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A critique of neo liberal economic theories
L. CARTELIER (Paris 13 University) - Pierre Bauby will now speak on this topic. Some of us do not entirely agree on these analyses but discussions may show that some arguments remain valid. We need to put down strong analytical foundations towards the creation of public services. We will then hear the rapporteur on the critique of neo-liberal theories.
P. BAUBY (Réseaux Services Publics) - A fifteen minute presentation of the criticism of neo-liberal theories is a challenge which I will try to take up. It will be oversimplified of course and the ensuing debate will allow for some clarification. I will limit my field of investigation to the second half of the last century (which is rather arbitrary), but the neo-realist debate is not over and is still relevant. Neo-liberal forces are still dominant but detractors make themselves heard. Within the neo-liberal movement there is a wide diversity of schools and opinions: Hayek, public choice, the Libertarians, etc. Looking at common fundamentals, with the risk of oversimplification, I have come up with five main points summarised through three questions: what are the neo-liberal views on the subject? What are they based upon? How can we judge them? As you can see: three questions x five points = fifteen minutes.
Relations between individual and collective interest
Questions about the knowledge of reality
The question of spontaneous order
Is the market a spontaneous order?
RICHEBÉ (Paris 8 University) - Organisations, between State
and market - My role here is to report on the discussions which followed
the presentation on the "criticism of neo-liberal theories", to comment
on these and maybe to enlarge the debate.
Starting from this omnipresence of organisations in the critical debates on liberalism, I would like to make two points:
First, I would like to remind you that the question of the conjunction
of the organisation and the market, or if you prefer, of the position of
the organisation in the market process, is not absent from the debates
which oppose liberalism and planning (or State control as Pierre Bauby
calls it. It is thus recognised -by liberals included- that there
is no market without organisation(s); or if you prefer, that there is more
to the market than the "spontaneous".
Thus, we can see here that a critique of liberalism should include these two facts established by the analysis: there is organisation in the market; there is "spontaneous order" in an organisation. Neither a "pure market" nor "pure centralised co-ordination" can be said to exist.
The limitations of an analysis of the economy from the single point of
view of the market, or: the organisation in the market.
Limitations to centralised co-ordination or: the importance of decentralised
co-ordination within the organisation.
summarise and close this presentation, I will say that studying organisations
is rewarding in three main ways:
i) First, they demonstrate the severe limitations of centralised power in which everything is controlled and regulated "from above", and the truth of the paradox mentioned by Michel Crozier (in Le phénomène bureaucratique) , i.e. that too much authority kills authority; a formal, over-centralised authority, concentrated at the top of the hierarchical pyramid, can ultimately be ineffective. All the managers' efforts involve the production of forms of organisation which ensure a type of decentralised co-ordination within the organisation. It is not only seldom possible, but also seldom desirable to manage everything "from above" in an organisation.
iii) Finally, the study of organisations shows the difficulty and complexity of the interaction between individual and collective interests. In an organisation there are obvious collective interests, and most obvious of all is the fact that the viability of a company lies in its results in the market. Individual and collective interests are obviously not entirely separate from each other and the viability of the company is in the interest of its employees. At the same time, they also have contradictory interests. The interaction between the two cannot be summarised through mere opposition or through perfect convergence of interests. Furthermore, these interests evolve over time, but not totally independently. The compatibility of individual and collective interests is something which has to be built, and learnt by all, day by day.
- those which show the importance of organisations and more specifically of institutions in the processes of the market order,A third form of co-ordination then appears; it is neither co-ordination through authority (as suggested by Coase) nor co-ordination through prices (as supposed by some liberals): it is co-ordination through regulation and is present both on the market and in the organisation
CARTELIER - Neo-liberal economic theory and efficiency - I should add
that we need to add a legal dimension to this debate. In this part of our
discussion I will concentrate on strictly economic implications.
The liberal economic theory and its relationship with social equity - Liberal or neo-liberal economists are not blind to problems of social equity. Their proposals in this area include direct taxation and grants, i.e. giving the poor the means to buy a number of services through coupons or cash benefits; this is hardly acceptable to us..
G. HEINTZ - No systematic opposition of State and market - Fifteen years ago, J. Attali wrote that liberalism can only situate itself in opposition to the State but can only realise itself with the help of the State. The two earlier presentations oversimplify matters and oppose market and State. This juxtaposition is based on a number of factors but the market's efficiency is also guaranteed by the State and by the intervention of States (exchange rate, work legislation, )
About the concept of organisation - I discovered this while researching the history of the railways in France, particularly the consequences of social conflicts. Just as nationalisation ended up in takeover by the State, the concept of organisation emerged when workers decided to organise against others. We find it in Lenin's ideas inspired by Taylorism because he had understood the American tendency to efficiency which was not the case yet in Russia. The concept has become popular with trade-unionists. But have we not gone beyond it? We have been talking for the last twenty years about the sociology of organisation, but I'm doubtful whether this enlightens many (with the possible exception of managers). I question whether this is the right concept.
