Spring 1998
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Winter 1998


Autumn 1998


Summer 1998-99

 
More articles in Spring 1998
Christianity and Free Enterprise
Robert Clark
Interests, Incentives and Institutions
Joseph Stiglitz
'League Tables' of School Performance
Ken Gannicott
 
 

 

Review by Martin Sheehan

Ego and Soul: The Modern West in Search of Meaning
by John Carroll
HarperCollins, Sydney, 1998, 280pp, $19.95
ISBN 0-7322-5990-8

Pauline Hanson has been described by some commentators as Australia’s own anti-politician. Hanson’s appeal lies in her advocacy of the traditional prejudices of ordinary Australians, denied a voice for so long by the ‘rancorous liberalism’ of the intellectual and social elites, who dominate the media and the academy. This counter-attack against the elites has, however, been reflected in the work of one Australian academic, Dr John Carroll, Reader in Sociology at LaTrobe University in Melbourne. In books such as Humanism: The Wreck of  Western Culture, and his latest work, Ego and Soul, Carroll has directed his keen intelligence towards a radical critique of the liberal humanism that dominates Western high culture. Instead, he defends the popular culture of ordinary people as both more healthy psychologically and sustaining a more fulfilling human existence. He could be described as Australia’s own anti-intellectual.

According to Carroll the chief culprit in the decline of the West is humanism, which came to prominence during the Italian Renaissance. Humanism placed human Reason at the centre of creation, thus displacing the Christian God as the new meaning of human existence. This has led, particularly amongst the cultural and artistic elites, to an overly rationalistic and nihilistic philosophy which, unable to provide a meaning for human existence or explain death, has resorted instead to ridiculing and deconstructing whatever is good and noble in traditional culture.

Carroll places himself in the Reformation tradition of Lutheran Protestantism, with its anti-rational, anti-humanist emphasis upon the individual’s relationship with God. His arguments, however, seem to me to be closer in spirit to the German Romanticism of the eighteenth and nineteenth centuries. Indeed, Carroll’s whole critique of humanism and
rationalism bears a striking resemblance to the anti-Enlightenment philosophy of the Lutheran pietist J.G. Hamann, whose anti-scientific and highly individualistic religious beliefs greatly influenced the German Romantics, and later the thought of Kierkegaard, one of Carroll’s intellectual heroes.

While Carroll’s book Humanism argued that Western man has been corrupted almost completely by perfidious humanism, liberalism and the belief in free will, Ego and Soul argues that things are not quite as bad as they seemed at first. It seems that the good old spirit of Protestantism is still with us in the form of dedication to work (‘work as prayer’) and in the supremacy of individual conscience, and this, according to Carroll, is a good thing. Carroll thinks this will see us through the troubled times ahead.

He also sees the Princess Diana phenomenon as an example of the rebirth of the sacred, in neo-pagan form. Silly me, I just thought it was a lot of hysteria over a none-too-bright princess, who managed to market herself well to the media. But according to Carroll she is the image of aristocratic virtue (she was not of noble birth), wedded to a post-Christian saintly compassion (the Queen and other members of the royal family do more charitable work than she did). Mother Theresa is irrelevant, according to Carroll: she means nothing to worldly Western people. Diana represents the new ideal: worldly, but saintly at the same time. Carroll argues, quite correctly, that this is a neo-pagan ideal of the sacred.

As always with Carroll, the myth is more important than the reality. What people believe is more important than the reality of the situation. It doesn’t matter that Diana was probably no more extraordinary than you or me, what matters is that people believe she is more extraordinary than themselves. Carroll argues quite bluntly that traditional Christianity is dead. There is no hope of revival in the Western world. He argues that our future is neo-pagan, where the ideal is an earthly one, combined with what is best in the compassionate morality of Christianity. Though, how (small-c) christian morality is supposed to survive without its traditional religious or theological underpinnings, Carroll does not say.

