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A MATTER OF PRINCIPAL:
Who is 'the Public' that Public Policy should Serve?

Keith Rankin, February 1999


"Analytic work begins with material provided by our vision of things, and this vision is ideological almost by definition."
     J.A. Schumpeter, History of Economic Analysis

Public policy is essentially a process of analysis, legislation, institution-building and service-provision that conforms with some vision of just who the public is.

I have identified four alternative visions of 'the public', and hence of who should benefit from public policy. They are defined according to their respective principals: Citizen, Consumer, State and Sovereign. (These four terms are capitalised here, when they are used in this sense of specific principals. A fifth alternative principal might be the deity - "God", "Allah" or "Gaia" - but I will restrict my argument to secular visions.) All represent versions of sovereignty (small-s), where the general terms "sovereign", "public" and "principal" are essentially synonymous.

While these concepts of publicness are not mutually exclusive, they represent quite different ideological interpretations of who should benefit from the policymaking process. Indeed the meaning of "public" in some contexts is very close to the meaning of "private" in other contexts. Examples include the English "public school" system, and Auckland International Airport, which, once privatised, became a "public company". An ideological example of inverting an existing order is the publicisation of the proletariat that is central to the Marxian vision.

In Karl Polanyi's thesis of industrial capitalism (see my "Compulsory Freedom" in the November 1998 issue of Political Review) "society", representing publicness, was seen as having been replaced as principal in nineteenth century England by the "economy", representing privateness. The process Polanyi described was as much a publicisation of something that was formerly private, as a privatisation of what was formerly public.

In a post-1984 New Zealand context, the privatisation agenda represents a publicisation of what were formerly private interests.

The different concepts of publicness have one thing in common; the public represents the principal of society, and the public institutions of society are agents or agencies in the service of that principal. The language derives from "principal-agency" theory, a conceptual framework from the economics of private property rights (where the owner of a firm is the principal and the employees are agents) that is particularly useful to the left in the analysis of political power.

The chain of legitimate political power always runs from public to private; ie from principal to agent to subject (as in subjection to the rule of a monarch). (The equivalent power chain in a feudal context is from lord to vassal to serf.) Thus, the principal is the "we" of a public transaction, and the subject is the "you". The word "subject" is itself confusing, because in other contexts "subject" is an "I" word and "object" its corresponding "you" word. Of course, in an inclusive society - and inclusiveness is the quintessence of democracy - all of the people must be both the principal of public policy and subject to (ie obliged to comply with) public policy.

In a firm, the nominal principal is the shareholder. In politics, the nominal or de jure principal is whoever public policy is legitimately meant to serve. The real principals may be hidden, or in denial. In Galbraithian economics (eg as in JK Galbraith's The New Industrial State), the de facto principals of large firms are the senior employees, not the shareholders. In politics, de facto principals are private interests who corrupt public policy.

In this article, I am concerned about who we regard as the legitimate beneficiaries of public policy, and not about the identification of corrupt principals. In an ideal world, the nominal principals are also the real principals, and their status as principals has been legitimated through some sort of broad-based popular consensus. In practice, legitimation is a negative consensus; principals are legitimated when they are not challenged through public debate.

I believe that a fundamental part of the post-1984 reform process in New Zealand has been a shift in the official view (as distinct from the popular view) of who should benefit from public policy. Inasmuch as the new official view has also been called the "Treasury view", it implies a process in which an agent (eg Treasury) of public policy imposes its own view of who the public is. In such a situation, the first task of such an agency is to legitimise its new vision of publicness, and to delegitimise what it sees as the "enemy" vision. Thus the words Consumer (in the 1980s) and Citizen (in the 1990s) have served the quite specific purposes of making a new public order acceptable. The State has, at the same time, developed more sinister overtones, representing a process of delegitimisation. We in New Zealand have also seen increased use (and misuse) of the term "the Crown".

