The Reform Club, Manchester. Election Time. c. 1890. Source: Club-Land, 85.
Today we discuss: Reform Liberalism.
1. Summary by Jose Ramos:
“In sharp contrast to the alternative development discourse, which seemed to have been swept aside by the onrush of ‘globalisation’, the highest profile advocates for an alternative globalisation do not seek comprehensive social change or transformation, but rather a reform of existing features of the neoliberal system, and can thus be considered ‘reform liberals’. For Scholte reformism seeks modest change which shifts the emphasis from economic development to socially oriented public policies through sub-state, state and supra-state mechanisms (Scholte, 2000, pp. 284-285).
Mittelman distinguishes between centrist neo-liberalism and reform neo-liberalism. Centrist Neo-liberalism no longer advocates one model (such as the Washington Consensus) for each and every country. It also acknowledges that globalisation creates winners and losers, and marginalises some groups, and accepts a role for the state in the provision of services. However, like orthodox neo-liberalism, it still argues that economic integration produces greater prosperity overall (Mittelman, 2004b, p. 50). Mittelman sees this as the current view of the World Bank.
Reform neo-liberalism, represented for example through the work of Stiglitz, Sachs, Soros and Krugman, takes issue with centrist neo-liberalism and the institutions that convey these ideas, arguing that, overall, global economic integration does not automatically lead to prosperity (Krugman, 1996; Sachs, 2005; Soros, 1998 ; Stiglitz, 2002). These authors argue for a general need to reform global institutions like the IMF and World Bank to make them more accountable and transparent, and to create mechanism that can moderate the excesses of the global system (Mittelman, 2004b, p. 51). Another variant on reform neo-liberalism might be considered the concept of the Third Way, popularised by Giddens (2003). As well, even though Friedman is often vilified by the left for pioneering neo-liberalism through the Chicago School of Economics, he later came to criticise features of the operation of the global economic system (Mittelman, 2000, p. 233).
In many respects reform neo-liberalists trace their lineage to Keynesianism, or more broadly to an approach which believes that economies and markets should be regulated, taxes should be (somewhat) re-distributive, and governments should be (somewhat) interventionist in staving off economic problems that lead to social ills, and to promote economic policies for social goods. In its simplest form, markets don’t work well left completely to their own devises, and require smart policy interventions for markets to be at the service of society, and not the other way around (Stiglitz, 2002, p. 11). Stiglitz is the clearest example of this lineage. In his version of economic development, key Bretton Woods institutions like the IMF and WB were initially conceived with Keynesian assumptions, or as Stiglitz argues: ‘The IMF was founded on the belief that there was a need for collective action at the global level for economic stability…’ (Stiglitz, 2002, p. 12). In his view the IMF was created to prevent the possibility of another great depression, by reducing the risk that countries would fall into depressions and later protectionism (precipitating a domino effect and global depression), by providing support as liquidity to stimulate aggregate demand, and to boost employment (Stiglitz, 2002, p. 12). As well, the focus of the WB was officially the eradication of poverty, and WB development projects were initially conceived in this light.
As Stiglitz argues, with the elections of the Thatcher and Reagan administrations in the UK and US, the policy orientation within these institutions was radically altered from a Keynesian model to a neo-liberal one. The key feature of the neo-liberal approach was structural adjustment programs (SAPs), jointly promoted by both the World Bank and International Monetary Fund. SAP ‘conditionalities’ meant that developing countries that wanted WB support were required to accept IMF conditions on loans. SAPs required developing countries to make structural adjustments to their national economic governance, by lowering trade barriers, slashing government spending, (with the goal of eliminating government debt through strict fiscal policy). The WB and IMF became instruments for integrating economically weaker and smaller developing countries into a free market trade model, what came to be known as economic globalisation (Stiglitz, 2002, pp. 13-14).
