The free-market eats itself

Pfizer’s putative takeover of British pharma giant Astra Zeneca exposes yet another intellectual paradox of free market economics. Left to their own devices, firms will always try to takeover other firms or force them out of business. But every takeover (or bankruptcy) by definition reduces competition and choice, which is supposed to be the whole point of the free market in the first place.

It’s always seemed to me that the three top dogmas of free market economics — rational behaviour, perfectly functioning markets and government non-intervention — contradict each other. If companies and firms always act rationally in their own self interest, they will always try to subvert the free market, unless the law stops them (and sometimes not even then). But in a free market, the government is supposed to stand aside. How can this work? Imagine a football match in which all 22 players are determined to commit as many fouls as they can get away with. Then send the referee to the stands.

Free market fundamentalists are always trying to kid us that firms are falling over themselves to "compete" for our custom. They aren't. Occasionally some business people will claim that they “welcome” competition. They don't, or if they do, their shareholders or owners certainly don’t. They don't want competition. They want, if possible, a monopoly, or as close to one as they can get. Is there any example, anywhere in the world, of a joint stock private company willingly giving up its stranglehold over a market? I tried really hard, but I couldn't think of one.

So how can “free” markets ever work perfectly, or even near perfectly, if every firm in the market has an existential urge to make sure they don't? It’s an idea that, as soon as it’s set in motion, destroys itself from the inside out.

As usual, free marketeers have little to say when the weird contradictions in their beliefs come to the surface. Some do admit that enforcing the rules of the free market might be a legitimate role for strong government, but they always seem to cry foul whenever a real government proposes to act — for example by blocking a takeover like Astra Zeneca which, whatever other damage it will do, will definitely reduce choice and competition.

In theory, a real free market government should not allow any takeovers at all, except where the target firm is seriously at risk of failure. But then it wouldn’t be a free market any more, would it?

Is France being let down?

Is France going into a deflationary spiral? Some economists — a minority, admittedly, but a growing one — fear it might be. If so, the consequences for France, for the eurozone and ultimately for the UK, would be serious indeed.

In 2013, inflation in France averaged just 0.9%. For January 2014, the estimate is lower still, just 0.7%. As the respected French columnist Christine Kerdellant said recently, ‘If this isn’t deflation, then it’s certainly disinflation.’

Things are heading the same way across Europe. In January, UK inflation dipped below the Bank of England’s 2% target for the first time in years, despite the supposedly “strong” economic recovery, which would normally be expected to add to inflationary pressure.

Few people, I think, realise how serious deflation is. Falling prices sound nice, but they’re never good news for long. Just ask Japan, which took two decades to recover from the deflation of the early 1990s. Even a small bit of deflation can be catastrophic, especially in a modern economy where reaction times are faster, panic spreads quicker, sacking people is as easy as pie, and everyone’s up to their eyeballs in debt.

Once prices start to fall, people stop buying. Why shell out for that new computer or holiday when it will be cheaper next week or next month? People stop investing. Why buy that expensive piece of kit when it might well be cheaper next year, and when the price you get for whatever you’re making or doing is falling. People stop borrowing. Why take out a loan, when the real value of the debt will get bigger not smaller?

Inflation erodes the value of debt, helping over time to make it more manageable. With deflation, this process goes into reverse, inflating the burden of mortgages and loans.

Companies, seeing the price of their products fall, may try to recoup their losses by cutting wages or laying off staff, triggering another vicious downward swing in the spiral. Confidence drains away, uncertainty takes grip. Pretty soon, everything starts to fold.

If deflation takes hold in France — or any other eurozone economy — the only way to avoid this vortex will be for the European Central Bank to effectively start printing euros (and perhaps, as Ben Bernanke suggested for the US, dropping them over Paris and Marseille from a helicopter). France desperately needs looser monetary policy to counteract the tightening of fiscal policy imposed on François Hollande by the international markets and Eurozone rules.

But with a single currency and open borders, there’s no way to flood France with euros without also flooding Germany. It’s one big bath and there’s only one tap. Germany wants the tap turned off. And with the ECB, what Germany wants, Germany usually gets.

Deflation in an economy as big as France’s could put at least as much pressure on the euro as Grexit or any of the other crises which have threatened to blow the single currency apart in the last five years.