I always feel after reading Carroll that it is better to give up any intellectual pretensions one might have, become a footy fan, drink lots of VB beer, watch soapies on the TV, and read the car manual instead of Aris-totle. It really makes you wonder why he bothers with intellectual matters himself. I read somewhere once that Wittgenstein used to advise his students at Cambridge to give up philosophy, which he believed to be a waste of time, and ‘go out and get a real life,’ to put it in modern parlance. Ultimately this is what Carroll is telling us as well: give up the intellect and go and get a life.

The silliness of all this is that if you have an intellectual inclination you can’t just deny it and go away and become a peasant. One of my favourite thinkers, Julien Benda, described this as ‘the treason of the intellectuals.’ This occurs when intellectuals give up their calling as social critics (‘practitioners of critique,’ as Frank Knopfelmacher put it) and become defenders of whatever the masses want, no matter how frivolous (like mythologising Princess Diana) or dangerous (like supporting Adolf Hitler).

The book is written in a superior and dogmatic tone, which begins to irritate as one reads on. This tone we have come to expect from John Carroll: little attempt is made to substantiate most of what is said, and we are meant to accept his analysis on faith, as Reason is not to be trusted. At the time of writing Humanism Carroll described himself as a ‘non-denominational Christian.’ This latest book represents his attempt to move away from that image, towards a more pagan position. It remains to be seen whether he can reinvent himself as a pagan, escaping what he sees as the crumbling edifice of Western Christianity.


Review by Allaine Cerwonka
University of California Humanities Research Institute.

The Packaging of Australia: Politics and Culture Wars
by Gregory Melleuish
University of New South Wales Press, Sydney, 1998, 152 pp, $19.95.
ISBN 0 86840 584 1

The Packaging of Australia is yet another attempt to make sense of the dynamic and conflict-riddled landscape of Australian national identity. In his latest book, Gregory Melleuish offers us a clear and well-argued analysis of the crisis of national identity and belonging in contemporary Australia. He has produced an intellectual history which skilfully unravels economic history, cultural protest, and the rhetoric of politicians. He does so as a means of understanding how the country has moved from Colonial Australia (colonial period - 1892), characterised by ‘energy, conflict and achievement’, into Contemporary Australia (1960s - present), the era when Australians now struggle to find meaning after the breakdown of ‘old certainties about nation, race, empire and the Australian way of life’ (p. 13).

The book breaks into two sections; the first analyses the historical development of the loss of confidence that Australians presently face. Melleuish describes Colonial Australia as an era characterised by a sense of infinite possibility as European colonial powers developed institutions and policies which revolved around ‘freedom and the rule of law’ (10). He does acknowledge that European expansion was premised on the subjugation of indigenous peoples and that during this era women were beginning to protest their inequality. However, on the whole, Melleuish paints a picture of a country with the potential to develop strong democratic institutions and a healthy sense of national community. Apparently for Melleuish, the fact that colonial law and membership in the political community were premised on white supremacy (terra nullius) and sexism does not disqualify colonial Australia from being considered the foundation of a democratic and healthy
society.

The confidence of the colonial era was shaken by the depression of the 1890s. Modern Australia (1890s - 1960s) was notable for its insularity and rigidity when Australians sought to provide structure and certainty following economic crisis. Additionally, Australian faith in free-trade and internationalism was replaced by a wide-spread demand for greater isolationism and self-reliance (Chapter 2). This discussion is one of the strengths of the study. The Packaging of Australia is refreshing in its study of national identity because it considers how developments in the international sphere such as the world-wide depression of 1892 have been highly influential in the construction of national mythologies and priorities. Additionally, Melleuish examines how domestic influences, such as the intellectuals of this era like Henry Lawson and Banjo Patterson, helped produce a collective identity of self-reliance, which (unintentionally perhaps) supported proponents in the economic sphere who campaigned for economic protectionism for Australia.

