Andy Blunden May 2003

Review: Mark Latham’s Civilising Global Capital

Civilising Global Capital. New Thinking for Australian Labor, Mark Latham, Allen & Unwin 1998.

Latham graduated in Economics from Sydney University in 1982 and became a political adviser for Gough Whitlam, then the New South Wales branch of the Australian Labor Party and NSW Premier Bob Carr. He was a councillor on the Liverpool Council between 1987 and 1994 and mayor from 1991 to 1994. Elected to Federal Parliament for Werriwa in January 1994, he has served in Parliament ever since.

As the work of a member of the “political class”, born and raised to serve in the state machine, altruistically looking after the affairs of the rest of society, this book appears to express the writer’s discovery of a world outside the bureaucracy.

“Social democracy needs to give closer consideration to the relations between citizens rather than simply working from an assumption that all social issues can be resolved in the state-to-citizen relationship.” [p. xl-xli] “Other strands of political thought [as well as social democracy] have taken a strong interest in the social relations between citizens”. [p. 263]

As such, it should be welcomed. Latham has read widely and has plenty of ideas for the political class to reflect upon and we should wish him well. But there are some profound misunderstandings in his work which need to be addressed.

Latham believes that the creation of the Welfare State in the wake of the Wall Street Crash, the Great Depression, Fascism and World War Two was based on a series of “old” assumptions about stability, security and conformity. [see p. 199] In passing, it should be noted that Latham’s principal method of argument is to append adjectives like “old”, “crude”, “binary”, “simple”, “raw”, “traditional”, “mechanistic”, “dogmatic”, “linear”, “rigid”, “narrow” or “conventional” to the view he opposes and “new”, “complex”, “profound”, “radical”, “fresh” to the view he advocates. But it remains to be seen whether he is able to distinguish in the new and in the old what should be supported and what should be opposed.

His principal thesis is that the Welfare State was a product of a culture in which Fordist methods of production predominated in the economy, and the Welfare State and the associated methods of macroeconomic economic management, essentially emulated the methods of Fordist hierarchically organised, one-size-fits-all mass production.

Observing the decline of Fordist methods of production in the economy, it is hardly surprising that Fordist methods of government administration are called into question.

“Some commentators have suggested ... that the organisation of government will increasingly reflect these methods of post-Fordist production and service delivery”. [p. 211]

The economy of mass production and its workforce have been replaced by the globalised, information-age economy and its very different workforce. Latham is fully cognisant to the malaise affecting the modern world, its shallowness and individualism, the anomie, widespread insecurity, loss of community, the spread of “downwards envy”, the widening of the gap between rich and poor, the growth of an under-class, etc., etc.

Also to be observed everywhere is the decline in what Latham calls “vertical” “patron/client” relations, alongside the growth of symmetrical, “horizontal” relations. Under these modern conditions, Fordist organisations, such as the Welfare State, are altogether dysfunctional.

“organisations tending towards the vertical have declined most notably in their participation and relevance in recent decades. ... Conversely, some organisations displaying horizontal social capital and the virtues of mutual trust seem to have moved against the tide of social capital depletion.” [p. 278]

Let us agree with Latham the welfarism and Keynesianism were indeed part and parcel of the period of Fordist production and that with the decline of mass production manufacture, these methods of governance must also decline. No rational person could wish to restore them.

But when trying to account for the malaise of modern society, is it rational to ascribe the rampant and burgeoning social problems of our times to the inadequacy of the system of government and welfare distribution? Can a member of the political class be so deceived as to their own importance to believe that the vast social changes witnessed over the past several decades are the result of a failure of government to move with the times?

To put it another way, if modernism has had the effect of replacing “vertical” (hierarchical patron/client) relationships with mutual, “horizontal” relations, why is there a crisis at all? What reason do we have to believe that if the public sector emulates the private sector, the problem will not get far worse, rather than better?

To make sense of this confusion we have to look a little critically at what we could call, to borrow some of Latham’s own adjectives, the old, rigid, binary categorisation of relationships as “vertical” or “horizontal”.

What has been the transformation of person-to-person relations wrought by modernism which has transformed work and society? It has been the replacement of all forms of hierarchical relations (bureaucratic, managerial or traditional) by the commodity relation.

