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The dismantling of the State since the 1980s: Brexit is the wrong diagnosis of a real crisis

Brexit is the last opportunity to radically dismantle the state-as-economic-referee as the window on the popularity of neoliberalism starts to close.

The Duran

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Authored by Abby Innes via The London School of Economics British Politics blog:


Abby Innes writes that the vote to leave the EU and the administrative chaos around it pull into focus the crisis we should have been talking about before: the failures of homegrown neoliberal policies and their dire implications. She argues that while Brexit has been heralded by supporters as a solution to a number of problems, what it will actually do is to accelerate to the point of ‘completion’ the already failed experiments to reform the state.

The Leave campaign in 2016 had a lot in common with the 1979 Conservative election manifesto. Both evoked the threat of a bureaucratic super-state and something approaching a conspiracy of that state against the public. Both promised to rescue a Greater Britain from the conspiratorial political forces that were holding it back. Both campaigns were a misdiagnosis of the real crisis at hand. This time we face a crisis of ungovernability potentially far more severe than that of the 1970s; but its roots are less in Europe than in the failures of the homegrown neoliberal reforms of the British state.

The ‘supply-side revolution’

The last three decades of state reform in Western democracies have aggravated rather than resolved the social divisions that emerged with de-industrialisation. Over the last thirty years, liberal market economies in general and the UK in particular have transformed the character of their states through privatization and outsourcing, through the development of quasi markets in welfare, and the rejection of industrial policies. At the same time, permissive tax and regulatory regimes have encouraged large corporations to opt out of their former social obligations in the name of maximising shareholder value.

The ‘supply-side revolution’ of the last thirty years was driven by the dominant New Right diagnosis of the economic crises of the 1970s and based on the radical public choice economics aligned with the Chicago and Virginia schools. According to this diagnosis it was the state that was primarily responsible for the end of the post-war ‘golden age of growth’ because of its inhibition of the market. Thus, according to the New Right and later New Labour too, it wasn’t technological change, or de-industrialisation in the face of emerging markets, it wasn’t the Nixon shock, or the end of Bretton Woods, nor rising exchange rate instability, it wasn’t stagflation or the oil crises that had confronted the country with a need to re-evaluate its production regime. It was the state. And so it was the state, above all else, that had to be transformed.

The first problem with the supply-side logic: the state as a firm

The supply-side critique of the state is profoundly flawed. It is rooted in abstract deductive logic derived from the first-principles of neoclassical economics uncalibrated against empirical reality. The public choice school based its understanding of politics on the assumptions of neoclassical economics that until the late 1950s had been applied only to decision-making in markets. Carrying over this methodology drove a devastating conclusion that is actually just an artefact of the method itself. To answer their questions around why the state had grown in the post-war era, public choice theorists simply asserted that politicians, bureaucrats and their voters are self-interested economic actors like any others in a marketplace.

By declaring that all public officials should be understood as homo economicus, the New Right could reconceive of democratic politics as a process in which politicians are effectively entrepreneurs who compete to gain control over the resources of a monopoly: the state. To increase their fiefdoms, both self-interested politicians and bureaucrats will generate policies most likely to appease self-interested voters in the market for votes. By this logic, according to the New Right, democracy is doomed to crowd itself out: the demand for state privileges by individually self-seeking voters will never be satisfied until the growth of the state has reached an unstoppable momentum towards totalitarianism. Bureaucrats, as in any monopoly firm, will tend only towards exploitative price-making and general budgetary greed. A responsible politician will strip the state of its powers to intervene in a ‘free’ market: the only ‘honest’ mechanism in a rationally selfish world.

The micro-foundations behind this thesis make it philosophically extreme. They assume a society populated by individuals who, in all contexts, deploy a clear and cold calculation of the costs and benefits of their actions, and do so with perfect information about their options. The supply-side diagnosis assumes that individuals are super-humanly rational around their immediate interests but completely witless about social or constitutional considerations and unmoved by ethics as distinct from material gain: implicitly, theirs is a voting population that can’t tell the difference between the NHS and communism. It is in this light that the European Union is viewed as no more and no better than a cartel of self-seeking monopoly enterprises. Clearly, if you conceive of the state in this way then the only rational solution is not to reform it but to break it.

