The story of The Big Society

The origins of The Big Society go back to the economist Milton Friedman and fellow academics at the Chicago School of Economics whose ideas came to prominence in the 1980s when Friedman was an economic advisor to Ronald Reagan.  Friedman’s approach to economics – termed neo-liberal, or neo-conservative – has become the dominant economic idea of the last 30 years, prompting The Economist magazine to label him “the most influential economist of the second half of the 20th century…possibly of all of it”.

There have been essentially three legs to Friedman’s ideological stool.  The first was monetarism.  No one talks about monetarism these days, but those of us of a certain age can remember that monetarism was all the rage when the Thatcher government came to power in the early 80’s.  In effect, monetarism and what was called supply side economics was The Big Idea of the Thatcher government in much the same way as The Big Society is The Big Idea of the Cameron government.  Monetarism was a theory about the relationship between unemployment, inflation and the money supply.  In a nutshell monetarism said that if you reduced the money supply you would reduce both inflation and unemployment.  It was a pretty simple idea – one reason that Margaret Thatcher was accused at the time of preaching “A level economics”.  The easiest way to reduce the money supply was to reduce the public sector borrowing requirement (PSBR) and the quickest way to reduce the PSBR was to reduce government spending.   It was this, rather than any ideological desire to reduce government, that was the main driving force behind the cuts in public spending that the Thatcher government introduced.

Monetarism didn’t really work in a conclusive way, not least because the predicted falls in unemployment did not occur – in fact unemployment rose sharply and didn’t show any signs of decline, so very quickly the game moved on to the second leg of Friedman’s theories.  This was all about the free market and deregulation.  The idea was that free markets (i.e. markets freed from forms of regulation) were the perfect form of organisation and could do everything from determining the price of onions in the supermarket to managing global trade.  The role of government was therefore to deregulate everything they possibly could and hand everything over to the free market.

The most notable area of deregulation under the Thatcher government was in the financial services sector – something called The Big Bang.  This caused the huge growth in the UK banking and financial services sector, largely because levels of regulation were a lot less in the City than other credible financial centres.  Unfortunately, of course, it encouraged the forms of behaviour that lead to the global financial meltdown (and subsequent recession) of 2008.  The Thatcher government also introduced markets into many areas of government itself – the NHS was divided up into internal markets, schools were given rankings and encouraged to compete with each other and the rail network was broken up into series of regional markets.  The free market was seen as a one-size-fits-all solution to just about any problem.  Little thought was given as to whether markets were actually good at delivering complex things like public services or even the bureaucratic consequences of trying to create markets in things like the NHS where markets don’t naturally exist.  This need to create artificial markets is the main reason for the growth in  managers, regulators and targets and other forms of bureaucracy that have grown up over the last 20 years in the public sector.

It is important to note that this form of free market fundamentalism is not the same thing as capitalism, it is simply an approach to capitalism.  Opponents of free market fundamentalism are frequently portrayed as opponents of capitalism or proponents of socialism – a convenient accusation but one very rarely true.

Free market fundamentalism has become the dominant economic ideology of the last 30 years, to the extent to which there is really no other idea around.  However, it has never become a political idea, probably because placing this idea beyond the reach of politics was a means by which the people who benefited from it could continue to benefit irrespective of who was in power.  Because it was afraid of challenging these people, the New Labour government became as much a disciple of the free market as was its Conservative predecessor and it was able to do this while still maintaining the posture of a party which looked after the interests of the disadvantaged.   The other reason that neo-liberal economics has become adept at covering its tracks is because of its rather unpleasant consequences which tend to affect the majority of the population.  It is therefore important to drive a wedge between these effects and what it is that caused them.  The unpleasant effects include trifling matters such as collapse of the global financial system in 2008 and the worst recession since the 1930s – dismissed by free market fundamentalists as ‘market malfunctions’ or ‘corrections’.  You also find that whatever the theories might predict or the politicians promise, there is a common thread running through any country that adopts the free market fundamentalist ideology.

First – you will get a significant transference of public wealth and assets into private hands.

Second – you will get an increase in the gap between rich and poor, usually with the creation of a new super-rich class at the top end and an underclass at the bottom.

Third – you will get a gradual breakdown in the basic fabric of society, as measured by almost any index of social cohesion.

The more rigorously a country adopts such policies, the more dramatic these effects.  What happened to Russia in the 1990s is probably the most extreme example.  Here Friedman’s men basically took over the management of the economy and implemented a form of radical free market fundamentalism which become known as Economic Shock Therapy.  What ultimately happened was that a small group of people become vastly wealthy (they became known as the oligarchs) almost everyone else lost out, a huge impoverished underclass was created and Russian society basically fell apart, and with it the fledgling processes of democracy.  While these disastrous effects have been recognised, the real cause has never really been identified.  Instead various excuses have been put around, notably that the Therapy was not administered strongly enough or quickly enough and that too many concessions were made to old-fashioned things like social welfare.

