Markets and Civil Society

Economic Rationalism in Canberra
Michael Pusey,
Cambridge University Press, 1991.

MICHAEL PUSEY'S Economic Rationalism in Canberra displays a deep hostility to the liberal economic ideas that came into prominence in the 1980s.  Pusey doubts the policies of economic rationalism can achieve their stated aims of improved efficiency and greater wealth creation, but this is not his major objection.  Rather, his central concern is that economic rationalism threatens what he calls the "reproduction of society".

On Pusey's account, civil society (non-state groups and organisations) is in danger from the cornerstone of liberal economics -- the free market.  He claims the last generation saw "extended family, church, and local community neighbourhood ... burnt up as fuel in the engine of economic develop ment" (p.241), with worse to come if economic rationalism is not halted.  The market is a "deadly enemy" of society (p.232), and economic rationalism a greater threat to the well-being of the species than nuclear war (p.22).

For liberals, Pusey's critique of the market is a challenge to their self-definition.  To most of its supporters, liberalism is an ideology of both the market and civil society.  They support the market as promoting efficiency and personal choice, and civil society as the institutional forum in which individuals and groups pursue their diverse aims and aspirations.  If Pusey's critique is right, it reveals a massive contradiction between liberalism's economic and social objectives.  In order to avoid social collapse, the economically "rational" reform process would not only have to be stopped, but urgent steps taken to reverse changes already made.

Pusey believes economic rationalism is accelerating the economisation of society.  According to Pusey, economic rationalists do not recognise the "legitimate bounds of economic behaviour" (p.13).  Instead, they envision a world in which all decisions are made by "socially denatured individuals", set free of norms, traditions, mutual obligations and social solidarities which stand in the way of the "behavioural orientation of all decisions to perfectly utilitarian criteria of costs and benefits" (p.204).  Furthermore, Pusey thinks that the economic rationalists now want to use the state to "liquefy" those aspects of civil society resisting the "external logic of incentivation" (p.241).

Pusey thinks economic rationalists are unable to conceptualise the kinds of relationships on which most institutions of civil society are based.  Understanding human association in terms of costbenefit calculations, they cannot see that families are supposed to be based on love, churches on faith, charities on altruism, sporting teams on loyalty to each other and the game, voluntary associations on the common pursuit of purpose, neighbourhood groups on social solidarity.  If the values Pusey ascribes to market activity were culturally dominant, they would preclude the kind of identification with others and with common purposes on which civil society relies.

THE MARKET FOSTERS VIRTUES

Pusey's criticisms echo those made of capitalism from Left and Right for more than a hundred years.  Karl Marx and the conservative Thomas Carlyle both complained about relationships between men being reduced to a cash nexus. [1]  However, there are a number of reasons to think that this cultural analysis of market society is wide of the mark.  On the contrary, we have grounds for believing there to be a mutually fruitful interaction between the market and other parts of civil society.

First, not all the values learnt in the market are inappropriate to the non-economic spheres of civil society.  For instance, the market encourages co-operative behaviour.  If firms are to do well in the market they must encourage co-operation between their employees.  An analogy can be drawn with sporting competitions, in which rival sides must maximise teamwork among their members.  Further, while firms compete with each other in the market, they must co-operate with consumers.  As opposed to producer-dominated societies (such as exist in the remaining command economies), market societies create institutional pressure for producers and consumers to arrive at mutually beneficial arrangements.  Participants in market activity are as likely to learn how to be responsive to the needs and requirement of others as they are to acquire self-interested money grabbing habits.

Co-operation is not the only virtue fostered by participation in markets.  Workers must learn punctuality, reliability, and a willingness to work within established frameworks.  Entrepreneurs must display imagination, initiative, drive and determination. [2]  The market encourages tolerance.  It creates common interests between groups and individuals who might otherwise be hostile and opposed.  By bringing diverse types into contact, markets ease suspicion born of mutual ignorance.  All these virtues learnt in the market are conducive to the flourishing of civil society.

Second, Pusey's argument assumes the values he attributes to the market will squeeze out other values.  Why this would be so he does not explain.  In reality, I suggest, all of us routinely differentiate between different parts of our lives, and try to find the appropriate values to apply in each.  Survey evidence strongly suggests Pusey's fears about market values dominating Australian lives are baseless.  Far from being preoccupied with economic matters, for Australians standard of living ranks fourth among their life priorities, and the amount of money earned is only the sixth most important factor in the level of work satisfaction. [3]  Even in economics and politics, where market values might be expected to be strongest, only 29 per cent of Australians believe we can rely on market forces to create a fair and prosperous society. [4]

Third, Pusey fails to consider the importance of a market economy to maintaining the diversity of civil society.  A central feature of a market economy is that decisions about the allocation of resources are substantially removed from political control.  While this diminishes the level of "collective choice" often approved of by social democrats like Pusey, a pluralistic civil society depends on economic power being dispersed.  This is because where financial resources are centralised, they cannot be used for the varied purposes found in civil society without first obtaining the approval of higher authorities. [5]  The need to obtain approval is a serious obstacle to groups with beliefs or customs alien to those of the dominant section of the population.  Without the "social separation of powers" provided by a market economy, a diverse civil society is impossible.