Each vision of publicness - of sovereignty - leads to different criteria of exclusion. Only one such vision - that of the Sovereign as principal - can be fully inclusive. The modern era has seen the dominance of the other three visions.

 

  1. Citizen as public
  2. "The new America was fascinated by the ancients: classical Greece, republican Rome. The values of these civilisations became American ideals too: democracy, civic responsibility, public virtue."
         Robert Hughes "The Republic of Virtue" (screened TVNZ 7/11/98) from the BBC television series American Visions.

    "There is a scholarly consensus that 'the American constitution was intrinsically an aristocratic document designed to check the democratic tendencies of the period', delivering power to a 'better sort' of people and excluding 'those who were not rich, well-born, or prominent from exercising power'."
         Noam Chomsky, quoted in the NZ Herald, 17 November 1998.

    In the Weltanshauung that emphasises Citizenship as principal, the concept of citizen defines the concept of public. In other Weltanshauung, citizenship is defined by whatever other meaning is given to the term "public".

    The prototypical Citizens were those of the classical era, the free men of democratic Athens and republican Rome. Classical concepts of civil society resurfaced in the period of the late eighteenth century known in Europe as the Enlightenment. The countries that formed the intellectual bridgehead of the Enlightenment were France, Scotland and the United States before and after the American Revolution.

    In revolutionary France, the concept of Citizen was intended to be inclusive relative to the alternative concepts of publicness based on either the nobility or the king. But, as Immanuel Wallerstein noted in Auckland in his 1997 Robb Lectures, by the end of the nineteenth century, Citizenship had become a concept of exclusion. (Indeed, it was always very much an exclusive concept in classical Athens and Rome.) Citizenship proved to be a middle-class concept which did not carry over well into a society with a rapidly growing class of wage workers.

    It was American culture rather than the French Revolution that forged our contemporary vision of Citizenship. American culture emphasises "direct democracy" (in which referenda are ubiquitous, and in which congress 'men' lobby executive government on behalf of their Citizen-constituents' private interests). Direct democracy contrasts with "representative democracy" (in which the Parliament acts as a proxy principal for the franchised population).

    That American interpretation of democracy has made significant inroads into international policy discourse in the last third of the 20th century, through the "public choice" paradigm of political economy (which claims that political failure is more of a problem than market failure), and through the 1990s' writings on civil society, social capital and dependency. The American tradition continues to be hampered by its bourgeois exclusiveness. In the United States, 50% is regarded as an excellent voter turn-out. And Switzerland, with its even greater emphasis on direct democracy, only allowed women to vote around 25 years ago. In these countries much of the working class cannot vote - they are guest workers or immigrants - or see little point in voting. Australia, with its formal citizenship-based suffrage, has made voting compulsory in order to create the illusion of a fully inclusive democracy.

    In the American tradition, as Robert Hughes noted, public buildings were consciously designed in the traditions of Athenian and Roman classical architecture.

    Classical Athens, Republican Rome and Thomas Jefferson's Virginia had one other thing in common. They were all slave-owning societies. Citizenship was defined in terms of economic independence. Thus citizens were men with sufficient property to be self-employed. Women and slaves were property.

    Paupers - the equivalent of today's beneficiaries - were nothing. Their indigence was taken as evidence of their indolence. They did not deserve equal civic rights. In the language of James Belich's Making Peoples, they were disreputable.

    By the twentieth century, the independent male breadwinner had become the archetypal citizen, a middle-class battler, married with 2.4 children, self-employed or with an individual employment contract. Citizens might not all be genteel, but they were expected to be decent if not respectable.

    There is an underlying logic through which, if classical-cum-American notions of citizenship are superimposed on New Zealand's quite different Westminster traditions, beneficiaries (who already do not qualify for, for example, "independent" family tax credits) could become politically as well as economically excluded. We have another case - the accident compensation bureaucracy - which provides negligible benefits to those individuals who are not economically independent. And we have a case where government-mandated child support is only allowed to benefit children who are in an "independent" family structure. The politics of exclusion are already with us. Its criterion for citizenship is regular paid employment. Even feminism, by emphasising paid employment as the basis of a person's social status, has been a carrier of bourgeois American values.

