Is Inequality Emotional Nonsense? Balcerowicz vs Klein and Piketty

To celebrate its centenary, the School of Slavonic and East European Studies at University College London had gathered illustrious academics and activists to debate the alternatives to the two economic systems that have battled it out throughout the 20 century. And judging by the passions that were flying across the conference floor, the jury is still out on which system is better.

And this — despite the fact that the great battle between socialism and capitalism was apparently won by the latter a quarter of a century ago. Why discuss it now?

Because, and almost all speakers at the SSEES100 conference agreed, socialism's arch enemy and victor, neo-liberalism, is now suffering its own crisis of credibility. And they may have a point.

Two years ago, the growth of new left-wing movements such as Syriza in Greece, or Podemos in Spain or Occupy in the UK and US suggested that under the influence of the western international financial crisis the predominance of capitalist ideology was being challenged.

Just look at theses quotes from the conference floor:

"Consent for capitalism is breaking down in the West because social mobility is all but gone" — Liam Halligan

"It was liberal capitalism that created a 'new man' — backstabbing and egotistic" — Paul Mason

"With communism we threw out the baby — organized labor, which allowed suppressing wages" — Anatole Kaletsky

And look at the huge enthusiasm during the campaign to elect Jeremy Corbyn as leader of the British Labour Party — it suggests a seismic shift even in pragmatist Britain. And it goes beyond a purely British affair, said political theorist Chantal Mouffe.

Corbyn has set an example to the European left of how to resurrect progressive left-wing populism. The term itself brought about a lively discussion about whether "populism" is the right word. "Shall we use the term 'socialism' instead," asked Professor Pete Duncan, who played a leading role in organizing the conference.

Votes Collected but not Heard

Whatever the term, Chantal Mouffe sees the need to radicalize and mobilize left-wing popular movements to reform the neo-liberal capitalist society that has lost its democratic credentials.

"Votes are collected" during ostensibly democratic elections "but not really heard" by the ruling elites, she said. Democracy substituted by liberalism results in a crisis of representation and inequality.

To fight inequality, which is getting out of hand more regulation and taxation are needed, argued Thomas Piketty, who made a splash in 2014 with his book "Capital in the 21 Century".

In many capitalist countries public wealth is not enough to pay off public debt, said Piketty.

Broadcaster Paul Mason, who has written a book on post-capitalism, believes this means that the next bust is quite likely but this time it will hit government finances and wipe out people's savings.

To author and activist Naomi Klein, fresh from the climate talks in Paris, to claim that any one issue — be it poverty or climate change — is more burning than any other is a losing strategy. The really burning issue is capitalism.

At one point in the conference it sounded as if there was no alternative to left-wing politics.

Emotional Nonsense

But Leszek Balcerowicz, the architect of capitalist transformation in Poland poured some very cold water on assertions that neo-liberalism increases inequality and reduces democracy.

"Talk of inequality of income is so fashionable because it's emotional, but it is all nonsense," Balcerowicz said to some incredulous gasps from the audience.

In Balcerowicz's view the issue of capitalism is that it is either too liberal and free market or overregulated and bureaucratic. But there is no alternative to what is in human nature — entrepreneurship. He believes his "shock therapy" (a description he does not like as he confessed to the conference) was vindicated by Poland's impressive economic performance since it was implemented in 1989-1991.

What he did not acknowledge was that the Poles managed to survive the steep rise in their cost of living by buying consumer goods in the Soviet Union at knockdown state-fixed prices and reselling them at street markets all over Poland. By the time he started helping implement the same "shock therapy" in Russia in 1992-1993, the local shops had been emptied and the Russians had no country next door to offer them the same lifeline.

But even to Balcerowicz, with his "rigid and dogmatic" views about the superiority of capitalism, as some participants remarked, the collapse of the socialist economy was a complete surprise, albeit a "pleasant one."

If such an advocate of capitalism accepts that the fall of socialism was not expected, no wonder, said Professor Ruslan Dzarasov of the Plekhanov Russian Economics University that, "nostalgia for the planned socialist economy dominates in many countries of FSU."

Fresh from a conference on the "Eurasian Project in a Global Perspective", held by Cambridge University and the Plekhanov Russian Economics University on 9 December, Professor Dzarasov listed the achievements of the Soviet economic model: full employment, free education, free healthcare, free housing, full literacy, breakthroughs in science and the arts.

And even now, said Professor Dzarasov, non-market economies play an important role in the global division of labor, as modern capitalism depends on global value chains.

But even before the globalization, socialism developed informal solutions that are now seen as highly free market. As veteran journalist Mary Dejevsky put it, Uber and #airbnb are just reinventions of unofficial taxis and bedsits that existed in the Soviet Union, alongside the official socialist economy.

Convergence, Anyone?

It was a pity Balcerowicz left the conference early — an opportunity for a "celebrity death match" was missed. Well, that wasn't the point of the conference, said its convener Jan Kubik, Director of SSEES at UCL.

His idea was that this conference should explore how an analysis of the historical and political trajectories of both pre- and post-1989 Central and Eastern Europe may contribute to confronting present day challenges to the economic model of the world. The big questions, according to Kubik are: Was economic failure of socialist planning in the Soviet bloc inevitable; and how successful was the transition of the post-Communist states from socialism to neo-liberalism?

Not very successful, appeared to be the feeling of many delegates.

They pointed to the fact that Germany was much more successful in rebuilding its economy after the total devastation of the Second World War than, say, Poland, a success story of the post-communist era. And Poland had a much better starting base. Was it not because Germany introduced quite a few elements of socialism back then, while Poland got rid of them? The answer to such questions may bring some clues as to whether the world is on the right track.

Summing up three days of deliberations the conference organizer Professor Pete Duncan of SSEES confessed that the conference "failed to convince me that socialism has no place."

However, said Ruslan Dzarasov, we should now "move beyond the old definitions of capitalism and socialism."

The definition that was missing from the debate was the one that used to be all the rage before the dismantling of socialism. It was called "convergence" and the capitalist West was happy to promote it as an antidote to pure socialism — such was its powerful appeal. But once socialism dismantled itself, "convergence" was quietly buried.

Maybe it's time to resurrect it?