The second problem with the supply-side logic: the state as a standard economic agent

But what if this metaphor is just wrong? What if it was always a normative assertion by a faction of academic theoreticians on a roll rather than an argument based on the historical evolution of actual states. What if the theory was an irresistible platform for large corporations who preferred to return to the good old days of laissez faire over a wise or sustainable political economic strategy? What if a failed firm enforces a limited reallocation of labour and capital, and a failing state collapses the effective mechanisms for democratic representation, the stability of capitalism, social integration and public order as such?

Not only does the supply-side revolution reintroduce market failures where they had always, historically, failed, it introduces state failures where they hadn’t previously existed.

As the economic theories of contract and property rights make clear, the higher the complexity of a good or product, the higher the risk of so-called ‘asymmetrical’ contracts in which the seller has more information than the buyer and hence can exploit that buyer. This is a fundamental problem when the state becomes that customer at the taxpayers’ expense. Transaction cost theory shows that trying to manage such asymmetrical contracts leads to massively increased costs. And these costs can never be rendered efficientbecause of the intrinsically unbalanced nature of the original contract, because of the complexity of the good. After thirty years the evidence suggests that introducing businesses into the UK state and competition between states produces the worst of both public and private regimes.

In the case of welfare reforms, the UK norm has become one of profit-seeking firms engaged at the tax-payers expense but in thoroughly non-competitive conditions. The resulting failure to produce either high quality services or lower costs has forced the state into doomed games of ever more Kafkaesque remedial action because of its continuing statutory responsibility for outcomes. Thus, in the name of this continuing supply-side experiment our schools, health service, prisons, transport services and social care institutions have become text-book case studies for ‘moral hazard’, in which private providers have few incentives to avoid risky or perfunctory behaviour because of the de facto insurance of continued public payment.

Private provision and its effect on government accountability

And this is before you consider the conflicts of interest that increasingly run through UK policymaking structures like a stick of rock. A relatively hidden dimension of today’s crisis of state failure is the increasingly pervasive role for private businesses throughout the entire state administration. After a sabbatical in the Cabinet Office Matthew Flinders reported that UK central government had lost the capacity to operate ‘meta-governance’ over state authority. That was in 2005. Since then that authority has increasingly been gifted into private hands. This process of dis-integrating state capacity was intensified after 2010 under the renewed supply-side zeal of the coalition and Conservative governments.

In 2015 Ruth Dixon and Christopher Hood found that reported administration costs in the UK had risen by 40% in constant prices over the previous thirty years, despite a third of the civil service being cut over the same period, whilst total public spending doubled. Running costs were driven up most in the outsourced areas. Deep failures of service, complaints, and judicial challenges had soared. This was in no respect the ‘better government for less money’ promised by governments of left and right. These reforms have also undermined the accountability of government because the more the state has become structurally dependent on private provision the harder it’s become to reverse even openly failing policies: the state capacity that used to be there has frequently been destroyed. The administrative chaos around Brexit demonstrate to the wider public the dysfunction that those who depend on the state have suffered for years.

The democratic principle of fiscal consent is that people are willing to pay their taxes because the liabilities are fair and the revenues never confiscated. But that principle is severely stretched. The wealthiest firms have escaped their side of the fiscal contract through an international race to the bottom on tax rates, standards, and enforcement. In the meantime the burden of continuing taxation has been pushed onto less mobile factors such as labour, consumption, and small and medium-sized businesses.

And all of this might have been worth it had we gained the promised renaissance of investment, innovation, higher quality employment, and growth that was supposed to occur spontaneously when the state was got out of the way. But what we have seen instead is the transformation of post-war democratic capitalism from a system of wealth-creation to one of wealth extraction.

A process of financialisation has occurred on three levels: financial markets and institutions increasingly displace other economic sectors as the source of profitable activity. Non-financial corporations are becoming financialized through a regime of maximizing shareholder value, wherein profits are increasingly extracted for higher executive pay through share buy-backs and dispersed through higher share dividends rather than reinvested. Finally, finance has penetrated into every aspect of life as people are increasingly incorporated into financial activity, and to a degree that significantly increases the systemic risk inherent in the boom and bust cycles of poorly regulated financial markets.