After the national retreat from the possibilities of Colonial Australia, a national community emerged which was unified by contradictory values. Melleuish writes,

    At one level the cultural order of Modern Australia was characterised by an emphasis on the positive worth of the common man as the rock on which the political and social order was built...  At the same time Australians sought this positive goal via the route of exclusion. White Australia, protection of Australian industry, and arbitration were designed to keep out undesirable elements of the larger world, to protect Australians from the chaos and disorder which existed beyond their control (21).

He argues that Modern Australia did succeed in firmly entrenching democratic values and institutions in Australia (125); nevertheless, it also imposed a false homogeneity and unity onto the population.

The contradictions of Modern Australia came to the surface beginning in the 1960s. The 1960s introduced a new form of individualism and a changing international order, marked in particular by the dismantling of the British empire and the rise of new regional alliances. This ushered in the current era of anxiety and self-doubt. Yet, Melleuish also insists that this crisis of confidence also opens up new possibilities when he writes, ‘in the cracks between the disciplinary state of Modern Australia and the not yet established discipline of Contemporary Australia a “moment of possibility” exists during which a genuinely free social order may emerge’ (52).

The second half of the book is devoted to describing various solutions that have been offered to the Australian public to ensure a brighter future. Melleuish labels these competing political visions ‘packages’, acknowledging that each contains an element of insight into Australia’s present political upheaval. Yet, more forcefully, he argues that the packages are problematic: each over-simplifies a complex set of issues; depends on government to solve social problems; exists only at the level of rhetoric but insists that it can impact the material world; and lastly, represents one particular group’s agenda masqueraded as a panacea for society as a whole. These packages include economic rationalism, the ‘clever country’, republicanism, and multiculturalism. Anyone who has lived in or even visited Australia in the last ten years will have a pretty good sense from the package titles what each promotes as its vision for the country.

I was interested to read Melleuish’s assertion that these packages, in functioning at the level of ideas, do not have a considerable effect on the real world, even if their proponents would like the public to believe that they will. He continues on to say that the packages are in some ways an admission that we cannot control the real world (77). This point seemed to overlook the ways in which at least some of these packages had corresponding policy in immigration and in the arts (e.g. Keating’s Creative Nation). These packages are more than ideas, but rather affect the material world by making certain things legitimate or thinkable. Although Melleuish comes to a different conclusion, the evidence he provides suggests that these packages are ideological frameworks that set the stage for the changes and implementations various groups will enact if they can garner enough support.

What is particularly useful in Melleuish’s analysis is that he traces the political interests and intellectual history that comprise the ‘packages’ which purport to solve Australia’s steering crisis. By tracing the genealogy of each package, he identifies the particular political and social context of each vision of reform. He also maps out the alliances between various camps, such as the clever country mob and the multiculturalists and explains how and why various groups have rejected other packages.

Given Melleuish’s careful analysis of the history of these ideological packages and of the political responses to them, I am particularly surprised by his category of ‘the ordinary Australian’ which appears in the last two chapters of the book. In arguing why these packages are inadequate, he asserts such things as, ‘Many ordinary Australians have perceived these packages as an attack on their sense of self-worth’ (122). Or, ‘what most Australians will be looking for in the immediate future is not extravagant government schemes designed to create some grand New Australia’ (130). The ‘ordinary Australians’ sensible response to these packages seems to be meant to highlight the self-serving nature of those who promote packages, the inappropriateness of government trying to resolve issues in civil society, and the need for ‘sensible policies that provide the space and security they need to live their lives’ (130).

I find Melleuish’s invocation of this ‘ordinary Australian’ disappointing. To begin with, it is analytically imprecise: is there really such a thing as the ordinary Australian? Of course, in this ordinary Australia category are women, elderly people, homosexuals, shop assistants, barristers, conservatives, lefties, Aborigines, Asian-Australians, Greek Australians, Anglo-Celtic Australians, etc. who most likely have very different takes (from other groups and from each other) on these important political questions of the day. Are all of these ordinary Australians unified in the need for security, space and sensible policies; and do they all define these things in the same way?

