first came across John Gray when I was
an undergraduate at Oxford. In those days (late 1970s) he
was very much part of the 'New Right' movement, but he has
since recanted and is now one of the New Right's most formidable
opponents. This book is a case in point. Unmistakably the
political tone of Gray's writing and thinking is high-Tory.
In keeping with this he brackets the current attempt at imposing
free-market capitalism upon the world, with the prior attempt
to foist Soviet-style communism on the hapless peoples of
Eastern Europe and South East Asia.
Strange as it may seem these two attempts at global social
engineering have the same roots in the Enlightenment thinking
of a previous age. Socialism (albeit in its deformed Stalinist
form) is merely the flip side of liberalism. Of course such
Utopian projects were and are bound to fail. He argues: 'What
Utopias have in common is more fundamental than their differences.
In their cult of reason and efficiency, their ignorance and
their contempt for the ways of life they consign to poverty
or extinction, they embody the same rationalist hubris and
cultural imperialism that have marked the central traditions
of Enlightenment thinking throughout its history.'
Such sentiments might have come straight from Edmund Burke
or Thomas Carlyle. But this should not be taken as an implied
criticism of Gray. High-Tory arguments are cogent enough precisely
because their central hypothesis - viz., human imperfectibility
- is confirmed in everyday lived experience. It is indeed
a difficult task to argue against such a bleak view of the
human condition when almost every positive idea which has
been tried during the twentieth century has ended in failure
- partial or total.
Writing in a style which is both lucid and readable Gray
situates his arguments historically and in so doing exposes
the utter provincialism of New Right ideology. It is axiomatic
that the ideas which are associated with free-markets, globalisation,
and so forth, now enjoy a regional if not global hegemony:
from the USA to New Zealand, from the UK to Russia. But these
theories are wretched artefacts; nothing less than an intellectual
and academic disgrace; ideological fantasies of the most crude
and ahistorical kind. One by one Gray demolishes these myths.
Specification I. The free-market is natural and conforms
to human nature. Gray writes. 'The laissez-faire policies...
in mid -19th century England were based upon the theory that
market freedoms are natural and political restraints on markets
are artificial. The truth is that free-markets are creatures
of state power and persist only so long as the state is able
to prevent human needs for security and the control of economic
risk from finding expression. Encumbered markets are the norm
is every society, whereas free-markets are a product of artifice,
design and political coercion... The free-market is not pace
the New Right a gift of social evolution. It is a by-product
of social engineering and unyielding political will. It was
feasible during the 19th century only because... functioning
democratic institutions were lacking.'
Specification II. All societies are converging towards
the American free-market model and we have arrived at the
end of history. This nonsense is given short shrift by the
author. 'To think that history would end because the conflict
between ephemeral Enlightenment ideologies - liberalism and
socialism - had come to a close exhibits a parochialism that
is hard to credit. It is the telling mark of intellectual
and political life toward the end of the century that such
absurd speculation could ever have seemed credible.'
Specification III. John Kenneth Galbraith's notion
of 'The Culture of Contentment.' In American parlance - strictly
for the birds. The Galbraithian view of a largely contented
US polity in which a minority underclass are an unfortunately
excluded segment may have been true during the 1980s, but
cannot be sustained in contemporary America. Here in possibly
the best and most chilling chapter of the book, Gray offers
us a glimpse of the new 'civilisation' of actually existing
free-market capitalism and one possibility of our own future
The New Deal tradition which began with Roosevelt prior to
World War II carried on without any break up until the Presidency
of Jimmy Carter in the late 70s. The fact that two Presidents
- Eisenhower and Nixon - were Republican did not shift the
consensus. It was Nixon after all who once declared 'We are
all Keynesians now.'
During this period American political life was dominated
by the East Coast liberal elites and Southern Dixiecrats.
The New Deal consensus was firmly entrenched in both the thinking
and institutions of pre and post-war American: Morganthau's
Treasury Department and the 'Fed'. The election of Ronald
Reagan in 1980 changed all of this. The neo-conservative ascendancy
in the US began with Reagan eerily in parallel with the neo-liberal
rise of Thatcher in the UK. This triumph of Wall Street over
Washington meant that along with the UK , the US would be
the first testing ground and flagship of the post-New Deal
order. The results have been devastating: 'To think of late
20th century America as a culture of contentment is anachronistic.
America today is not a society in which an affluent majority
looks on with complacent disdain at an underclass mired hopelessly
in poverty and exclusion. It is a society in which anxiety
pervades the majority. For most Americans the ledge of security
on which they live has never been so narrow ... America has
become a divided society in which an anxious majority is wedged
between an underclass that has no hope and an over-class that
denies any civic obligations.'
Additionally, the post-modern anarcho-capitalisms - the US
and Russia - which militantly eschew the welfare state end
up with a repressive penal-police state. In Gray's terms the
USA has become an 'incarceration' state. By the end of 1994
some 5 million Americans were under some type of legal restraint.
According to official figures around 1.5 million were in jail:
a rate of 373:100,000. This compares with a rate of 103:100,000
when Reagan was first elected President in 1980.At the start
of 1997 approximately 1 in 50 adult American males were behind
bars and about 1 in 20 was on parole or probation. This is
ten times the rate in European countries.
Other classic neo-liberal hypotheses - embourgeoisiement,
culture of poverty/dependency - receive similar treatment.
For this we owe Gray a debt of gratitude.
Having said this, however, some of Gray's arguments are surprisingly
crude and deterministic. He seems, for example, to share the
commonly held view that the process of globalisation has reached
a point of unstoppable momentum; social democracy, protectionism,
Rhineland capitalism, have all been rendered obsolete by this
The globalisation juggernaut will continue to flatten everything
in its path. Such views, bearing as they do a strong resemblance
to mechanistic Marxism, are usually associated with neo-liberal
ideologues, or simply repeated parrot fashion by Economist
readers who don't know any better. It is almost as if Gray
is falling victim to those ideas which are the very target
of his polemic.