Germany’s antipathy to even mild inflation is often attributed to the hyperinflation of the 1920s. But it’s worth remembering that it was Heinrich Brüning’s disastrous policy of deflation in the early 1930s that led directly to Hitler’s rise to power.

Thumbs up for the real digital revolution

Cover of Petite Poucette by Michel Serres
Petite Poucette, by Michel Serres. Editions Le Pommier 2012.

Saint Denis was beheaded on the hill looming over northern Paris now known as Montmartre. The legend is that he picked up his own head and carried it several miles north, before finally collapsing and expiring on the site of the present day suburb that bears his name.

It’s to Saint Denis that Michel Serres compares future generations of human beings in this remarkable little book (barely 90 pages long). Petite Poucette (“little thumb”) is his female avatar for today’s young people who, with their dextrous digits, carry their heads — their knowledge — on laptops, mobiles and tablets. This is changing everything, not just the way we learn, do business and enjoy ourselves. It’s changing human nature itself, and just as importantly, the way we live together.

I’ve been a Serres fan since writing about him in my very first blog three years ago. His reasoning is razor-sharp, and he writes with the radical clarity of someone very young and the wisdom of someone very old. Yes, he’s 83, French, and professor of something very intellectual at Stanford. But he’s no grumpy old don whingeing about porn-addicted kids with minuscule attention spans and the world going to hell in an online shopping cart. Believe it or not, Serres is optimistic about the future.

You might think only a conservative could be optimistic at the moment, but Serres reckons that if the powers that be aren’t trembling yet, it’s only because they don’t understand what’s hit them. “I see our institutions shining with a brightness similar to that of constellations that astronomers tells us have been dead for a long time,” he says.

With knowledge freed, existing power structures will crumble. It starts, says Serres, with education.

Why sit listening to a tired teacher reading “approved” excerpts from a book, when the whole book is out there, freely accessible from anywhere, at any time? Why accept the established interpretations when you can read and discuss the comments of thousands if not millions of people who’ve read it and thought about it?

Why sit with your ‘arse parked’ in serried ranks, when you can sit in the park, on the beach, in the pub? Why listen to this single narrow conduit of knowledge and power (the teacher at the lectern) when the whole world of knowledge is there in your hands? And why bother learning facts when you can bring them up under your thumb? The minds of Petite Poucette will be free to think and have ideas instead of being clogged up with remembering second-hand information.

This, says Serres, is the true birth of the individual. ‘Grumpy adults’ may see this as “selfish”, but weigh that egotism against where the “libido of affiliation” has got us in the last 100 years. In the name of abstract collectives like the nation, race and religion, hundreds of millions have died. Individuals rarely ask this of each other. And no one was ever asked to die for a virtual community.

Michel Serres
Michel Serres: “I would like to be 18 years old, since everything is to be remade, everything is left to invent.”

“To no longer build a community on the massacre of another or of oneself — this is our future life set against your history and your politics of death,” replies Petite Poucette.

And are the virtual communities young people have created any less “real” than the ones we have been taught to value? ’We adults have succeeded in creating no new social connections,’ says Serres. The “community”, the nation, the church, school, family, class, the market — where do they stand today? To Petite Poucette, they are just ‘abstractions flying overhead like cardboard mascots’.

Are the British and French “nations” any more “real” than a Facebook group? Do we “belong” to a social class, or the company we work for, more than the online communities we choose to join?

For thousands of years, from the pyramid of Cheops to the Eiffel Tower, the ‘global form’ of human society has been broad at the bottom and narrow at the top, with power, wealth and the control of knowledge concentrated in a few hands. New technology is set to change that, perhaps within a generation, says Serres. The real revolutionaries are not the inventors of this technology, but the users. They will turn the world upside down.

It’s a striking view of the future, both optimistic and disturbing at the same time. But unlike the zombie ideology of free market capitalism, young people don’t have to sit back and take it. It’s something that they can shape for themselves. Serres has no fear. ‘I like to be 18 years old,’ he says, ‘because everything is to be remade, everything is left to re-invent.’

Stopping councils from building houses hurts us all


This graph from Monday’s Guardian tells you most of what you need to know about the housing crisis in the UK. It tells a simple but very sorry tale.

