in the wake of the economic crisis, recent polls suggest a growing fondness for socialism over capitalism, a dramatic change from polls just a few months earlier.

This shift betrays the danger that emanates from those who understand how to reframe the debate with clever, softer words. Political leaders such as Kevin Rudd, not to mention the commentators who have filled these pages during the past week, talk about social democracy, democratic socialism and social justice. Certainly, many of the wiser minds on the Left have evolved from old-fashioned socialists advocating central control of the means of production, but they remain wedded to the belief that a small group of elites can, and must, fashion a better world.

Their form of “progressive economics”, which places government at the centre of the economy, resurfaced most recently at last week’s Group of 20 meeting in Pittsburgh. To be sure, the Prime Minister has done well to ensure that Australia will be included in global economic debates. Greater co-ordination among countries is also admirable. But what if co-ordination involves a larger group of countries making co-ordinated but wrong decisions based on a flawed set of beliefs?

The latest G20 statement was full of talk about a profound crisis justifying drastic action. Governments yet again pledged to “do something”: discourage excessive risk-taking, keep up the stimulus spending, limit executive bonuses and impose tighter regulation of financial markets. Government must now be at the “centre of the economy” to avoid the boom and bust cycles of the past, said the leaders.

The glaring omission from these grand-sounding statements is an acknowledgment that government action played a large part in fuelling the boom in the US housing market that became a bubble in the wider mortgage market and finally burst across the globe. Successive US administrations mandated taxpayer-funded home loans to those who, in more prudent times, would be regarded as clear credit risks. There is a great deal of irony, and even more dishonesty, when social democrats such as Barack Obama and Rudd exploit the crisis to demonise free markets.

As Opposition Leader Malcolm Turnbull noted in his speech to the Policy Exchange in London last week, US governments effectively underwrote two-thirds of the US mortgage market using government creations, Fannie Mae and Freddie Mac. The GFC was triggered, in large part, by governments in the US assuming a place at the centre of the economy to pursue well-meaning social goals that delivered disastrous unintended consequences. Without an honest appraisal of the causes of the global meltdown, the case for social democracy is a fraud.

While the Left’s catchcry of social justice is intuitively appealing, there isa reason no philosopher has been able to articulate the principles of social democracy. The closer one looks, the clearer it is that the Left’s language of a new social democratic project is deliberately couched in emotional, ambiguous terms as camouflage for an old project of centralising power in the hands of a few elites who presume to know what the rest of society wants.

Refugees from the Left – men such as Irving Kristol – have a knack for nailing the illiberal tendencies of left-liberal “reforms”. Kristol, who died last week, likened them to amateur poetry, “more concerned with the kind of symbolic action that gratifies the passions of the reformer rather than with the efficacy of the reforms themselves”. Their elephantiasis of moral sentiment means that they are overwhelmingly concerned with “revealing, in the public realm, one’s intense feelings: we must ‘care’, we must ‘be concerned’, we must be ‘committed’. Unsurprisingly, this goes along with an immense indifference to consequences, to positive results or the lack thereof.”

These are not arcane arguments for political philosophers. They go to the heart of human progress and how we live. For example, as Australian Industry Group chief executive Heather Ridout pointed out last week, the union movement’s hardline push against flexibility clauses in new workplace agreements harks back to an era when “if a mother wanted to collect her kids from school early, they would have to ask everyone on the shop floor whether it was possible and get a collective vote on it”. Those who advocate social justice by centralising power necessarily diminish our individual freedom.

With remarkable relevance to today’s debates, William Simon, US treasury secretary under Richard Nixon, wrote in 1978 of the searing experience of the last great recession caused by the “promise-borrow-spend” programs of social engineers on both sides of politics. In A Time for Truth, Simon tracks a recession that deepened on the back of growing government intervention and stimulus spending. The conclusion was clear: “the country … taught the social engineers a lesson.”

More than 30 years later, history may repeat itself if we allow ourselves to be duped by those preaching a new order of social democracy little different from its forebears. The danger of replicating neo-Keynesian spending policies of the early 70s is we may end up with the disastrous stagflation – economic stagnation, high unemployment and inflation – that defined the middle to late 70s. With that in mind, it is worth repeating what Milton Friedman wrote in the preface to Simon’s book. Critical analysis of social democracy is needed so that “socialist snake oil no longer sells so readily”.


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