Now the commodity relation, the relation of buyer and seller, of customer to service provider, is a mutual, symmetrical relation based on fair exchange. It is a relation in which each party enters as a free agent with equal rights. This relation is nevertheless the very relation upon which the modern form of exploitation is based, for if two parties enter a fair exchange under conditions where there is a gross imbalance in social power, the outcome though fair is also exploitative. Furthermore, it is a relation in which, rather than collaborating, each manipulates the other for their own ends; it is a relation which isolates people and reduces them to appendages of an object.

This is a horizontal relation to be sure. But not of the same kind as that which, for example, binds together the participants in a neighbourhood project, a football team, a cooperative, a volunteer firefighting group, and so on. I call these relations “collaboration”. There is a third party in all these relationships, which I could call “we”. In the exchange of commodities there is no third, there is no “we”, only them and us.

So when Latham proposes to abolish the “old” patron/client relation in favour of the modern, mutual relation of customer/service provider, he sounds the death knell on the last surviving points of support against capital, and must thereby place enormous pressure on those relations of collaboration which are struggling to develop in opposition to both bureaucratic patronage and commercial anomie.

Social Capital

Among the concepts which Latham draws on in his analysis of global capital is “social capital”, in my opinion, one of the most perverse usages of the English language ever to come out of academia.

Latham has organised his view of social life in terms of the contrast between the two forms of “social capital": “horizontal” and “vertical”. Consequently, he is blind to the distinction between, commerce and the normal, voluntary, collaborative relations which are at work in the day to day life of people when they are not engaged in commerce. It is all good “horizontal capital”, as opposed to bad, “vertical capital”.

Just as Nature as a pre-condition for capital accumulation is called “natural capital”, social relations which are the pre-conditions for capital accumulation are called “social capital”. If the capitalists take these conditions for granted, then there is a danger of them being used up or destroyed. Since nature and society are also the conditions of human life, there is a very good reason for explaining to the capitalists the value of preserving, even enhancing “natural capital” and “social capital”.

Latham claims that “social capital” cannot be transformed into property:

“Vertical relationships, by virtue of their essential inequality, are open to exclusive ownership. The patron — in most systems of modern governance this signifies the state — owns and controls the source of coercion. By contrast under horizontal structures, social capital cannot be appropriated as the exclusive property of any of its participants. It belongs to all and relies on the actions of all to sustain it. This means of course, that horizontal social capital, unlike most things of value in capitalist society, cannot be brought into the orbit of property rights. ... While [social trust] may be held and nurtured in common, it cannot be satisfactorily subjected to third party direction or authority. Nor can it be institutionalised in the sense of having property rights or binding social obligations allocated to it.” [p. 268]

But this simply not true. Subsuming more and more social life under capital is exactly what has been going on for 400 years.

What a strange thing it is, to introduce a term from economics, “capital”, in order to understand social relations which are external to capital. Capital and value are themselves social relations, and economics is nothing but the mystification of social relations based on the conception of value as a non-human, “natural” entity. The theory of human capital and social capital carry this mystification one step further by rendering relations between people as forms of value. It may be useful for a Christian to know that Man was made in the image of God, but it means little to an atheist. Likewise, unless your purpose in life is to accumulate capital, it of little use to be told that volunteer groups, families, sporting clubs and art galleries, etc., are “forms of capital”.

Within society external to capital there exists both “horizontal” and “vertical” relations.

“A society ... in which trust is widely exercised as an expression of freely formed mutuality, carries the characteristics of horizontal capital. ... Trust exercised through systems of hierarchy and authority is an expression of vertical social capital”. [p. 267]

While there is some truth in the idea that “vertical” relations are in decline and that some aspects of this decline could be welcomed, it is not an absolute truth. Relations of representation, delegation and leadership and all forms of mediation can also be characterised as “vertical”, and such relations are absolutely essential to the maintenance and strengthening of the social fabric. The undermining of such relations by commodification is quite destructive. Voluntary organisations which do not sustain forms of mediation will very soon lose the capacity for basic collaboration, at all but the microscopic level. For example, trade unions would be impossible without the maintenance of committees, national councils, branch presidents, etc., etc., and Latham has no hesitation in listing trade unions as an example of “vertical” organisations which are in decline due to their inability to re-invent themselves as service providers. As service providers, unions relate not to members, but “clients”. There is no question of union democracy because a union stands in external relation to its clients. The client chooses whether or not to buy the service, that is all. By this means the inner “vertical” relations of electing delegates and representatives is replaced with the external “horizontal” relation of customer to service provider.

