Rather than re-create the past, a new social movement posture is desperately needed — one which, in the words of Melbourne University academic Kevin McDonald, embraces the emerging complexity (or “fluidarity”) of the present context. Far from the historical labour movement catch-cry of “touch one, touch all”, McDonald demonstrates how the raw fuel powering today’s social movements are increasingly individuals (especially within minorities) struggling to assert a coherent sense of self in an unstable, globalised world. There are already some promising examples of global movements venturing down this path and even some progressive trade unions that are beginning to break with the more recent past and rediscover a conflictive posture.

It is to these movements, not Kevin Rudd’s “social market”, that a society serious about overturning neoliberalism must ultimately turn.

To a large degree, most of this debate is highly ritualised. I thought Bernard Keane had a very interesting point to make today in a long Crikey piece where he argued that decision makers who are gleefully imposing a story or narrativising both events and their preferred solutions may be as much in the dark as the rest of us. The increased unpredictability of events, and of prescriptions as well as diagnoses in a time of crisis really foregrounds the artefactuality of sense-making work as people try to reduce uncertainty and simultaneously ensure that their preferred perspective becomes “common sense”. Aside from the really dire possibilities facing us all from a system which has precisely been characterised by distributed decision making and thus – by design – up until now resistant to centralised control, it’s been a fascinating study in both the sociology and social psychology of policy making.

It’s in no one’s interest, of course, to admit that they don’t quite know what is going on or that they’re frantically trying to impose a frame on the world economy for the intertwined purposes of politics and policy. It may be that we need different tools for understanding the social aspects of finance and market behaviour. It may also be that we need more research on exactly what drives “confidence” from a perspective which takes into account the fact that markets and investment decisions are far from random if driven by logics other than purely economic ones – what exactly is going on, for instance, when Geithner’s proposals send the Dow plummeting? It’s got to be both more complex and more interesting than the usual story (his presentation was poor, “investors”/”markets” were “spooked” by a “lack of detail” etc…)

One threshold such studies would need to overcome would be the notion that “the economy” itself is a reified sphere with perhaps only tenuous or tendential connections to the social and the cultural. Another would be the enforcing of the borders of explanation which are erected around events, and which often refer back to purportedly “natural” equilibria and explain far too much actual activity as in some way deviant. We need to re-embed the economic within the social, as both an analytical and a political project. As SocProf points out, Karl Polanyi can teach us how to do this. So I’d like to experiment a bit and characterise this post as a longish introduction to hers, which I’d now encourage you to read…

The only certainty that has emerged from this week is that by treating this as politics and policy as usual, Rudd has been utterly foolish. Anna Rose has an excellent summary of the scheme design itself. Anybody who thinks it should pass the Senate in its current shape is either being paid to say that, living in an unreality so loopy that I’ll drop out and have what they’re having dude, or never thought we would be able to get organised in time to do anything about the problem. And to the latter, I say screw you emo. Go home and listen to some whinging depressed crooner and let the adults get on with it. For the purposes of this post I’ll leave aside the question of whether, according to some deft Machiavellian logic it’s in Australia’s long term interests to have a scheme so riddled with loopholes, striving for such a pathetic target as to render it worthless in driving appropriate investment and behavioural change.

The Kyoto Protocol ratifying, Stolen Generation Apologising (don’t hear much about Teh Intervention these days, do we?), 2020 Summiting Kevin07 is a very distant memory now. We were expecting a fiscally conservative Kevin08, but this has translated into a blinkered and tawdry managerialism.

The White Paper epitomises this mentality, not just in substance, but in process. Consider, for example:
1) The release of the 800+ page, impenetrable tome of bureaucratese 10 days before Xmas
2) $130m in greenwash funding to advertise it during the silly season
3) The top down, lack of substantive public consultation outside ‘the submissions’.

This whole process is a damning indictment on the Canbureaucracy’s role in the praxis of government in our efforts to come to terms with the problem over the past 20 years – when the director of Toronto Conference declared “The time to act on these problems is now”. Few will remember the National Greenhouse Response of the Hawke era, the valuable discussion papers that emerged from the Australian Greenhouse Office in the late 1990s and numerous interventions at the state level. Of course, all of these hugely expensive processes are quickly forgotten by the myopic public sphere as we wait for CCS, a China+America deal, the end of the commodity boom, the end of the slowdown, Godot or whatever else the lobbyists, shills and emos pick as flavour of the month.

The political Realists in both the Green and Denialist/Emo camps have been focusing on the most obvious processes of politics: questions like ‘will it get through the Senate?’ ‘How much danger are Turnbull, Albo, Tanner and Plibersek in of losing their seat?’ But I think these sort of questions miss the real question of politics here, which is why the government is ostensibly driving for a single carbon price as the centrepiece of its policy at all?