After tracing the particular political interests of so many groups in their struggle to define the terms of Australian identity, Melleuish then asks us to believe that there are some people in Australia who have no political agenda or loyalties, but just have an honest (and more authentic) response to the political questions of the day. In this way, Melleuish seems to be using a romanticised image of some authentic voice in Australia as a way to support the call he makes to reject all of these visions and to reject strong governmental involvement in civil society. Certainly, groups of people have rejected some or all of these packages. However, just as he traced the terms and politics of the rejection of these packages in his discussion of Pauline Hanson’s One Nation constituency, Melleuish might have traced out the genealogy of other significant responses to these packages. Instead he invokes the image of the ordinary Australian and uses it as a moral voice (akin to the chorus in Greek tragedies) which will ultimately guide the country to health if it is not seduced by the siren song of one of these ideological packages. In other words, I don’t think we can so easily speak of ordinary Australians in contrast to the people who comprise interest groups and political parties (ch. 5). When we start to analyse the ordinary Australian category, we necessarily find particular interests and social perspectives which often conflict with those of other segments of the population. This complexity makes it difficult to believe that there is a more unified voice or spirit of the Australian population by which we could or should be guided.

Melleuish should be applauded for creating a book that tries to sketch new directions for how to redefine the bonds of national community. However, in the process, he packages his own political ideas into the ‘neutral’ will of an imaginary category of ordinary Australians, an analytical device that is less than satisfactory.


Review by Julie Novak

On Voting: A Public Choice Approach
by Gordon Tullock
Edward Elgar for the John Locke Institute, Cheltenham UK, 1998, 208pp, £Stg.49.95.
ISBN 1-85898-666-4

One of the fundamental lessons of economics is that there exists a select range of goods – public goods – which, by their characteristics (i.e. non-excludability of potential consumers, non-rivalry in consumption, production indivisibility), cannot be optimally provided in a competitive market economy. As Adam Smith noted, although public goods ‘may be in the highest degree advantageous to a great society, [they] are however of such a nature, that the profit could never repay the expense of any individual or small number of individuals’ (Smith 1776: 325). Accordingly, to avoid the incidence of free-riding it is asserted that government, as an agent of coercion, should tax individuals in order to finance the provision of public goods.

However, having said this, the free-riding problem necessitates a method to be found by which individuals are induced to reveal to the government their honest preferences for these goods. This is where the voting mechanism steps in. Gordon Tullock, one of the leading exponents of public choice theory, sets out to examine the effectiveness of the voting mechanism in On Voting.

Tullock briefly introduces the reader to a world of direct democracy where all voters are well-informed, they neatly order their preferences in terms of rank (including indifference), and their preference orderings are consistent (transitive). In this world, the voting options (in this case, various public programs) are put to the test and the option preferred by the majority of voters wins. In a special case as identified by Duncan Black in 1948, if individual preferences are single-peaked, and the number of voters is odd, then the majority decision will yield transitive social preference at the median of the distribution of voter preferences. In other words, the rational-actor voting model achieves a unique and stable equilibrium resembling that of the general equilibrium result under perfectly competitive market conditions.

If we assume that all voters are equally distributed in terms of intensity of their preference, then this result is safe. However, what if a spending program or political candidate scrapes in with 51% majority support, although the losing 49% of the population who opposed the winner actually possess a greater intensity of opposition than the support felt by the winning constituency? If preference intensities are unequal, then it appears that some preferences are ignored in favour of others. This issue is not insignificant given that the supposed purpose of voting is to allow the population to accurately record political preferences.

So, where to from here? Tullock suggests a number of alternatives to majority voting, which may succeed in registering the strength of preferences across the voting population. These range from ‘log-rolling’ procedures where legislators can trade votes (presumably on behalf of their constituents) if preference intensities on various issues are unequal, to the introduction of ‘demand-revealing’ voting mechanisms where voters are allocated 100 points (or another appropriate bundle of points) in order to register their strength of preference across all options on the ballot paper. While the proponents of such schemes assert that their implementation can deliver Pareto-superior political outcomes, subsequent writings have indicated that even these proposals are far from perfect.

