Timothy Garton-Ash recently wrote about the differences between China and ‘the West’ with regard to state intervention and free markets. He made the case that things are not as clear-cut as we might think. China sometimes has a very light touch in terms of Government regulation, and its spending on the public sector compared to even that bastion of free markets the US, is meagre. He also pointed out that there is a very strong entrepeneurial culture in China, perhaps too strong – one of the problems the Chinese communist party faces is tempering inequality and environmental degradation in the face of almost untrammelled private sector growth.  

Of course, there are strong statist elements in the Chinese economy, especially in the banking sector (although the West has recently caught up here!). But the point of Garton-Ash’s article was to disabuse us of a tendency to think in terms of a crude dichotomy between West and East along free-market/statist lines.

I wonder whether this way of analysing things really works anymore – are the challenges we face to be met by getting the right blend of free-markets and state control? At a certain level yes. But what about thinking a bit harder about how social organisation in institutions and businesses reflects what kind of individuals we are, what kind of individuals we want to be? What about thinking about where we want forms of social organisation to take us – where do we want to go, is it really high-growth consumerism that we want?

Here’s the connection with motivation: it seems quite clear now that one reason for adopting neo-liberal capitalism is the claim that people won’t be motivated to work hard by anything other than self-interest. Or, that even if they can be otherwise motivated, the motivation of self-interest is so powerful, producing so much surplus wealth, that discounting other forms of motivation can be justified. Here in the UK, New Labour has bought into this motivational model wholesale.

But this claim has hardly any credibility any more. At the level of the brain, research is showing that altruistic and other-regarding concerns have their own distinct neural pathways. At the level of analysing individual behaviour, in game-theory, behavioural economics and social psychology, it has been shown that people are at least sometimes as motivated by such concerns as they are by self-interest. (The jury is out on whether altruism can be reduced to self-interest, but the point is that most theorists now accept that it is optimally rational to be as swayed by ‘pro-social’ concerns as self-interested ones – for example, game-theorists recognise that it is rational to maintain one’s social reputation as a ‘good person’ through altruistic acts.) And, as Chris Dillow suggested in his blog recently, at the level of social organisation, it appears  hierarchically oriented competition between individuals may actually harm innovation and efficiency in many settings (that some workplaces and institutions function far better if more ‘horizontal’ models of collaborative endeavour are adopted).

In light of all this, and in light of the spectacular recent seizing up of psychological facilitators of economic activity such as trust, seeing the role of Government merely as a corrector of the individualist excesses of markets, purely through the blunt instruments of taxation and regulation, looks increasingly unimaginative and crude.

So the global downturn is not, as Garton-Ash seems to suggest, just an opportunity to rethink the ratio of free-market to statist economic solutions. It is an opportunity to rethink how we organise institutions and civic society so that individuals can become more than self-interested consumers. What we need is a new approach to how we think about the aims of economic activity and the forms of social organisation that facilitate it. It is now time to start thinking seriously about incorporating social capital and indicators of environmental impact into the mainstream economy. The claim that made such moves appear pie in the sky – that individuals can only be motivated by self-interest, that only competition, regulated by Government, can deliver efficient economic activity – is being exposed as false by the day.