[Paleopsych] TLS: (John Gray) Robert Skidelsky: What's wrong with global capitalism?
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Sat Jun 18 23:29:57 UTC 2005
Robert Skidelsky: What's wrong with global capitalism?
The Times Literary Supplement, 98.3.27
FALSE DAWN. Delusions of global capitalism. John Gray. 240pp. Granta
Books. £17.99. - 1 86207 023 7
While reading John Gray's False Dawn, a diatribe against global
capitalism, I had to keep reminding myself that I was reviewing a
book, not a person. Gray's intellectual gyrations have become
legendary. I am told he was a socialist in the 1970s. He was a
Thatcherite in the 1980s. (The Iron Lady once said to me: "What ever
happened to John Gray? He used to be one of us.") Then he adopted the
fashionable communitarianism. Judging from his latest book, he is what
Marx would have called a "Reactionist" - with hope extinguished, but
with a lively apprehension of disaster. He plays each role with
passion and panache. But with so much here today, gone tomorrow, it is
hard to know how seriously to take his arguments.
These are very much hit-and-miss. Half-way through reading False Dawn,
an economist friend of mine exclaimed in exasperation "This is the
worst book I have ever read. In almost every sentence there is a
mistake, every statement is questionable." I would put it more
generously. For one thing, Gray can write. His prose crackles with
analytic energy. There are intermittent flashes of good sense. He says
things about the varieties of capitalist forms, and the requirements
for a civilized life, which are wise and true. He understands
perfectly well that our future may be neither paradisaical nor
hellish, but something in between. Then all of a sudden he goes off
the rails, leaving the reader with a violent feeling of resistance to
his exaggerations, distortions, and his whole intellectual
This is a great pity, because Gray is writing about a centrally
important subject. It has become almost a cliche to say that
globalization is reconnecting the last decade of the twentieth century
to the first decade, putting paid to the pathological and even benign
forms of statism which dominated the intervening years. As The
Economist quipped: "Communism was a long detour from capitalism to
capitalism." The question is whether the new globalism, based on
markets, will auto-destruct like the old globalism did.
A brief summary of Gray's thesis would go like this. Since the 1980s,
there has been a determined attempt by something called the
"Washington consensus" to impose free-market liberalism on the world.
The collapse of Communism created the illusion that America had "won"
the ideological war. It was an illusion, according to Gray, because
laissez-faire economics can no more be realized than can Communism.
They are twin stems of what he calls the "Western Enlightenment
project" - the belief that the world can be reshaped according to the
dictates of reason. Both are failed or failing utopias. Just as
Communism failed to realize the brotherhood of man, global capitalism
will fail to bring about universal harmony. It does not spawn a
"single" global economy but a congeries of rival, resentful, rancorous
national capitalisms which will become locked in a life-and-death
struggle. Today's regime of global markets, Gray tells us, will be
briefer than even the belle epoque of 1870 to 1914, since a regulatory
framework for the world's diverse economies "figures on no historical
or political agenda". He writes, "We stand on the brink of a tragic
epoch, in which anarchic market forces and shrinking natural resources
drag sovereign states into ever more dangerous rivalries. A deepening
international anarchy is the human prospect." One cannot get much
gloomier than that. In the attempt to interpret the post-Communist
world, Gray plays Jeremiah to Fukuyama's Pangloss.
Before discussing the nature and substance of Dr Gray's argument, let
me say a word about its auspices. Gray stands in a long line of
critics of capitalism. He does not add anything to Karl Marx's superb
passages on capitalism in the Communist Manifesto, published 150 years
ago. "The bourgeoisie", Marx wrote, cannot exist without constantly
revolutionizing the instruments of production, and thereby the
relations of production, and with them the whole relations of society.
Uninterrupted disturbance of all social conditions, everlasting
uncertainty and agitation distinguish the bourgeois era from all other
ones. All fixed, fast-frozen relations, with their train of ancient
and venerable prejudices and opinions, are swept away, all new formed
ones become antiquated before they can ossify. All that is solid melts
into air, all that is holy is profaned . . . .
This powerful caricature captures a likeness which we can all
recognize, namely the insatiable restlessness of capitalist
civilization. And Marx was equally prescient about its globalizing
propensities: "The need of a constantly expanding market for its
products chases the bourgeoisie over the whole surface of the globe."
A more direct borrowing is from The Great Transformation (1944) by
Karl Polanyi. Gray follows Polanyi in distinguishing between markets
"embedded" in social relations, which Polanyi saw as "natural" to
human society, and the attempt to create a "free" market system which
pulverizes all social relations. It is the latter which is utopian and
has to be "created by state coercion". Curiously, Gray omits the
essence of Polanyi's distinction between "social" and "free" markets.
"Social" markets are confined to goods, whereas the free-market system
incorporates the factors of production. It was the attempt to subject
land, labour and capital to the logic of buying and selling which, for
Polanyi, constituted the core of the nineteenth-century liberal
project; and the resistance to this attempt which eventually produced
the social-democratic welfare state. As John Gray tells it,
dismantling society's defences against free markets is at the heart of
the contemporary "neo-liberal" project.
Both Marx and Polanyi were optimists. But the consolation of optimism
is no longer possible for Gray. Capitalism does not pauperize the
worker as Marx thought it would, but constantly enlarges the numbers
of the affluent; more and more people and countries move up the income
ladder. So Marx's own terminus, the revolution, is cut off. Gray
reworks the Marxist categories in describing the delayering,
down-sizing effects of the new information technology: "The result is
a re-proletarianization of much of the industrial working class and
the de-bourgeoisification of what remains of the former middle
classes." But his is not a revolutionary scenario. It is capitalism,
not Communism, which abolishes classes. Since all global markets make
social democracy unviable, we are left with a world of disoriented
masses, ready to be mobilized under the banner of xenophobic
nationalism. The historical model for this sort of relapse is fascism.
