Professor David Howarth, formerly LibDem MP for Cambridge, contributes to the new SLF book with a powerful, closely argued essay on Liberal economics. This an extract:
Here is a puzzle: if JS Mill, JM Keynes and James Meade were all Liberals and economists, what is a ‘neo-liberal’ economist? One might have thought that it would be someone who updated their thought to consider new facts and new problems.
In a highly successful example of propaganda and disinformation, ‘neoliberal’ has come to mean the doctrines of Friedrich Hayek or Milton Friedman. But those doctrines are anything but ‘neo’. They hark back to the era before Mill. We need to rectify names. Instead of ‘neo-liberals’ the followers of Hayek and Friedman might be called ‘paleo-partial liberals’.
The next step is to reclaim the Liberal tradition. That was the avowed aim of the editors of the Orange Book, but what some of them seemed to mean was not updating Mill, Keynes and Meade but abandoning them in favour of paleo-partial liberalism. Admittedly the diagnosis was not entirely wrong. The Liberal Democrats, as a political party, had wandered a long way from the Liberal tradition and had succumbed to various forms of conventional wisdom.
But the most distinctive feature of Liberal policy was its stance on corporate governance. From Mill onwards, through the Yellow Book to support for codetermination, Liberals argued for a different way of organising firms, not as hierarchical structures dominated by the owners of capital but as partnerships between labour and capital, incorporating democratic representation.
James Meade provided a continuation and deepening of this tradition that should have formed the basis of the merged party’s position.
The Liberal Party showed interest in another intellectual movement pre-figured by Mill, ecological economics and rejection of GDP growth as a universal measure of success.
The way forward, as seen from the early 1980s, was a new synthesis of old themes: economic policy should be aimed at political liberation; the market is a useful tool but not a God; the aim of political liberation encompasses reform of the internal organisation of firms on a more democratic basis; and the search for endless environmentally damaging economic growth is a painful phase elongated by mistakes of policy. Added to those older themes a newer theme was awaiting incorporation, the theme of community, which was the centre of the party’s community politics but whose economic consequences were never fully thought through. The value of voluntary association and small scale collective effort as an alternative to both the market and the state was implicit, but the economics of community remained largely unspoken.
But that new synthesis did not happen. Instead the party drifted into dull conformity with a centre ground between paleo-partial liberals and conventional macro-economics. Eventually the Orange Book took the party so deep into that conventional wisdom that it became indistinguishable from other parties ‘of government’ (which was, of course, its purpose).
Regardless of why the new Liberal synthesis failed to materialise in the previous generation, it is now time to revive it. That means above all reclaiming the name Liberal. The Liberal tradition in economics is that of Mill, Keynes and Meade, and now Ostrom, not that of Hayek and Friedman. The question is where it goes next.
A version of this blogpost originally appeared on LibDemVoice.org.uk