     

  3. Consumer as public
  4. "Our champions are not interested in the rights of citizens, but in the rights of consumers."
         Jane Scott and Chan Dixon in "In the Nature of Marriage", NZPR, September 1998.

    "In their arguments against the government's initiative ... sector [ie private] interests who of course want as much protection as can be conspired ... compromise consumer sovereignty."
         Gareth Morgan in "Parallel importing: A victory for the consumer", NZ Herald, 7 July 1998.

    The notion of Consumer sovereignty, which is central to neoclassical economics, emerges naturally as a modern extension of classical political economy. Classical political economy hails not from Rome and Greece but from Britain, from the time of Adam Smith to that of John Stuart Mill. It explicitly analyses income distribution and growth through the organising principle of class.

    In post-agricultural but pre-industrial epochs, there were two classes: a consuming class (gentry) and a producing class (peasantry and artisans). Classical Athens and Rome were a bit more complex, but not much more. Social configuration in terms of class is unambiguously exclusive. If the privileged consuming class is regarded as the appropriate beneficiary of public policy, then it is the Consumer who is principal, and citizenship follows from a person's status as a consumer. A citizen is thus a person who is to some extent free from the burden of economic competition. And a person with a large discretionary income is more of a citizen than a person with a small discretionary income. At least in the individualist American vision, all citizens are equal.

    Neoclassical economics simply removes the language of class present throughout classical economics, while reinforcing the idea that the Consumer is the legitimate beneficiary of public policy. The critical distinction between a consuming public and producers as private subjects remains.

    Under the assumptions of classical economics, to be a worker was to be poor, by definition. Workers were subject to the iron law of wages, meaning market forces. Consumers, on the other hand, were sufficiently free from the forces of competition to benefit from the value created by those fully subjected to competition. In a Consumer society, the working classes were poor. Polanyi noted in The Great Transformation:

    "'The Poor Laws' [is] a most confusing term to modern ears, to which poor and pauper sound much alike. Actually, the gentlemen of England judged all persons poor who did not command an income sufficient to keep them in leisure."

    Until this century, the English Parliament was "owned" by the consuming classes, who were also the effective tax-paying class. In "free trade" Britain, most of the government's revenue was derived from customs duties on wine, tobacco, sugar and tea. The Westminster Parliament was an Association of Consumers and Taxpayers.

    In an economically liberal policy environment, public policy is conducted at the behest of the consumer; or more particularly, the consuming class or classes. The central feature of such policy is to remove "distortions" from in particular the labour market but also to subject supply industries to fully competitive sub-contracting. Public policies of this type seek equilibrium at the expense of creativity, despite a certain amount of lip service to innovation and education.

    A key clue to this "consumerisation" process lies in the changing composition of output. The production of wage goods - ie goods consumed by the producing classes - becomes relatively small, while the production of "luxury" products (or "profit goods") for the increasingly affluent consumer class rises. In New Zealand, for example, the manufacturing sector that once produced wage goods for New Zealand workers was gutted in the late 1980s, and replaced in the 1990s by a new manufacturing sector that produces profit goods for the international market.

    Members of today's consuming class may well work, but their privileges arise not from the produce of their labour but from the scarce resources that they control, and from any employment rents they may command. (Employment rents arise from conventions that favour people in jobs over those not in those jobs but equally capable of doing them, from having work experience as well as tertiary qualifications, and they arise from restrictive professional registration practices.) In the years of protection and compulsory union membership (1939-90), the working class as a whole shared in employment rents, so therefore workers were able to receive a considerable share of the economic surplus. In those years, being a producer was a ticket, not a barrier, to consumption.