THE IMPACT OF ECONOMIC REFORM

Pusey's criticisms of the effect of economic rationalism on the social fabric would be stronger if he stuck to the direct effects of the reform process, rather than its indirect cultural influences.  As many proponents of industry protection point out, decline of industry can seriously affect particular groups in the community.  Single factory towns, or regions heavily dependent on one industry, are particularly vulnerable to having their whole social system damaged by reduced protection.

In these cases, however, the central problem is economic and market values are clearly relevant.  It is up to the protectionists to explain the special circumstances which justlfy substituting non-market principles.  They need to explain why consumers and taxpayers should subsidise the business operations of another section of the community, thereby diminishing their own economic viability.  Preservation of a particular subsection of society may count as an important consideration here, but the social costs to the rest of society need more attention than protectionists are usually prepared to give.

The relevance of market values arises once again with the issue of centralised wage fucing.  Under the centralised system, unions have tried to substitute "wage justice" for market principles.  Economic rationalists respond by pointing to the unemployment, inefficiency, and inflation created by this method of setting wages.  The important point here is that economic rationalists are also in a strong position to argue that there are significant social costs attached to their opponents' proposals.  These are inevitably incurred when industries become unable to support themselves.  The economic and social chaos of the former Soviet Union is an extreme example of the problems created when non-economic considerations dominate production.  Just as Pusey stresses the need to find legitimate bounds of economic behaviour, to maintain a reasonable standard of living we must also set limits on how large a role non-economic values can play in essentially commercial activities.  Pusey, for one, gives us no idea of what these limits might be.

THE STATE AGAINST CIVIL SOCIETY

Pusey's critique of economic rationalism is further marred by confusion over the role economic rationalists see for the state.  Pusey imagines they support a "minimalist laissez-faire state" (p.6).  If this were so, he would be right in thinking the state would have little capacity to co-ordinate or support the institutions of civil society in the "reproduction of society".  But if Pusey had read the economic rationalist literature, he would realise that they agree that modern governments should have numerous functions extending well beyond those of the minimalist state.  Generally, economic rationalists envisage a public sector of 30 per cent of GDP or above, with the state playing an important role in promoting and protecting many aspects of civil society.

Much of Pusey's argument rests on the claim that economic rationalists do not understand or appreciate civil society, while Pusey-preferred social democrats are able to find the balance between economy and state that provides the right environment for civil society.  However, in several ways Pusey himself appears not to understand civil society.  As I indicated above, he overlooks the many ways in which the market has positive effects on civil society.  Pusey compounds the effects of this omission by giving little space to the negative effects of state activity on civil society, such as local community help groups losing their functions to state welfare bureaucracies, misguided welfare payments contributing to family breakdown, or business being adversely affected by poor regulation.  In both cases, economic rationalists are more attuned to the functional requirements of civil society than is Pusey.

Pusey also understates the sociological importance of civil society.  This is apparent in his claims that bureaucratic and public policy-making institutions "alone" stand between individual citizens and market structures (p.2) and that the state is the "great engine of integration for social actors 'separated' by the market" (p.196).  To the contrary, many sociologists have shown how the small institutions of civil society (particularly the family) are the maior forces inteeratine individuals into society, and that state institutions can be remote and alienating.  This is one reason

In times of economic difficulty, reminders of the dangers in letting economic ways of thinking dominate politics and society can be useful.  However, the kind of ill-considered denunciation of markets we find in Economic Rationalism in Canberra are hardly a constructive contribution to debate over the policy choices facing Australia.  Pusey is a throwback to earlier forms of left-of-centre thinking.  While many social democratic intellectuals and the modern ALP recognise that the market promotes economic efficiency, personal choice and the flourishing of civil society, Pusey repeats old and fanciful claims about market society and has an unwarranted faith in the state.

ENDNOTES

1. See Robert Nisbet, The Present Age:  Progress and Anarchy in Modern America, New York:  Harper and Row, 1988, p.85.
2. William A. Galston, Liberal Purposes:  Goods, Virtues and Diversity in the Liberal State, New York:  Cambridge University Press, 1991, p.223.
3. J. Kelley and C. Bean (eds.), Australian Attitudes, Sydney:  Allen and Unwin, 1988, pp.168-169.
4. Sydney Morning Herald, 26 August 1991, p.8.
5. See Chandran Kukathas, David Lovell and William Maley, The Theory of Politics:  An Australian Perspective, Melbourne:  Longman Cheshire, 1990, p.67.