Tuesday, April 21, 2009

The Tanner Thesis - Part III

I'm not the only person to have seen the Tanner blog and commented on it admiringly, as Christian Kerr noted in yesterday's Oz;

Finance Minister Lindsay Tanner, one of the Government's sharpest minds, published a predictably thoughtful essay on the global financial crisis on a Fairfax blog last week. It shows up his boss's effort. By and large it prefers fact and reason to polemic and hyperbole.

I've covered Tanner's thoughtful contributions on economics, but he concluded with a contribution on politics. He asked;

And what does the recovery from economic crisis mean for the ideological contours which frame the political contest in developed countries?

He goes on to claim that politics since the Industrial Revolution has all been about the group versus the individual, with a political cleavage between a collectivist party and an individualist party. A student of party politics would have something to say about the actual migration of the concept of party as something based in philosophy and mass movements to the more modern version of parties motivated by power and replicating the Hotelling ice cream sellers (two ice-cream sellers on a beach will both site themselves in the middle).

There is, however, also something wrong in the depiction that at all times this was a battle between unified collectivists and unified individualists. Indeed at the philosophical and political level it is actually easier to see the history as made up of a very long period whre there was one strong philosophy against which there was an array of opposition, followed by a point at which this switched. In this conception the collectivist philosophy dominated from the late eighteenth century as the one intellectual idea and there was arraigned against it a coalition of philosophies including liberalism and strict conservatism. In the late nineteenth century this resulted in some odd occurrences such as the Tories being the ones who extended the franchise because they had more at risk from a collectivist revolution.

In the Australian context the merger of the Free Traders and Protectionists was motivated by the need to create an anti-Labor position. The early Liberals (Deakin) and the latter Liberals (Menzies) distinguished themselves by how much of the collectivist agenda they actually accepted to ensure stability rather than how much of an individualist agenda they pursued.

But events in the middle of the twentieth century brought about a significant shift. Firstly the ongoing divisions within the collectivists between the revolutionary and democratic wings took their toll on the collectivist position. At the same time the events in Europe inspired a re-examination of the role of the state as documented in Hayek's The Road to Surfdom which was a rejection of state control (both left and right) not an attack of collectivism itself.

However, the fractured position of the collectivists and the set of ideas that became attached to the Hayek warnings led to the development of the modern individualist philosophy. This went far beyong classical liberalism and included elements of Ayn Rand's libertarianism, and picked up a new collection of economic theorists including Alan Greenspan and Milton Friedman.

Most significantly from the mid 1970s on the dominant intellectual position was the individualist position and the rest fell into an anti-individualist camp, but even when that modern left came to power (Hawke/Keating) they distinguished themselves by how much of the individualist agenda they implemented (technically more than the Fraser/Howard and Howard/Costello eras).

In his book The Wrecking Crew Thomas Frank gives a good outline of the positive stance of the new era individualists, and his explanation of the high deficits from the Bush administration is that it is merely an extension of defunding the left.

Tanner thinks the absence of the communist bogey has forced the right to be more populist. It is probably more reasonable to pursue the position of John Rawlston saul that the depth of intellectual discussion on policy has escaped the capacity of the voter to analyse and hence has resulted in campaigning by slogans. But this generalisation seems to be an exercise in romanticising the past. While the early socialists were great pamphlateers the mob in the streets were mostly there to support a slogan.

The only reason why a move from populism seems to be important now is because of the sense of crisis, and people respond more to someone who tyakes a crisis seriously rather than one who takes it glibbly. Aspirational slogans are out, but the message that "we are in a crisis and we are safe hands" is still mrely populist.

Tanner under the funky heading of "Gov 2.0" suggests that;

The script for the new accommodation between governments and markets is yet to be written. The global recession is a crucial turning point. Just as the Great Depression signalled the end of laissez-faire economics in the industrial era, the current crisis will spell the end of its modern equivalent.

If there is a new script it is the one that was mentioned in Part I, the choice isn't between Government or markets it is only about what Governments have to do to make markets work. In the end making markets work also means adjusting for equity affects because without the adjustment you get various kkinds of social collapse if not outright revolution.

This is either Gov about 5.1, or it remains political theory 101. But the defining line in the last great philosophical shift was the war not the depression (though on one reading the war itselfmay not have happened without the depression).

As Tanner himself notes "Nassim Nicholas Taleb convincingly demolishes the modern conceit that we can accurately predict and manipulate the future." We can't really know if this crisis is a defining ine or not...yet.

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