On Voting bravely also goes much further than asking ‘what voting system should apply?’ by airing possible restrictions on the voting franchise itself. For example, ‘… people who are dependent upon the government for their livelihood should not be permitted to vote because they will have the strongest possible motive to vote almost entirely in terms of their own personal income’ (p. 103). This is an interesting suggestion indeed, given the entrenchment of the welfare state amongst Western democracies, and the associated drain on public finances. However, no matter what voting system is in place, it is difficult to see how politicians would be willing to freeze out potential supporters from exercising the right to vote, let alone risk any social chaos that may be unleashed by the newly disenfranchised mobs.

The standard public choice line is that individuals who participate in the political sphere do so for reasons of rational self-interest. However, some recent research into the vote motive indicates that citizens may not necessarily engage in the act of voting for these reasons alone (Brennan and Lomasky 1993, Eichenberger and Oberholzer-Gee 1998). Emotional sentiments such as moral feeling could come into play as often as financial or economic self-interest, if other political agents to play a key role in influencing electoral outcomes through their ability to influence public perceptions of moral judgements and political values. This raises the question once again as to whether the preferences as revealed by the electoral process are a true and reliable reflection of the voters’ demands for political goods.

Public choice theory tends to portray a rather gloomy story of voting as a highly suspect, perhaps counter-productive, mechanism to reveal public goods preferences, not to mention a rather ineffective constraint on the political process. Tullock seems well aware of the dilemmas implicit in this type of conclusion, and has therefore played a key role in attempting to find a voting system that balances the need for democratic expression in a free society against the need to properly assess the demand for public goods. In a reflection of Tullock’s long-time devotion to research on voting systems, On Voting: A Public Choice Approach serves as a high-quality, panoramic introduction to a subject which, paradoxically, is widely discussed in the public arena yet remains poorly appreciated in terms of its underlying technicalities.

References

Brennan, Geoff and Loren Lomasky 1993, Democracy and Decision: The Pure Theory of Electoral Preference, Cambridge University Press, Cambridge.

Eichenberger, Reiner and Felix Oberholzer-Gee 1998, ‘Rational Moralists: The role of fairness in democratic economic politics,’ Public Choice 94: 191-210.

Smith, Adam 1776, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam and Charles Black, Edinburgh.


Review by Charles Richardson

Rewriting the Sexual Contract
edited by Geoff Dench
Institute of Community Studies, London, 1997, 294pp., £Stg.12.50.
ISBN 0-9523355-8-1

Ten years ago, Carole Pateman used the term ‘sexual contract’ to express the idea that the classical liberal idea of the ‘social contract’ was hiding something important – that indeed it presupposed a radical inequality between men and women. Only men were admitted into the public sphere of government and civil society; women’s rights had already been surrendered at an earlier stage of the process – the sexual contract.

As a historical account of social contract theory, it seems to me that this model has some serious problems. Nonetheless, there is no doubt that Pateman was onto something. The question of sex discrimination and the sexual division of power today is as significant as ever. In this British collection, Pateman and 25 others offer their contrasting thoughts on the subject, giving us a good opportunity to see the current state of the debate.

One problem with this debate is that the opponents of patriarchy tend to come from the Left, and they have an awkward habit of assuming – in flat contradiction of the evidence – that the market is their enemy and government is their friend. Pateman herself is passionate about equality, but she is preoccupied with the state and its activities. Although she cannot help recognising that globalisation has helped undermine the sexual division of labor, she still attacks moves to wind back the welfare state and to introduce flexibility into labor markets.