The existing structural divisions and the EU referendum

For a doctrine to require a super-human rationality to function as promised makes it totalitarian, whether that rationality is social, as in Marxism-Leninism, or utilitarian, as in neoliberalism: it requires a perfect consistency of human character. But it’s also in the nature of such ideologies that in the face of often terrible social consequences their dogmatism encourages the doubling down on their projects in the belief that the validity of the programme will be finally proved at the point of completion. As a result, the energy of these doctrines only becomes fully unspooled once the disorder that they create has spread to every single part of the polity. Hard Brexit is an invitation from supply-side zealots to enter the full disorder of a ‘liberated’ market.

The Global Financial Crisis was also used as a pretext by George Osborne for an acceleration of the supply-side project but that same government was heedless enough of the social consequences to offer an opportunity for a public judgement on the current direction of travel: the 2016 Referendum. The findings on subjective attitudes are telling. Those most likely to vote Leave were:

  • Those finding it difficult to manage financially (70%) or just about getting by (60%);
  • Those who believed Britain has got a lot worse in the last ten years (73%);
  • Those who think things have got worse for them rather than other people (76%);
  • Those who perceive themselves as working class (59%). Those who see themselves as English rather than British (74%) or more English than British (62%).

These are constituencies built by the supply-side revolution. They were unlikely to be persuaded by a Remain campaign that spoke only of the economic joys of the status quo. The voting split for Remain versus Leave is between the centres of the new knowledge economy – rooted in ICT and services – and those of the rural, industrial and mid-range technology economies, abandoned by a state no longer understood by government as the historical midwife of development.

These trends support the worrying thesis that there are deepening structural divisions in advanced capitalist economies between those higher educated voters who prefer the labour market dynamism of highly liberalised economies, versus those with little hope of achieving a stake in any such system.[1] The rising emphasis on English national identity follows as a reaction to the unmanageable pace of globalisation: the scale of displacement of manufacturing activities by imports into a region drove perceptions around the risks of immigration more than the scale of immigration as such. This is hardly a trajectory compatible with democracy.

It was under these conditions that the referendum was heralded by Leave as the solution to the collective pain and frustration of an already divided society. Under the UK’s constant leadership the EU had often become a champion of neoliberal policies. More often, however, it had acted as a brake on the more extreme preferences of UK supply-sider governments. It was the Conservative, Labour and Liberal parties in government that made of the British state both an inefficient public regime and an increasingly extractive private regime dominated by large corporations. The historical irony is that the supply-side revolution has effectively built the state that haunted the fever dreams of the public choice theorists.

Brexit as the last chance saloon

So why are we leaving the largest trading block in the world rather than having an empiricist public debate about the systemic crisis of the domestic political economy? One reason is that this crisis creates no neat division between party lines as it did in 1979: no party but the Greens gains from discussing their role in these developments. For Labour it is the deepest ideological division between its right and left. The expressive function of parties is further discouraged when the most powerful actors across the political economy are likewise implicated, from the City to the CBI. Even if supply-side reforms hadn’t built so powerful a large business constituency for their extension, it would be awkward for mainstream elites to call for the renewal of central and local state capacity after so many years of insisting its relative incompetence.

The entire history of empiricist political economy tends to teach us that both states and markets have their virtues and their vices. The virtues are typically interactive. Cooperative solutions tend to be more efficient than markets at solving problems characterised by complexity and uncertainty: Germany’s stakeholder production regime is exceptionally functional. Given the urgency of climate change the debate we ought to be having is about how to develop a political economic strategy with ecology at its very core. Even were we not dangerously behind on climate mitigation it is unclear how the trend towards increasing social polarisation driven by a doctrinally and practically corporate-captured state could be reversed without a radical shift in the political economic paradigm.

But in the face of these realities the strategy of the hard Brexiteers is uniquely unwise: it is to accelerate to the point of ‘completion’ the already failed supply-side experiments of the last thirty years and to deny climate change, all in pursuit of arrangements that exist nowhere but in the pages of the economic utopias of the 1960s. Brexit militants have offered no precise strategy for free-market greatness because it exists in no realisable place: the days of the British Empire are mercifully finished, a democratic free market is a fantasy. For its leadership, Brexit is the last opportunity to radically dismantle the state-as-economic-referee as the window on the popularity of neoliberalism starts to close. It is the hard right equivalent of rallying for Soviet Communism in 1989. As Arthur Koestler wrote of his former ideological zeal, “Gradually I learned to distrust my mechanistic preoccupation with facts and to regard the world around me in the light of dialectic interpretation. It was a satisfactory and indeed blissful state.” Koestler was talking about communism, but it sounds familiar for a reason.