    The welfare state continues to ensure that ordinary New Zealanders still identify to some extent with the label "consumer". Equally important to our identity as consumers is the existence of widely available consumer credit. Nevertheless, the share of consumables being consumed by the wage workers and beneficiaries has fallen markedly since 1984, a result in part of both more targeted social welfare and a growing underclass of people whom the banks do not want as customers.

    In New Zealand today, for policymaking purposes, the prevailing concept of "the public" has become the Consumer. The Labour Party now fully endorses the Consumer as the end-user of public policy. To be a member of the consuming class in New Zealand means to be trebly privileged: to have a job that's not a McJob, to have discretionary purchasing power, and to be one of the constituents for whom public policy is conducted.

     

  5. State as public
  6. "The many agencies of the state - its vast bureaucracy - are seen to be a neutral instrument in the hands of the government of the day."
         Simon Upton, The Withering of the State.

    The State as the embodiment of publicness is the bogey of neoliberals; it is their version of the official vision pre-1984. The term "State" is used as a somewhat sinister synonym for government; a name that emphasises the full apparatus of government, including suffocating red tape and a self-serving bureaucracy. The term "Government" on the other hand places greater emphasis on the executive as principal to the public service.

    Either way, the Government or the State is seen as apart from the subject population. In one dystopian image, the State is a super-organism, of which each person is an expendable cell. (The preferred neoliberal utopia of the self-regulating market economy is, on the other hand, a machine, in which individuals are cogs, albeit free cogs.)

    The modern System of National Accounts treats Government as a consumer, reinforcing the notion that the Government - or the State - is a public body in direct competition with the (private) people for consumables.

    In New Zealand, the considerable amount of popular and media cynicism towards politicians suggests that the popular view of an exclusive Government as the principal for which public policy serves, but should no longer serve. Our elected representatives are reviled as a parasitic interest group.

    New Zealanders are in fact more ambivalent about the State than radiotalkbackland suggests; indeed the majority of us are not anti-State. We still look to an inclusive State to tax the privileged disproportionately and to provide health, education, and income support services. Through our seeing each of us as an equal part of our State, we have a welfare society that is more inclusive than many of us imagine. Nevertheless, the State is divorcing itself from its constituents; it is less inclusive than it once was. We need another vision of publicness, one that cannot be anything other than inclusive.

     

  7. Sovereign as public

"The benign condition of the English was associated, for Necker, with the fact that 'the people are part of the government'; ... for another French social reformer of the 1780s, it was due to 'every citizen being in some respect, and with solidarity, proprietor of a portion of sovereignty'."
     
Emma Rothschild, "Social security and laissez faire in eighteenth-century political economy", Population and Development Review, Dec 1995

"The thrust of the [Economical Reform Act of 1782] was to redefine as public property what has previously been defined as the private property of the crown."
     
Margaret Levi (1988), Of Rule and Revenue

One image of a Sovereign is of a king, an emperor, an overlord, a dictator; a class of one, an absolute ruler. Such a Sovereign ruling - indeed possessing - his subjects seems unpromising as the basis for an inclusive form of publicness.

Of course, a single person cannot lord it over a whole population without help. An autocrat requires an apparatus, which makes him a Head of State. The autocrat is a person who identifies himself and his kin as the State, even when out of office. Recent examples include Zaire's late President Mobutu, Chile's Pinochet, Indonesia's Suharto and the Philippines' Marcos. They saw themselves as the exclusive beneficiaries of public policy. Imelda Marcos still cannot see that the billions of dollars that she still possesses are not her legitimate personal property. Pinochet believes that his personal status as a former national sovereign entitles him to global privileges.

Where the Sovereign represents a symbol of publicness - a throne, a crown, or a flag - then all forms of exclusiveness disappear. Producers and consumers, nobility and commoners, beneficiaries and capitalists all have an equal status with respect to their Sovereign. The principal is the Crown itself, and not the person wearing it.