In a similar vein, Ruth Lister in ‘Promoting Women’s Economic Independence’ concludes that

    It is time that politicians looked beyond their preoccupation with public dependence on the state, which for some women, in fact, spells independence, and addressed this issue of private dependence within the family (p. 191).

There is a valid point to be made there, but it is buried under the cavalier unconcern for the difference between government and private action and the danger of giving more power to governments.

The problem on the Right is even more serious. Geoff Dench at least raises the question of increased state power, but he still wants its assistance to prop up traditional families. He is convinced that ‘The wheel of sexual revolution is turning’ (51), despite all the evidence showing a huge and continuing generational change in attitudes to sex roles. Even the moderate voices on the Right, such as Patricia Morgan and Angela Rumbold, seem unable to escape from a ‘difference’ paradigm; they cannot envisage men taking on traditionally ‘female’ roles, or vice versa.

A comparison here with racism is instructive. A few decades ago, racism was a deceptively simple issue. On one side were those who argued that certain races were inferior to others and therefore could not expect equal treatment. Sometimes they hid behind euphemisms like ‘separate development’, but few were taken in. On the other side were those who wanted to abolish segregation and discrimination in the name of racial equality.

The good guys won that round. The debate moved on, and as some frustrated elements on the Left came to advocate ‘reverse discrimination’ and even theories of racial difference, those on the Right were able to recast themselves (whether sincerely or not) as defenders of equal treatment and non-discrimination. But the debate on sex discrimination lags behind. There, the majority on the Right are still pushing the sort of ‘identity politics’ that they condemn in the case of race.

One thing this volume shows is that, as far as sex roles are concerned, the Right have not even adopted the rhetoric (much less the reality) of non-discrimination. David Phillips, in ‘Trading Sex for Security,’ argues for a full-scale return to sex stereotyping and biological determinism: ‘a young woman’s initial gift of sex requires a lifetime of loyalty to repay’ (13). Roger Scruton, in ‘Sex in the Commodity Culture,’ is simply overflowing with hatred of democracy, capitalism and the whole Enlightenment project: ‘sex education helps to neutralise … one of the greatest sources of privilege and inequality’ (60). And Barbara Cartland descends from polemic to self-parody with complaints that ‘on television women read out the sports’ news and results, which are much better read by men’ (259). This is scary stuff.

There are good reasons, though, to read this book other than to be scared. There are real gems to be found. There is Ros Coward (‘Was Feminism Wrong about the Family?’), who pleads for the acknowledgement of real problems with child rearing and socialisation, ‘not prejudiced by nostalgia for partriarchal values, nor insensitive to the difficulties which might be arising from shifts in family values’ (69). There is Sebastian Kraemer, on ‘The Fragility of Fatherhood,’ who, although he still seems to assume that parental leave is a government responsibility, understands that ‘while women have begun to be liberated from their traditional roles, men are still predominantly trapped in theirs’ (102). And there is John O’Sullivan, who presents ‘A Manifesto for Men,’ pointing out that men ‘have failed to understand the opportunities of this century’s greatest and most enduring social movement, the collapse of the sexual division of
labour’ (226).

Overall, this is a highly stimulating book, readable and well-produced, with a comprehensive bibliography (unfortunately there is no index), and with something to suit (or to outrage) every point of view. Many of its contributors suffer from the ideological blinkers I have identified, but they present their views clearly and fairly for the reader’s judgement. Others are more specialised (there is some good statistical material on distribution of household work from Jonathan Gershuny, and on changing sex attitudes by nationality from Catherine Hakim), while some are merely strange. But if you enjoy diversity of opinions, this book is for you.

I had picked my two favorite essays before I checked the notes to see where their authors hailed from. One is by Clive Soley, a remarkably sensible (Labour) MP, who recognises that governments have to admit their limitations, and in particular should not try to prescribe family structures. He gently chides nostalgia: ‘the fact that we no longer enjoy “the crispy bacon we had before the war” may have more to do with our ageing taste buds than with real change’ (214). The other, ‘The Androgynous Generation,’ is by Helen Wilkinson, from the think-tank Demos. She delivers an eloquent and optimistic plea for genuine equality and freedom of choice. If the Blair government is listening to voices like these, there may be hope for Britain yet.