The carbon price really is front and centre of the Canbureau’s response, with expanded Renewables Target and CCS bringing up the rear (excellent topics for later discussion). I took up the question of voluntary response and a secondary market with Blair Comley at the White Paper information session in Sydney on Wednesday. His response was basically: it’s more efficient for us to have a single carbon price. Now I understand the basic economic theory: allocate property rights, create the market structure with appopriate legislation = drive more abatement for less cost. But behind these are epistemological, sociological and essentially political questions about who has the resources, time and expertise to certify that, for example, soil carbon, fugitive emissions for coal mining, forestry plantations, brown coal burnt for power (( interesting aside – until very recently Loy Yang had no idea how much its emissions were – it just dug, shipped and burned ))

Loy Yang pit mine, Latrobe Valley, Vic. Photo credit: author’s own.

If the CPRS is a failure of governance, these processes behind building a form of equilibrium through a carbon price within the polity should be thought of as front and centre to politics rather than at the peripheries or simply a matter for scientists. Our experience with voluntary carbon markets to date should be instructive to policy makers on two fronts: firstly, concentrating on the supply side, the market for emissions reductions (at least when working according to textbooks) renders the uncertainties about the authenticity or permanence of the reductions as ‘risks’ and prices them accordingly. On the demand side, projects are valued by buyers according to very specific marketing criteria. What kind of story does this project tell? How can this story relate to my brand?

Bracketing out these questions of values and evaluation of the socio-technical nature of ‘emissions reductions’ from the regulatory market design process is setting it up for failure. Because in many ways, the White Paper represents the apotheosis of Neoliberal theory at a time when everyone is beginning to once again feel thoroughly alienated from claims that the ‘Free Market’ will liberate us. Witness in the White Paper:

• The rejection of any secondary market for voluntary emissions reductions because it would be ‘inefficient’. True in theory, but why not establish mechanisms to actually drive behavioural change explicitly? The price signal will be far too weak for this.
• The weird international linkages based on the assumption that if we throw our weight behind the CDM process it will somehow become less dodgy. The sheer idiocy of market-like (project based) mechanisms providing any kind of efficient transfer without clearly delinated and enforceable property rights should be a cause for considerable concern
• The horrendously inequitable EITE clauses effectively creating two carbon prices: Anyone who support this in its current uncapped form either has rocks in their head, is a mouthpiece of industry or too emo to take seriously. This creates a basket case culture of industry handouts which may prove extremely difficult to remove the trainer wheels from. Their carbon price is effectively zero because, with banking and borrowing clauses, they’ll be able to hedge their position effectively with the hope of getting a more sympathetic ear in Canberra down the track, deferring any effective decision-making.
• Provisions to keep coal fired power running under the auspices of ‘supply security’. What was wrong with Garnaut’s proposal to provide structural adjustment assistance to the effected communities? This is market fundamentalism in the form of the National Electricity Market whose sole, perverse efficiency is providing Kilowatt hours of power instead of what people actually need: energy services

This dialectic between the unleashing of market forces and the horror at their divisive social effects is the story of the Great Transformation; and I suspect the response to the White Paper we’re seeing unfold will demonstrate its explanatory power in much the same way as the EU ETS Phase I caused great cynicism amongst the population there. The difference is that we’ve allocated property rights but not backed them up with effective governance arrangements. They are treating emissions trading as a rolling series of experiments from which social and institutional learning should feed into each phase of the scheme design, we’re treating it as a problem with essentially a techno-economic fix. Any market will have winners or losers that emerge according to the rules written into its function.

So who are the winners and losers in the current proposal:

Winners:

1. The biggest winners are industry that gets over the line to qualify for EITE assistance, or has cooked their books sufficiently to get them there. Movements in commodity or currency prices will see them have a field day, generating permits for deviations from a historical baseline intended to drive change but simply creates a whole new raft of uncertainties
2. The big financiers and traders. We’re establishing a market, remember. ‘nuf said
3. Consultants. The f*ckin’ thing is 800+ pages of, often impenetrable bureaucratese.

Corresponding Losers:

1. Those suckers (us) who have to pay for their permits one way or another
2. The 900 odd medium sized firms who scraped into the NGER threshold but don’t qualify for EITE. Prepare to get taken to the cleaners by the big end of town, boys
3. Generalists/the public writ large/future generations. This is where the whole thing comes full circle and the challenge is to find avenues of engagement where people can link their actions to effective technological changes.