The key ontological assumptions within reform neo-liberalism reflect a mix of classical economic assumptions together with Keynesian ones, in the changing context of globalisation. Markets are still seen as fundamental, something that cannot and should not be fundamentally tampered with. Sachs, before his make-over as a ‘Professor of Sustainable Development’ at Colombia University, was best known for his role in introducing ‘shock therapy’ capitalism into Latin America (Bolivia), Eastern Europe and Russia, which led to societal disintegration, anarcho-capitalism and the rise of the ‘oligarches’ (Gray, 1998 pp. 144-145). Friedman’s analysis of Soviet society, for example, provided the argument that the Soviet Union survived as long as it did because black markets emerged out of necessity to do what the state had outlawed. Markets are not social constructs, they are an intrinsic feature of any society (Friedman, 1980, p. 10). As well Stiglitz may be highly critical of the functioning of global economic institutions, and may propose reform of these institutions, but economic competition is still central, and ‘the agenda is to stabilise global capitalism’ (Mittelman, 2004b, p. 52). Along with functioning markets comes economic liberalism, the liberty of individuals to make economic decisions. The Schumpeterian engine of transformation within economic liberalism rests upon this ‘creative-destruction’ brought about by human inventiveness and entrepreneurialism, the ability to harness scientific and technological developments in bringing forth economic innovation (Harris, 2009, p. 412).
Reform liberalism includes a variety of economic perspectives (Keynesian and post Keynesian), which are highly specialised areas of training, largely based on quantitative research, but resting philosophically on liberalism. There can be no doubt that it is a place for experts only. Krugman, for example, reserves nothing but distain for what he considers ‘pop’ economists (Krugman, 1996). For him, non-economists are meant to be seen and not heard. Stiglitz expresses a greater degree of openness through his Initiative for Policy Dialogue, which brings together social scientists from around the world to discuss policy alternatives (Mittelman, 2004b, p. 51). Overall economic decisions are too fragile and important to leave to the market alone, or in the hands of ordinary people, although they must include the value of people’s own micro-enterprise successes and failures.
As the expert orientation of this group might indicate, agency resides in economic and social science expertise, in the reform or innovation of institutions, and the development of policies that can regulate and control economies, and deliver better social outcomes. Soros advocates for reforming the very finance system he profited from (Soros, 2000), as well as supporting political democratisation through his Open Society Institute. There is also a large role for aid, to deliver programs for the poor parts of the world, for example by supporting the UN Millennium Development Goals. Corporate social responsibility can also be seen as a key avenue for change (Collier, 2005), an extension of this is seen through the UN Global Compact despite its contradictions (Capdevila, 2008 ). The importance of economic, or financial contributions, be they individual, corporate or national, are emphasised, taking to the streets in protest, and the role of people’s movements are largely ignored.
One criticism is that the reformist goals of this group do not challenge the status of global capitalism as a system, but rather (re)stabilise it through addressing the concerns that Robinson and Sklair argue are central to the crisis of capitalism, class polarisation (the exploitation of the majority of the world’s peoples), and the destruction of the environment (Robinson, 2005b, p. 14; Sklair, 2005 p. 55). Capitalist globalisation is still the future, and is still expected to produce shocks along the way, but better policies to regulate capital and taxes for re-distributive justice through aid can alleviate extreme poverty. The Millennium Development Goals (MDGs) are a key expression of efforts to address extreme poverty through aid. Unfortunately the goal is not the end of poverty itself. ‘Sustainable development’ is the vision, by balancing economic concerns with environmental ones, but does not challenging the underlying causes of our eco-social crisis.
2. First P2P Commentary by Michel Bauwens
“In terms of spatial perspective, it would seem to me that reform liberalism takes globalization as a given, and wants to merely manage it. In contrast, I would argue that peer to peer distinguishes between the material aspect of globalization, which is subject to a severe resource and environmental crisis; and the immaterial, cultural, aspects of globalization, and especially the possibility of global cooperation, as a value to be maintained. Therefore it would seem to me that a p2p attitude has a strong focus on ‘smart material relocalization’, (though not necessarily across the board, but rather following the principle of subsidiarity or ‘right level’) out of a logic of sustainability, and used on the new possibilities of distributed manufacturing, while maintaining global cooperation through shared IP, i.e. global social, cultural and scientific cooperation through knowledge, code and design commons. Reform liberalism recognizes the reality of globalization, but absolutizes it.
