A new social democracy

GUESTXCOLUMNThere are three basic models of an economy.

The first is what is called neoliberalism or market fundamentalism. This is an almost religious faith that unregulated markets will somehow always produce the best possible results.

This model, championed by Margaret Thatcher and Ronald Reagan, along with  the World bank and IMF in the 1970s and 1980s led to the dismantling both of social services and regulations on business. This model, apart from provoking financial crises, creates greater income inequality and general social malaise.

Second is the centrally planned, command and control model of classic communism, inspired more by Lenin than Marx, and typified by the former Soviet Union and the present North Korea, about which the least said the better. The command and control  model has proven to be a disaster economically, and politically has only ever been compatible with non-democratic authoritarian governments.

The truth is that Marx, while making some brilliant analyses of capitalism, got it completely wrong when he predicted that capitalism would collapse from its own internal contradictions.

The third model is social democracy. This model recognizes that the market is the best instrument of economic growth, but that markets have to be managed and society protected from the worst effects of the market. In essence, social democrats strive to save capitalism from itself and to make it work better for the good of all.

Yet the model is inherently precarious. For governments are required to pursue policies that, at the same time, promote market-driven growth, ensure that the benefits of growth do not accrue only to a tiny minority but are broadly distributed over time, and, most critically, keep budget deficits under control. This is  a tough balancing act.

In some cases, the state’s interventions, along with the additional taxation that accompanies them, start to stifle the economy, discourage innovation and investment and lead to unsustainable budget deficits.

In other situations, as fiscal crises worsen, the state’s social services and supervisory mechanisms are dismantled willy-nilly and all hell breaks loose in an untrammelled market, with a minority making exorbitant fortunes while most descend into poverty.

Since the tension between competing policy demands is inherent to the model, this tension cannot be avoided, only managed. Hence the premium placed primarily on political leadership, but also on leadership in the business community and the trade union movement.

It is this model that laid the basis for Barbados’ economic and social progress in the first decades of Independence. We were lucky to have prudent management that put us on a path to relatively slow but equitably shared economic growth that fuelled the rise of a broad middle class and a more humane society.

Things came unstuck in the early 1990s.

Since the 1990-1992 crisis, Barbados has been slowly slipping away from a social democratic model towards a more market fundamentalist market model. With the 2008 financial crisis, this process has speeded up.

What is the solution?

The continued drift to neoliberalism/market fundamentalism will only tear our society apart. But we cannot simply go back to the social democratic model we forged with Independence. That won’t work any more. Our circumstances have changed too radically. We have to come up with a model for
21st century Barbados.

Right now, while we would all like to see greater economic growth, the major issue is the handling of the budget deficits and the debt. Various policy measures have been advocated and some tried, including increasing taxation, laying off workers, cutting social benefits, privatizing statutory corporations and so on.

The problem is that this crisis-oriented piecemeal approach to keeping budget deficits under control may do long-term damage to the prospects of the country because they have little or no grounding in any conceptual analysis of what the role of the state should be in a Barbados of the 21st century.

This piecemeal approach, at the worst, will either lead us into greater market fundamentalism with sharply increased economic inequality and all its attendant social evils –– crime and so on. Or, at best, we will remain stuck in the morass in which we now find ourselves, neither moving forwards nor backwards.

Moreover, because management of budget deficits is critical, it’s tempting in a fiscal crisis such as we now have to go after those spending areas that are heaviest: health and education. While it’s true that Barbados’ historic level of expenditure on health and tertiary education is unsustainable, the answer is not to cut across the board, but to work out carefully a system of means testing on the principle that those who can afford should pay.

Cutting and slashing without careful thought may undermine the very prospects of stable growth and the creation of human capital that is the basis both of a knowledge economy such as Barbados, and a humane society in which all  citizens can realize the goals of self-fulfilment and human flourishing.

The present functions and activities of the Barbadian state are a hodgepodge of policy measures inherited from the past without any clear idea of their continued relevance. This is the result of decades of institutional inertia coupled with bureaucratic empire building and political patronage within the public sector. Tinkering with this and that here and there won’t solve the problem.
Some thoroughgoing analysis and radical reform are needed.

Most important of all, any new model of social democracy must make provision for the much greater participation of civil society in the governance of Barbados.

We have to get out of the bind of thinking that nothing can get done unless the Government or private capital does it, and create mechanisms by which this third sector can participate in the governance of the country. For example, communities might take the initiative by organizing recycling and other garbage solutions.

Or, suppose the Government didn’t have the money to finance a small infrastructural project, like say, extending the popular Richard Haynes Boardwalk on the South Coast, why couldn’t those who use the boardwalk raise the financing and contract the project direct, with Government’s permission.

Possibilities are endless if we have the imagination and the will.

(Peter Laurie, a former Barbados diplomat, is a noted social commentator.)

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