So far, these avenues appear to be (a) basically to buy permits through some kind of intermediary exchange (linked to solar panel purchase, for example) only if they will retire or bank without using official permits. This will push the permit price up, creating scarcity etc. Just pray we don’t hit the domestic price cap too quickly [edit: I should emphasise that I fully support community projects like putting solar on the surf club etc., but it must somehow incorporate the retirement of permits to be additional] (b) a bloody coup with the emergent carbon elites first against the wall (c) if you’re feeling adventurous, this kind of thing (d) exerting an unprecedented level of civil pressure on sitting members to reform this thing before it’s legislated.

Elsewhere: Guy Beres on Mr 5%, John Quiggin on PPPs, Deltoid: as long as we beat New Zealand.

Since September, I’ve been wading through far more reading matter than I’d ever imagined possible on economics and finance. Much of it has been, by necessity, somewhat ephemeral. However, it’s good to see some commentators coming out with something of a longer view.

Immanuel Wallerstein’s conclusion won’t be any surprise to anyone who’s been following his work:

We can assert with confidence that the present system cannot survive. What we cannot predict is which new order will be chosen to replace it, because it will be the result of an infinity of individual pressures. But sooner or later, a new system will be installed. This will not be a capitalist system but it may be far worse (even more polarizing and hierarchical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times.

As for our immediate short-run ad interim prospects, it is clear what is happening everywhere. We have been moving into a protectionist world (forget about so-called globalization). We have been moving into a much larger direct role of government in production. Even the United States and Great Britain are partially nationalizing the banks and the dying big industries. We are moving into populist government-led redistribution, which can take left-of-center social-democratic forms or far right authoritarian forms. And we are moving into acute social conflict within states, as everyone competes over the smaller pie. In the short-run, it is not, by and large, a pretty picture.

As I’ve previously commented, I’m not at all sure that he’s right that what we’re seeing is the final death throws of capitalism. But I do think he makes another very important point in his commentary:

The characteristics of a Kondratieff B-phase are well-known and match what the world-economy has been experiencing since the 1970s. Profit rates from productive activities go down, especially in those types of production that have been most profitable. Consequently, capitalists who wish to make really high levels of profit turn to the financial arena, engaging in what is basically speculation. Productive activities, in order not to become too unprofitable, tend to move from core zones to other parts of the world-system, trading lower transactions costs for lower personnel costs. This is why jobs have been disappearing from Detroit, Essen, and Nagoya and factories have been expanding in China, India, and Brazil.

As for the speculative bubbles, some people always make a lot of money in them. But speculative bubbles always burst, sooner or later. If one asks why this Kondratieff B-phase has lasted so long, it is because the powers that be – the U.S. Treasury and Federal Reserve Bank, the International Monetary Fund, and their collaborators in western Europe and Japan – have intervened in the market regularly and importantly – 1987 (stock market plunge), 1989 (savings-and-loan collapse), 1997 (East Asian financial fall), 1998 (Long Term Capital Management mismanagement), 2001-2002 (Enron) – to shore up the world-economy. They learned the lessons of previous Kondratieff B-phases, and the powers that be thought they could beat the system. But there are intrinsic limits to doing this. And we have now reached them, as Henry Paulson and Ben Bernanke are learning to their chagrin and probably amazement. This time, it will not be so easy, probably impossible, to avert the worst.

I think it’s incredibly important to underline the point made in the second paragraph of that extract. I feel like I’m sounding the same note over and over again when I’m arguing that what we’ve seen during the global financial crisis reveals the incapacity of ideology for understanding events. Dichotomies about states v. markets are nonsense. There are no “free markets”, except in the fervid imaginings of Hayek’s disciples. The bubbles which are now bursting simultaneously are to large degrees artefactual creations of state power – the self same mob – the Bernankes and the Paulsons of the world – who have now totally lost control of what’s occurring. It is just foolhardy to believe otherwise, and it also should signal that “state action” doesn’t necessarily equate to action in the public interest, another theme I believe has gone missing in action as folks on the left have rushed to claim some sort of revenge of socialism moment with strategies such as the TARP bailout.

It’s understandable that ideology continues to operate as a frame through which to view events which appear unprecedented and frightening, even when the events themselves show up its inability to provide understanding. In this context, LSE political economist Robert Wade’s analysis in the latest New Left Review is very instructive indeed:

Since the 1930s the non-communist world has experienced two shifts in international economic norms and rules substantial enough to be called ‘regime changes’. They were separated by an interval of roughly thirty years: the first regime, characterized by Keynesianism and governed by the international Bretton Woods arrangements, lasted from about 1945 to 1975; the second began after the breakdown of Bretton Woods, and prevailed until the First World debt crisis of 2007–08. This latter regime, known variously as neoliberalism, the Washington Consensus [1] or the globalization consensus, centred on the notion that all governments should liberalize, privatize, deregulate—prescriptions that have been so dominant at the level of global economic policy as to constitute, in John Stuart Mill’s phrase, ‘the deep slumber of a decided opinion’.