A public policy which is blind to the distinction between customer/service provider relations and relations of mutual collaboration, and hostile to non-commercial forms of mediation deemed to be patron/client is doing the work of capital and it will fail dismally in its declared aim of protecting the fabric of society from destruction at the hands of global capital.

Hegel, Recognition and the Social Contract

“According to Hegel (followed by Kojčve and Fukuyama), the desire for recognition drives the whole historical process.” [p. 274]

As a member of the political class, Latham makes no claim and indeed has no need for recognition as a Hegel scholar, but a word on Hegel and Recognition is necessary.

In Hegel’s first systematic work, the System of Ethical Life (1802) Recognition is indeed made the driving force of the system. But this is an obscure work, in both senses of the word, and is never cited as the basis for the place of Recognition in Hegel’s system. In the Phenomenology (1807), the master-slave dialectic (a.k.a. Recognition) occupies one section, followed by “Unhappy Consciousness” in which Man is confronted by the unexpected consequences of his action.

Let us put Hegel and Kojčve in historical context. System of Ethical Life was written a mere 8 years after the end of Robespierre. Understanding the French Revolution and trying to find an alternative path to modernism is a central concern of the young Hegel. The French Revolution endeavoured to implement Rousseau’s contrat social, and it took the form of a despotic terror in support of militant egalitarianism. It is in opposition to Rousseau’s contrat social, and Hobbes’ “war of all against all”, that Hegel developed his conception of political life. Hegel wants a conception of social life in which, through mediation, each antagonist recognises themselves and each other and ultimately comes to understand the State as an expression of their own will. In his mature system, the struggle for recognition occupies a place within the Subjective Spirit, and as the foundation of his Objective Spirit, a.k.a., social theory, takes the form of Property.

Hegel’s resolution of the drive for Recognition is a constitutional monarchy based on respect for Property and Law.

Kojčve on the other hand, is writing in the 1930s. Published in 1947, his work becomes a central component of the milieu in which Simone de Beauvoir and Frantz Fanon gain their philosophical education. The struggle of Blacks, women and others who have been excluded by the post-Second World War compromise take the form of a struggle for Recognition.

Recognition must now be accepted as a fundamental value of modern society, and I don’t wish to diminish the place given to it by Latham. However, if we are going to embrace the struggle for Recognition, then we cannot, without comment, counterpose Recognition to Property, which is the most ubiquitous form of Recognition in modern society, as in:

“The concept of recognition directly challenges modes of liberal thought reliant on the ideals of self-preservation and boundless accumulation”. [p. 272]

and we cannot eclectically mix it up with social contract theory with which it is altogether incompatible, as in.

“the best governance arises, not only from helping people, but by defining the social contract in a way that also makes people responsible for their willingness to help themselves” [p. 206]

However Rousseau may have conceived of his social contract, ever since Robespierre, the notion has been taken as a kind of metaphor for the state-citizen relation. No state can lay claim to legitimacy transmitted from an indefinite past, and certainly not a state founded on the illegal theft of land. Latham, on the other hand, seems to somewhat naively believe that such a contract actually exists. For this to be the case, then little account could be given to the recognition of the individual citizens since not a one of them as ever negotiated a contract legitimising the breadth of authority exercised by the state today. Universal suffrage cannot constitute the voters into a collective consciousness, and most social theorists today recognise this. Only elected politicians can delude themselves into thinking that the electorate is a self-consciousness (“the voters”) with whom they have a contract.

Mutual Responsibility

One of the most controversial proposals that Latham brings forward from the program of the British Labour Party is the policy of mutual responsibility for welfare recipients, and in fact, as an overall principle of public expenditure.

“This means entrenching a sense of reciprocal responsibility throughout the work of the welfare state. It means funding social responsibilities as well as rights; the rights of needy citizens to receive government assistance but, just as much, their personal responsibility to make best use of this assistance. Skill formation relies on the efforts of both providers and recipients. It makes the welfare state a two way rather than a one way street”. [p. 204]

Latham make a good point in distinguishing his policy from that implemented by the Howard government:

“The Coalition has developed a commitment to what can be termed ‘functional obligations’ — that anyone receiving government assistance has an obligation to reciprocate, not by virtue of what they can do for themselves (or even society for that matter), but as a narrow function of the act of assistance itself. This view of human nature discounts the possibility of altruism, ... It uses its public authority to impose reciprocation for no other moral purpose than reciprocation itself.” [p. 205]

but by contrast, Labor’s programs

“aid the unemployed by developing their skills and reconnecting them with the benefits of work and active citizenship”. [p. 205]