Of course, it is relatively easy to shift the blame for all of the effects of free market fundamentalism onto other things.  The breakdown in the fabric of society can be blamed on the deteriorating morals of the population as a whole, or groups within it.  Or indeed Government itself can be blamed.  It is a curious feature of the detachment of free market ideology from the political process, that this allows any form of government, no matter what its political complexion, to be portrayed as ‘The Problem’.

This brings us to the third leg of Friedman’s ideology.  Friedman basically did not believe in government.  He thought that government’s role should be restricted to protecting borders and maintaining law and order and that everything else should be left up to private enterprises operating in a free market.  While the Thatcher government adopted monetarism and embraced deregulation and free market fundamentalism they stopped short of embracing this, perhaps most radical, aspect of neo-liberalism.  The Thatcher government was very keen to encourage entrepreneurship and business enterprise by removing re-tape, but the idea of actually dismantling the institutions of government did not really fit comfortably with the approach of either Thatcher herself or the party establishment at the time.  As a result, this third leg was never really developed, beyond privatising some state companies (many of which should probably never have been nationalised in the first place) and starting to create artificial markets within the provision of public services.

This brings us to The Big Society.  While behind the scenes free market fundamentalism remains the dominant economic ideology, it is now a rather difficult sell.  The global financial collapse of 2008 made it impossible to continue to sweep the unpleasant effects of free market fundamentalism under the carpet any more.  Initial attempts by some in the Conservative party to position this disaster as “the recession we needed to have” or simply a “market correction” went down like a lead balloon.  Rather inconveniently, it was Big Government that actually saved the world from the havoc wrong upon it by Big Business operating in a deregulated environment.  A new cover story was therefore needed, hence David Cameron and his team, turned to the one remaining bit of neo-liberalism that had yet to really be adopted – Friedman’s idea that the State should basically dissolve itself and hand everything over to private enterprise and the free market.  The problem with this, in common with most of the other aspects of Friedman’s ideas, is that if you expose what it is you are doing, people won’t vote for you.  Democracy and neo-liberalism don’t really mix.

The only way to get a neo-liberal idea of the ground is either to disguise it as something else, or to create an environment within which people can be steamrolled into accepting it.  Hence why David Cameron will never say that The Big Society is about turning the whole business of government into a profit-making opportunity: who, after all,  would vote for a Big Business Society?  Instead he talks about handing power back to the people, eliminating bureaucracy, empowering communities, or that wonderful term that can be used to cover a multitude of sins – Reform.  It also explains the demonization of the deficit problem and the unseemly rush to introduce radical spending cuts.  No one could really argue with the fact that cuts need to be made, but there is much less evidence to support the need to introduce them quite so rapidly or dramatically, or that outsourcing everything is actually the best way to achieve real savings or efficiencies.  However, if we were given time to develop a more considered approach, the current levels of panic would subside and people would start to challenge and question exactly what it is we are doing.  Already the reasons we were given at the election, that Britain was going to become the new Greece and the IMF would take over the country, are starting to look more than a little hysterical.  Indeed the IMF itself is starting to caution against rapid and dramatic cuts.

What is needed is not a Big Society.  What is needed is a Big Idea, liberated from the failed economic dogma which has been used as a facade behind which established interests have advanced themselves for the last 30 years,  immune from the inconvenient interference of democracy.  Crucially, it should not be an idea which harks back even further to the socialist inspired economics which decided that the State (rather than Big Business) was the answer to all our problems.  We need something that recognises that competition in free markets is good for setting the price of onions, but not good at providing a system of public health or education.  After all, winners and losers is fine when is a question of Asda versus Tesco (or Eton versus Harrow) – but we don’t want a public education or health system of winners and losers.  Critically, this needs to be an idea which is subject to public debate and the process of democracy, not something which is rushed past us under heavy disguise.

Big Society Suffolk is quite clearly not that idea.


3 Responses to “The story of The Big Society”

  1. 1 Felipa January 26, 2013 at 5:57 am

    Thanks for a marvelous posting! I seriously enjoyed reading it, you could be a great author.

    I will make sure to bookmark your blog and definitely will come back in the
    future. I want to encourage you to definitely continue your great job, have a nice

  1. 1 Left hand to outsource right hand « Big Society Suffolk Trackback on February 7, 2011 at 10:19 pm
  2. 2 Big Society Suffolk: has Society won? « Big Society Suffolk Trackback on May 5, 2011 at 4:07 pm

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