Reform perspectives are generally based on constant improvement, and they work well in times of expanding economies, expansive and more just social contracts, i.e. when the pie is growing. However, the big danger in times of shrinking pies, is that reformers can become co-responsible for policies of contraction and austerity, and are not challenging the system in radical enough ways. By contrast, a p2p perspective would in my view adapt its proposals by recognizing the opportunities for radicalisation in a downturn, as well as the possibilities for non-linear historical jumps.
In my own interpretation, a p2p perspective looks at interlocking cycles; apart from the long wave Kondratieff cycle, which ended in a systemic shock in 2008; it recognizes a deeper cycle of civilisational decay due to the unsustainability of the present system. If you take into account only the first cycle, then after a period of hardship, it is possible to imagine a new green-capitalist wave that would also strongly incorporate p2p values; however, we recognize that this scenario may be complicated by the deeper logic of the sustainability crisis. Therefore, transformation has to go beyond the mere reorganization necessary for a new Kondratieff cycle, but needs to preserve and strenghten enough post-capitalist elements so that the transformation can go deeper.
However, there are many green-capitalist measures that may be of use in a sustainability transition, and p2p social forces can support those parts of the agenda, which have a maximum transformative potential in terms of post-capitalist practices. P2P also challenges the ‘expert-based’ agenda, and stress much wider participation at all levels of governance.”
3. Response by Jose Ramos
Reform liberalism is a universalising approach and herein lies its strengths and weaknesses. The post war contract ushered in by Keynesian-ism was meant to salvage a global economy from the threat of economic isolationism and post-colonial dependency economics. GATT was designed to provide a slow but inexorable liberalising process. For this group economic globalization is both an act of creation and regulation. While this group disagrees with the excesses, they also agree on the benefits of the global market.
I believe the strengths of this perspective need to be fully valued, even though they might be seen to be complicit in societal decline through managerial austerity and paralysis.
The institutions of the global market have become vast dynamic systems for pooling capital, with the capacity to drive new industries in far flung regions. Much of the green capital is driven from within the structures of this system: a global factory, massive capital pools, sprawling markets. Yes the anonymity of the capital and its byproducts is often destructive, but it is powerful and we must analyse the nature of this power.
My question here is whether 1) the P2P perspective keeps a space open for a reformed capitalism, and 2) can it ever hope to approximate the “triumphs” of the liberal system (global factory, capital investment pools, markets based on abstract value). I know that P2P displays the seeds of such possibilities, but we must take in fully the lessons and achievements of the present system – scale, universality, the abstract power of currency, etc. You partly answer this by making the distinction between immaterial (global) and material (re-localized). But I’m not convinced one of the key engines of economic development, (capital formation), is fully appreciated.
I do agree that liberal reformers have no answer to decreasing energy supplies and potentially eminent negative growth scenarios (contraction). In a sense growth must now be mined out of the excesses of the existing system, and P2P has much to offer here. Can P2P be conceived as an engine of growth then, an ally to the reform agenda from within? Or is it outside watching and waiting for the system to die?
In anticipation of GFCII, or some other wildcard outlier which has the potential to destroy the foundations of the liberal system, I’m interested in the extent to which P2P offers survivability through community based cooperation and extended integration into other P2P and non-P2P systems. Does P2P prop up and support a reform liberal (green) capitalism in decline, does it offer people a transition strategy between an end to liberalism and the next, or does it do neither?
4. Final Response by Michel Bauwens
Dear Jose,
I’m reacting to your specific paragraphs.
You write:
– “My question here is whether 1) the P2P perspective keeps a space open for a reformed capitalism, and 2) can it ever hope to approximate the “triumphs” of the liberal system (global factory, capital investment pools, markets based on abstract value). I know that P2P displays the seeds of such possibilities, but we must take in fully the lessons and achievements of the present system – scale, universality, the abstract power of currency, etc. You partly answer this by making the distinction between immaterial (global) and material (re-localized). But I’m not convinced one of the key engines of economic development, (capital formation), is fully appreciated”.