“It [the radical centre] casts tax concessions, not in terms of who receives them, but what citizens have done to deserve them” [p. xxxii]

I think that we can say that Latham here broadly-speaking marks the distinction between the kind of obligation which flows from the traditional/hierarchical system characteristic of pre-bourgeois ethics, in which obligations flow from social position, and bourgeois ethics in which obligations flow as an outcome of “fair exchange”. The point is however, that this is not the end of history. Exploitation, inequality and the failure of recognition do not come to an end with the advent of a world of fair exchange. As remarked above, fair exchange is only genuinely free and fair when the parties engaged in exchange meet on a par with one another. No relation could be more unequal than that between the state and a welfare claimant. However personable and sympathetic may be the placement officer or case manager, the state has the welfare claimant under their thumb. Welfare to work is no free and fair contract between equals, but has the potential to be a humiliating or even exploitative relation of dominance.

Latham’s leit mofit — the devolution of governance — has some attractions to be sure. But one must remind oneself of where the social democratic devotion to statism has its origins. The labour movement sought to gain control of the state in order to protect itself against capital. The “sword and shield” metaphor of the Wobblies expressed it well enough: labour parliamentarians should be the shield protecting the unions who would be the sword in the fight against capital. Unfortunately, once they were bumped into parliament labour’s delegates became a political class in their own right.

The most likely outcome of the devolution of governance as Latham propounds it, is the disappearance of welfare agencies, cooperatives and so on into the general swirl of an economy dominated by capital. There is a very real danger that in giving up what little power it still has, the state will hand it over, not to ordinary working class people, but to capital.

If this is not to be the outcome, then there has to be recognition of the distinction between voluntary collaboration and commerce, and basically Latham is unable to distinguish between the two.

If the welfare state were to be transformed into an insurance company with people opening their life-long Learning Accounts and Income Security Account when they leave school, paying in contributions and drawing out benefits, I see no reason why such a system will be able to offer any point of support against the domination of capital.


Latham follows Fukuyama in giving a central place in his view to trust:

“High levels of mutual trust not only make society and its economy more efficient, they are also an important means by which a consensus can be constructed for the handling of collective interests”. [p. 265-6]

I think that the case is well made that trust, confidence that the other party to any relation is playing by the same rules as oneself, is an essential underpinning to all social life, and that modern society has been characterised by a failure of trust. This loss of trust seems to be directed against big business, the political class and strangers in general. The point is to identify the reason for this failure of trust and to have a program likely to restore it.

I cannot accept that an approach which begins from trust as a form of capital can lead to a satisfactory resolution of the problem of trust.

Latham on Rawls

Wishing to stake his claim as a “communitarian”, Latham makes his own critique of the liberal ethical theorist John Rawls.

Latham, however, does not understand the difference between ethical theory and social science; he interprets Rawls’ ‘veil of ignorance’ and ‘original position’ as if they were conditions that really existed, at least in a normative sense, as things which ought to exist. For example, he believes that the ‘veil of ignorance’ could refer to ‘uncertainty of social change’.

“The extent to which citizens might freely and voluntarily adopt the social contract of a just society are essentially left to circumstance and the practical work of social democracy. Clearly, however, the veil of ignorance is an important consideration in the application of this task. To the extent to which no citizen can have full certainty about his or her future prospects, the theory of justice has value”. [p. 155]

Unsurprisingly, he finds that Rawls’ theory is not fully adequate to the social democratic practice of government:

“Rawls’ theory assumes that an unsituated citizenry has no knowledge or experience of government . ... His social contract precludes the possibility of citizens, acting on their accumulated knowledge of how government works, engaging in a contest for the allocation of scarce public resources”. [p. 156]

What can I say? The only actual ‘veil of ignorance’ and ‘original position’ relevant to Australian politics is the ‘veil of ignorance’ which lay over Governor Philip when he annexed the Australian continent on behalf of the British Crown, an ‘original position’ from which he could not know what would follow, or the ‘veil of ignorance’ over the gentlemen who created the Australian Federation back in 1901. The ‘veil of ignorance’ of which Rawls speaks is a “thought experiment” intended for use by members of the political class who must formulate a conception of “justice as fairness” for which they could answer, in good conscience, to any citizen. It was the last thing in Rawls’ mind that anyone should actually hide behind a real veil of ignorance or that such a veil actually existed.