Nothing much happened to private sector housing completions for thirty years, at least until they fell off a cliff after the 2008 crash. Housing association building remains an insignificant part of the picture. What really matters is the complete collapse of council house building since the 1980s. This has been a disaster, and not just for potential council house tenants.

The boom in house building during the 1950s and 1960s (which ensured for the first time in our history that most people could spend their lives in sanitary housing conditions) was a highly effective partnership between the private and public sector. Very crudely, the councils built for renting and the private sector built for buying (it wasn’t entirely true – I was brought up in a house built by the GLC for sale as part of its “overspill” policy of encouraging people to move out of London). This ensured there was a plentiful supply of affordable housing for renting and kept the lid on house prices even while incomes rose.

This is why so many middle and even working class people were able to buy their own homes in the 1960s and 1970s, without getting into silly amounts of debt. These were the golden years when working families, if they were in secure employment, could buy the sort of reasonable family home that only millionaires can afford in London today. There was plenty of housing about and plenty of ways to put a roof over your head: council flats and houses, private landlords, rooms to rent, bedsits – we were providing houses of all shapes and sizes for families of all shapes, sizes and means.

Far from “crowding out” private investment in housing, or making people “reliant” on the state (as if people don’t have minds of their own), council house building was the reason people could afford to buy their own homes. Council development stimulated private development. There is no evidence from this data that the private sector is capable or willing to respond to today’s unprecedented demand for housing: the long boom in house prices which began in the 1960s has had no net effect on private housing completions at all, even from the 1980s onwards when private developers no longer had to compete with councils for tenants and buyers. It’s a dismal market failure.

If we want affordable housing to buy, we have to have affordable housing to rent, and that probably means council housing. That means lower rents and lower prices. Of course, people who are relying on property hyperinflation to fund their retirement won’t like it. But at least they’ll still have a roof over their heads.

Mission accomplished, George?

Osborne’s recovery is just like Darling’s – only slower, weaker and later.

George Osborne’s crowing over the economic recovery reminded me of George W Bush, strutting around on the USS Abraham Lincoln celebrating the ‘end’ of the Iraq War on 1 May 2003. As Bush spoke, a huge banner behind him read ‘Mission Accomplished’. Shortly afterwards, all hell broke loose. The war wasn’t over after all. It’s arguable if it’s even over now.


Like Bush, Osborne is in a tearing hurry to declare victory and move on. He doesn’t want you to think too hard or too long about what victory looks like, in case you conclude that it doesn’t look much like this.

It’s not just that two quarters of growth at 0.3% and 0.7% is hardly setting the Thames on fire. It’s not just that this is the slowest recovery for a zillion years (you can take your pick how long, but we could go with the broadly pro-Osborne IEA, who say it’s the slowest for 170 years), making Osborne a less effective recovery Chancellor than Alistair Darling, Norman Lamont, Geoffrey Howe, Denis Healey, Tony Barber or even Neville Bloody Chamberlain). And it’s not just that falling living standards, spiralling house prices and frozen wages are making this recovery feel almost as bad as the disease.

There’s also Osborne’s own view on what constitutes economic recovery. You see, this is our second attempt to recover from the great slump of 2008. Our first recovery – far more promising than this one – was cancelled just as it was getting going by no other than Gideon George Osborne himself.

When Osborne moved into Number 11, the economy had grown by 0.5%, 0.4% and 1.0% in the preceding three quarters. But Osborne said that was no good. He threw out Alistair Darling’s more considered strategy – a successful strategy – and reached for his austerity blunderbuss. The economy collapsed back into recession, then drifted sideways for two years. Living standards, especially for working people, plunged.

Osborne said the Darling recovery was unsustainable because government debt was too high. He said we were on the road to becoming Greece, although how a growing economy and a level of national debt on a par with Germany’s merited comparison with Greece was, and remains, beyond me. He said the economy was too reliant on a house price ‘bubble’ and households were borrowing too much. Darling’s recovery wasn’t really a recovery at all and we’d have to start all over again.

Three years later, the economy may finally be crawling out from under the rock Osborne dropped on it. But the national debt will be £533bn higher at the next election than at the last. Osborne’s recovery has barely begun and there’s already talk of a ‘house price bubble’ in many areas. And with stagnant or falling wages, rising house prices can only be accommodated by ever-higher borrowing.