Neoliberal economics has powerful antibodies against evidence contrary to its way of seeing things. However, the current crisis may be severe enough to awaken economists from the ‘deep slumber of a decided opinion’, and render them more receptive to proof that the post-Cold War globalization consensus has strikingly weak empirical foundations.

[My emphasis.]

Wade’s article is well worth reading in full. Written on 7 October, it’s a relatively up to date analysis incorporating a historical view with a sound understanding of the current conjuncture. He’s less apocalyptic than Wallerstein, but I think well captures the actual significance of the global financial crisis as a turning point:

The shocks of the past year—another thirty years on from the last major shift—support the conjecture that we are witnessing a third regime change, propelled by a wholesale loss of confidence in the Anglo-American model of transactions-oriented capitalism and the neoliberal economics that legitimized it (and by the us’s loss of moral authority, now at rock bottom in much of the world). Governmental responses to the crisis further suggest that we have entered the second leg of Polanyi’s ‘double movement’, the recurrent pattern in capitalism whereby (to oversimplify) a regime of free markets and increasing commodification generates such suffering and displacement as to prompt attempts to impose closer regulation of markets and de-commodification (hence ‘embedded liberalism’). [3] The first leg of the current double movement was the long reign of neoliberalism and its globalization consensus. The second as yet has no name, and may turn out to be a period marked more by a lack of agreement than any new consensus.

Wade also emphasises something I wrote about in comments on a recent post:

The uk’s role in the crisis deserves emphasis, because contrary to conventional wisdom, the dynamics at its heart started there. The Thatcher government set out to attract financial business from New York by advertising London as a place where us firms could escape onerous domestic regulation. The government of Tony Blair and Chancellor Gordon Brown continued the strategy, leading Brown to boast that the uk had ‘not only light but limited regulation’. In response, political momentum grew in the us over the course of the 1990s to repeal the Depression-era Glass–Steagall act, which separated commercial from investment banking. Its repeal in 1999 produced a de facto financial liberalization, by facilitating an unrestrained growth of the unregulated shadow-banking system of hedge funds, private equity funds, mortgage brokers and the like. This shadow system then undertook financial operations which tied in the banks, and it was these that eventually brought the banks’ downfall.

Wade’s final suggestions about a reform of economic thought and global policy are also measured, stimulating and worth reading and discussing.

Have you noticed that every person suddenly knows everything there is to know about how the economy works? Wow, it’s all so simple.

Maybe there’s a point there, but not the one John Amato thinks he’s making. I’ve consistently been of the view that the economy should be a subject for civic and political discussion, and that we shouldn’t hold back because of the “not an economist!” cries that sometimes echo around the place. If one of the continuing problems with the US financial sector is the lack of transparency which is causing the crisis of solvency – because no one still knows where all the securitised bodies are buried – so too a bit of transparency in demystifying the fiscal arcana whose complexity was part of the reason for this mess should be welcomed.

So, with that in mind, I wanted to share some links (from econobloggers and non-economists both) I’ve found particularly insightful and interesting over the last few days.

First, Tyler Cowan’s take at Marginal Revolution is succinct and informative.

Secondly there’s no lack of alternative proposals to the TARP bailout around in the blogosphere. I haven’t reviewed all of these carefully, and there are a lot more out there, but there are some samples at Crooks & Liars and Boztopia. It’s good to see some policy thinking going on among online activists as well as political pointscoring. That leads me to my next theme – which is exemplified in this post from Ian Welsh at Firedoglake – the indictment of the neoliberal consensus for what’s gone down and a call for a new New Deal. FDR’s getting more than a few hat tips at the moment, and Barack Obama has certainly made the first part of the case, and it may not be entirely wishful thinking to expect an Obama administration – it one eventuates – to make a genuine attempt to reshape the governing structures and logics of the American economy. The enormous bill that’s being presented to the taxpayers may provide the political opening.

Publius at Obsidian Wings also argues for the possibility of a “Progressive Moment”.

Of course, it’s also possible that an Obama administration would be Clintonomics as usual. We’ll see, but the discussion itself will hopefully build some momentum.

It’s hard to see how the immiseration of the American middle class can be permitted to continue (I don’t expect any real action from the Democratic Party on actual poverty) for another four years, if the culture wars card fails to trump economics.

On a somewhat more theoretical note, it’s also pleasing to see attention being paid to the work of Karl Polanyi and his work back in the 1940s on the constructedness of markets. At the same site, Saskia Sassen joins the new New Deal chorus and calls for a refocusing of policy on the real economy.