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Sunday, April 28, 2019

Big Ideas #2 - neo-liberalism vs social democracy

'Money, money, money ... always money ..' sang Abba. Debates aren’t always about money, but they very often are, at least in the widest sense of how we distribute resources in the fairest and most effective way. The study of the distribution of resources is called Economics, but in the UK it is not studied until A-Level, (which begins at age 16) and then only as an optional subject. I’ve never understood why it isn’t studied earlier and more widely, as so much of our life is determined by economic decisions, and because those decisions are often based on the most fundamental values.

One of the most central points of clash in Economics, and one which comes up again and again in debates, is that between neo-liberalism and social democracy

What are neo-liberalism and social democracy? What do neo-liberals and social democrats believe?

I said that Economics is based on values, so let’s start with the values. 

For neo-liberals, the individual is more important than the community, and liberty is a higher good than equality. For social democrats, the community is more important than the individual, and equality is a higher good than liberty. In the Freedom vs Security clash we discussed in an earlier post, neo-liberals would most often come down on the side of freedom, and social democrats on the side of security. Both sides think their approach is both fairer and more effective.

Now let’s see how those values are applied, in terms of economic principles, and of practical measures.

Neo-liberalism

Principles 

  • Everyone is responsible for themselves. 

  • The less government, the better.

  • People have the right to keep whatever they have earned by their work.

  • People work hardest and most productively when they are left alone to make their own decisions.

  • People should accept the consequences of their decisions and not expect the government to look after them.

  • Competition between businesses is the best guarantee of efficiency and good customer service.

  • Inequality is a good thing, as it motivates people to work harder.

Practical measures

  • Low taxes (see the earlier post on taxation).

  • Low government spending.

  • Minimum regulation.

  • Introduce competition wherever possible.

Social democracy

Principles

  • We are all responsible for each other; the strong have a moral duty to help the weak.

  • People work best and most productively when they work with support from outside.

  • Government can be a force for good, protecting the weak against the strong.

  • Government intervention can make the economy work better, because the government acts in the interests of all the people.

  • Inequality is a bad thing, as it breeds division and resentment.

  • Collaboration is better than competition.

Practical measures

  • High taxes, with the wealthiest paying the most.

  • High government spending.

  • Social benefits, such as health, education, pensions etc. funded by taxation and provided to all free at the point of use.

  • Some parts of the economy run by the government in the interests of the whole of society.

  • High levels of regulation, to ensure that businesses look after their employees and customers.



Now you’ve got an understanding of the two different sides, let’s look at how they might clash in some common debates.



1. This house would abolish university tuition fees.

Social democratic arguments for the proposition:

  • University education should be available to everyone who has qualified for it academically; no one should be excluded because they cannot afford it.

  • Children of rich parents sometimes have all their fees paid by their parents and never have to worry about repaying them, while other equally able students are saddled with debt for years afterwards.

  • A well educated workforce is a benefit to the whole of society, so it is in all our interests for the government to invest in education.

  • Making distinctions between those who can afford university education and those who can’t is divisive and undermines social solidarity.


Neo-liberal arguments for the opposition:

  • People only value what they pay for. Subsidising education makes people value it less.

  • Having a university education is a benefit; graduates earn far more than non-graduates, so it is only fair that people should pay for a university education.

  • It is a basic human right to be able to bring up your children in the way you choose. Parents who choose to pay their children’s tuition fees are only exercising this right.

  • Measures such as this can only be funded by higher taxes. Higher taxes damage the economy and cost jobs, to everyone’s detriment.


2. This house would introduce a maximum wage

Social démocratie arguments for the proposition

  • It is fair that some people should earn more than others, but incomes at the very top level are beyond what anyone deserves or needs.

  • Unlimited incomes promote extreme inequality, which breeds division and resentment.

  • Extreme wealth gives some individuals disproportionate political power (e.g by donating to political parties, threatening to take their businesses out of the country if they do not get their way etc.) and this is undemocratic.

  • In a more equal society, everyone feels more valued and more connected to each other.


Neo-liberal arguments for the opposition

  • The government has no right to tell people what they can earn.

  • Introducing a maximum wage disincentives hard work.

  • Talented individuals will be driven out of the country.

  • The very rich benefit society by paying lots of taxes and by investing in businesses which provide thousands of jobs.

3. This house would bring the railways into public ownership

Social democratic arguments for the proposition:

  • Competition may work well in some sectors, but not in the railways. There is not sufficient capacity for competing offers. E.g. there is only one track from London to Edinburgh, so there can only be one company running that line.

  • Governments are more incentivised and able to take the long term view, investing in maintaining and updating tracks and stations; businesses are only interested in short term profit.

  • Removing the need for profit and introducing subsidies could bring down fare prices, to everyone’s benefit. Cheaper fares would also incentivise people to use public transport more, to the benefit of the environment.

  • Having an efficient, cheap, reliable railway service to carry goods and people around is good for the economy, so it is worth having the government invest in it.

Neo-liberal arguments for the opposition:

  • Without competition, the people running the railways will become lazy and complacent.

  • Competition will motivate companies to provide the best service and lowest prices.

  • Higher public investment in the railways will mean higher taxes, which will discourage businesses and individuals from working harder.

  • Being able to travel is a benefit, and people should expect to pay for it.


Here are some more motions which could easily break on neoliberal vs social democratic lines:

  • This house would privatise the NHS.
  • This house would introduce a flat tax (see the taxation post for an explanation of what a flat tax is).
  • This house would cut benefits.
  • This house would abolish private schools
  • This house would introduce a universal basic income

Try drawing up arguments for and against those motions, using neo-liberal and social democratic ideas.

Knowing about neo-liberalism and social democracy is also very useful when following current affairs (as all debaters should). Often there are arguments about economic measures. Both sides present their proposals as being simply common sense. Seeing what economic assumptions (and ultimately what value systems) people are using helps you to evaluate their arguments better.

Let’s give the last word to two characters in a very well known play: An Inspector Calls by J.B. Priestley. You may well have studied, or be studying, this play; it is very often taught in UK schools. In many ways it’s a debate between neo-liberal and social democratic ideas. Mr Birling, a wealthy industrialist, represents neo-liberal ideas when he says:

… a man has to mind his own business and look after himself and his own …

while the Inspector, whose job it is to reveal uncomfortable truths about the Birling family, puts the social democratic case when he says:

We are members of one body. We are responsible for one another.


Priestley was firmly on the side of social democracy, and makes sure that the Inspector wins the debate in the play. But you have to make your own mind up.

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