If Darling’s recovery wasn’t real, then neither is Osborne’s. And it’s three years late.

This 18th century monolith is ripe for reform

Hardly an hour passes without talk of some new reform in the public sector. For at least thirty years change has been a constant in public services. Indeed the job of a public sector leader – perm sec, chief executive or whatever – seems to involve little else but going round telling everyone how much the organisation needs to change. You wonder how they find time to do whatever it is the organisation is supposed to do when it is not reforming itself or being reformed.

The joint-stock company model remains essentially unreformed since the time of the South Sea Bubble in 1711. Pic: Library of Congress.
The joint-stock company model remains essentially unreformed since the time of the South Sea Bubble in 1711. Pic: Library of Congress.

Any failure in a public sector body – or sometimes even by a single public servant – is met with instant and shrill demands for the entire system to be changed. Mid-Staffs was not just a badly run hospital; it was symptomatic of a disease afflicting the entire NHS (if this were true, of course, there would have been no Francis Inquiry, as Mid Staffs wouldn’t have stood out). For these people, it doesn’t matter how much public services have been buggered around with, they are always ‘unreformed’. Only one reform counts: making them more like the private sector, preferably by transferring them to the private sector altogether. This is so widely accepted – even by people on the left – that an outsider would imagine our private sector to be a gleaming model of efficiency and service.

Actually, quite a lot of the private sector is rubbish. Banks, insurance companies, supermarkets, the railways and the utility and oil companies are among the most despised and distrusted organisations in the country. If you can’t find somewhere affordable to live, if your broadband doesn’t work, if your pension scheme isn’t delivering what was promised, if you can’t get a seat on a suffocating train, if an elderly relative has been abused in a care home – it’s the private sector that has failed, not the public. It’s private sector firms that brought you horse burgers, phone tapping, Windows 7, incendiary fridges, PPI, ‘self-checkouts’ and – the daddy of all cock-ups – the great recession itself.

This is the culture we cherish so much we’re extending it further and further into our lives. If you can’t get a GP appointment, your local school is failing, escaped cons are roaming your neighbourhood – even if your Boris Bike breaks down – it’s more and more likely that a private sector firm is responsible (usually Serco). We hear a good deal about the failure of big ‘government’ IT contracts – but a good deal less about the firms who failed to deliver what they were contracted to do. So why do we only ever talk about reforming the public sector, never the private?

Most private firms would wilt in minutes under the kind of scrutiny public sector managers have to deal with every day. There’s no Francis Inquiry into the obviously systemic failure of the banking sector, just a compliant Parliamentary commission under former banker and oil executive Andrew Tyrie. Ministers mull over prosecuting nurses for poor care, but pass over evidence of criminal fraud (LIBOR, PPI or pensions for example) by banks and insurance companies. There’s no shake-up of our greedy utility companies, no probe into BT’s monopoly stranglehold on broadband, no action on the eternal failure of the railway companies to provide the service passengers pay through the nose for. Just tame regulators, stuffed with industry insiders, presiding over cosy cartels that fob us off with the same products and the same lousy service under different brand names.

When Serco was caught overcharging the Ministry of Justice – ripping off you and me – justice secretary Chris Grayling said it was ‘indefensible and unacceptable’, but he didn’t do anything. After fraud and mismanagement were uncovered in the welfare to work scheme run by A4e, the company was eventually sacked. Good. But where was the inquiry? Where was the policy review? Where is the evidence that ministers have learned anything from their mistakes? (The employment minister at the time was, incidentally, one Chris Grayling.)

At most, you get the Daily Mail or government ministers railing against individual firms for their failings. But you can’t blame Scottish Power for putting up its prices, or care provider Southern Cross for trying to make a quick buck out of its property portfolio. This what those companies do, it’s what they have to do. They have one objective and one only – maximising shareholder value. And they’re not always very good at that.

There are many models in the public sector, but only one in the private. The joint-stock profit-maximising company is simply not fit for purpose in many areas. It has proved a hopeless way to run natural monopolies like railways and utilities. It’s not up to providing health or social care, as has been proved time and time again. It cannot manage competing priorities – the way public services have to do every day – because it has only one priority. Why do we think this creaking 18th century model is so perfect, so superior to everything else, that it can never be challenged and must be applied to everything we do as a society?