The most obvious thing about this kind of argument is its excessively
abstract character. I once chaired a debate between Gray and the
Harvard economist Jeffrey Sachs, at which Gray accused Sachs (and his
kind) of ignoring the historical particularities of different
societies. But what struck me (and others) was that Gray was right up
in the air, whereas Sachs actually knew a great deal about the
different societies whose governments he had been advising. Like many
whose reverence for history and culture is essentially Olympian,
Gray's knowledge of the historical and cultural terrain is very
sketchy. For example, he implies that it was the stresses and strains
of capitalist civilization which brought about the destruction of the
first globalist "project" in 1914, without bothering to consider
whether autocratic rule in Germany, Austro-Hungary and Russia might
have had something to do with it. Those who argued that trade would
have a pacifying effect never neglected the importance of responsible
government. Today's world is much more democratic than that of 1914,
and I know of no case of democracies going to war with each other.
Gray's account of the dislocating effects of capitalist civilization
is also highly overwrought. The market system brings great benefits to
most of its participants, but it is an inherently difficult
discipline, which goes against deep-seated tribal instincts. The
possibility of anti-market movements is therefore always there. But
Gray fails to make a distinction, crucial to any sensible discussion
of this matter, between stress and instability. Indeed, he conflates
the two all the way through. Most people are fairly adaptable, and a
sizeable minority welcome challenges. They are also very adept in
preserving old forms of life in new conditions. What is lethal for a
market-based order is violent instability, because this severs the
connection between effort and reward. Keynes understood this better
than anyone, and it is an insight we need to regain - for example, in
our international monetary arrangements. The fluctuations of the
dollar, the yen and the yuan certainly contributed to East Asia's
financial crises. But a general rant does nothing for clear thinking.
Gray discusses the impact of free-market economics in various parts of
the world. His general conclusion is that they have produced, or
contributed to, social breakdown and rising inequality wherever they
have been tried. It is far from clear whether he attributes these
consequences to globalization per se, to new technologies, or to the
"intellectual fashion" for free markets, and what the relationship
between these three things might be.
On the one hand, we are told that globalization has created competing
capitalisms subject to a kind of Gresham's Law, with the bad driving
out the good. The paradigmatic "bad" economy is the United States.
Gray's hatred of American capitalism is visceral; free markets there
are apparently responsible for the policy of "mass incarceration" - a
phrase repeated many times with evident relish. At any rate, having
reproletarianized its own people through down-sizing, delayering and
other heinous practices, "American free markets work to undercut both
European and Asian social market economies", which are burdened with
social costs. What is it about America that drives everyone else down?
Gray argues that, "in the contest between free market economies and
social market systems, free markets are often superior in
productivity". He talks about American productivity "steadily rising".
Yet on the previous page he writes, "US employment has grown as fast
as it has partly because US productivity (he means "growth of
productivity") has been low - around half that of most European
countries". Elsewhere Gray claims that "the root cause of falling
wages and rising unemployment is the worldwide spread of the new
technology". He then states correctly that "wage rates in any economy
are determined by its domestic labour market, not by wage rates in
other countries". It is not possible to reconcile these various
assertions. If Gray were thinking clearly or honestly about these
things, he would be forced to admit that globalization has not had
much effect on patterns of domestic income distribution. Nor has it
been "global markets . . . which make social democracy unviable".
Globalization has nothing whatsoever to do with the crisis of the
welfare state. Rather, this crisis reflects "tax resistance", an
increased unwillingness to pay for social programmes by the average
taxpayer. Nowhere in this book is the important phenomenon of "tax
resistance" treated properly.
Gray's most serious mistake is to attribute to free-market policies
the pains and dislocations involved in admittedly often botched
attempts to escape from previously controlled economies experiencing
crisis or breakdown. This vitiates a large part of his discussion of
the effects of free-market capitalism in Russia, New Zealand and
Mexico. His account of post-Communist Russia, while factually
accurate, is almost worthless as interpretation, because he makes no
allowances for the extent to which the system had ceased to function
He states that a major shift in New Zealand's policy "may have been
unavoidable", but makes no mention of the stagnant and debt-ridden
state of the New Zealand economy when the reforms began fourteen years
earlier. The adjustment costs - worsened by poor sequencing of reforms
- were a by-product of liberalizing an economy which had become one of
the most over-regulated and inefficient in the Western world. Contrary
to Gray's assertion that "income inequalities increased in New Zealand
more than in any other western countries", the increase in income
inequality which occurred with rising unemployment has, in fact, been
arrested since the labour market was freed up in 1991 and unemployment
Similarly, the calamities which have befallen Mexican society are not
the consequence of the so-called "neo-liberal" project, but the
product of many years of state intervention in, and massive regulation
of, the Mexican economy, a "project" that was no longer sustainable by
1982. In particular, the number and type of state-owned industries
reached ridiculous proportions by the end of Lopez Portillo's regime.
Gray attributes the revolt of Chiapas to neo-liberalism. In fact, the
misery of this region was a direct consequence of decades, if not
centuries, of arbitrary government intervention.
It is not the individual mistakes or questionable interpretations
which are depressing but the cumulative effect of the whole. Hayek was
once asked why he didn't review Keynes's General Theory. There was no
point, he replied. "By the time I would have finished my review, he
would have changed his mind." In fact, Keynes did not change his mind.
But I hope John Gray will change his. He has a great contribution to
make - if only he can steer a steadier course.
Lord Skidelsky is Professor of Political Economy at the University of
Warwick and the author of The World After Communism: A polemic for our
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