When it comes to history repeating itself, it is both tragic and farcical that it is the most militant supply-siders of all who were crowned by the 2016 Referendum. It is this faction above all that gets the diagnosis of our current condition most exactly wrong. It is their idea of a cure that would be most lethal to the British body politic.

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When we voted for Brexit we knew it would cause hardships, but the main aim is to destroy the status quo, and rebuild a new political reality as a sovereign nation, most Brit’s today don’t care or remember the Empire we just want decent lives for ourselves and our family! Richard Branson said on morning TV that if they hold a new referendum in 5 years the remainers would win as most Brexiters will be dead from old age, which just goes to show how out of touch he is, all young hard working (non University indoctrinated/eductated) voted leave, also… Read more »

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Clinton-Yeltsin docs shine a light on why Deep State hates Putin (Video)

The Duran – News in Review – Episode 114.

Alex Christoforou

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Bill Clinton and America ruled over Russia and Boris Yeltsin during the 1990s. Yeltsin showed little love for Russia and more interest in keeping power, and pleasing the oligarchs around him.

Then came Vladimir Putin, and everything changed.

Nearly 600 pages of memos and transcripts, documenting personal exchanges and telephone conversations between Bill Clinton and Boris Yeltsin, were made public by the Clinton Presidential Library in Little Rock, Arkansas.

Dating from January 1993 to December 1999, the documents provide a historical account of a time when US relations with Russia were at their best, as Russia was at its weakest.

On September 8, 1999, weeks after promoting the head of the Russia’s top intelligence agency to the post of prime minister, Russian President Boris Yeltsin took a phone call from U.S. President Bill Clinton.

The new prime minister was unknown, rising to the top of the Federal Security Service only a year earlier.

Yeltsin wanted to reassure Clinton that Vladimir Putin was a “solid man.”

Yeltsin told Clinton….

“I would like to tell you about him so you will know what kind of man he is.”

“I found out he is a solid man who is kept well abreast of various subjects under his purview. At the same time, he is thorough and strong, very sociable. And he can easily have good relations and contact with people who are his partners. I am sure you will find him to be a highly qualified partner.”

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss the nearly 600 pages of transcripts documenting the calls and personal conversations between then U.S. President Bill Clinton and Russian President Boris Yeltsin, released last month. A strong Clinton and a very weak Yeltsin underscore a warm and friendly relationship between the U.S. and Russia.

Then Vladimir Putin came along and decided to lift Russia out of the abyss, and things changed.

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Here are five must-read Clinton-Yeltsin exchanges from with the 600 pages released by the Clinton Library.

Via RT

Clinton sends ‘his people’ to get Yeltsin elected

Amid unceasing allegations of nefarious Russian influence in the 2016 presidential election, the Clinton-Yeltsin exchanges reveal how the US government threw its full weight behind Boris – in Russian parliamentary elections as well as for the 1996 reelection campaign, which he approached with 1-digit ratings.

For example, a transcript from 1993 details how Clinton offered to help Yeltsin in upcoming parliamentary elections by selectively using US foreign aid to shore up support for the Russian leader’s political allies.

“What is the prevailing attitude among the regional leaders? Can we do something through our aid package to send support out to the regions?” a concerned Clinton asked.

Yeltsin liked the idea, replying that “this kind of regional support would be very useful.” Clinton then promised to have “his people” follow up on the plan.

In another exchange, Yeltsin asks his US counterpart for a bit of financial help ahead of the 1996 presidential election: “Bill, for my election campaign, I urgently need for Russia a loan of $2.5 billion,” he said. Yeltsin added that he needed the money in order to pay pensions and government wages – obligations which, if left unfulfilled, would have likely led to his political ruin. Yeltsin also asks Clinton if he could “use his influence” to increase the size of an IMF loan to assist him during his re-election campaign.

Yeltsin questions NATO expansion

The future of NATO was still an open question in the years following the collapse of the Soviet Union, and conversations between Clinton and Yeltsin provide an illuminating backdrop to the current state of the curiously offensive ‘defensive alliance’ (spoiler alert: it expanded right up to Russia’s border).