G. WIRTZ - Two redeployment routes for public services - The concept of a public space for communication appears important to me. Public services will have to organise and facilitate communication spaces, encounters between individuals, actors and creators, in order to create joint projects. Two theoreticians come to mind: Albert [Mass] and his history of communication and public space and Amartya Sen on the capacity of individuals. Today, States must meet not only the basic needs of individuals (food for example) but also make access to so-called superior goods possible. Public services could be redeployed in function of these two essential research indicators.
CAVOURIARIS - I would like to add three points to the five presented
with great clarity by P. Bauby: equilibrium, production cost and social
dimension. The advantage of the social economy is that it takes all cost
into consideration (cost-advantage analysis).
MASSIAH - Which questions and critiques are relevant to our debate? - Which
critique(s) do we need? How do we identify and order the questions to be
submitted in our discussions? Which guidelines should we adopt? We have
an international debate in which liberal theories are dominant but also
in crisis. What matters here is the debate on the reform of economic policies
and the fundamental questions it raises. The dominant idea today is that
a structural adjustment is essential. We need to eliminate poverty and
we need to be governed properly. This is not particularly coherent but
it is a response to other critiques. The latest report by the PNUD puts
forward the idea of international public goods and the world bank replies
that liberalisation is the first in a series of international public goods.
The paradigm of liberalisation is the following: the market and competition
create efficiency (and even democratisation, it was said, but this is not
the case any more). Companies are free to act and this is considered
as the engine of liberalisation. International investments are the only
precursors of modernity, and the movement of capital makes international
investments possible. Which questions should we discuss?
P. BARGE - Democraty et poverty - JI will have the opportunity to intervene on the questions Guss has raised (democracy and regulation). The liberals do not have the same concept of democracy as those who situate themselves in the other camp. Neo-liberalism has taken us towards a more modern position than that of Malthus where the poor are left to their fate. We witness a return to a moral order in which the poor are helped under social rather than individual schemes: minimum income, vouchers ). A danger emerges from the common discourse, which does not lie in the adoption of the entire liberal theory by society and politicians, but of some elements of liberalism which give us an alternative: offering the poor minor solutions because things are happening somewhere else. The poor are excluded but they are not meant to spoil too visibly the development of the market.
What happens within organisations is interesting and I am not talking about the construction process within. If the people are going to be heard, there will have to be new organisations, means and forms of construction.
F. FOURQUET - Consequences of the global dimension of the market - I will expand on the fourth point presented by P. Bauby. Which market are we talking about: internal or global? Internal markets were often created by the political powers in the Middle Ages. The attributes of sovereignty were taxes, currency and the market. The global market is spontaneous, it is coextensive with war. We have today a regulation authority, the WTO. Why? Problems with non liberal theories started with the fall of communism, a political and not merely economic world event. Keynes' interventionist ideas aim to resolve the crisis and develop employment without resorting to totalitarian methods. This is possible if the State keeps initiating and orientating investments. We live in different times. The world is globalised. The liberals denounced by Polanyi live in a liberal universe made of nation-States. Communism has collapsed, sapped by globalisation. Why is world trade regulated or organised? There exists already a global society and European society is an element in outline as a part of it. There are global organisations because there is a global society and a global new order, and all our debates on public services must include a world dimension.
SIMPSON - Beware of facile criticisms - We are in danger of embarking
on a witch hunt in citing always the most extreme exponents of liberalism
, like Hayek, Friedman and Crozier, and in denouncing such models
which, in practice, are not put into effect in public services.
CARTELIER - I thank you for refocussing the debate. The subject is
complicated enough without looking for non-existent problems. Public authorities
intervene extensively in the management of most of these public service
networks; but most national systems are moving towards market solutions
which are presented to us as better than past ones.
CAPRON - About the general interest - I have questions about the use
of a position relative to economic neo-liberal theories on the definition
of a theoretical foundation for the existence of public services today.
L. CARTELIER - What is the general interest? We have at the moment two unsatisfactory answers. The standard view by economists is that the general interest is the optimum. We all know why this is unsatisfactory. The second view is that of the Keynesian tendency: the general interest is a common superior principle. Keynesians consider that the State is omniscient and benevolent and decides on this. But the State has often been wrong. The question remains, particularly as today, nations (the usual route to the general interest) disappear behind Europe and globalisation. We remain in the dark.