With only one model, all large corporations are forced into the same mode of behaviour: short-termism, cost-cutting, service degradation, price hiking, misleading marketing and pressure sales tactics. Even charities have started to behave like this. But why do all companies have to be profit maximising? Some, while needing to generate profits to stay in business and invest for the future, might have purposes other than squeezing the last ounce of profit out of their suppliers and customers. Might some have social interests, or the interests of their workers or clients at heart? Actually, many small businesses have such diverse priorities because of the way their owners choose to run their businesses or live their lives. But big corporations, with only one model to follow, have no choice but to behave the way they do.

Cameron: "There is such a thing as society, it's just not the same thing as the state." It's not the same thing as SERCO either.
Cameron: “There is such a thing as society, it’s just not the same thing as the state.” It’s not the same thing as SERCO either.

If he’d meant a word of it, David Cameron might have been onto something with the Big Society. No, it doesn’t always have to be the state, but it doesn’t always have to be the big private corporation either. And might not the ‘third sector’ also be an alternative to the private sector as well as the public?

There are failures in both private and public sectors. But where the public sector is expected to innovate and reform in response to failure, the private sector gets away with shrugging its shoulders and wringing its hands. It’s as if the private sector was created by God 300 years ago, and must be left unsullied by human hands. It’s time we changed that.

Talking therapy

The left needs to dispel Europe’s political depression before it can tackle the economic gloom.
Spain's Mortgage Victims Platform holds protests outside ministers's homes, but also help families fight evictions at local level.
Los Indignados: Spain’s Mortgage Victims Platform holds protests outside ministers’s homes, but also help families fight evictions at local level.

Europe seems to be in the grip of a political depression every bit as deep as the economic one. Spinoza wrote that we feel depressed when we are cut off from our power to act. Faced with the economic depression (let’s call it what it is), Europeans seems to be suffering just such a collapse in will brought about by utter hopelessness. The British pollster Peter Kellner said recently that politicians need to find ‘a narrative to dispel the gloom’. This is exactly what ‘talking therapies’ aim to do for people suffering from depression. But if it’s hard to find that narrative for an individual, it’s harder still for a whole nation or even a whole civilisation.

One reason the European left hasn’t done very well out of the global economic crisis is that many voters don’t believe politicians can to do anything at all to end the slump, or even to protect the gains working people have made in the last one hundred years or so. The left runs on hope and there isn’t much hope about.

Kellner was commenting on a recent poll in Britain which found that most voters didn’t believe there was anything politicians could do to restore living standards to pre-crash levels anytime soon. Even among Labour party voters, only 56% thought there was anything to be done. The same fatalism seems to lie behind the vertiginous collapse in support for François Hollande’s socialist government in France. Most French people seem to believe that the President’s widely derided ‘toolbox’ for dealing with the crisis is empty, and probably always was (of course there is a small but vocal minority who claim he is the willing stooge of international capitalism, but in France there always is). But the mainstream centre-right UMP (Sarkozy’s party) remains in disarray and the main beneficiary has been Marine Le Pen’s Front National.

Note: the Front National not the Front de Gauche. The surge in support for so-called ‘anti-politics’ parties – the FN, UKIP in Britain, Beppe Grillo’s Five Star movement in Italy and Golden Dawn in Greece – is largely confined to those on the right. On the ‘alternative’ left, nothing stirs. But if this is rage, it feels like an impotent rage – one of Spinoza’s ‘sad passions’. I doubt even supporters of these parties have much real confidence in them as potential governments. Grillo certainly made an electoral breakthrough, but then ran away from the responsibilities of power. And how many people who will vote for UKIP in Thursday’s local elections in the UK can put their hand on their heart and say that a lot more Thatcherism and flouncing out of the EU will deliver jobs and growth? Really?

So, if I cannot solve my problems and they cannot solve them for me, perhaps we can solve our problems together. This idea used to be called ‘solidarity’ (fraternité in France – one of the three founding principles of the 1789 revolution, and the most overlooked). But solidarity has been largely slung out of the left’s toolbox. The traditional channels for expressing solidarity and applying collective pressure for change were mostly closed off even before the crisis began: street protests are often seen as a waste of time (democratic governments make it a virility test not to give in to such protests); trade unions are weak and often discredited, and their traditional weapon – strikes – are almost useless in a depression; and there are no credible revolutionary movements to force governments into offering radical but democratic change.