In 1995, Yeltsin told Clinton that NATO expansion would lead to “humiliation” for Russia, noting that many Russians were fearful of the possibility that the alliance could encircle their country.

“It’s a new form of encirclement if the one surviving Cold War bloc expands right up to the borders of Russia. Many Russians have a sense of fear. What do you want to achieve with this if Russia is your partner? They ask. I ask it too: Why do you want to do this?” Yeltsin asked Clinton.

As the documents show, Yeltsin insisted that Russia had “no claims on other countries,” adding that it was “unacceptable” that the US was conducting naval drills near Crimea.

“It is as if we were training people in Cuba. How would you feel?” Yeltsin asked. The Russian leader then proposed a “gentleman’s agreement” that no former Soviet republics would join NATO.

Clinton refused the offer, saying: “I can’t make the specific commitment you are asking for. It would violate the whole spirit of NATO. I’ve always tried to build you up and never undermine you.”

NATO bombing of Yugoslavia turns Russia against the West

Although Clinton and Yeltsin enjoyed friendly relations, NATO’s bombing of Yugoslavia tempered Moscow’s enthusiastic partnership with the West.

“Our people will certainly from now have a bad attitude with regard to America and with NATO,” the Russian president told Clinton in March 1999. “I remember how difficult it was for me to try and turn the heads of our people, the heads of the politicians towards the West, towards the United States, but I succeeded in doing that, and now to lose all that.”

Yeltsin urged Clinton to renounce the strikes, for the sake of “our relationship” and “peace in Europe.”

“It is not known who will come after us and it is not known what will be the road of future developments in strategic nuclear weapons,” Yeltsin reminded his US counterpart.

But Clinton wouldn’t cede ground.

“Milosevic is still a communist dictator and he would like to destroy the alliance that Russia has built up with the US and Europe and essentially destroy the whole movement of your region toward democracy and go back to ethnic alliances. We cannot allow him to dictate our future,” Clinton told Yeltsin.

Yeltsin asks US to ‘give Europe to Russia’

One exchange that has been making the rounds on Twitter appears to show Yeltsin requesting that Europe be “given” to Russia during a meeting in Istanbul in 1999. However, it’s not quite what it seems.

“I ask you one thing,” Yeltsin says, addressing Clinton. “Just give Europe to Russia. The US is not in Europe. Europe should be in the business of Europeans.”

However, the request is slightly less sinister than it sounds when put into context: The two leaders were discussing missile defense, and Yeltsin was arguing that Russia – not the US – would be a more suitable guarantor of Europe’s security.

“We have the power in Russia to protect all of Europe, including those with missiles,” Yeltsin told Clinton.

Clinton on Putin: ‘He’s very smart’

Perhaps one of the most interesting exchanges takes place when Yeltsin announces to Clinton his successor, Vladimir Putin.

In a conversation with Clinton from September 1999, Yeltsin describes Putin as “a solid man,” adding: “I am sure you will find him to be a highly qualified partner.”

A month later, Clinton asks Yeltsin who will win the Russian presidential election.

“Putin, of course. He will be the successor to Boris Yeltsin. He’s a democrat, and he knows the West.”

“He’s very smart,” Clinton remarks.

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New Satellite Images Reveal Aftermath Of Israeli Strikes On Syria; Putin Accepts Offer to Probe Downed Jet

The images reveal the extent of destruction in the port city of Latakia, as well as the aftermath of a prior strike on Damascus International Airport.

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Via Zerohedge


An Israeli satellite imaging company has released satellite photographs that reveal the extent of Monday night’s attack on multiple locations inside Syria.

ImageSat International released them as part of an intelligence report on a series of Israeli air strikes which lasted for over an hour and resulted in Syrian missile defense accidentally downing a Russian surveillance plane that had 15 personnel on board.

The images reveal the extent of destruction on one location struck early in attack in the port city of Latakia, as well as the aftermath of a prior strike on Damascus International Airport. On Tuesday Israel owned up to carrying out the attack in a rare admission.

Syrian official SANA news agency reported ten people injured in the attacks carried out of military targets near three major cities in Syria’s north.