“Justice as fairness” as formulated by Rawls is actually very close to Latham’s notion of government by contract.


Latham believes, with some justice, that the advent of TV has played a central role in the loss of community. What is strange though, is that Latham sees TV-watching as a form of recognition:

“While TV might commonly be regarded as a relatively passive form of recreation, it actually generates the basis of interactivity. ... each of us is a participant to the medium .. From participation flows recognition. ... We commit ourselves to sporting events, political debates and special ceremonies on TV because of our search for recognition in group behaviour, especially nationalism. Most of all television has been able to create a comparative mode of recognition, measuring one’s worth through the experiences of those on TV.” [p. 275-6]”

But TV is a mode of recognition which has displaced trust:

“Trust is one of the means, certainly the most socially useful, by which people receive social recognition. If trust were to be replaced by other forms of recognition in the normal course of social behaviour, then, to be sure, social capital would be diminished”.

The intrusion of celebrities into everyday life has a negative effect:

“By and large, people have come to judge and acknowledge each other’s worth on a scale well beyond civic life”. [p. 280]

I share Latham’s belief that TV has a lot to answer for. I also accept that TV has brought a kind of social bonding which is also liberating, and that its destructive power resides in its liberating power.

But I cannot grasp how Latham can describe it as a form of recognition. What TV represents is the power of the global division of labour, typified perhaps in the capacity of us all to listen to Luciano Pavarotti sing. What is missing is any sense that Pavarotti singing to the people of the whole world is also my achievement, that I have through my contribution to the global division of labour also made it possible to bring the finest singer into every living room.

It seems to me that if my only recognised contribution is the purchase of the TV set, then there is every reason for the power of the global division of labour to appear not as an expression of my power but as a power over me.

Global capital and national government

“the most prominent political tension of our time arises from neither private production nor public ownership structures but from the relationship between global capital and nation-based politics”. [p. 27]

Latham has some useful and insightful things to say about the “spatial” aspects of the problem of global capital. Perhaps his location as representative of an oppressed region of Western Sydney has focussed his attention. His regional policy is worthy of support.

He claims that enhancing a region or a country’s ‘human capital’ is a better alternative to low labour cost policies for a government which is [in Bill Clinton’s words] ‘like a big corporation competing in the global market place’ for capital investment. [p. 21]

However, unless the state has the specific weight and legitimacy to carry out a policy there is little chance that it will be able to withstand the assault of global capitalism, far less “civilise” it. The problem is not just that the big state stands in the relation of patron/client to its citizens, but that it stands in external relation to its citizens, it is an Other, the citizens do not recognise in the State their own will, as Hegel desired, but that of the political class, a will as alien as that of the “business class”.

The only state which would be able to implement the progressive policies that can be found in amongst Latham’s proposals is a state which expresses the universal will. Such a will can only be developed by “vertical” relations, by citizens organising and collaborating and giving universal expression to their own will against that of both the political class and the business class.


“It is now too readily forgotten that the socialist cause commenced as a social creed in search of mutuality and self-sufficiency. It was not necessarily assumed, however, that the achievement of these goals required a large and centralise scale of state provision. This only arose as a consequence of state socialist ideology and, particularly after the Second World War, the expansion of Fordist government and state planning. Early Left thinking, such as the ideals of guild socialism, was heavily influenced by the possibilities of a smaller scale of public mutuality. This ideology was expressed through attempts to create a new type of production system: the development of self-governing guilds in the workplace, similar to what we would now think of as industrial democracy.” [p. 325]

This observation comes in just the final pages of his book, the theme of which is:

“One of the weaknesses of left-of-centre thinking ... has been its lack of interest in non-state governance”. [p. 259]

Mark should speak for himself when it comes to what has been forgotten and what is remembered. His proposal for:

“combining vertical statism in the arrangement of inputs for public purposes with horizontal systems of self-governance and devolution in the determination of outputs”. [p. 311]

can only serve to accentuate poverty and inequality. Nevertheless, I think it likely that such a policy of devolution will open up opportunities for the workers’ movement to regain its identity and revitalise itself, in much the same way that enterprise bargaining accentuated inequality and powerlessness in the workplace, but created a stimulus for rebuilding workplace organisation.