If there is a ray of hope to pierce the gloom it might come from the example of the indignados movement in Spain, which mixes local grass-roots activism – for example, helping impoverished families fight evictions – with imaginative direct action protests, such as noisy demonstrations outside ministers’ homes. These kinds of social movements, which might also include co-operatives, credit unions and the like – have more practical appeal than fuzzy movements like Occupy and pack more political punch than charities. They offer collective action and individual help with specific problems. There is a ‘narrative’ that most people can relate to.

The conventional left has always been a bit sniffy about anything too ‘grass roots’ or smacking of ‘self-help’, often preferring to operate at the systemic or theoretical level (or even sometimes to not operate at all). But we should remember this is exactly how trade unions and organised left got started in Europe in the first place.

Can’t get no satisfaction?

‘You can’t always get what you want,’ sang Mick Jagger in 1969. ‘But if you try sometimes, well you might just find, you get what you need.’ The Rolling Stones frontman isn’t mentioned in How Much is Enough, which is a shame since his lyrics encapsulate the failure to distinguish between needs and wants which is at the heart of this thoughtful assault on contemporary capitalism.

Buy How Much is Enough from WH Smith
How Much is Enough? The love of money and the case for the good life, by Edward & Robert Skidelski, Allen Lane, 2012.

Although they sound like a Scottish punk band, the Skidelskys make an unlikely pair of iconoclasts: Lord Robert, the acclaimed biographer of John Maynard Keynes, and his philosopher son, Edward. And it is from Keynes’s mistaken belief that the richer we became the less we would choose to work less that they take their cue. Keynes failed to understand, say the authors, how capitalism would continue generating endless wants which could never be satisfied. Indeed, neo-classical economics has abolished Jagger’s distinction between wants and need by subsuming both within the empty concept of ‘utility’. So we keep working longer and harder to afford more stuff which we certainly don’t need and may not even really want.

To make capitalism work for us rather than the other way round, the Skidelskys propose trying to meet our needs rather than our wants. To this end, they identify seven ‘basic goods’ which we need in order to live, in Keynes’s words, ‘wisely, agreeably and well’: health, security, respect, personal independence, leisure, friendship, and harmony with nature.

For this to work, we need to dispense with the modern Western idea that happiness is merely a subjective ‘state of mind’, which makes it worse than useless as a goal of public policy. The Skidelskys’ solution is to revive the Ancient Greek concept of happiness – eudaimonia –  as ‘a blessed or enviable condition’. Behind this lurks the idea that some modes of life are intrinsically better than others. Take friendship: who would disagree with Aristotle’s assertion that, ‘No one would choose to live without friends, even if he had the other good things’?

jagger_portraitThe Skidelskys cheerfully own up to ‘honest paternalism’, and you can hear Keynes’s echo in their suggestion that the good life is more about ‘strumming a guitar’ or ‘decorating furniture’ than ‘watching television and getting drunk’. Curiously, there is no discussion of democracy here, or how we might choose between different versions of the ‘good life’ without an Athenian-style panel of elders deciding for us.

Some of the Skidelskys’ policy prescriptions – a basic income for all citizens (working or not) and higher pay for public servants, for example – look like a dauntingly hard sell in the current environment. And it’s a measure of the capture of conservative thinking by free-market fundamentalism that ideas drawn from Greek and medieval philosophy, Christian social teaching and Edwardian patricians like Keynes are now only likely to find favour on the left.

‘Making money cannot be the permanent business of humanity, for the simple reason that there is nothing to do with money than to spend it. And we cannot just go on spending,’ the Skidelskys warn. Mick Jagger might have agreed with that in 1969. These days, I’m not so sure.

  • A version of this review was published in Public Service Magazine, Autumn 2012.

Baudelaire and our destructive obsession with change

‘The shape of a city changes too fast, alas!, for the heart of mortal man,’ wrote Charles Baudelaire in one of his most famous poems, The Swan. Baudelaire wrote it around 1859, when many of the narrow old streets of Paris were being bulldozed by Napoleon III’s henchman Baron Haussmann to make way for the grand boulevards we see today (though not the boulevard that bears Haussmann’s name, which dates from the reign of Louis XIV).