F. FOURQUET - There remains the humanitarian level
L. CARTELIER - Yes, but we need to develop a theory
BRACHET - How useful is the notion of organisation? - Robin is
right to bring us back to realities; this conference has concentrated on
ultra-liberal theoretical models. The key questions lie in the relationship
between facts and theoretical models. We could attempt to integrate facts
and realities more satisfactorily during this conference. To what extent
can theoretical concepts account for realities and to what extent do realities
invalidate theoretical models?
P. BAUBY - Why position ourselves in relation to neo-liberalism? Every theory develops in opposition to a previous dominant paradigm. Neo-liberal theories point to the relevant questions (not necessarily immediate realities though) which once again make us question our culture, our history and previous positions and allow us to go beyond them.
General interest - Traditionally, for the French, the highest levelof the State decides what is in the general interest and that is final. Principles are applied and developed. Neo-liberal criticism is pertinent here. We need to define a new concept of the content and mode of elaboration of the general interest based on the intervention of all actors at all levels: from the micro to the global the interest of the group is a collective interest. The difficulty is to generate these collective interests at all levels through democratic processes. This is what underlies the existence of services in the general interest. The European designation for them (services of general interest) is adequate and explicit because it stresses their objectives, i.e. the interest of all
Globalisation and territories - Environmental matters and the question of sustainable development require global public services to be built. F. Fourquet tells us that what is new in the world is globalisation. He is right but it does not stop here. Globalisation exists in conjunction with territories. The two go together. The strongest actors in globalisation are anchored in local, regional and national territories. This is why the European dimension is so important in these questions.
N. RICHEBÉ - I tend to agree with François Fourquet. To enlarge and open the debate, we must move beyond the State vs. liberalism dilemma. I suggest we move the debate towards mesoeconomic forms. Our two proposals are complementary and move in the same direction. I will now reply to M. Heintz on the organisation concept. I have used the word 'organisation' but do not exactly know its origin. I have used it because it is ambiguous: an organisation designates both what contains and is contained (institution and co-ordination). I could have used the words co-ordination or institution.
MULLIER - Concepts about general interest-
LIdeas on general
interest are evolving. Fifty years ago people did not need to have a current
account and could be paid in cash. The banking system is open to competition.
There are nationalised banks but the State is not involved, as it is with
transport. People are excluded from banking services. You cannot pay your
rent in cash, yet some people do not have a current account. The Livret
A (the A Book) is used as a current account but no agency meets this new
need. Is that what the general interest is? Poverty should not be alleviated
through public charity but through a system of redistribution. One of these
systems involves equal access to minimum facilities through geographic
equalisation of tariffs. I am not particularly keen on this notion but
we have to find new means without involving public charity.
A. DRIVAS - Why has liberalism generated such interest for such a long time? I feel that we are amalgamating economic and political liberalism. If we look at history, we see that in the 19th century, liberalism, scarcely arrived at its peak, found itself facing a contradiction, i.e. that of the State which was being created little by little. The question of distributive justice is central to this. Liberalism faces two facts: it needs authority from the State to assert itself but the State is not that good at controlling things. Do we not have to face outdated forms of authority? The word 'democracy' is often used but this is more to do with authority than democracy.
T. KLEIN - A proposal for future research - We need to specify what we call organisation. Neo-institutional views or theories on collective agreements should be our starting point and we should look into the question of institutions, which may take on State functions and go beyond that. We must recognise an imbalance in information and reports by decision makers in organisations. The latter can also involve other problems. I agree with Lysiane Cartelier's conclusion: we must be careful not to see things in black and white, our critique of neo-liberal theories is not clear. We need to use the most pragmatic elements within neo-liberal theories and also within other tendencies
CALLA - Is there an economic theory (liberal or not) which can explain
why financial objectives have become the main instruments of destruction
of public services? These are going to be privatised in order to satisfy
"stock exchange vampires".
L. CARTELIER - A proposal for future research - Our workload today on public services and globalisation is very heavy. I conclude from what I have heard that the first step could be to look into the organisation concept using to that effect neo-institutional outlooks. We could also consider the general interest concept. What does it mean at the time of globalisation? How could we put it into practice or at least get close to it? New types of exclusion risk exist today. Are public services the right solution to manage or lessen this risk? I tend to think they are. La Poste is obliged to open an account to any person who has been rejected by traditional banking systems. The principle of a universal banking system is now being considered; this shows that public services constitute a good solution to new types of risk. More liberal solutions ought to be considered and we can only rejoice at the possibilities on offer today.
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