He argues that purely national responses to globalisation
in the form of Keynesian deficit financing and full employment
policies cannot work in the global competitive environment
and must now be considered defunct. Well this is hardly new.
We have known this since the ill-fated Mitterrand experiment
in the early 80s. But it may well be the case that within
a regional trading and currency bloc - the EU - it would be
possible to construct institutional and monetary bulwarks
against global economic and financial pressures.
Gray seems to imagine that social-democracy is impossible
because global bond markets will view such a development askance:
'... an integrated EU equipped with a single currency and
fiscal policy could not escape (my emphasis) the consequences
of competition with highly educated, low-wage workforces that
European reunification and Asian industrialisation have forced
on it... unregulated world currency markets with a chronic
allergy to policies of job-creation through public borrowing
will sell the European currency and provoke a crisis... European
social-democracy has been removed from the agenda of history.'
So there we are: game, set and match to the forex and bond
dealers. I suppose that we should all become post-modern aesthetes
from now on ! No, I don't think so. The strength and power
of the globalisation leviathan seems exaggerated. 'A colossus
with feet of clay' as Lenin once said of imperialism. In addition
if we examine in greater detail the globalisation hypothesis
we will see that the term itself is one of the great misnomers
of contemporary political economy. In fact some 3/4 of trade
and investment (direct and portfolio)as well as currency speculation
takes place between the 'Triad' of developed industrial blocs:
NAFTA, EU and East Asia. Whilst most of the centre-left and
left focus on sweat shops in low-wage venues, multinational
capital avoids really low-wage production sites and also avoids
investing in most developing countries. Nearly 2/3 of the
world's population concentrated in the underdeveloped world
is written off as far as foreign investment is concerned.
Furthermore, within the 'Triad' most trade and investment
is intra-regional. Most of Britain's trade and investment
is with the EU. This hardly constitutes a globalised international
economy; 'Triadisation' might be a more apposite description.
The regionalised nature of the new International political
economy means the EU is in a position to become an autarchic
regional economic and currency bloc.
This may not be to everyone's liking, and may be waved aside
as fantastic by others but it does demonstrate that alternatives
to globalisation exist; political will can prevail over particular
historical trends (which in any case are nothing more than
the expression of other prior political choices). Western
Europe can escape, just as Japan thumbed its nose at
GATT (now the World Trade Organisation - WTO) since the war
and in so doing escaped the baleful consequences of the free-market
by practising protectionism. A social-democratic Europe, perforce
protectionist, is a possibility.
It is also worth noting that far from being irresistible,
footloose speculative capital can be faced down. For even
with an open European economy and financial system it is by
no means inevitable that the cosmopolitan money men will always
get their own way. George Soros and his pals may have made
a pile and wrecked European Monetary Union when they forced
sterling and the lira out of the ERM, but they came a cropper
when they tried it on with the French franc a short time later.
In a similar manner the Multilateral Agreement on Investment
MAI has been successfully stymied by concerted political opposition.
All of which suggests that history is an outcome of political
will and conflict rather than some unstoppable natural process.
Gray seems prone to make too many of these types of assertions
and begs a number of questions. In Chapter 4 'A New Gresham's
Law' he argues that deregulated market systems fatally undermine
regulated social market economies. Deregulated firms and economies
have cost advantages which cannot be matched by social-market
economies. One example is paying for environmental costs.
'A global free-market operates to externalise costs that
better (social-market) regimes have internalised. In environmentally
sensitive economies tax and regulatory policy is designed
so that firms are required to pay for the costs their activities
impose on societies and the natural world. This has long been
the case in continental Europe. Global free-markets put heavy
pressure on such policies. Goods produced by environmentally
accountable firms cost more than similar goods produced by
enterprises that are at liberty to pollute.'
This is of course a non-sequitur; but the logic is
clear enough. What is true of pollution costs is also true
of other costs; health, holidays, social insurance and so
forth. Thus the sweatshop is intrinsically more efficient
- in costs terms - than regulated capitalism; bad capitalism
will therefore drive out good capitalism.
This view however is out of kilter with the facts of the
situation. For bad capitalism is riven with systemic weaknesses
which result in inefficiencies, including cost inefficiencies.
What might be regarded as factor advantages - low-wages, low
social overheads - can and do become factor disadvantages
in the sense that the 'bad' capitalist has no incentive to
upgrade their physical and human capital and in so doing in
crease the productivity level and reduce unit labour costs.
Free-market deregulated economies are almost always low productivity
economies. This is because poor investment performance results
precisely from a low-wage, equity dominated system, and predictably,
low investment results in low productivity and economic decline.
Low wages will also tend to restrict the level of aggregate
demand forcing the economy to operate below full (optimum)
capacity which again will force up unit costs. Deregulated
economies - UK, US - both have poor investment and productivity
records and both have been in long-run decline. Both also
have long-term and chronic balance of payments problems which
are an indubitable indicator that both are simply uncompetitive
on world markets. The Anglo-American trade deficits are mirrored
by Japan and Germany's trade surpluses.
In the last contest between laissez-faire and regulated capitalism
- laissez-faire lost. This is not to say that it will be the
same this time around. Maybe, maybe not. In politics anything
is possible. It is just that it seems strange that Gray at
times argues in a style redolent of 'historical inevitability'
and seems sometimes mesmerised by the apparent power and inexorable
nature of the new global leviathan. Very odd for a high-Tory.
Theory should be subordinated to facts and not the other way
*A False Dawn: The Delusions of Global Capitalism, John Gray,
Granta Books £17.99