Charles Baudelaire: destruction isn’t always creative.

Like Baudelaire, many artists and writers have an ambiguous attitude to change: often voiciferous in demanding socal and political reform, but just as often lamenting the loss of traditional ways of life and old, familiar places, especially those remembered from childhood.

Baudelaire had stood on the barricades armed with a stolen pistol (it was just a pose really, he didn’t do much) during the revolution of 1848 which eventually brought Napoleon III to power. He hated the bourgeois values of his own upbringing, and despised the French establishment – both personified in the form of his loathed stepfather General Aupick. But in The Swan, he laments that ‘the old Paris is no more’ and compares the new city to ‘an empty tomb’, and himself to a captive swan, pining for it’s ‘native lake’ and unable to drink from a dry gutter.

As Baudelaire’s poem shows, ceaseless change is nothing new, especially in the city where the engine of capitalism fires on all cylinders. Full-blooded capitalism really came to France with Napoleon III – a spivvy property developer masquerading as a politician – but the French never took to it as enthusiastically at the Brits. It’s one of the reasons why when you go back to Paris, even after several years, your favourite bar or restaurant is often still there, sometimes even with the same staff. In London, nothing on the high street endures for more than five minutes before it is replaced, ‘under new management’ or somehow made-over into something different. This process seems to have acceleated since our return to turbo capitalism in the 1980s.

Many people on the left are embarrassed to oppose change – of almost any kind – for fear of being branded ‘conservative’. After all, isn’t progress supposed to be about change? And isn’t innovation the motor of cultural and economic life? In Britain, and increasingly in France too, no politician – left or right – can afford to be against change. In the UK, every area of public life has been constantly ‘in reform’ for at least 20 years. Perhaps we’ve lost sight of the fact that not all change is good, and that innovation and change are not the same thing.

In the 1940s, Joseph Schumpeter coined the term ‘creative destruction’ to describe the way free-market capitalism requires ceaseless change – that goods, services, companies and even people are disposable and transitory – in order to generate the constant demand for new production on which the system depends. Left unfettered, this results in a world where consumers must never be satisfied, care and craftsmanship are for the birds, and work itself has no intrinsic value, since nothing endures and nothing should endure.

The philosopher Bernard Stiegler, who is director of innovation (note the title) at the Pompidou Centre in Paris, has written about how this ‘structural obsolescence’ in the things we buy and the things we produce, in the organisations we work for and the environment around us – makes people feel disposable themselves, to the point where they ‘lose the sense of existing’. It’s a more extreme and generalised version of Marx’s ‘alienation’, where we are not only estranged from the means of production but from the things that we own (workers in Marx’s day didn’t own much), the places we live in and, ultimately, from each other. We become, like Baudelaire, strangers in our own city – ‘exiles’ like Victor Hugo, to whom Baudelaire’s poem was dedicated.

At the root of this, is the little value we now place on work itself. In 1995, in his final speech to the UN, François Mitterrand warned against a world in which speculation ‘ruins in a few hours the work of millions of men and women’. This is – perhaps already was – the world we live in.

In a recent series of articles in the Guardian calling for ‘a new capitalism’, the British economic commentator Will Hutton was making similar points when he argued that ‘uncommitted tourist shareholders’ and the linking of director’s pay to short-term share price performance ‘have allowed a madhouse to develop’, where ownership and branding changes constantly but there is little real innovation. Shareholders have little engagement with the companies they own and the company itself has become ‘nothing more than a network of short-term contracts’.

In this environment, where no one has any patience or takes any long-term responsibility, there is little investment and precious little innovation. It’s hardly surprising that no one takes any pride or care in the products they make or the services they offer. After all, everything that’s here today will be gone tomorrow.

‘No game changing improvement in British investment and innovation is possible without a return to engagement, stewardship and committment,’ writes Hutton. ‘The company has become a dysfuctional organisational construct that needs root-and-branch reform.’

The effects of all this are not just economic, but social, cultural and even psychological. Constant, meaningless change leaves us feeling rootless, emotionally destitute, disorientated, even nauseous. Only people with substantial assets can afford to buy some permanence and stability in their lives. According to Stiegler, this has lead to the ‘general depressive state’ afflicting working people in most Western societies.