The Times of Israel, which first reported the release of the new satellite images, underscores the rarity of Israeli strikes happening that far north and along the coast, dangerously near Russian positions:

The attack near Latakia was especially unusual because the port city is located near a Russian military base, the Khmeimim Air Force base. The base is home to Russian jet planes and an S-400 aerial defense system. According to Arab media reports, Israel has rarely struck that area since the Russians arrived there.

The Russian S-400 system was reportedly active during the attack, but it’s difficult to confirm or assess the extent to which Russian missiles responded during the strikes.

Three of the released satellite images show what’s described as an “ammunition warehouse” that appears to have been completely destroyed.

The IDF has stated their airstrikes targeted a Syrian army facility “from which weapons-manufacturing systems were supposed to be transferred to Iran and Hezbollah.” This statement came after the IDF expressed “sorrow” for the deaths of Russian airmen, but also said responsibility lies with the “Assad regime.”

Israeli Prime Minister Benjamin Netanyahu also phoned Russian President Vladimir Putin to express regret over the incident while offering to send his air force chief to Russia with a detailed report — something which Putin agreed to.

According to Russia’s RT News, “Major-General Amikam Norkin will arrive in Moscow on Thursday, and will present the situation report on the incident, including the findings of the IDF inquiry regarding the event and the pre-mission information the Israeli military was so reluctant to share in advance.”

Russia’s Defense Ministry condemned the “provocative actions by Israel as hostile” and said Russia reserves “the right to an adequate response” while Putin has described the downing of the Il-20 recon plane as likely the result of a “chain of tragic accidental circumstances” and downplayed the idea of a deliberate provocation, in contradiction of the initial statement issued by his own defense ministry.

Pro-government Syrians have reportedly expressed frustration this week that Russia hasn’t done more to respond militarily to Israeli aggression; however, it appears Putin may be sidestepping yet another trap as it’s looking increasingly likely that Israel’s aims are precisely geared toward provoking a response in order to allow its western allies to join a broader attack on Damascus that could result in regime change.

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“Transphobic” Swedish Professor May Lose Job After Noting Biological Differences Between Sexes

A university professor in Sweden is under investigation after he said that there are fundamental differences between men and women which are “biologically founded”

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Via Zerohedge


A university professor in Sweden is under investigation for “anti-feminism” and “transphobia” after he said that there are fundamental differences between men and women which are “biologically founded” and that genders cannot be regarded as “social constructs alone,” reports Academic Rights Watch.

For his transgression, Germund Hesslow – a professor of neuroscience at Lund University – who holds dual PhDs in philosophy and neurophysiology, may lose his job – telling RT that a “full investigation” has been ordered, and that there “have been discussions about trying to stop the lecture or get rid of me, or have someone else give the lecture or not give the lecture at all.”

“If you answer such a question you are under severe time pressure, you have to be extremely brief — and I used wording which I think was completely innocuous, and that apparently the student didn’t,” Hesslow said.

Hesslow was ordered to attend a meeting by Christer Larsson, chairman of the program board for medical education, after a female student complained that Hesslow had a “personal anti-feminist agenda.” He was asked to distance himself from two specific comments; that gay women have a “male sexual orientation” and that the sexual orientation of transsexuals is “a matter of definition.”

The student’s complaint reads in part (translated):

I have also heard from senior lecturers that Germund Hesslow at the last lecture expressed himself transfobically. In response to a question of transexuallism, he said something like “sex change is a fly”. Secondly, it is outrageous because there may be students during the lecture who are themselves exposed to transfobin, but also because it may affect how later students in their professional lives meet transgender people. Transpersonals already have a high level of overrepresentation in suicide statistics and there are already major shortcomings in the treatment of transgender in care, should not it be countered? How does this kind of statement coincide with the university’s equal treatment plan? What has this statement given for consequences? What has been done for this to not be repeated? –Academic Rights Watch

After being admonished, Hesslow refused to distance himself from his comments, saying that he had “done enough” already and didn’t have to explain and defend his choice of words.

At some point, one must ask for a sense of proportion among those involved. If it were to become acceptable for students to record lectures in order to find compromising formulations and then involve faculty staff with meetings and long letters, we should let go of the medical education altogether,” Hesslow said in a written reply to Larsson.

He also rejected the accusation that he had a political agenda – stating that his only agenda was to let scientific factnot new social conventions, dictate how he teaches his courses.

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