Politicians Paint Themselves into a Market Corner

The shenanigans over the rate of the feed-in tariff is a good example of the way in which politicians have, in accepting the myth of the omnipotent market, limited their room for manoeuvre and made themselves incapable of taking the steps necessary to ensure social and environmental benefit.

We can argue about the appropriateness or otherwise of the 43.3p set by Labour for the rate of the feed-in tariff and whether it was just a deliberate banana-skin for the incoming Tory government, but the broader question of who should pay the cost is what really demands attention. The transfer of money uniformly via energy bills in a market dominated by an informal cartel and from those who can least afford to pay, towards those who have the spare resources to buy solar panels to install and would then receive the tariff was always a questionable scheme.

Imagine a world where the production and distribution of energy was in public hands - local government rather than national, ideally - and where the cost of energy rose as you used more, rather than costing most when you use least. The extra money charged to heavy energy users could be made available via grants to local people, or used to directly fund the installation of solar panels on the roofs of the tenants of social housing, who are least able to pay their energy bills. You have neatly created a just solution and simultaneously generated sustained demand for solar panels, reducing costs and making them available at a lower price to those who can afford to buy their own. This is a political solution, but it is hardly communism.

In the end this decision to set a price to underpin the development of a market for solar in the UK, immediately followed by a reversal, is bad for business too. It gives a mixed message which is exactly the opposite of the clear signal businesses need to make investment decisions. It will have negative knock-on effects in other areas, as managers doubt political commitment to the transition to a green economy.

As the myth of the market itself corners the market in ideas, we see the consequences in terms of inert and impotent politicians, and we all pay the social and ecological price.
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A Reverse Transformation?

Polanyi's work is valuable in denying the priority placed on the market in most economic theory. His account of how we arrived at the situation where most of our needs are met by the market is worth consideration. Polanyi identifies three stages in the 'subjection of the surface of the planet to the needs of an industrial society. The first stage was the commericalization of the soil, mobilizing the feudal revenue of the land. The second was the forcing up of the production of food and organic raw materials to serve the needs of a rapidly growing industrial population on a national scale. The third was the extension of such a system of surplus production to overseas and colonial territories. With this last step land and its produce were finally fitted into the scheme of a self-regulating world market.' (p. 188)

Given that the market system needs to be re-evaluated in an era when our most pressing task as a human community is to ensure the sustainability of our society, we might raise questions about all three of these process of transition. It is taken for granted by most contemporary economists that land can operate like any other resource, that the process of the commodification of land—its bundling into parcels over which ownership rights can be asserted—and of its sale in a market is unproblematic, but recent developments towards land reform across the world, based in the indigenous view of land as having its own rights, argues against this.

Polanyi's second stage of the transition to a market economy he calls the 'forcing up' of production of food and organic raw materials' in response to the movement of the population from the land and its rapid expansion in the industrial cities. What he has in mind here, I think, is the loss of balance between people and their land, which is a nexus of interacting pressures and conflicts rather than a simple cause-and-effect process. This reopens the generally accepted view that economic growth increased population and then put pressure on resources.

While some environmentalists have traditionally taken what can be judged to be a neo-Malthusian stance on the population question, the more nuanced response to the debate is to recognise that the shift to the market broke the connection between people, their need for resources and the land they inhabited. In a peasant community, each new birth represents a mouth that needs feeding from a limited land resource; in contrast, in an economy where livelihoods are based around the labour-market, each birth represents a potential labourer whose time can be sold. Evidence of the extent of child labour in Victorian cities or in the megalopolises of the global South today is greeted with horror, and yet it is a rational response to an economic system where people have no right to land and need their children to guarantee their subsistence.

Polanyi's third point is linked to the second, since once the industrialised country's population were engaged in producing goods for trade rather than for their own subsistence, their basic needs for food and the raw materials to make clothing, had to be met from the work and land of others, and in the colonial era and subsequently this has meant through using the over-priced land and labour of countries of the global South. Extending Polanyi's insight into the present globalised economy we can see the system of the global trade system as a means of enabling the rich Western economies to rent land in the poorer countries, and exchange which cannot be fair while the former's currencies dominate the system of global trade.