‘Paris changes! But nothing in my melancholy has stirred!’ wrote Baudelaire. Wandering among the ‘new palaces’ springing up on the site of the old neighbourhoods of Paris, with his ‘dear memories heavier than rocks’, he felt even then that nothing of real value was being created.

It’s up to Europe’s democrats to save capitalism from itself

Battered by the economic crises of the 1920s and and 30s, European politicians clung to the gold standard because it was the only thing they knew. The gold standard dictated permanent austerity and relentless downward pressure on wages. The result was stagnation followed by collapse, soaring unemployment, and massive social and political upheaval. The dead hand of the gold standard was only lifted when European voters began to flex their muscles and put the austerity parties out of office. It didn’t end happily.

Members of the Golden Dawn party give their version of the Nazi salute after being sworn in as Greek MPs on 17 May.

Today’s European leaders are in the same position, trapped inside a similar orthodoxy. For the gold standard read ‘German’ monetary policy – an obsession with the phantom threat of inflation and a scorched-earth approach to reducing debt. The austerity and wage cuts follow as a matter of course. Voters can see this, which is why they are felling incumbents across the continent like old dead trees.

Europe’s leaders have no political strategy, just a defunct economic one. And without a political strategy there is no hope. It doesn’t matter if orthodoxy dictates that austerity is the ‘right’ economic policy. Parties who keep offering up the same meagre fare will be pushed aside. People who think they can preserve our existing form of capitalism and democracy are deluding themselves in a bubble.

Democratic parties – on the centre-left or centre right – must either reinvent capitalism or be swept away by wilder forces who are no friends of either free-market capitalism or democracy.

Some on the democratic right (mostly in the UK it has to be said) want seize this opportunity to impose more free-market reforms, more deregulation of labour markets, deeper and deeper cuts in government spending. They dream of completing the Thatcherite revolution on the broken backs of the Eurozone economies. We can argue the toss about the economic consequences of this, but politically it’s a dead letter. It’s not the way European voters are facing.

European voters can’t make up their mind whether to turn left or right in response to the crisis. But even those turning to the right are not voting for more of the same. They are flocking to parties like the Front National in France, Geert Wilders’s Freedom Party in Holland, the True Finns in Finland, even the openly pro-Nazi ‘Golden Dawn’ in Greece. These aren’t free market parties. Their economic programmes often have more in common with the resurgent left-wing groups like Jean-Luc Mélenchon’s Front de Gauche or Alexis Tsipras’s Syriza movement in Greece.

Take Marine Le Pen’s Front National, which is locked in a battle to the death with Nicolas Sarkozy’s UMP for dominance of the French right. Leave aside the casual racism, xenophobia and repressive social and penal policies that would fill France’s jails with half its workforce (I exaggerate, but only slightly). She also wants to end the European single market, introduce protectionist trade barriers, stop the free movement of European labour, impose capital controls and nationalise banks.

This is not exactly communism, but it’s no free market nirvana either. Sour, insular and repressive, if you want to know what Marine’s Le Pen’s France might look like, look at Putin’s Russia.

But these ideas are gaining hold with European voters because they at least try to address people’s fears. Because they seem to be a genuine break with the past. Unencumbered by economic orthodoxy, parties like Le Pen’s can offer a explicitly political programme.

If Europeans on the centre-left and centre-right, who have more in common than they usually admit, want to preserve liberal democracy and a broadly capitalist economy, they need a political strategy to address (among other things):

Insecurity – austerity and free market ‘reforms’ create insecurity which leads to the instability which markets hate. Fearful people do not make contented or industrious workers. Or voters.

Disenfranchisement of working class people – these are the voters who are turning in increasing numbers to the undemocratic parties of the right and left.

Falling/stagnant wages – in the last 30 years too little a share of economic growth has gone into wages. Working class incomes have been largely stagnant in Europe (and the US) for many years. Now they’re falling off a cliff. In a democracy, this is unsustainable.

Globalisation – those who say we must buckle under and cut our wages to compete with China and India can forget it: you will be swept away long before that happens.

If we can’t reinvent liberal-democratic capitalism so it works for ordinary people, what right do we have to expect that it should survive? Decide now: are you for democracy or the free-market? You might not be able to face both ways for much longer.