Sector: business

Matthew Taylor at the RSA: “The core characteristics of modern Western societies are market-based economies, relatively extensive welfare systems and the rule of law presided over by representative democracy. All three of these elements have been subject to sustained critique in recent years….

Like capitalism, democracy, both in principle and practice, has always had its critics. But, again, a number of current factors have combined to increase the volume. Democratic institutions and the politicians who occupy them have become even less trusted and more unpopular than usual, something reflecting both the failure of leadership and policy and a succession of exposes of misbehaviour. Democracies have also generated outcomes – particularly Trump and Brexit – which seem to go beyond the normal swings of party politics into acts of collective self-harm. Finally, the economic performance and comparative effectiveness of Chinese leadership and the capacity of Putin’s Russia to get away with aggression, dishonesty and sabotage has led more people to question whether representative democracy really is the most resilient basis for either political authority or social progress in the 21st century.

This state of disenchantment could be merely unhappy but it is in reality potentially catastrophic. Because, despite all the negativity we direct at the way things are there is as yet in countries like ours no viable or popular alternative to the persistence of these systems in their current form. To coin a phrase ’democracy, welfare state and financialised capitalism; can’t live with them, can’t live without them’. The question then is how do we radically renew the dominant systems of the Western world before their failures and our disillusionment drives us into making even more profound mistakes than the ones we and our leaders have already committed?

4 ways of coordinating human activity

The starting point is surely to think more deeply about this system as a whole. I have written before about an approach which views societies, and systems within those societies, through the prism of three active, and one more passive, ways of coordinating all human activity. The active forms are the hierarchical, the solidaristic and the individualistic. Each of these forms of coordination is complex and ubiquitous and each is reflected in everything from our day to day choices to political ideologies and organisational forms.

In modern societies the primary hierarchical institution is the state. Individualism – albeit a partial form – is most powerfully expressed in the dynamism of market. While solidarity, which is more internally divergent in form, tends to be gauged by reference to social justice, on the one hand, and a shared sense of identity and belonging on the other. Right now we are experiencing a crisis of confidence and legitimacy in all three domains. One sign of this is that the fourth major way of thinking about social change – fatalism – has become ever stronger.

Before exploring responses to our plight it is important to note two important lessons from history. First, when liberal democracies get all three active forms of coordination working together they can achieve major advances in human welfare. This was, for example, the case during the decades of the post war miracle when economic growth and living standards rose, welfare expanded, inequality fell and the state was more confident and trusted. In general, Scandinavian countries have managed to achieve a better balance which is why they nearly always come out top of surveys on social outcomes and citizen wellbeing.

The second lesson is that these periods of healthy balance between state, market and society are the exception not the rule. Thomas Piketty has provided strong evidence that differential returns to labour and capital drive rising inequality which eventually leads to social conflict. Historian Walter Scheidel goes further, arguing that the trend to rising inequality in all societies has only ever been broken by plague, war or bloody revolution.

Politicians and campaigners tend to focus on just one dimension of the system-wide loss of confidence choosing business as their target or the state or, more abstractly, individualism or liberalism. But it is the social system as a whole that needs renewal.

This argument is illustrated by the hard case of technology, the subject of a fascinating and brave lecture at the RSA by Deep Mind’s Mustafa Suleyman. …(More)”.