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Review: Them and Us: Politics, Greed and Inequality – Why We Need a Fair Society by Will Hutton
Robert Skidelsky
The Guardian | Saturday, September 25, 2010

Them and Us: Politics, Greed and Inequality - Why We Need a Fair Society by Will Hutton.
In 1996 Will Hutton wrote The State We're In, setting out his vision of Britain's future as the then ascendant Tony Blair prepared to take power. The new dawn didn't break. With Them and Us, he turns his persuasive efforts on the coalition, from whom he has accepted a job to review public sector pay. Here he argues that fairness should not be sacrificed to austerity, and tries to reconcile radical principle with political pragmatism. The result is a tract for our times, passionate, erudite, with much common sense. Hutton is not a socialist, but a progressive liberal. By "fair" he means simply that "good things should happen to good people, and bad to bad, and they should happen proportionately and impartially". Behind this deceptively simple idea of fairness there is a substantial engagement with Marx, Rousseau and John Rawls. Hutton rejects the egalitarianism of Marx and Rousseau, arguing that it runs counter to our moral intuitions. In accepting justice as a matter of desert, he dismisses Rawls's view of it as an outcome of just institutions.
Unlike all three, he believes people can be held responsible for their successes and failures, and should not be treated simply as victims of circumstances. However, he dilutes this principle by introducing the notion of luck. People can be lucky and unlucky, and deserving and undeserving. So people should share in others' good luck and be compensated for their own bad luck.
Hutton believes, plausibly enough, that popular notions of fairness do make allowance for luck. For example, free treatment on the NHS can be regarded as a compensation for the bad luck of being born poor, while inheritance taxes share the good luck of a few all round. However, I doubt if most people think of redistributionary policies in this way, nor does Hutton. He frequently makes judgments about desirable social policy that have nothing to do with his two criteria of fairness. As he says, we don't provide smokers free treatment for lung cancer because we believe it was bad luck for them to get cancer, but out of pity for their suffering. This has nothing to do with fairness.
He argues convincingly that fairness is just as important for the right as the left. Those who defend the egregious rewards of the financial elite fail to understand that fairness is "capitalism's indispensable value". The motor of capitalism is innovation – entrepreneurs taking risks to create something new.
Drawing his examples from world-changing technologies like the printing press and the railroad, he asks why innovation thrives in some societies more than others. His answer is fairness. The explosion of science and technology unleashed by the Enlightenment was stimulated by the dismantling of the entrenched elites and monopolies, opening up society to talent. When entrepreneurs can expect to reap the rewards of their efforts, they are spurred on to innovate. In open societies, this mechanism from effort to reward is the dynamo of the economy. But if financial elites receive rewards disproportionate to the social value of their contribution, the connection between innovation and reward gets lost.
This is what Hutton thinks has happened in Britain since the 1980s. He pictures a society dominated by the City of London, whose inflated wealth is unmerited by the value of its contribution. However, there is a difficulty here. It seems clear that Britain has too many Fred Goodwins and not enough James Dysons. But without an objective measure of "value", Hutton's distinction between "socially useless" and deserving effort dissolves. What is it fair to reward and what is a fair reward?
Marx thought labour should be paid by hours worked, and charged capitalism with stealing a proportion of the worker's labour time. But his labour theory of value, which proportioned reward to the length (and disagreeableness) of work, has long been replaced in economics by the doctrine of subjective utility, according to which value is determined solely by subjective preferences. If a banker is paid £1m a year, it is because that is the value placed on his services by those who buy them. But the older view lingered in the popular perception that miners deserved higher wages than shop assistants, because their work was more onerous, and that a premium should be paid for dangerous work. Unless we find some way of reconnecting "value" and "price", the doctrine of desert lacks an intellectual anchor. A similar problem arises in sorting out the respective contributions of desert and luck to the making of money.
Hutton puts these conundrums to one side, and puts his notion of "fairness" to work to understand the causes of the financial crisis. He paints a picture of the City run wild, with politicians incapable of providing the moral leadership to challenge its dominance: "New Labour ran up the white flag before the march of finance without even an exchange of hostile fire."
The financial crisis gives a powerful new resonance to his previous advocacy of "stakeholder capitalism". The short-sightedness of the market was the natural consequence of its relentless focus on shareholder value, driving spurious "financial innovation" that enriched bankers while ruining the economy.
Hutton's analysis of the financial crisis is thoughtful, precise and accessible to the general reader. Even if the narrative is now familiar — bewildering derivatives, hapless regulators, systematic miscalculation of risk – his command of the details is impressive. He never loses sight of his key argument: "Big finance was economically inefficient, dysfunctional and socially destructive. Above all, it was unfair. And it still is."
So what next? The government's new adviser repudiates the main plank of the coalition's policy: rapid deficit reduction. "Moralism about debt," he thunders, "is no guide to good economics." Britain's public debt of 60% of GDP is far from crisis level. Hutton restates the Keynesian argument that we need a state that steps in to halt the plunge of private demand. He is no "deficit-denier", but stresses the need to cut fairly, with the baby boomers who benefited from the housing bubble making a larger contribution.
That same clarity is not always on display in his diagnosis of the British political system. His proposals are less obviously linked to fairness, and are weaker for it. Hutton's policy prescriptions are almost too wide-ranging, from splitting up large banks to reform of the education system and support for PR. In all these he maps out paths for reform. A church broad enough to include George Osborne and Will Hutton does, perhaps, leave something to hope.
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By Julian Wells (Kingston University London) on Fri 15 Oct 2010 - 10:26

Robert Skidelsky may be a formidable scholar of Keynes, but his grip on Marx is feeble at best.

Contrary to Skidelsky, Marx not only did not think that “labour should be paid by hours worked” but explicitly repudiated this idea on a number of occasions—most famously in his “Critique of the Gotha Programme”, first published in 1891.

It follows that his complaint about capitalism was not about its “stealing a proportion of the worker’s labour time”. As Marx makes clear in volume one of “Capital”, his aim is to explain profit on the basis of the exchange of equivalents.

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