Polanyi's central point is that the role of the market as the central and controlling mechanism in economic life is a modern and short-lived one: 'Though the institution of the market was fairly common since the later Stone Age, its role was no more than incidental to economic life.' (Polanyi, 1944: 45). To move towards a provisioning based economy we need to reverse the three stages Polanyi identifies as forming the transition to a market economy. In other words we need policies to:

Decommercialise the soil - perhaps a Land Value Tax is a first step here;
Return to sufficiency via the strengthening of self-reliant local economies;
Limits on global trade rather than hyper-globlisation.
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The Future of Universities: A Rhetorical Question?

The higher education sector is giving clear evidence that the Tories are responding to their own rhetoric rather than the reality of the way a modern economy is organised. Cuts to university funding have been savage and sudden: 6% to the teaching grant and 54% to the capital grant for 2011/12. Universities are supposed to make up the shortfall through increasing fees, but these increases cannot be imposed until 2012/13, leaving a year with a massive spending gap.

These cuts are aimed particularly at teaching, penalising those universities which continue to focus on teaching rather than research and contribute to social mobility by accepting students from less wealthy backgrounds. As Sally Hunt, UCU General Secretary, put it:

'Exceptional universities that concentrate on teaching and widening participation have been told today that they are being left to scrap it out in an untried market place. In addition, institutions that focus on arts and humanities will be forced to charge higher fees to make up the shortfall when they are given the option to triple the current maximum fee to £9,000 in 2012.'

In the market for education of the government's imagining, a lower-quality university will compete on price, offering cheaper degrees to those with less money, first-generation hopefuls perhaps, rather than public-school leavers. If we were talking about shoes or beefburgers this rationale might work, but no university wants to think that its degrees or its students are second-rate. A full 57 of the 80 English universities that have so far revealed their fee structure have tripled their fees to the maximum £9000, with many more within a thousand or so of that maximum.

Universities, long the object of managerialisation, are now being treated as though they were private-sector businesses, but they are not and never can be: they face different rules and constraints. In the private sector, if you see your market share contracting you cut costs and change the quality of your product or cut output. Since standards of education are controlled by the QAA and numbers of students are fixed by government dictat, neither of these options is possible for university managers.

What we are facing in the UK's once proud university sector is a bloodbath as managers struggle to be impressively ruthless by engaging in a process of random downsizing without any sense of strategic direction. In spite of the continuing public support for higher education, courses of practical value to the country will be cut if they are not the ones favoured by students. Staff who have failed to make themselves fit for the purposes of corporate managers will be lost.

The threat posed a generation of politicians who cut their teeth under Thatcher, and imbibed market rhetoric with their mother's milk, is only now becoming clear. Their failure to understand that the public sector cannot behave like the private sector is a danger to us all.
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The Gift of Life

Earlier this week the Archer Report into the infection of haemophiliacs with Hepatitis C and Aids was launched. Although it had all the appearance of a report that would come out of a public enquiry it was in fact a private enquiry. In spite of the deaths of more than 2,000 people the government refused to fund an enquiry, and this one was paid for by donation.

The problem arose because haemophiliacs need regular treatment with blood-clotting factors which they do not make themselves and which have to be extracted from large quantities of blood. During the 1980s this blood was imported, bought on the open market, from the US.

In Britain blood is donated - it is considered too important or too sacred for a market transaction. As argued by Richard Titmuss in The Gift Relationship, the blood donor system is a metaphor for the nature of a healthy and communitarian social contract. This is why we see heavily emotive advertising persuading us to 'do something amazing' by enabling a celebrity to live.

In the US, by contrast a payment is made in exchange for blood. There are no prizes for guessing who gives blood: those who need the money. In the time at which the contaminated blood was imported this often meant drug-users, who unknowingly carried viruses.

This raises important questions about introducing market culture into the area of health - or in fact any vital area of human life. We can only conclude that life is too important to be bought and sold. This applies to blood, to operations, and to care itself. The vital issues of human life are in the world of love, not money. Tweet