Does the p2p p2p perspective keep the space open for a reformed capitalism?
I have three answers to that:
1) the first one is that p2p (shorthand for: my vision on p2p) is adaptive, and takes a meliorist approach. This means that if there is a possibility for a improved and reformed capitalism, that continues to make progress on a number of fields related to social justice and human empowerment, then that is quite acceptable, if we are not utopians expecting the immediate emergence of a classless society.
2) However, there is an add-on to that: is it really possible to have an infinite growth system, based on compound interest and other factors, within a limited natural environment. If that is indeed capitalism, then it is not possible in the long run to have a reformed capitalism, though I do believe that it is in the realm of possibilities to have a new Kondratieff wave based on a reformed capitalism that integrates ‘green’ and ‘p2p’ aspects, but I see that only as temporary and leading to a crisis at a later time.
3) I think it is imperative to distinguish capitalism from the more generic market mechanisms. I’m in favour of a pluralist economy, centered around the commons, under supportive collective conditions of a Partner state, but also with a vibrant private sector, a ‘reformed market’ as it were. However, because it would be based on distributed ownership, monetary transformation, the core of commons entities etc… it would not be a capitalism.
I’m very appreciative of your concern regarding capital. I see two concurring developments. One is the ongoing democratization of the state, despite its current crisis, i.e. from authoritarian absolutist Ancient Regime structures, to a democracy of proprietors, to universal suffrage, the insertion of NGO’s and civil society associations in the 60s etc .. Regarding the state, we can advocate a further deepening of participative structures ..
Similarly with capital formation, we see a tendency towards distribution, monopolistic ownership structures moved to shareholder structures dominated by pension funds (U.S.), and now, we are adding distributed mechanisms such as social lending, crowdfunding, etc… These p2p distributed capital structures do not fully abolish the previous structures, but augment them. I believe that by combining distributed manufacturing (the personal fabricators, fablab, maker machines united around shared design communities), combined with distributed ownership models that go beyond shareholding to citizen ownership, can actually improve capital allocation mechanisms.
You also write:
– Can P2P be conceived as an engine of growth then, an ally to the reform agenda from within? Or is it outside watching and waiting for the system to die? In anticipation of GFCII, or some other wildcard outlier which has the potential to destroy the foundations of the liberal system, I’m interested in the extent to which P2P offers survivability through community based cooperation and extended integration into other P2P and non-P2P systems. Does P2P prop up and support a reform liberal (green) capitalism in decline, does it offer people a transition strategy between an end to liberalism and the next, or does it do neither?
I personally believe that the era of quantitative growth is over, but can be replaced by qualitative growth, under the aegis of a steady state economy, and perhaps some necessary measures of degrowth, but which can be compensated by well-being policies. I believe it will be possible to thrive under sufficiency conditions. I take a very special position to your very last question: is it inside or outside the present system. I actually argue that it can be both. That, just as proto-feudal structures (coloni) strengthened the temporary survival of the Roman system in crisis, and proto-capitalist formations strengthened the feudal system in crisis, peer production mechanisms can strengthen a reformed capitalism but at the same time build the seeds of its ulterior transformation. To achieve this we need an attitude that is not centered on the enemy, i.e. the abolishing of capitalism, but rather a constant engagement with the separate interests of the peer producers, i.e. we take what we can within capitalism, strengthening alternative social logics, and we strive for the optimally possible social contract under post-capitalism. What I see and that few people in the classic left can appreciate, is that the co-existence of p2p with capitalism is not a zero sum game, i.e. an advantage of capitalism does not necessarily mean a negative for peer production. It ‘can’ be, but doesn’t have to be, and each and every social compact is determined by social struggle and the intelligence of peer producing communities that are guarding their own logic of functioning, within capitalism if that is the dominant system, beyond it if it fails.