An interesting historical example of Sovereignty is that of nineteenth century Japan. Under the Tokugawa Shogunate, the public was very much the Samurai class, constitutionally recognised as a non-producing consuming class. Following the restoration of the Meiji (boy) emperor, the class system was formally abolished. The emperor became almost a deity, and everyone other Japanese became equals, subject only to the formal sovereignty of their emperor. The release of democratic forces made possible from the inclusive redefinition of publicness brought about one of the world's most successful political and economic revolutions. The only constitutional limitation to the achievement of a true "one-to-all" relationship in Japan is its cultural xenophobia, which means that residents who are not ethnic Japanese (the vast majority being paid workers) constitute a civil underclass. Despite its promising beginnings, modern Japan is really a Citizen-based sovereignty and not a true Sovereignty where every resident has equal status relative to the emperor.

The Sovereign as an economic symbol of publicness is not so much a ruler as a proprietor; the nominal owner of a nation's public domain, of everything of economic value to a society that is not subject to exclusive (ie private) ownership. (Americans, lacking the symbolism of the Crown, use the term "public domain" as a synonym for our "Crown land".) Thus the Sovereign is the name for an economic interest that is quite distinct from the private interests associated with owning (and selling) labour, and with owning (and leasing) property (or capital).

With the Sovereign as principal, every person who resides in a particular "national" territory is constitutionally equal. All permanent residents of that territory are citizens by virtue of their equal relationship to their Sovereign. Furthermore every person on the planet is an economic citizen of one (and only one) Sovereign nation, the nation in which they pay their taxes. And, given that the Sovereign is not a person but a symbol, the property of the Sovereign as the Sovereign, becomes the equal property of all economic citizens.

Public policy should for all people, treated equally. If we lose sight of the public equality that complements our private uniqueness, we cede control of public policy to groups within society who seek to legitimise their exclusive interest as the public interest. Sovereignty is about a vision of publicness that equally serves all of the people. It is about the equitable use of commonly owned income-generating assets (and the Government is such an asset), and equal access to the revenue made possible by those assets. And Sovereignty is about equal protection from injustice from within, and aggression from without.

The concept of national Sovereignty can be extended into the international sphere. A global Sovereignty completes a three tier federal structure of each person's public identity: local, national and global. The constitutional recognition of a global Sovereignty - as the public proprietor of the global commons - is quite a different emphasis to that of a "global state" or "world government" which contains totalitarian undertones. Sovereignty, which is synonymous with publicness rather than nationalism, nevertheless gives nations an important place within the international commonwealth.

 

A New Vision of our Public Identity

"The cause and the resolution of the long-lasting and apparently indissoluble impasse in modern economic thought lies in its pretheoretical vision rather than its postvisionary theory. ... It is the legitimacy of the public sector within capitalism that lies at the core of the contemporary crisis of vision. ... We are, of course, keenly aware that the popular view in America today is clearly in favour of a delegitimation of the public sector, not its enhancement."
     
Robert Heilbroner & William Milberg (1995): The Crisis of Vision in Modern Economic Thought

The vision of publicness that I seek to promote makes the concept of sovereignty into much more of an economic than a political form. This may seem like bad news to those who fear that economics, per se, represents some form of project to privatise everything. While neoclassical economics has no public vision beyond that of the Consumer, economics premised on Sovereignty can be an analytical form that derives its legitimacy from the fully inclusive and democratic bonds between a population and its Sovereign.

Public domain economics, quite different to both economic liberalism and state capitalism, is not an alternative to market-based economics; rather it represents an appropriation of the market system by the people and for the people, giving full expression to public property rights. 1984 represents a transition of publicness in New Zealand from a semi-inclusive welfare state to a state of consumer sovereignty with increasing differentiation between "independent" citizens and the "dependent" poor. 1999 seems as good a year as any to forge a new egalitarian vision of publicness.

 

© 1999 New Zealand Political Review


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