Review by Jason Soon

The Logic of Action: Two
by Murray N. Rothbard
Edward Elgar, Cheltenham, 1997, 416pp, £Stg.49.95.
ISBN 1-85898-570-6

This is the second collection of essays by the late Murray Rothbard, known as an advocate of a natural rights-based individualist anarchism and a great figure in twentieth century Austrian economics. His particular allegiances in political philosophy and economic methodology make for both the strengths and weaknesses of many of these essays.

The first, on ‘Freedom, Inequality, Primitivism and the Division of Labour,’ is vintage Rothbard. Here he argues that specialisation is a prerequisite to civilisation and attacks the Marxist concept of alienation while refuting presumptions about the virtues of close-knit communities. The wide reading and synthesis of insights from his particular allegiances displayed here characterise the strengths of a typical Rothbardian ‘debunking’.

Weaknesses of this approach are evident in his more straightforward writings on welfare economics. In ‘The Myth of Neutral Taxation’ he tries to refute the ‘welfare enhancing’ case for public goods by arguing that if even one anarchist in the population objected it would fall down. Yet if the disutility of the lone anarchist is as immeasurable as the utility of the majority, it is difficult to see why it should be given such disproportionate weight.

Rothbard’s conclusions are better understood in terms of his natural rights-based objections to government coercion. But if that is the argument, there is little point in rewriting it as economic analysis, which is necessarily utilitarian. His dismissal of some economic concepts as immeasurable and thus useless is too glib. The same could be said about natural rights, which Bentham described as ‘nonsense upon stilts.’ Rothbard constantly claims that economics reduces to ethics; in fact von Mises, one of his teachers, saw the concept of rights as a problem solving device. This would imply that all ethical concepts can be reduced to very subtle economic arguments.

Notwithstanding these qualifications, Rothbard is a superb expositor of economic first principles, a highly effective deployer of supply-demand analysis and entertainingly polemical.


Review by Charles Richardson

Corporate Welfare Policy and the Welfare State
by Davita Glasberg and Dan Skidmore
de Gruyter, New York, 1997, 172pp, DM42.00.
ISBN 3-11-015693-8

This book is best described as a Marxist analysis of the United States savings & loan crisis. Although Marxism is, for very good reason, out of fashion, it is only fair to say that if any event ever cried out for a Marxist analysis, it is the savings & loan crisis.

Savings & loan institutions are what Australians call ‘building societies’; generally small cooperatives that lend money, traditionally, for residential housing. In the late 1980s, the industry, having taken on more risky loans on commercial property, became sufficiently insolvent to require a comprehensive government bailout. The rescue package was estimated to cost American taxpayers the unfathomable sum of US$500 billion; as P.J. O’Rourke said at the time, ‘enough money to pay for a New York City cab ride from Earth to the planet Uranus and back ten times, including tip.’

The crash was widely attributed to deregulation, but it was particularly one-sided. As this book shows, savings & loan institutions were freed from government restrictions and supervision of their lending practices, but the government’s guarantee on deposits remained in place. Indeed, the way that deregulation was conceived as a ‘state project’ (in the authors’ term) encouraged the belief that the guarantee, nominally limited to small depositors, would in fact cover the whole industry.

Glasberg and Skidmore are particularly good in describing the close collaboration between industry and government, including the involvement of Neil Bush, son of the then Vice-President. Their general argument is that the welfare state is not being dismantled, but changing its form, diverting government resources away from the needy and toward the corporate sector instead, in line with the class interests of legislators.

Although some of it is Marxist jargon, this book is a good read, and one with a moral for free marketeers as well as Marxists: that we need ‘A serious discussion of the differences between social and corporate welfare, and an analysis of the real costs of each’ (p. 148).


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