Neoliberal crony capitalism is driven by a grand coalition between the pragmatic centre-left and the pragmatic centre-right. Crony capitalist policies are always justified as the pragmatic solution. The range of policy options is narrowed down to a pragmatic compromise that maximises the rent that can be extracted by special interests.
The idea of radical centrism is not just driven by vague ideas of social justice or increased competition. It is driven by ideas and concepts that lie at the heart of complex system resilience. All complex adaptive systems that successfully balance the need to maintain robustness while at the same time generating novelty and innovation utilise a similar approach....
A bimodal strategy of combining a conservative core with an aggressive periphery is common across complex adaptive systems in many different domains. It is true of the gene regulatory networks in our body which contains a conservative “kernel”. The same phenomenon has even been identified in technological systems such as the architecture of the Internet where a conservative kernel “represent(s) a stable basis on which diversity and complexity of higher-level processes can evolve”.
Stress, fragility and disorder in the periphery generates novelty and variation that enables the system to innovate and adapt to new environments. The stable core not only promotes robustness but paradoxically also promotes long-run innovation by by avoiding systemic collapse. Innovation is not opposed to robustness. In fact, the long-term ability of a system to innovate is dependent upon system robustness. But robustness does not imply stability, it simply means a stable core. The progressive agenda is consistent with creative destruction so long as we focus on a safety net, not a hammock....
The principle of radical centrism aims to build a firewall that protects the common man from the worst impact of economic disturbances while simultaneously increasing the threat of failure at firm level. The presence of the ‘public option’ and a robust safety net is precisely what empowers us to allow incumbent firms to fail.
The safety net that protects individuals ensures robustness while the presence of a credible ‘invisible foot’ at the level of the firm boosts innovation....
The irony of the current policy debate is that policy interventions that prop up banks, asset prices and incumbent firms are viewed as the pragmatic option and polic[y] interventions focused on households are viewed as radical and therefore beyond the pale of discussion. Preventing rent-seeking is a problem that both the left and the right should be concerned with. But both the radical left and the radical right need to realise the misguided nature of many of their disagreements. A robust safety net is as important to maintaining an innovative free enterprise economy as the dismantling of entry barriers and free enterprise are to reducing inequality.Macroeconomic Resilience
Radical Centrism: Uniting the Radical Left and the Radical Right
Ashwin Parameshwaran
Interesting analysis and point of departure for discussion on changing the system through a radical centrist coalition. This is very similar to the approach I have been advancing and would support it.
2 comments:
Interesting! And I wasn't surprised he quoted Taleb a couple of times. Seems similar to his approach as far as I can tell.
In a nutshell, he claims that the radical right an radical left could fing common ground if they agreed on two principles. The first is the need for a clearer distinction between public and private. The second is a bottom up approach (via the public sector) to stabilising the economy - i.e. no bailout of corporations, only of citizens.
The logic seems clear from a systemic point of view, but I do wonder, particularly with respect to the first principle, whether in reality it relies too heavily on a false dichotomy of public vs. private matters. Similar to the critique of methodological individualism, I miss the appreciation for the importance of higher order phenomena at all levels of society (private or public) that are worth conserving in the name of stabilising the system. Although I'm partial to the policy recommendations put forward, I personally find it much more plausible to think of society as a continuous hierarchy of formal and informal social phenomena instead of as a bipolar world of public vs. private.
Take the health care system, e.g. Even with a public option, or even in a single payer system, there is a large, even increasingly large, demarcation line between public and private spheres wihtin the supply chain of medical services. This can be modelled away but will never disappear in reality and will always be subject to abuse! The question is, how do you counter abuse?
An interesting speach in this respect by Katharina Pistor titled 'False Dichotomies in Law and Finance'.
http://ineteconomics.org/katharina-pistor-false-dichotomies-law-and-finance
The essence is that stability can be better achieved if subordinate entities are given the rights and means by which to challenge the dominance of the higher order entities. She posits a bottom up approach to flexibilising contractual obligations instead of the current top down approach. The important difference to the above is that the whole system is thought of as a continuum, not a dichotomy.
Oliver, what I think Ashwin in saying, as I have been saying also, no public-private partnerships. There needs to be a clear distinction between public and private with the public sector dealing with public goods and the private sector with private goods, Otherwise, capitalism becomes crony capitalism and inefficiency and privilege rule.
The basic rule of capitalism is putting capital investment at risk, which means that failure must be an actual possibility. However, in a debt deflation, firms that would otherwise be profitable fail due to monetary knock-on effects. So government must remove systemic risk from the financial system as far as possible and be willing to step in and put failed financial institutions into resolution quickly to prevent contagion.
For capitalism to works also, firms cannot be allowed to own more than a limited % of their industry or monopoly rent will get extracted. In cases in which this is impractical then monopoly rent should be taxed away to prevent capital from flowing to rent-seeking rather than production.
This is not rocket science but rather basic economics and systems design.
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